Human resource management in state-owned and private enterprises in Indonesia

This paper compares the management of human resources (HRM) in two large, modern sector business organisations, one state-owned and the other privately owned, in the context of the rapidly deregulated Indonesian economy of the mid-1990s. The two organisations differed greatly in the extent to which HRM was able to underpin the efficient management of the organisation. Owing to fundamentally different approaches to recruitment, training and development, employee performance management and remuneration, the state-owned enterprise had far less effective HRM than its private sector counterpart, and could learn a great deal from how the privately owned organisation responded to the challenges presented by deregulation. The findings suggest that firm effectiveness depends significantly on the HRM function, and that the performance of state-owned enterprises tends to suffer as a result of interference in HRM processes by their government owners.