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Performance management study

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Performance management study

  1. 1. ForPeerReview Proposed Performance Management System Framework By Using IPMS Method at Indonesian Government Research Institution Under Ministry Administration Journal: International Journal of Productivity and Performance Management Manuscript ID: Draft Manuscript Type: Standard Paper Keywords: Performance management systems, Government agencies, IPMS Method, TOWS matrix International Journal of Productivity and Performance Management
  2. 2. ForPeerReview PROPOSED PERFORMANCE MANAGEMENT SYSTEM FRAMEWORK BY USING IPMS METHOD AT INDONESIAN GOVERNMENT RESEARCH INSTITUTION UNDER MINISTRY ADMINISTRATION Mahammad Khadafi and Dermawan Wibisono School of Business and Management Bandung Institute of Technology, Indonesia m.khadafi@sbm-itb.ac.id; dwibisono@sbm.itb.ac.id Abstract Purpose – It proposes performance management system framework by using Integrated Performance Management System (IPMS) method at Indonesia government research institution. The problem such as lack of innovation, a few number of scientific publication and limited of budget allocation makes Center for Pulp and Paper as one of the government research institution in Indonesia is poor at R&D performance. R&D activity is only focused on achieving the target of annual state budget allocation. So that, output from R&D activity such as number of technology and patent that produced are very a few in numbers. Consequently, the institution needs a suitable corporate performance management system that can be monitored R&D output activity of Center for Pulp and Paper. Design/Methodology/Approach – The analysis begin with formulate corporate performance management framework based on IPMS method to proposed a new strategic plan, The new strategy formulation is obtained from SWOT analysis, Internal – External Factor Strategy analysis for positioning the company at directional strategy matrix and TOWS matrix analysis. New strategic objectives from strategy formulation are used as a reference to determine performance variables and Key Performance Indicators (KPI) of company based on IPMS variable framework. Weight factors of performance measurement indicator are calculated by using Analytical Hierarchy Process (AHP). The result is obtained in form of performance variable weight that can be used to measure government research institution performance. Finding – Found that there is problem with current performance management that had been implemented. The monitoring and evaluation is based on financial variable. This paper also provides some strategies how to improve government research institution performance through implementation of Integrated Performance Management System. Research Limitation – This research is limited to design performance management system topic in Center for Pulp and Paper as government research institute under Ministry of Industry Republic of Indonesia Administration. Originality/Value - This paper fulfills with supported and improvement framework based on IPMS method how to boost Center for Pulp and Paper performance in research and development institution. Pratical Implication - The paper includes implications for an performance improvement in government research institution especially Center for Pulp and Paper Indonesia. Keywords : Performance Management System, Government Research Institution, TOWS Matrix, IPMS Method. Page 1 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  3. 3. ForPeerReview 1. Introduction Ministry of Industry is a government institution which the main duty is making the public policy or regulation for industrial community. Ministry of industry has duty to drive Indonesia economic growth through real sector by improving the value added of natural resources through industrial activity. Center for Pulp and Paper (CPP) is one of the eleven government research and development (R&D) institution under the Ministry of Industry administration with its vision is becoming an innovative and professional research and development (R&D) institution and center for technical services in the field of pulp and paper commodity. The institution was established on November 14th , 1968 and since then CPP has a lot of operational experiences in providing research and development activity, formulation of Indonesia National Standards (SNI), consultancy, training, testing, certification and calibration services (bbpk.go.id, 2013). The used of R&D result in industrial sector depend on the quality of R&D result that applied at R&D institution. Therefore, R&D activity is encouraged to more applied from the laboratory scale to up scale industrial approach in order to applied with business or industrial needs. This is important to attract the industry or business in using the research and development result at R&D institution and properly used in the industry through technoeconomy or feasibility study analysis. In the internal business process of Ministry of Industry, service activities that related with R&D are facilitating the used of Intellectual Property Right (IPR), implementation of standarization and industrial promotion through dissemination of R&D publication (kemenperin accountability report, 2013). Indonesia’s R&D investment has doubled in the last 5 years (Roland Berger Strategy Consultants, 2012). The government now identifies R&D as a principal driver to develop the economy. Yet, at 0.08%, Indonesia has considerably lower R&D investment as a share of GDP in developing Asia, compared particularly to the PRC and India (Figure 1). Figure 1. Number of Scientist and Engineers and Percentage of R&D Spending to Nations GDP (ADB Report, 2014) However, there is a long-term goal to increase R&D investments from less than 1% of GDP to 3%. Indonesia’s innovation performance compares poorly with the BRIICS group as well as with other countries in Southeast Asia. Despite increases in gross domestic expenditure on R&D (GERD), it is still a very low proportion of GDP and most national R&D is being performed by public research organizations. Despite growing intellectual property registrations, the number of researcher as well Per m Page 2 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  4. 4. ForPeerReview as of scientist and engineers have also been relatively small between others country that become members of OECD (OECD, 2010). Increase research and development expenditure to at least 1.5% as a percentage of gross domestic product. Other than the People’s Republic of China (PRC), none of the emerging economies have an R&D investment of 1.5% of GDP that countries such as the Republic of Korea, Japan, and Singapore undertook at middle-income levels. The study suggests that an allocation of at least 1.5% of GDP to R&D is required to undertake innovations that will help to advance beyond middle-income levels (ADB report, 2014). The implementation of reform of bureaucracy in cental or district government institution must be guided by the grand design that written on presidential decree No. 81, 2010 and also road map for reform that written on Ministrial of Reformation of Bureaucracy decree No. 20, 2010. The purpose of national bureaucracy reform is to create good corporate government (GCG) with high integrity and productive civil servant and also excellence service in order to improve public trust (Presidential Decree No 81/2010). Reform of bureaucracy has significant impact to the employee, both civil servant who comply the standard competence and performance and also who doesn’t have it. Therefore, the institution must take a right steps for increasing the capacity and competence of employee, in order to enhance the performance that in accordance with the aim of reform of bureaucracy program. From the explaination above, problem that identified is mainly because lack of innovation in Indonesia R&D public institution. Based on study from World Intellectual Property Organization (WIPO), the number of Intellectual Property Right of Indonesia that applied in industry is increasing from 284 patent in 2007 to 601 patent in 2013, but the patent produced comes from R&D activity in Indonesia is very few compare to Singapore (1.081 patent in 2013), China (535.312 patent) and India (9.553 patent) (WIPO, 2013). According to Asian Develpment Bank (ADB) study, number of human resources in R&D activity around 200 researcher per million population and Indonesia has lower R&D investment at 0,08% Gross Dometic Expenditure on R&D (ADB, 2014). The other issues are based on internal organization performance such as 8 main area of reform of bureaucracy issues in Indonesia. This study focuses on designing performance management system by using IPMS method at Center for Pulp and Paper. The step for design performance management framework begin with stage 0 for foundation step, stage 1 for basic information step, stage 2 for designing framework step and stage 3 for implementation plan of IPMS framework. This final project is limited to design performance management system framework at Center for Pulp and Paper as government research institution below Ministry of Industry Republic of Indonesia administration. This paper begins with a brief literature review of IPMS method explaination followed by an explanation of the theoretical framework employed. In theoritical perspectives, Author also explain about Analytical Hierarchy Process (AHP) method that used to measure the weight of designing the Key Performance Indicators (KPI). Section 3 discusses the research method used, and the section 4 discuss about designing the performance management system framework by using IPMS method at Center for Pulp and Paper. A conclusion and suggestions for future research ends this paper. 2. Theoritical Perspectives 2.1 Integrated Performance Management System (IPMS) A good performance management system should have a close connection with accountability, in which contained performance indicator as a target and measurement reference. The good performance measurement system should outline seven cirteria (Wibisono, 2013) such as : 1. Directly related to coporate strategy 2. Variables should be measured by non – financial measurement 3. Flexible and varies depending on the location of company 4. Dynamic, constantly updated in line with changing times 5. Simple as possible and easy to operate 6. Quick feedback for the operator and manager in charge Page 3 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  5. 5. ForPeerReview 7. Directed to the improvement not only monitoring Government institution can improve their performance over time not by simple trial and error, but by systematically analyzing what works and what doesn’t and translating the information into decision about where to put their resources, how to manage, and how to improve program design (Redburn et al, 2008). This statement is similar with the function of performance management as an improvement process (directly to improvement) as mention in the one of seven criteria of good performance management system above. Performance management is all about execution by the translation of plans into results. The improvement of performance management is also synchronizing to create value for and from customers with the result of economic value creation to stockholders and owners (Cokins, 2009). Beside the plan, company also must execute the plan into the action plan. This action plan can be divided into activities that related to company core business. As the performance management is a set of system, the system is evaluated and monitored to make continous improvement in the system. Figure 2 Design framework of Performance Management System (Wibisono, 2006) The first step of any performance measurement system improvement lies in its framework. The framework is a reliable translation of the vision, mission and strategy statement of organization. This framework will be included in the performance indicators that will be a benchmark in the achievement of business objectives and vision of the organization, as well as the improvement of organization. According to Wibisono, there are four basic steps in designing performance management systems (Wibisono, 2006) : 1) 0 Stage : Foundation 2) 1st Stage : Basic Information 3) 2nd Stage : Design Page 4 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  6. 6. ForPeerReview 4) 3rd Stage : Practice 5) 4th Stage : Refresher In the 1st phase, examining the information surrounding organization by using business environmental analysis framework such as internal and external condition analysis of company. In the 2nd phase, examining the analysis of current company vision and mission, and also formulation the company startegy. Thus, the 1st phase and 2nd phase have a central role in design performance management system. Therefore the framework that will be used in performance management system evaluation at Center for Pulp and Paper Ministry of Industry. 2.2 The Role of Indonesia Goverment Research Institution The number of government research institution in Indonesia is a lot of in numbers and the role of each institution have similarity in their main duty and function. This issues have been major problem in Indonesia. Because of overlapping in the function and main duty, there is also problem with coordination between each government research institution. Based on research from Mulyanto in 2014, he categorized the Indonesian research and development institution into 4 different institutions and build the linear model of innovation between those research and development institutions. This linear model can be seen on Figure 3. University Government Research Institution (non ministry) Ministry research and development institutuion Industry Basic research Applied research Technology development LIPI BPPT CPP MoI Figure 3 The linear model of innovation, role of each R&D institution (Mulyanto, 2014) The process of transfer, exploitation and commercialization of public research result are critical areas of science, technology and innovation policy. The linear model of innovation explain about the role of each Indonesia R&D institution from university that have role in doing basic research to industry as the used of technology development (Mulyanto, 2014). Center for Pulp and Paper as ministry R&D institution that below ministry of industry administration has role to develop technology or transfer technology to industry as the final used of R&D result. In fact, the weak performance issues has arisen in ministry R&D institution due to a weak linkage between R&D institutions on the supply side with industries on the demand side occurs. The operational system for public research institutions does not provide much opportunity to build linkages with the private sectors. This weak linkages between public research institute and private company (industry) is because of incentives system that supports these linkages is weak and also there aren’t national industrial policies related to government procurement that supports domestic industry. Figure 4 Core of innovation system (Lakitan, 2013) Page 5 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  7. 7. ForPeerReview Based on the study from Lakitan, the role of government in core of innovation system (Figure 4) is as a regulator. The main duty of regulator is proactively facilitate communication and interaction between technology developers and users. Technology developers included university, public R&D institution and any other institution or individuals that develop technology. In addition, technology users include industry (producing goods or services), government (especially for providing better public services, also for national security and defense), and any other institutions or individuals who require technology for executing or improving quality and/or efficiency of their activities (Lakitan, 2013). Regulation should be formulated with main aim to establish favorable ecosystem for innovation system to blossom. Tax incentives are common tool used by many governments for directing prioritized technologies to be developed, improving absorptive capacity of the users, and facilitating interaction between developers and users. 2.3 Analytical Hierarchy Process Process AHP was first introduced by Thomas L. Saaty in 1970 and Niemira in 2006. AHP was designed to rationally perception toward a problem through a procedure which designed to gather prefential scales of several alternaltives. This model of AHP is used to determined the priorities. AHP principal is to give score for each factor, variable, and indicator by using comparison of factors, variables and indicators one to another. Generally, the application of AHP model is executed in two step. They are hierarchy arrangement and hierarchy evaluation (Saaty et al, 2006). In this final project, Expert Choice version 11.5 is used to determine the weight factor of performance of Center for Pulp and Paper as the main objectives. And then, the hierarchy of variable that affected the performance of CPP was made. Those hierarchy are consist of perspectives, strategic objectives and strategic measurement. The priority of each variable in first, second and third hierarchy are determined by making a pairwise comparison. To fill in the pairwise comparison, it uses numbers that are considered to be relatively more important than the other elements. The scale is illustrated in scale one to nine to determine the hierarchy one to another. Studies prove that scale at level 9 is considered to be accepted and it indicates the level which can differentiate the intensity of relations among the elements. A pairwise comparasion scale which is used in AHP to detemined the alternative priority to achieve the goal as illustrated in Table 1. Table 1. Numerical value of weighting scale for AHP method (Saaty, 1987) Numerical value Importance relativity Definition 1 Equal Both factors are important 3 Moderate One factor is quite more important than others 5 Strong One factor is essential or more important than others 7 Very strong One factor is clearly more important than others 9 Extreme One factor is definitely more important than the others 2,4,6,8 Median value The value to compare among these numbers While all considerations are expressed in number, its validity is evaluated with one correlation assessment. In decision making process, there is a need a consistency to prioritiza related elements or activities by using certain criteria. This executed for the sake of valid result in empirical description. AHP measures the whole consistency from various considerations through consistency ratio. The value of consistency ratio must be 10 percent or less (CR < 0.1). If it is more than 10 percent, the consideration could be done randomly and is required to fix (Sucihatiningsih, 2014). Hierarchy model of AHP calculation are divided into 3 different perspectives, 11 strategy objectives and 24 of strategic measurement.. Then, the weight factor for each perspectives, strategic objectives and variable mesurement can be obtained through AHP calculation. 3. Research Methodology The research methodology for final project is about designing performance management system at Center for Pulp and Paper, Ministry of Industry. After exploring business issues based on the Page 6 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  8. 8. ForPeerReview exploration framework from all the history data result and strategic analysis in the internal organization. The root problem faced by Center for Pulp and Paper can be concluded mainly because the lack of appropriate performance management system. The used of Balanced Scorecard as company performance management system is not suitable with the competitive advantage of CPP as government research institution. The methodology used in conducting this research is using stage 0 (Foundation) until stage 3 (Implementation) of IPMS framework. After identified the problem of institution, the research continue with designing the performance management system framework by using IPMS method. First, the method of this research is identified the external and internal of company based on business environmental analysis framework (Wheelen and Hunger, 2010). This analysis consist of internal (Strength – Weakness) analysis and external (Opportunity – Threat) analysis. This analysis is conducted to formulate the new strategy formulation of Center for Pulp and Paper. The tools that used in this analysis are begin with SWOT analysis, positioned the company at Directional Matrix Strategy and Internal – External strategy matrix (defined company strategy in the future) by using the scoring result comes from EFAS and IFAS analysis. And then, by using TOWS matrix analysis, new startegy formulation of CPP can be obtained. From this analysis, author can formulate the new eleven startegic objectives for designing the framework formulation of IPMS method. The choice of IPMS as performance measurement system is because of this framework can monitor and evaluate government research institution not only based on financial measurement, but also non – financial measurement. Stage 0 (Foundation) is the gap analysis of performance measurement system between current PMS of institution and new PMS that needs based on 4 principles and 5 rules of IPMS framework. Stage 1 (Basic informaltion) is company external and internal analysis. This stage has already done from the identification of new strategy formulation of company based on business environmental analysis framework. After that, designing the PMS framework (Stage 2) is done through company vision analysis, mission analysis (and also proposed the new vision and mission), building the company performance variables based on IPMS framework perspectives, calculated the weight scoring of performance indicators that designed by using AHP method, link those performace variable into design variable linkages and bechmark the performance variables to other goverment research institution, in this case Forest Research Institute Malaysia (FRIM) from Malaysia. The next step is Stage 3 which is implementation plan of this research project at institution. This stage explained through draw the schedule of project timeline and resource allocation that needs in this project. The process of data collection is done through Forum Group Discussion (FGD) with management team and staff at company as primary data. Another resource is taken from questionnaire that sent out to employee of CPP. The process of weight factor for performance indicators is calculated by using Analytical Hierarchy Process (AHP) method. This method is carried out from Expert Choice V.11.5 software as tool for calculation the weight factor of performance indicators. Author devided the layer of calculation into 3 different layer that influenced the performance of CPP. Those layer are perspectives, strategic objectives and performance indicators. Then, those performance indicators are calculated by using the questionnaire as the source of primary data for weight calculation. The process of data collecting is using 25 sample of person to answer the pairwise question of each hierarchy on the questionnaire. 4. Result and Discussion Following the IPMS framework that descibed in Figure 2, the IPMS method begin with stage 0 until 4 (in this paper only until stage 3). The explaination of analysis are described as follow : a) Stages 0 : Foundation The basic stage of designing a performance management system is the foundation. In building the foundation, IPMS refer to the four basic principle and the five rules, as explained in the framework of exploration in figure 2, problem analysis from previous exploration will be conducted with further Page 7 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  9. 9. ForPeerReview direction to formulate an ideal foundation for design of new performance management system as follows: Table 2 Ideal foundation for new performance management system design Foundations The weakness of previous system The new system needs 1. The partneship between management, staff, customers and suppliers Based on daily activity (routine) considering the public / customer interest 2. Staff empowerment Ignorance staff contribution Reward and punishment system 3. Integrated performance improvement Dashboard updated manually Dashboard updated by system (automatically) 4. Independent team Missing alignement between job description and individual KPI Job description and individual KPI must align with company vision and strategy 5. Easily understandable system Disconnect between company strategy map and performance indicator Connection between company strategy and performance indicator 6. Long term orientation PMS based on financial perspectives PMS based on customer satisfaction and the quality of services 7. Timely report Absence of direct asssessment PMS can be calculated through real time report 8. Focus on contious improvement The absence of benchmark and performance target Create performance target of important variable 9. Using a quanitative approach Still used subjectivity of percentage between target and realization of performance indicator Using online system, so that can be calculated through real time based b) Stages 1 : Basic Information Basic infromation is needed as an input in the performance management system design regarding the business environment that is currently being worked on, consist of the external and internal condition of company. In this chapter, basic information for company only analyze the external condition that include the societal environment (PESTEL analysis) and task environment analysis (Porter Five Force analysis). 1) Task Environment Task environment analysis is implemented in the environment that related to institution that directly affected. In the company, a corporation’s task environment is typically the industry within which the firm operated. Industry analysis refers to an in-depth examination of key factors within a corporation’s task environment. By using Porter force analysis, the company can identify competition between company in the same type of industry. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry (Wheelen & Hunger, 2010). i. Rivalry Within Industry : The research and development institution like Center for Pulp and Paper has to compete with the other goverment research institution for instance : university (ITB and Unpad), non ministry R&D institution (UPT chemistry and biomatterial LIPI ) and private R&D institution (APP and RAPP). ii. Threat of New Entrant : International R&D institution like FRIM from Malaysia, Kao Chemicals multinational private company and Invenntia (RAPP R&D consultant) from sweden are the R&D institution enter the Indonesia market. The international R&D institution especially comes from country that member of ASEAN country will be enter the Indonesia market as the implementation of AEC 2015. The other threat is come from corporate university (ITSB) from sinarmas group, The entrants of corporate university in this kind of business will become the competition getting tough. Page 8 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  10. 10. ForPeerReview iii. Threat of Substitute : Research and development institution like CPP doesn’t have the substitute of product or services. Because the role and function of CPP is only provided services that related to pulp and paper industry as customer. iv. Bargaining Power of Buyer : CPP is much more concern in paper market. Paper industry has many number of company in Indonesia especally from medium to large industry scale. The issues of environmental friendly technology and higher cost of energy in Indonesia become the main issues of industry especially pulp and paper industry. v. Bargaining Power of Supplier and Other Stakeholder : The supplier for this industry is pulp and paper laboratory equipment, laboratory glassware, chemical substance and ISO laboratory standard supplier. The power of supplier is relatively low, because those kind of product is very familiar in the market and there is a lot of varian product that sold. 2) Societal Environment The purpose of societal environment analysis is to identify the opportunity and threat of the company that has impact to the customer value that produced. Factors that are scanning in this analysis such : 1. Political – legal force that allocate power and provide constraining and protecting laws and regulation 2. Economic force that regulate the exchange of materials, money, energy and information 3. Technological force that generate problem – solving inventions 4. Sociocultural force that regulate the values, mores and customs of society (Wheelen and Hunger, 2012) Table 3 External environmental variables analysis External Environment Opportunities Threats 1) Politics • The new regulation from new president / ministry that has been elected 2) Economy • Contribution of pulp and paper comodity to Indonesia GDP • Implementation of ASEAN economic community 2015 • Cashless society 3) Technology • Energy saving and green technology • The implementation of e- document 4) Social • Environmental issues Organization and public services as the main area of changes for reform of bureaucracy program. Indonesia rank is the 9th largest of pulp production & 6th of paper production in the world. The support from government to develop nanotechnology and biotechnology in pulp and paper industry. Government regulation regarding the greenhouse effect and energy saving in industry The bottlenecking in the implementation of regulation, because of different polical party interest in parliament. Indonesia isn’t ready for the implemetation of AEC 2015, due to low scientific productivity. The used of electronic documentation is higher due to easiness and flexibility. The hazardous material waste from pulp and paper industry can cause the harmful to community c) Stages 2 : Design i. Vision Analysis From the company profile of Center for Pulp and Paper, the company formulated a vision as follow : “Becoming an innovative and professional research and development institution and center for technical services in the field of pulp, paper, cellulose derivate and environmental study.” Page 9 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  11. 11. ForPeerReview Table 4 Vision statement in details Keyword Interpretation Implication “Becoming an innovative and professional R&D institution” To create the culture of company and employee become more innovative and professional as the main principle of working activity especially that related with R&D activity. Defined the company competitive advantages in R&D activity. Encourage the employee to be professional in their position and make the new idea of innovation “center for technical services in the field of pulp, paper, cellulose derivatives and environmental study” To be appreciated by the customer that the main services provided by company are very spesific and also to become the center of those kind of services compared to another institution Defined the company services that provided to customer and make differentiation with other company Maintain a good relationship with the customer. Defined the company goals and target ii. Mission Analysis Based on the CPP company profile, the mission of company are as follow : 1. To conduct an innovative research and development in the field of pulp, paper, cellulose derivatives and environmental study 2. To provide technical services in the field of pulp and paper industry, cellulose derivatives product and environmental study Table 5 Mission statement in details Keyword Interpretation Implication 1. To conduct an innovative research and development in the field of pulp, paper, cellulose derivatives and environmental study Creating innovations to increase the customer confidence and the existance of government institution in industry especially pulp and paper industry Doing the research project activity based on the customer problem (industry needs) Establishing employee training program to become more creative and innovative through new ideas 2. To provide technical services in the field of pulp and paper industry, cellulose derivatives product and environmental study Giving the best quality of services to customer based on technical services that the company has Make clear explanation about the company services that provided to customer. Improve the employee knowledege and company facilities in those area of company services provided to customer iii. Strategy Formulation a. EFAS and IFAS Analysis IFAS and EFAS analysis which based on internal and external factor in previous SWOT analysis will be rated to get significant factor for strategy formulation. The table of IFAS and EFAS analysis are shown below on Table 6 and Table 7. The calculation for weight score is using Analytical Hierarchy Process (AHP) method. Page 10 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  12. 12. ForPeerReview Table 6 IFAS Analysis of Center for Pulp and Paper NO Internal Factor Weight Rating (1 – 5) Weighted Score Strength (S) S1 The only one pulp and paper R&D government institution 0,10 4 0,40 S2 The company has integrated two quality management system that based on ISO 17025 for good laboratory practice and ISO 9001 to ensure the quality management system since 2009. 0,02 3 0,06 S3 The funding source for doing R&D activity 80% comes from government state budget (APBN). 0,01 3 0,03 S4 Strong relationship with pulp and paper industry with become the member of Indonesia pulp and paper association (APKI) and International pulp and paper association (TAPPI) since 2006 0,02 2 0,04 S5 53% of employee has graduated from university and 23% of them have position become researcher and engineers. 0,05 3 0,15 Weakness (W) W1 The promotion of company services isn’t effective 0,17 3 0,51 W2 The gap generation of employee due to vacuum of recruitment process from 1986 – 2004 0,03 2 0,06 W3 There is only a few of R&D activity with average ratio 12 : 1 yearly that can be implemented in the industry as the main customer 0,29 4 1,16 W4 70% of laboratory equipment especially in pulp and paper study are still using the old technology 0,23 4 0,92 W5 The used of government state budget as the main funding source of institution isn’t utilized optimally 0,08 3 0,24 TOTAL 1 3,57 Table 7 EFAS Analysis of Center for Pulp and Paper NO External Factor Weight Rating (1 – 5) Weighted Score Opportunity (O) O1 There is an insentive from government for R&D institution that implemented KNAPPP standard such as scholarship, SINas insentive and business incubator insentive 0,12 3 0,36 O2 The reform of bureaucracy program for 8 main area of change in government institution based on ministry of reformation of bureaucracy regulation no.20 year 2010 0,11 4 0,44 O3 Pulp and paper industry as the main priority for national industry program based on law no.3 year 2014 ministry of industry regulation 0,05 2 0,10 O4 Based on the new article no.100 year 2012, there is a clear carrer path and compensation program for employee who hold position as researcher and engineering 0,17 4 0,68 O5 Indonesia rank as no.9 for pulp production and no.6 for paper production in the wordwide that made pulp and paper as th the main commodity product for Indonesia 0,03 2 0,06 Threat (T) T1 Based on study from mckinsey the growth of using the electronic payment system (e-payment) is 57% in asia pasific region as well as the electronic documentation system (e-document) is getting higher 0,17 4 0,68 T2 The recruitment system isn’t based on the needs of company qualification 0,03 1 0,03 T3 Different technology between industry and government institution in case of processing technology 0,11 4 0,44 T4 The implementation of ASEAN Economic Community 2015 0,17 3 0,51 Page 11 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  13. 13. ForPeerReview T5 The financial regulation no.190 year 2012 about the used of government state budget that limited the movement of CPP to expand the company activity 0,04 3 0,12 TOTAL 1 3,42 Based on the calculation of EFAS and IFAS analysis that had been calculated, the position of company in the directional matrix strategy can be seen on Figure 5. Analysis from company opportunity and threat which are classified as external factor analysis, CPP can gain score 3,42 based on AHP calculation. Futhermore, analysis from company strength and weakness which are classified as internal factor analysis, the company can get score 3,57 by using the same method of calculation. Figure 5 Directional Strategy Matrix of Center for Pulp and Paper From the directional strategy matrix analysis, the position of CPP is in the first quadrant in the matrix which can be classified in the growth phase. Growth phase means that CPP has greater strength than its weakness and also greater opportunity that its threat. In the growth phase, the institution put strategy for expanding the company activities. Beside R&D activity, CPP can expand activity through diversify the kind of services to customer. b. TOWS Matrix This matrix is used to identify the new strategy formulation of CPP institution from the following SWOT analysis that has been identified before. New strategy that has been analysis comes from the used of strength strategy that can capture opportunity strategy (SO strategy), improve the weakness strategy CPP to capture opportunity strategy (WO staretgy), utilization the strength strategy to cope with threat of CPP (ST strategy) and improve the weakness strategy to overcome the threat of CPP faced (WT strategy) (Carpenter and Sanders, 2009). From Table 6 and Table 7 of EFAS – IFAS analysis, TOWS matrix analysis can obtain the new 11 strategy formulation as follow : 1. Optimization the used of state budget into productive activity 2. Increasing the company revenue from other kind of services 3. Promoting the company technical services to customer 4. Diversify the other services that related with pulp and paper industry 5. Focus on R&D pulp and paper industry 6. Build communication with pulp and paper industry 7. Carry on the applied R&D that can solve the problem of industry 8. Buying the new laboratory equipment and facilities 9. Developed training program for employee who work in R&D activity 10. Strengthen organization structure through implementation of IT system 11. Improving the leadership capability of echelon unit in organization 1 2 3 4 5 1 2 4 5 EFAS IFAS GrowthStability Retrenchment Diversification CPP 3,57 3,42 Page 12 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  14. 14. ForPeerReview d) Stages 2 :Framework Formulation Determining the appropriate performance variable to be used, there are three perspectives which used to be variables basis such as resources capability, internal process and organization output. The third perspectives are also consist of several aspect that can be divided into 9 aspects of measurement. Each aspect describes the parameter of variable measurement in the internal organization. Resource capability is divided into three different aspect such as human, technology and organization. Internal process of organization explain about the process of innovation, operation, marketing and after sales service. In addition, business output is measuring the parameter of financial and non financial aspect (Wibisono, 2013). The exploration framework perspectives can be seen on Table 8 below. Table 8 Exploration Framework Perspectives Perspectives Aspects Business output Financial Non financial Internal process Innovation Operation Process Marketing After Sales Services Resources capability Human Technology Organization i. Resource Capability To make different value and sustainability resources capability of institution, CPP must develop three kinds of intangible assets as its resources capability such as : a. Human Resources Strategic objective for this aspect is developing training program for employees of organization. Competence of employee as the performance variable to be measured, the institution used performance indicators for this aspect such as : the amount of training certificate, percentage of employee skills, percentage of new R&D personel and the productivity of researcher. b. Technology Resources The strategic objective such as buying the new laboratory equipment and facilities can replace the old technology of CPP technology resources. The variable performance for technology resources aspect is technology availability of company. To measure the availability of technology can be done through performance indicators such as number of new equipment purchased and percentage utilization of laboratory equipment. c. Organization Resources As the company strategic objectives are Strengthing the organization structure through implementation of IT system and improving the leadership capability of echelon unit in organization. This can be translated into organization readiness and leadership capability performance variables. Organization readiness can be measured through improving the quality of company services and percentage of employee attendance after using IT implementation as absency method. Furthermore, the leadership capability can be measured through percentage of employee who participated in leadership program as variables measurement. ii. Internal Process From the previous analysis, it can be concluded that the main business process which affects the performance of CPP is innovation, operation process and marketing. Page 13 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  15. 15. ForPeerReview a. Marketing From the strategic objectives of CPP, marketing process is selected as variable performance for marketing aspect. Eventhough the main service of institution is R&D services, the others technical services that have contribution to the company revenue such as training, material testing, consultancy, calibration, standardization and certification must be promoted to customer, in order to boost the company revenue. The performance indicator for this aspect can be monitored through the number of industry as customers served and customer satisfaction index. b. Operation Process CPP must diversify the other kind of services that provide to the main customer for sustaining its business in pulp and paper industry. By achieveing the service effectiveness, the performance indicator for this variable are measuring the percentage of revenue that comes from training service, number of ceritification product, number of testing sample and number of calibration equipment. CPP also must keep focus on the pulp and paper industry for R&D services. The measurement of this performance variable such as number of scientific research published and number of Indonesian national standard (SNI) produced. Other variable that related with operation process aspect is relationship with industry. The performance indicator for industry relationship can be measured through percentage of industry participation in company activity. c. Innovation The sucess of innovation can be measured through how many R&D activity can become industrial patent and prototype of industry. This is very important to bring the solution of technology to industry as technology users. The performance indicator for innovation aspect are number of joint research with industry and percentage the quality of research. iii. Business Output From the previous analysis, it can be concluded that the main business process which affects the performance of CPP is innovation, operation process and marketing. a. Financial Financial aspect for government institution mainly related with the company income or usually called non – taxes national income (PNBP). Other performance indicator that related with finacial aspect is percentage the realization of government state budget. This measurement comes from how much the percentage of money from government can be spent into productive activity that can be delivered to customers, in this case pulp and paper industry. b. Non - Financial As the company competitive advantage is R&D services, the measurement of output that comes from R&D aactivity can be classified as productive activity such as number of patent and number of technology produced. This measurement also support the company strategic objectives which is to optimize the used of government state budget into productive activity. From the exploration of framework perspectives, performance indicators that have been determined can be translated into company strategic map. Strategy map provide such a tool that give employee a clear line of sight into how their jobs are linked to the overall objectives of organization. The strategy map describes the process for transforming intangible assets into tangible customer and financial outcomes. It provides executives with a framework for describing and managing strategy in a knowledge economy (Kaplan and Norton, 2001). IPMS framework perspectives can be translated into company strategy map. Mapping of Center for Pulp and Paper strategy is depicted on Figure 6. With become innovative and professional R&D institution as company strategic vision, twenty-four of Key Performance Indicator (KPI) that have been decribed on each perspectives are mapped into strategy map of company. This strategy map is very useful to show the cause and effect links by which specific improvements create desired outcomes. Page 14 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  16. 16. ForPeerReview Figure 6. Company strategic map based in IPMS framework perspectives The determination weight of variable mesurement is calculated by using AHP (Analytical Hierarchy Process) method. . Hierarchy model for AHP calculation is divided into 3 different perspectives, 11 strategy objectives and 24 of Key Performance Indicators. Then, those variable is calculated by using the questionnaire as the source of primary data for weight calculation. The ranking of weight factor priority is shown from the value of weight factor as seen on Table 9. Table 9 Ranking of weight factor priority from AHP calculation No Key Performance Indicators Weight factor 1 Percentage utilization of laboratory equipment 0,181 2 Percentage of employee skill 0,171 3 Researcher productivity 0.152 4 Number of new laboratory equipment 0,060 5 Percentage the realization of state budget (APBN) 0.049 6 Number of technology (RBPI) 0.049 7 Total amount of company revenue (PNBP) 0.049 8 Percentage of industry participation in company activity 0,047 9 Percentage of new researcher 0,039 10 Percentage of employee participation in leadership program 0,037 11 Number of joint research with industry 0,030 12 Improving the quality of service 0,022 13 Number of patent 0,016 14 Customer satisfaction index 0,015 15 Number of testing sample 0,015 16 Number of training certificate 0,014 17 Number of certification product 0,010 18 Percentage the quality of research 0,010 19 Number of calibration equipment 0,008 20 Number of scientific research (journal) 0,008 21 Number of Indonesia national standard (SNI) 0,008 22 Total company as customer 0,005 23 Percentage of employee attendance 0,003 24 Percentage revenue from training service 0,003 Page 15 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  17. 17. ForPeerReview Mapping those performance indicators into 11 performance variable according to framework perspectives and then linkage the correlation or relationship between performance variable by linking each performance variable that has correlation or relationship. The design of linkage performance variable for Center for Pulp and Paper can be seen on Figure 7. Figure 7 Design variables linkages The type of benchmarking for Center for Pulp and Paper are done by using performance benchmark. This type of benchmarking step to compare the performance of institution to others government institution with the same type of business. Government institution from Malaysia that called FRIM (Forestry Research Institute of Malaysia) is selected as the institution for benchmarking of CPP. FRIM is a government research institution under Ministry of Natural Resources and Environment. Data of performance variable benchmark for R&D profile between CPP and FRIM can be seen on Table 10 (FRIM Annual Report, 2013). Table 10 Table of bechmarking for R&D profile between CPP and FRIM in 2013 Perfromance variable (yearly) Center for pulp and paper Indonesia (CPP) Forestry research institute Malaysia (FRIM) Research fund (Rp) Rp. 730 million Rp. 100,8 billion Ratio number of researcher / total employee 1 : 4 3 : 10 Number of research project (project) 11 189 R&D dissemination through exibition (Event) 8 28 Number of scientific journal (Journal) 20 159 • International publisher 10 47 • Local publisher 10 112 Number of joint research with industry (company) 17 71 Number of patent (patent) 1 6 Number of technology produced (techology) 1 3 Number of invention disclosure (invention) N/A 15 e) Stages 3 : Implementation Plan Strategic management is an integrated process of continous improvement, strategy formulation, strategic plan, harmonizing the organization, strategic reformulation. As goverment institution, CPP must reformulation its strategy in the period of 5 years basis. Display for this final project is the schedule of implementation plan for new performance management system. CPP should redefine its position and formulated new strategy formulation for implementation of new performance management system. The willingness of top management in this cased head of center as the manager of institution is very important and depend on its policy on the Page 16 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  18. 18. ForPeerReview organization. The schedule and timeline for implementation plan of this project can be seen on figure 8. Figure 8 Timeline for implementation plan schedule 5. Conlusions & Recommendation By designing the new performance management system framework based on IPMS method is very useful for government research institution especially Center for Pulp and Paper to monitor and evaluate the performance of institution. Conclusion of this final project is designing the performance management system based on IPMS method can be done through reformulation the strategic objectives of institution by using tools such as SWOT analysis, EFAS – IFAS analysis, TOWS matrix and company position on directional strategy matrix. From three perspectives of IPMS performance framework, the design of performance framework continue with deriving those three perspectives into eleven new strategic objectives. After that, list the twenty four of Key Performance Indicator (KPI) from eleven strategic objectives that effected the performance of Center for Pulp and Paper. Recommendation for this final project is the performance management framework based on IPMS method should be implemented at Center for Pulp and Paper. The design framework should be tested in the real implementation. In addition, if this design framework is implemented at CPP, there would be benefit and weakness of this system. Then, the process of continous improvement should be done for completing the design performance management framework into the next step. Reference Anonymous. (2013), “Forestry Research Institution Malaysia (FRIM) Annual Report”, Ministry of Natural Resources and Environment, Malaysia. Anonymous. (2013), “Ministry of Industry Accountability Report 2013”, Ministry of Industry, Republic of Indonesia. Asian Development Bank. (2014), “Innovative Asia : Advancing The Knowledge – Based Economy”. ADB : Philippines. Carpenter, A. Mason and W. Gerard Sanders. (2009), “Strategic management : Concept a dynamic perspective”. Second Edition. Pearson Publisher : America. Page 17 of 18 International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
  19. 19. ForPeerReview Center for Pulp and Paper Website. (2013), “Center for Pulp and Paper Company Profile”. Quoted on 8th October 2014 from http://www.bbpk.go.id/profile. Cokins, G. (2009), “Performance Management : Integrating Strategy Execution, Methodologies, Risk and Analytics”. John Willey and Sons : New Jersey, Canada. Indonesian Government. (2010), “Grand Design Reformasi Birokrasi Indonesia 2010 - 2025 – Presidential Instruction Inpres No. 81/2010”, Indonesian Government, Jakarta, Indonesia. Kaplan, S. Robert and Norton, P. David. (2001), “The strategy focused organization : How balanced scorecard companies thrieve in the new business environment”. Harvard Business School Press : Boston, Massachusetts USA. Lakitan, B. (2013), “Connecting all the dots : Identifying the ‘actor level’ Challenges in establishing effective innovation system in Indonesia”. Journal of Technology in Society, 35, pp 41 – 54. Mulyanto. (2014), “Performance of Indonesian R&D Institutions : Influence of type of Institutions and their funding source on R&D Productivity”. Journal of Technolohy in Society, 36, pp 148 – 160. Organisation for Economic Co-operation and Development. (2010), “The Emerging Middle Class in Developing Countries”. Working Paper No. 285. Paris : France. Redburn, F. Stevens., Robert J. Shea., and Terry F. Buss. (2008), “Performance Management and Budgeting : How Governments Can Learn From Experience”. Nation Academy of Public Administration. M. E. Sharpe : New York. Roland Berger Strategy Consultants. (2012), “Innovation – How the Emerging Markets Are Driving the Global Innovation Agenda”, Munich : Germany. Saaty, T.L. (1987), “The Analytic Hierarchy Process – What it is and How it is Used”, Math Modelling, Pergamon Journals Ltd, Oxford. Saaty, T.L. and Niemira, M.P. (2006), “A framework for making a better decision how to make more effective site selection, store closing and other real estate decisions”, Research Review, Vol. 13 No. 1, p. 5. Sucihatiningsih, D.W.P. (2014), “Strategy for controlling agricultural land conversion of paddy by using Analytical Hierarchy Process in Central Java”, Management of Environmental Quality : An International Journal, Vol. 25 Iss. 5, pp. 631 – 647. Wheelen, Thomas L and J. David Hunger. (2010), “Strategic Management and Business Policy”. Twelfth Edition. Pearson Education : America. Wheelen, Thomas L., and Hunger J. D., (2012), Strategic Management and Business Policy : Toward Global Sustainability, Thirteenth Edition, Pearson Education : America. Wibisono, D. (2006), “Manajemen Kinerja : Konsep, Desain dan Teknik Meningkatkan Daya Saing Perusahaan”, Penerbit Erlangga : Jakarta, Indonesia. Wibisono, D. (2012), “How to Create a World Class Company : Panduan Bagi Manajer dan Direktur”, Gramedia Pustaka Utama : Jakarta, Indonesia. World Intellectual Property Organization. (2013), “WIPO IP Facts and Figures : Economic and Statistic Series”. WIPO Publication No. 943E/13 : Geneva, Switzerland. Page 18 of 18International Journal of Productivity and Performance Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

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