On this blog we have long offered TBI as an example of a dysfunctional company. We have often focused on the personalities of some of its most vicious and dishonest managers: Luke Preece, Mariam Kartikatresni and Binsar Simorangkir were amongst the worst offenders in this regard. However, not all of its weaknesses relate to its host of narcissitsic and sociopathic managers. We have long been aware that a lot of its problems were structural.
In fact, TBI’s doom might have been sealed the moment it was acquired by UndiSadhuGuna (USG), a supposed yayasan (charity) which was thereafter the master in its relationship with TBI. USG was a small organization that now owned by a much larger and much more profitable concern, The British Institute (TBI). From that moment onwards, whoever controlled the board of this ‘charity’ would also control a chain of schools in Bandung and Jakarta which had at least 2000-3000 students enrolled and income worth billions of rupiah a year.
The person with the greatest power was Ning Anhar, Ibu Ning. The USG takeover of TBI in the late 1990s put her in a dangerous position where she was able to extract massive rents from TBI without needing to give anything in return. This arrangement smacked of a classic rent-seeker scenario, and the opportunities for corruption it afforded were to deform TBI’s prospects in the long run. For USG was to develop as a classic example of a rent-seeking organization, and this arrangement is particularly inefficient in most cases. We consider rent-seeking as the fundamental flaw in the whole chain. It was this flaw which made TBI-USG so attractive to lazy people looking for easy money. The company may be withering now, but a decade or so ago, it was a real honeypot, and a lot of people wanted to get their paws in it.
What Is Rent-Seeking?
Rent-seeking is the use of the resources of a company, an organization or an individual to obtain economic gain from others without reciprocating any benefits to others through wealth creation. An example of rent-seeking is when a company lobbies the government for loan subsidies, grants or tariff protection. These activities don’t create any benefit for society; they just redistribute resources from the taxpayers to the company.
This definition comes from Investopedia, and it paints a clear enough picture. Ibu Ning’s salary at USG was rumored to be in the vicninity of around Rp 60 million a month, and during Ramadan, when THR was added, this came to a total of Rp 120 million in a single month. That was as much as the teachers were getting in a year in many cases. And there were also extra ‘management fees’ which were being levied from time to time. Yet the irony was that Ibu Ning never even appeared in TBI schools. She literally would go years between visits and never contact the managers about their performance. She was using the resources of TBI for economic gain without giving any benefits to others. She was extracting without giving anything back or investing in the future of TBI. Everything she did was based on short-term thinking and selfishness.
Nor did the rent-seeking end with her huge salary for doing nothing. She raided the finances of TBI to get money to set up her family members in side businesses too. During 2010 she refused to let TBI have any money for repairs and maintenance because all the profits were being diverted into her daughter’s unpopular and unproductive side venture called UIC Design School. This was even more rent-seeking behaviour. Money was being misallocated based on connections and a master-servant relationship between USG and TBI, all for the personal enrichment of Ning and her family. Over the coming days, we will show how this chronic rent-seeking was to define all that USG and TBI did.