Contingency Perspective of Strategic HRM in the System ... · resource system will contribute to...

International Journal of Management and Administrative Sciences (IJMAS) (ISSN: 2225-7225)

Vol. 6, No. 4, (11-33) www.ijmas.org

Copyright ©Pakistan Society of Business and Management Research

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Contingency Perspective of Strategic HRM in the System Dynamics

Model: The Case of the Branch Office of PT Bank Rakyat Indonesia, Tbk

in Medan Regional Office, Indonesia

Audia Junita

Faculty of Economy & Business

Harapan University of Medan

Medan, Indonesia

[email protected]

Ferdinand Dehoutman Saragih & Andreo Wahyudi Atmoko

Faculty of Administrative Science

University of Indonesia

Depok, Indonesia

Abstract

This research are expected to provide a fundamental contribution to develop the field of

strategic human resource management studies that so far have only used a linear approach, to

test the dynamic interaction of the elements in contingency perspective of strategic human

resource management by using system dynamics method, which has been empirically never

done before, to find the leverage factor in contingency perspective of strategic human resource

management, and based on the analysis is also able to find the right alternative strategies to

make the system work more optimally. This is a case study research. The research analysis unit

is an organization namely branch offices of PT Bank Rakyat Indonesia, Tbk. Medan Regional

Office. The data were obtained from 24 branch managers of PT Bank Rakyat Indonesia, Tbk. in

Medan Regional Office. The data were analyzed using system dynamics, which is one method in

a system perspective. The system perspective emphasizes non-linear interactions between

elements in the system and the search for points of leverage. Dynamics system output is a

validated model, with the help of Powersime Studio Academic and Vensime software. The

results of the study confirmed the theoretical model of the contingency perspective of strategic

human resource management. The commitment-based human resource system is the main

leverage subsystem. The growth of organizational strategy and commitment-based human

resource system become the optimal strategy to make the contingency perspective of strategic

human resource management system work better.

Keywords: contingency perspectives, strategic human resource management, banking,

dynamics system




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1. INTRODUCTION

The business world is dynamic. Today's business organizations are bound by a dynamic, both

internal and external dynamics of the organization (Wahyudi, 2018). Business organizations are required to

be able to establish a relationship of interdependence and interaction between business entities and their

environment after each subsystem within an organization. Thus, it allows organizations to adapt to an

environment that is constantly changing, as time changes. The form of adaptation can be the ability to

overcome various challenges and problems faced.

Likewise the banking industry, in carrying out its functions, banks are faced with challenges that are

increasing from time to time. The Bank is faced with the challenge of meeting increasingly stringent

regulatory standards after Bank Indonesia issued the Indonesian Banking Architecture (API) on January 9,

2004, improved management quality, fulfilled profit orientation and efforts to gain public trust through

healthy and efficient competition.

In addition, banks are also faced with three main problems related to capital, technology and human

resources (infobanknews, 2013). Currently, there are only 5 banks in the Book IV category, namely banks that

have core capital above 30 Trillion (Bank Indonesia, 2012), out of 115 general banks in Indonesia, including

conventional and sharia commercial banks (Financial Services Authority, 2018). The adoption of technology

to provide better services to customers requires considerable investment from banking management.

Likewise the problem of Indonesia's weaker quality of human resources (Kompas, 2015), also occurs in the

banking industry, as a national industry that absorbs labor from the local labor market.

As a labor-intensive service industry, human resources are the key to banking competitive

advantage. Research results in the Indonesian banking industry prove the importance of human assets in

supporting banking performance (Santoso, 2011; Umanto, 2015). Expansive strategies applied by banks to

increase market share demand not only technology-based services but also conventional transaction services

that rely on human capital capabilities are still important things to do (Sakapurnama and Kusumastuti, 2013).

Therefore, the ability of banks to manage the organization's human resources is very important because it

will have an impact on the quality of services provided to customers. It takes a strategy for managing human

resources that are in line with the bank's competitive strategy.

The phenomena that occur in the banking industry are very precisely monitored using the theory of

strategic human resource management, especially contingency perspectives, as a knife for analysis. The

contingency perspective in strategic human resource management presents an archetype linkage between

organizational strategy, human resource systems, and organizational performance. The assumption from this

perspective is that the alignment between the characteristics of the organization's strategy, and the human

resource system will contribute to the achievement of greater organizational performance (Schuler and

Jackson, 1987a; 1987b). Theoretically, coherent or high integration of human resource management policies

and practices as a system, which is aligned with organizational strategy, will be difficult to identify and

emulate by competitors (Chadwick, 2007; Katou, 2012; Piening et al., 2013) and contribute to improving

organizational performance better. Elements of organizational strategy, human resource systems and

organizational performance interact dynamically as time changes.

Theoretical problems then arise related to the complexity of the causal relationship between

organizational strategy, human resource systems, and organizational performance, that studies involving

these variables have been carried out in the analysis of linear causal relationships. Even though an empirical

study of the recursive relationship between the two is carried out, it still uses a linear approach (Chadwick,

2007; Katou, 2012; Piening et al., 2013). Various theoretical and empirical recommendations are proposed to

examine recursive (non-linear) relationships between elements in the perspective of strategic human

resource management behavior in order to provide a holistic frame of mind (Ginsberg and Venkatraman,

1985; Becker and Gerhart, 1996; Boselie et al., 2009; Harris, 2009; Podsakoff and MacKenzie, 1997; Sun et al.,




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2007; Wrigth and Haggerty, 2005; Wrigth and Snell, 1998; Wrigth et al., 2003; Wrigth et al., 2005). Based on

these problems, a system dynamics approach is used that allows to analyze the dynamics of interaction

between elements in the contingency perspective of strategic human resource management including

organizational strategy variables, human resource systems, and organizational performance, which involves

recursive (non-linear) relationships between variables, as an effort to develop models that represent

perspectives of strategic human resource management contingencies.

The importance of this research is on the purpose of the activity to test and validate the dynamic

interaction of variables in the contingency perspective of strategic human resource management using

dynamic system methods, which have never been empirically done before. The research objectives to carry

out theoretical confirmation of the model of contingency perspective in strategic human resource

management, to find the main leverage in the contingency perspective of strategic human resource

management and propose the best alternative strategies that are able to make the findings model work more

optimally.

2. LITERATURE REVIEW

2.1 Strategic Human Resource Management

The concept of strategic human resource management is elaborated as a link between three concepts

namely strategy, organization, and human resource management (Evans, 1986). The concept of strategy

implies the existence of objectives and outcomes to be achieved in the form of organizational effectiveness,

organizational performance or individual performance and success in achieving strategic goals. Therefore,

human resource management in a strategic perspective focuses on how to adjust the activities of human

resource management with desired outcomes and not the implementation of human resource management

functions alone.

2.2 Contingency Perspective of Strategic Human Resource Management

The relationship between organizational resource management systems and organizational

performance must be understood in the context of the relationship between the organization and its

environment, both internal and external (Jackson and Schuler, 1995). Business strategy is one aspect of the

internal environment that affects human resource systems (Huselid, 1995; Jackson and Schuler, 1995;

Schuler and Jackson, 1987a; Schuler and Jackson, 1987b; Delery, 1993). Contingency perspectives assume

that the use of the human resource system must be in accordance with organizational strategies (Delery and

Doty, 1996; Schuler and Jackson, 1987a; Youndt et al. 1996). Strategic human resource policies will have a

strong impact on organizational performance if aligned with the organization's business strategy (Nigam et

al., 2011; Valle et al., 2000).

The main elements in the contingency perspective of strategic human resource management include

organizational strategy, human resource system, and organizational performance. The characteristics of

different organizational strategies require different human resource systems. When organizational strategies

change, the organization's human resource system also changes. Based on theoretical and empirical studies it

is known that organizations with differentiation strategy and commitment-based human resource system are

able to leverage organizational performance (Arthur, 1992, 1994; Sun et al., 2007; Nishii et al., 2008).

2.3 Causal Relationship between Elements in The Contingency Perspective of Strategic Human Resource

Management

The theoretical framework that explains the archetype of the relationship between the

organizational characteristics of the organization-system of human resources-organizational performance is

the rationale for the contingency perspective in strategic human resource management (Schuler and Jackson,




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1987a). Service-oriented business organizations tend to implement differentiation strategies in order to be

able to quickly respond to environmental changes and market demands so that workers are needed with high

participation and involvement in carrying out their duties, are skilled and have high motivation and

organizational commitment. Efforts to foster organizational commitment in workers are highly dependent on

the choice of human resource management strategies (Lepak and Snell, 1999: 33). For this reason, the

organization needs to implement a commitment-based human resource system that is able to facilitate

workers to get opportunities for active involvement and participation in carrying out different tasks,

participate in various training activities and develop extensively, objectively assessed their performance,

increase their career opportunities and get motivational compensation. Typology of differentiation strategies

tends to be able to bring up the organizational commitment, expected work behavior, high organizational

performance (Arthur, 1992, 1994; Sun et al., 2007; Nishii et al., 2008) and customer satisfaction in service-

oriented companies (Nishii et al., 2008). Systemic relationship structure that explains the interaction between

elements in the contingency perspective of strategic human resource management interacts to provide

feedback to each element, shown in Table 1.

Table 1: Structure of Relationship between Research Elements

The Form of Interaction between

Elements Reference

Organizational Strategy Commitment-

Based HR System

Schuler and Jackson (1987a); Jackson and Schuler

(1995)

HR System Organizational Strategy Ginsberg and Venkantraman (1985); Wright and

Snell (1998); Harris (2009)

Organizational Strategy HR System Ginsberg and Venkantraman (1985); Wright and


Differentiation Strategy Commitment-

Based HR System

Schuler and Mac Millan (1984); Arthur (1992);

Nishii et.al. (2008)

Differentiation Strategy Commitment-

Based HR System

Junita (2015)

Organizational Strategy Organizational

Performance

Porter (1980); Beard and Dess (1981); Porter

(1985); White and Hamermesh (1981); Dess and

Davis (1984); Ginsberg and Venkantraman (1985);

Frederickson (1985); Miller (1988); Harris (2009)

Organizational Performance

Organizational Strategy

Ginsberg and Venkantraman (1985); Wright and


Organizational Strategy Organizational

Performance

Ginsberg and Venkantraman (1985); Harris (2009)

Differentiation Strategy Organizational

Performance

Arthur (1992); Nishii et.al. (2008)

Differentiation Strategy Organizational

Performance

Junita (2015)

HR System Organizational Performance Huselid (1995); Youndtet.al (1996); Delery and

Doty (1996); Ginsberg and Venkantraman (1985);

Bamberger et.al. (1989);

Commitment-Based HR System


Arthur (1992); Arthur (1994); Wright et.al (2003)




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Organizational Performance HR System Wright and Snell (1998); Chadwick (2007);

Massimino and Kopelman (2012); Katou (2012);

Pieninget.al (2013)

HR System Organizational

Performance

Becker and Gerhart (1996); Wright et.al (2005);

Wright and Haggerty (2005); Boselieet.al. (2005)



Junita (2015)

2.4 Theoretical Model

Based on literature studies related to causal relationships between variables in the contingency

perspective of strategic human resource management, the theoretical model of research can be described as

follows:

Figure 1. Theoretical Model

3. RESEARCH METHODS

3.1 Research Design

This study is descriptive and case studies research that wants to investigate causal relationships

between elements of research to understand the object specifically examined as a 'case'. The unit of analysis

of this study is the organization, namely the branch office of PT Bank Rakyat Indonesia, Tbk. (PT BRI, Tbk.)

which included 24 branch Offices. The research respondent was the branch manager of PT BRI, Tbk. in Medan

Regional Office The entire population is the sample. Research variables were measured using an interval scale

with 10 points of scale choice. Data is sourced from a primary source, who provide opinions for each item

question in the questionnaire, for 3 consecutive time periods, namely 2015-2017 (time-series data)and

interview results to confirm the structure of the research model. Elements were analyzed in the contingency

perspective of strategic human resource management including organizational strategy, commitment-based

human resource system, and organizational performance, as shown in Table 2.

Organizational

Strategy

Commitment-

Based HR System

Organizational

Performance




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Table 2.Measurement Framework

Element Definition Indicator

Organizational

Strategy

Organizational ways to compete with

competitors by emphasizing marketing

differentiation aspects (Dess and Davis,

1984; Lee and Miller, 1999)

Marketing

Differentiation Strategy

Commitment-Based

HR System

Human resource management practices

that are expected to generate workers'

commitment (Arthur, 1992, 1994)

Staffing

Participation

Training &

Development

Compensation

Performance Appraisal

Organizational

Performance

Organizational activities to achieve market

performance compared to competitors

(Chuang and Liao, 2010; Delaney and

Huselid, 1996; Katou, 2012)

Competitive Activities

Data analysis techniques use system dynamics, which is one method in a system perspective. To

achieve the goal of dynamic systems as a method, the steps that need to be carried out include: structuring

the problem, making the model, validating the model, simulating the model scenario, interpreting and using

the simulation results of the model (Soesilo & Karuniasa, 2014: 7). The system perspective emphasizes non-

linear interactions between elements in the system and the search for points of leverage. Qualitative data is

transformed into quantitative using a mathematical model (Appendix 1). Data processing is assisted by

Powersime Studio Academic and Vensime software.

4. RESULTS

4.1 Structure Validation

The first step of implementing a dynamic system (Maani and Cavana, 2000) is the articulation of the

problem. Articulation of problems is interpreted as a form of structure validation of the conceptual model

that represents the existing reality. Structure validation in this research is done by interviewing the parties

who are able to help provide confirmation of the theoretical model of research, especially which loops that

actually take place in the real system. This activity is to ensure that the research model fits the model in the

real world. The results are confirmed 11 loops that will be analyzed dynamically in the system (Figure 3),

which are in 3 (three) elements in the model of strategic human resource management perspective of branch

offices of PT BRI, Tbk. in Medan Regional Office, namely organizational strategy, commitment-based human

resource system and organizational performance.

Organizational strategy is defined as the process of determining the organization's mission and

vision and the allocation and use of various organizational resources used to achieve organizational goals

(Tichyet al., 1982: 47). As a service organization, PT BRI, Tbk. has the following vision, mission, and values

(Figure 4). PT BRI, Tbk. carry out business activities with differentiation strategies that are service oriented

and marketing activities (interview results, 2018). Differentiation strategy, emphasizes on producing and

marketing unique products or services based on buyer preferences (Porter, 1980: 38).




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Vision

Become the Most Valuable Bank in Southeast Asia & Home to The Best Talent

Mission

1. Doing the best banking activities by prioritizing services to the micro, small and

medium segments to support the improvement of the community's economy.

2. Providing excellent service with a focus on customers through:

a. Professional human resources and a performance-driven culture

b. Reliable and future-ready information technology

c. Conventional and digital networks that are productive by applying operational

principles and risk management excellence.

3. Provide optimal benefits and benefits to interested parties (stakeholders) by taking

into account the principles of sustainable finance and excellent Good Corporate

Governance practices.

Main Values

Integrity, Professionalism, Trust, Innovation and Customer Centric

Human Capital Management Strategy

Communication with Workers, Industrial Relations, Diversity Programs, Collective Labor

Agreements, Managing Complaints of Workers, Monitoring Settlement of Cases of Discipline

Violations, Recruitment Systems, Talent Management Systems, Performance-Based Career

Development, Performance Management Systems, Performance Assessments, Performance-

Based Benefits, Work Culture Revitalization, Work Culture Internalization Program, Work

Culture Externalization Program, Monitoring Corporate Work Culture Implementation,

Human Capital Management Information System, Human Capital Development, Human

Capital Performance Management

Target of Human Capital Management Strategy

The Best Talent Strong Employee

Engagement

High of Productivity

Gambar 4. Vision, Missionand The Main Values of PT BRI, Tbk.

Source: Bank Rakyat Indonesia, 2017




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Organizational strategies include various decisions that are able to define organizational

relationships with their environment (the dimension of content) and are able to provide direction for various

operational and administrative activities carried out (process dimensions) (Shirley, 1982: 262). The various

mechanisms that take place in organizations are largely determined by the choice of organizational strategies,

including the organization's human resource system. Organizational strategies oriented to marketing

differentiation require commitment-based human resource systems (Schuler and Jackson, 1987; Arthur,

1992,1994; Sun et al., 2007; Nishii et al., 2008).

Commitment-based human resource systems are management systems that create conditions for

workers to have high involvement in the organization, identify themselves with the overall goals of the

organization and efforts to foster commitment in workers (Ogilvie, 1986). The commitment-based human

resource system is characterized by work design that allows high work flexibility, minimizes vertical

hierarchy, opportunities for individuals to be able to make independent decisions and more authority in

carrying out their tasks by means of the process of staffing to get workers who in accordance with

organizational values, internal promotion, extensive training and development programs, varied and fair

compensation both internally and externally, incentives based on performance both individually and in

groups so as to increase work satisfaction of workers and build a comfortable work culture and performance

appraisal performance-based, behavior-oriented for the long-term development of workers assessed (Arthur,

1992; Pfeffer, 1995; Baeand Lawler, 2000; Youndtet al., 1996; Deleryand Doty, 1996; Wright et al., 2003,

Kwon et al., 2010). Related to this, PT BRI, Tbk. tend to apply the commitment-based human resource system

(Bank Rakyat Indonesia, 2017). The retrospective design used in this study is to ask respondents to recall

human resource practices that took place before the performance period (Wright et al., 2005: 412-415).

These human resource management practices synergize as a commitment-based human resource system,

which has great power to contribute to organizational performance, compared to individual practice

(MacDuffie, 1995; Deleryand Doty, 1996; Youndtet al., 1996). The reciprocal interactions between

organizational strategies and human resource systems as well as the theoretical framework Ginsberg and

Venkantraman (1985) and Wright and Snell (1998), are confirmed (interview results, 2018) with real

conditions in PT BRI, Tbk. commitment carried out at PT BRI, Tbk, influenced by the intensity of the

marketing differentiation strategy implemented, and vice versa, the intensity of the commitment-oriented

human resource system will be feedback for the next period organizational strategy design.

Alignment of organizational strategy characteristics and human resource systems that are carried

out will also contribute maximally to organizational performance (Schuler and Jackson, 1987; Arthur, 1992,

1994; Sun et al., 2007; Nishii et al., 2008). Organizational performance is the overall ability of the organization

to effectively achieve its goals and mission (Kanterand Brinkerhoff, 1981; Venkantraman and Ramanujam,

1986). Organizational performance in this research is measured by the performance of the perceptional

market performance of PT BRI, Tbk. in facing competitors at the same level, namely the category Book 4 bank

(a bank that has core capital above 30 Trillion) (Bank Indonesia, 2012). Performance achievements of PT BRI,

Tbk. at the end of the year, it will be the basis for strengthening strategies oriented to service and marketing

activities (interview results, 2018). Increased market performance is in line with the increase in market share

and financial capabilities of PT BRI, Tbk., The impact is the marketing promotion budget in each business unit

will increase. Performance achievements at PTBRI, Tbk. will also be feedback for the human resource system.

Improved performance will trigger an increase in investment commitment-oriented human resource systems

(interview results, 2018). This is in line with the framework of the relationship of feedback between strategy

and organizational performance proposed by Ginsberg and Venkantraman (1985) and Wright and Snell

(1998).




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4.2 Empirical Model

The final result of this structure validation is the result of the development of a conceptual model

which is then referred to as an empirical model. The empirical model is a conceptual model that has been

incompatible with the field situation. Model of strategic human resource management’s contingency

perspective of branch Office PT BRI, Tbk. in Medan Regional Office is depicted in a causal circle diagram or

called Causal Loop Diagram (CLD) (Figure 3.), a theoretical model that has been empirically verified in the

field. The CLD model in this study is used to answer and explain the dynamic interaction of systemic elements

in the contingency perspective of strategic human resource management, which includes organizational

strategy, commitment-based human resource system, and organizational performance.

Based on theoretical studies that have been empirically confirmed, closed-loop interaction has been

obtained as much as 11 positive loops in the model of strategic human resource management’s contingency

perspective of branch Office PT BRI, Tbk. in Medan Regional Office, as shown in Figure 5. The structure of

positive feedback is a causal relationship that increases the value of the variable. The process of growth of

positive feedback structures is explained in terms of following an exponential pattern of increase and

decrease. Variable relationships that are feedback for themselves continuously to strengthen or accelerate

growth (positive growth) in themselves or destruction and degradation (negative growth)

OrganizationalStrategy Marketing

Differentiation Strategy

Commitment-BasedHR System

Staffing

Training &Develoment

Involvement

CompetitiveActivities

+

+

OrganizationalPerformance

+

+

R1

Compensation+

+

+

+

R2

R3

R4

R5

+

+

R6+R7

+

R8

R9

R10PerformanceAppraisal

R11

Figure 5.Causal Loop Diagram (CLD)

Source: Data Processed (2018)

4.3 The Stock-Flow Diagram (SFD)

Furthermore, CLD from the empirical model was developed into a dynamic system model commonly

called the Stock-Flow Diagram (SFD) (Appendix 2). The SFD shows the interaction of causal relationships

between all elements and leverage factors, which translates into stock (levels), flows (flows/rates) and

complementary variables (auxiliaries) and the feedback loop formed by the analyzed system

components(Maani & Cavana, 2000: 62-63).Empirical data based on questionnaires from respondents of a

qualitative type are converted into quantitative data. The empirical data will be processed using the

application of Powersime Studio Academic software through mathematical equations (Appendix 1) dynamic

systems that describe how the process of obtaining non-linear values over time in complex and iterative

systems.




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4.4 The Output of Computation

The computational results obtained over time behavior patterns in the contingency model

perspective of branch offices of PT BRI, Tbk. in Medan Regional Office. The pattern is shown in Figure 6.The

behavior pattern of organizational strategy, commitment-based human resource system, and organizational

performance have exponential goal-seeking behavior patterns that are the pattern that moves fast at the

beginning (exponential growth), followed by a slowdown which will eventually reach a fixed final value. From

figure 6., it appears that if without any intervention the element of strategic human resource management’s

contingency perspective of branch Office PT BRI, Tbk. in Medan Regional Office will be 10 (very good) in

2034.

2,016 2,019 2,022 2,025 2,028 2,031 2,034

7

8

9

10




Non-commercial use only! Figure 6.The Output of Computation


Based on the computational output in Appendix Figure 6, it is known that commitment-based human

resource system is the most dominant loops among existing loops. Thus it can be interpreted that the

strategic human resource management’s contingency perspective of branch Office PT BRI, Tbk. in Medan

Regional Office is predominantly influenced by commitment-based human resource system. Then followed by

a loop of organizational strategy and performance.To find out more in detail the value difference between the

graph of the element at each time change, Appendix 3 shows the quantitative value of each element in the

strategic human resource management’s contingency perspective of branch Office PT BRI, Tbk. in Medan

Regional Office. It appears that in each subsystem there is an increase in value as the time period changes.

These computational results support factual phenomena at BRI, which are very concerned with the

organization's human resource system. At the corporate level, a special human capital division is formed to

ensure that all management activities at BRI contribute significantly to the company's competitive advantage.

At the business unit level, the execution of commitment-based human resource system policies is in the hands

of branch managers. Variations in the approach used to implement the policy are very dependent on the

branch manager's style of management, so that branch leaders can estimate BRI's market performance

achievements that it will perceive.

4.5 Output Validation

The output of a system dynamics model needs to be validated with empirical actual data, which is not

processed through system dynamics. Output validity test is done to determine the suitability of model

estimation data with actual data. One way to measure the output validity of the model is the Mean Absolute

Percentage Error / MAPE method. MAPE is a comparison between the results of system dynamics

calculations and empirical data, calculated using the formula:




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Xm - Xd

MAPE = 1/n Ʃ X 100%

Xd

Note:

Xm: the output model

Xd: the actual value

N: the amount of data (t) measured

The criteria for the ability to estimate the MAPE test are:

MAPE < 10% : High accurate

10% ≤ MAPE ≤ 20% : Well

20% ˂ MAPE ≤ 50% : Accepted

MAPE > 50% : Not True

In this study, MAPE was chosen for less than 10% as the assessment standard. Based on the results of

output validation, it can be concluded that this research model is in accordance with real conditions so that

this model is feasible to simulate. Table 3.shows the overall results of the output validation test for model

elements.

Table 3.Recapitulation of Output Validation Test Results with the MAPE Method

No. Element MAPE Test

Result

Validation

1. Organizational Strategy 2.04 % High Accurate

2. Commitment-Based HR

System

1.90 % High Accurate

3. Organizational Performance 3.91 % High Accurate


4.6 The Sensitivity Test

The Sensitivity test is conducted to test which leverage factor is the most sensitive or dominant to the

other. In this study, the sensitivity of observation is measured by increasing the observation value by 10% in

the first 3 (three) years and with the value of other leverage factors. All interventions affect all elements of

strategic human resource management’s contingency perspective in different amounts. This difference can be

used to determine the most sensitive leverage factor and then the data is designed to be the most appropriate

intervention. The impact of increasing leverage factors on the strategic human resource management’s

contingency perspective can be seen in Table 6.

Overall, the most sensitive element in the strategic human resource management’s contingency

perspective at the Branch Office of PT BRI, Tbk. Medan Regional Office is a commitment-based human

resource system. This system assumes that workers have the ability to carry out continuous improvements

and display better performance if they are given the opportunity to do so through highly committed

management practices. The commitment-based human resource system is an effort made by the organization

to foster organizational commitment within workers through staffing activities, participation, training and

development, compensation, and performance appraisal which have a horizontal/internalalignment (Schuler

and Jackson, 1987a; Baird and Meshoulam, 1988) and implemented in synergy. Various practices or policies

of human resource management individually have limited ability to produce competitive advantage, but in

combination, they have a stronger ability to enable companies to realize competitive advantage (Mac Duffie,

1995; Delery, 1993; Deleryand Doty, 1996; Youndtet al., 1996; Becker &Gerhart, 1996; Becker et al., 1997:

42). The power of human resource practices and policies as systems that have complementary properties




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exceeds the strength of the sum of the effects of individual human resource practices and policies (Alewell&

Hansen, 2012: 91). Unconformity or conflict between one practice and another in a human resource system

will have a negative impact on the organization (Becker et al., 1997: 41).

Compensation is the most influential leverage factor in commitment-based human resource system.

Organizational commitment appears as a manifestation of the perspective of exchange (the cognitive

component) and psychological (an affective component) in work relations between organizations and

workers. From an exchange perspective, commitment is a cognitive evaluation function of the costs and

benefits of maintaining membership in an organization. Workers who are experienced in the organization

and fulfilled their basic needs, including being satisfied with compensation policies run by the company tend

to have affective commitment in themselves compared to workers who are less satisfied (Meyer et al., 1993).

The positive perceptions of workers on perceived organizational support in the form of attention to the

welfare of workers will lead to the emergence of affective and normative commitments and reduce

commitment to 'continuance' (Fu, 2009: 339). An increase in compensation has a great impact on the

improvement of organizational performance. By distributing competitive compensation fairly and objectively

to employees, BRI branch leaders believe they will be able to achieve better market performance from time to

time.

Table 4.Sensitivity Rating of Contingency Perspective in Strategic HRM

As The Result of The Increasing 10% Leverage Factor Ratio

Visualization

ε Linkage

Element

Rank Leverage

Factor Ratio

Organizational

Strategy

Commitment-

Based HR

System

Organizational

Performance

Total

Element


2

The Ratio of

Marketing

Differentiation

Strategy

1.5029 0.4559 0.1397 2.0985


1

The Ratio of

Staffing

0.1106 1.1285 0.1148 1.3539

The Ratio of

Involvement 0.1132 1.1515 0.1175 1.3822

The Ratio of

Training &

Development

0.1138 1.1634 0.1182 1.3954

The Ratio of

Compensation 0.1154 1.1791 0.1198 1.4143

The Ratio of

Performance

Appraisal

0.1058 1.0748 0.1098 1.2904

6.8362


3

The Ratio of

Competitive

Activities

0.1284 0.3872 1.4602 1.9758

Source : Data Processed (2018)




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Organizational strategy is the second sensitive element in the system. Increased marketing

differentiation strategy has a major impact on all elements in the contingency perspective of strategic human

resource management at branch offices PT BRI, Tbk. Medan Regional Office, especially towards improving

commitment-based human resource system. The human resource system is a mechanism for implementing

organizational strategies (Schuler and MacMillan, 1984; Schuler and Jackson, 1987a; Jackson and Schuler,

1995; Deleryand Doty, 1996; Youndtet al., 1996). The choice of a particular organizational strategy has an

impact on the ways in which the organization manages its human resources. It is important to design

organizational strategies and human resource systems that meet vertical/external alignment (Schuler and

Jackson, 1987a; Baird and Meshoulam, 1988). Companies with differentiation strategies tend to have

commitment-oriented human resource management strategies (Riduanand Kumar, 2006: 22) and these

strategies contribute significantly to the performance of market-oriented organizations.

Organizational performance is the third most sensitive element in the system. The increasing of

perceptual market performance will have a major impact on the organizational strategy, and in the long run,

will have an impact on the commitment-based human resource system.Theoretically, the strategy will have

an impact on the competitive advantage of the organization in the market, and the heart of competitive

advantage is organizational performance (Porter, 1980, 1985; White andHamermesh, 1981). Frederickson

(1985) concluded that the level of organizational performance has a significant effect on strategy as a

strategic decision-making process. This is because the organization's strategy includes various decisions that

are able to define organizational relations with its environment (content dimension) and are able to provide

direction for various operational and administrative activities that are carried out (process dimensions)

(Shirley, 1982: 262).

4.7 Simulating The Model Scenario (Strategy Alternatives)

Alternative strategies which are called scenarios are a collection of combinations of certain

variables/parameters that form a particular system behavior (Soebagijo et al., 2007). In this study, the

scenario involves 3 (three) parameters/elements that have the highest sensitivity which is then combined

and intervened functionally, with a fixed model. The intervention is done by increasing the value of the

leverage factor from the scanned parameter/element by 10% of the initial value. There are 3 alternative

strategies to be intervened, as shown in Table 7.

The first strategy alternative is to combine elements of organizational strategy and commitment-based

human resource system. The intervention was carried out by raising 10% the value of the leverage factor

ratio of the organizational strategy, namely marketing differentiation strategy ratio and the value of leverage

factor ratio of the commitment-based human resource system, namely staffing ratio, participation, training

and development, compensation and performance appraisal. The results of the intervention for the first

scenario combination is shown in Table 7. The second alternative strategy is to combine elements of

commitment-based human resource system and organizational performance. The intervention was carried

out by raising 10% the value of the leverage factor ratio of the commitment-based human resource system

consisting of the value of staffing ratio, participation, training and development, compensation, performance

appraisal, and organizational performance leverage ratio, namely competitive activities ratio. The third

alternative strategy is to combine elements of strategy and organizational performance. The intervention

carried out is to increase the 10% value of the leverage factor ratio of the organizational strategy, namely

marketing differentiation strategy ratio and the value of the leverage ratio of organizational performance,

namely competitive activities ratio. The results of the intervention for the second scenario combination of

strategy and organizational performance are shown in Table 7.

Table 7.Combination Strategies in Strategic HRM’s Contingency Perspective




24

at PT BRI, Tbk. Medan Regional Office

Parameter/Element

High

Sensitivity

Parameter

Parameter Combination

Combination

Strategy

Value Total Rating of Strategy

Organizational Strategy (P1)

Commitment-Based HR

System (P2)


(P3)

P1, P2, P3

1st Alternative

Strategy

(P1& P2)

8.3562 1st Rating

2nd Alternative

Strategy

(P2& P3)

8.2605 2nd Rating

3th Alternative

Strategy

(P1& P3)

4.0674 3rd Rating


Of the three combinations of the alternative strategy proposed in the contingency perspective of

strategic human resource management model at the Branch Office of PT BRI, Tbk. The Regional Office Medan

is known that the firstalternative strategy scenario is the most optimal strategy with the highest total score of

8.3562 (Table 7). The value of leverage factor ratios in organizational strategy namely marketing

differentiation strategy ratio and commitment-based human resource system consists of staffing ratio,

participation, training and development, compensation, performance appraisal ratio having a large impact on

the model working more optimally than previous. Theoretically, marketing differentiation strategy is

identified as a competitive strategy that is appropriate for service organizations. Marketing differentiation

strategy requires commitment-based human resource system, as organizational processes that are able to

execute the characteristics of marketing differentiation strategy and are able to contribute to organizational

performance (Arthur, 1994; Nishii et al., 2008; Sun et al., 2007).

4.8 Interpreting the Simulation Results of The Model

Based on these results, the proposed policy is to improve the quality of commitment-based human

resource system as well as the intensity of marketing differentiation strategy at the branch office of PT BRI,

Tbk. Medan Regional Office. As a business entity that seeks to differentiate itself in terms of services, the

branch office of PT BRI, Tbk. The Medan Regional Office is very precise in implementing a commitment-based

human resource system. Theoretically, organizations with service-oriented strategies need a commitment-

based human resource system to excel in competing. Achieve competitive advantage through human

resources, requiring organizational management to change the way of thinking about the role of labor and

work relationships within the organization. Many companies that have managed to maintain their

competitive advantage are determined by the ability of the organization to manage its human resources very

well (Becker et al., 1997; Pfefferet al., 1995). Investment of PT BRI, Tbk. in Medan Regional Office in staffing

activities, participation, training and development, compensation, and performance appraisal and the

marketing differentiation strategy simultaneously at the branch office of PT BRI, Tbk. Medan Regional Offices

must be intensified by improving service quality strategies, providing unique and varied services to

customers according to market segment characteristics, market research utilization, intensive and innovative

marketing to identify the brand of PT BRI, Tbk, expand market share and choose marketers who valuable,

skilled and committed to organizational values, able to execute organizational strategies.




25

5. CONCLUSIONS AND SUGGESTIONS

Contingency perspective in strategic human resource management at branch offices of PT BRI, Tbk.

Medan Regional Office is a complex unit consisting of organizational strategy, commitment-based human

resource system, and organizational performance elements, which interact dynamically and non-linearly,

with positive feedback system behavior, namely reinforcing feedback. An increase in one element will trigger

growth that is getting stronger on the other elements in the system leads to system boundaries. The element

of commitment-based human resource system is the main leverage in the contingency perspective of strategic

human resource management at PT BRI, Tbk. Medan Regional Office. The commitment-based human resource

system consists of staffing, participation, training and development, compensation, and performance

appraisal activities which are integrated as a system and align internally. The strategy of combining the

improvement of commitment-based human resource system and the intensity of organizational strategies

that are oriented towards marketing differentiation strategies simultaneously is able to make a contingency

perspective in strategic human resource management at PT BRI, Tbk. Medan Regional Office model works

more optimally.




26

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29

APPENDIX

Appendix 1.The Mathematics Model

Stock


Init

Flow

Doc

Organizational Strategy = 7.09

Organizational Strategy = +dt*Marketing Differentiation Strategy

Organizational Strategy = conditions where organizations have

the ability to compete by implementing marketing differentiation

strategies

Primary data

Measuring scale 1 (very very poor) to 10 (very very good)


Init

Flow

Doc

Commitment-Based HR System = 7.11

Commitment-Based HR System = +dt*Inflow of Commitment-

Based HR System

Commitment-Based HR System = conditions where the

organization is able to carry out various activities of a

commitment-based human resource management system

Primary data



Init

Flow

Doc

Organizational Performance = 6.94

Organizational Performance = +dt*Competitive Activities

Organizational Performance = conditions where the organization

excels among competitors in carrying out banking activities

perceptually

Primary data


Auxiliary of Subsystem

Marketing Differentiation Strategy

Aux

Doc

Marketing Differentiation Strategy = 'Ratio of Marketing

Differentiation Strategy'*(('Organizational

Performance'/10)*('Commitment-Based HR System'/10)*(10-

'Organizational Strategy'))/10

Marketing Differentiation Strategy = organizational policy to

carry out marketing differentiation strategies, which are

determined by constants, organizational goals, and performance,

commitment-based human resource system

Weighting (/ 10) is done for scale adjustment

The inflow of Commitment-Based HR

System

Aux

Doc

The inflow of Commitment-Based HR System =

(Involvement*(Organizational

Performance'/10)*Compensation*'Training &

Development'*'Performance Appraisal'*(10-'Commitment-Based

HR System')*Staffing*('Organizational Performance'/10))

The inflow of Commitment HR System = organizational policy to




30

run an organization's human resource system that is able to

generate the commitment of the members, which is determined

by staffing activities, involvement, training and development,

performance appraisal, compensation distribution,

organizational performance, and commitment-based human

resource system goals


Competitive Activities

Aux

Doc

Competitive Activities= 'Ratio of Competitive Activities'*((10-

'Organizational Performance')*('Organizational

Strategy'/10)*('Commitment-Based HR System'/10))/10

Competitive Activities= organizational policy to carry out

superior banking activities compared to competitors determined

by competitive activity constants, organizational performance

and strategies as well as commitment-based human resource

systems


Auxiliary of Leverage Factor

Staffing

Aux

Doc

Staffing = Ratio of_Staffing*('Organizational

Performance'/10)*('Orgniational Strategy'/10)

Staffing = the level of an organization's ability to recruit and

select marketers determined by organizational strategy and

performance


Involvement

Aux

Doc

Involvement =Ratio of Involvement*('Organizational

Performance'/10)*('Organizational Strategy'/10)

Involvement = the level of an organization's ability to carry out

involvement activities, which are influenced by organizational

strategy and performance


Training & Development

Aux

Doc

Training & Development = 'Ratio of Training &

Development'*('Organizational Performance

/10)*('Organizational Strategy'/10)

Training & Development = the level of an organization's ability to

facilitate training and development activities for marketers,

which are influenced by organizational strategy and performance


Compensation

Aux

Doc

Compensation = Ratio of Compensation*(('Organizational

Performance'/10)*('Organizational Strategy'/10))

Compensation = the level of an organization's ability to distribute

compensation to marketers, which is influenced by




31

organizational strategy and performance


Performance Appraisal

Aux

Doc

Performance Appraisal = ('Ratio of Performance

Appraisal'*'Organizational Strategy')

Performance Appraisal = the level of an organization's ability to

evaluate the performance of marketers in harmony with the

organization's strategy


The Input of Leverage Factor

The Ratio of Marketing Differentiation

Strategy

Aux

Doc

The Ratio of Marketing Differentiation Strategy =

Graph(Time,2015,1,{0.71,0.73,0.76//Min:0;Max:1//})

The Ratio of Marketing Differentiation Strategy = constants to

calculate the level of ability of an organization to run a marketing

differentiation strategy

The measurement scale uses a ratio scale

The Ratio of Staffing

Aux

Doc

The Ratio of Staffing =


The Ratio of Staffing = constants to calculate the level of the

organization's ability to carry out recruitment and selection

activities for marketers


The Ratio of Involvement

Aux

Doc

The Ratio of Involvement =


The Ratio of Involvement = constants to calculate the level of the

organization's ability to carry out the activities of involvement of

marketers


The Ratio of Training & Development

Aux

Doc

The Ratio of Training & Development =


The Ratio of Training & Development = constants to calculate the

level of ability of the organization to facilitate training and

development activities for marketers


The Ratio of Compensation

Aux

doc

The Ratio of Compensation =


The Ratio of Compensation = constants to calculate the level of

the organization's ability to distribute compensation to

marketers


The Ratio of Performance Appraisal

aux

The Ratio of Performance Appraisal =





32

Doc The Ratio of Performance Appraisal = constants to calculate the

level of the organization's ability to carry out performance

appraisal activities to marketers


The Ratio of Competitive Activities

Aux

Doc

The Ratio of Competitive Activities=


The Ratio of Competitive Activities= constant to calculate the

level of ability of the organization to run banking activities in

order to excel compared to competitors


Appendix 2.The Stock-Flow Diagram (SFD)

Appendix 3.The Output of Computation


year Organizational Strategy Commitment-Based HR System Organizational Performance

2,015

2,016

2,017

2,018

2,019

2,020

2,021

2,022

2,023

2,024

2,025

2,026

2,027

2,028

2,029

2,030

2,031

2,032

2,033

2,034

7.09

7.19

7.30

7.40

7.51

7.62

7.73

7.84

7.94

8.05

8.16

8.26

8.36

8.46

8.56

8.65

8.73

8.82

8.90

8.97

7.11

7.22

7.36

7.56

7.77

8.00

8.24

8.48

8.73

8.98

9.20

9.41

9.58

9.73

9.83

9.91

9.95

9.98

9.99

10.00

6.94

7.05

7.15

7.27

7.38

7.49

7.60

7.71

7.82

7.93

8.04

8.15

8.25

8.36

8.46

8.55

8.64

8.73

8.81

8.89

Non-commercial use only!




33

Acknowledgment

Special thanks and respect to my promotor Professor Ferdinand Dehoutman Saragih and co-

promotor Dr. Andreo Wahyudi Atmoko for the guidance and knowledge sharing to improve and complete my

dissertation. As well as management of PT BRI, Tbk. which facilitates the implementation of research. Last but

not least, thanks to the Ministry of Research, Technology and Higher Education for grant assistance of

Doctoral Dissertation Research Program 2018.

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