Performance management study

For Peer Review

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

For Peer Review

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

[email protected]; [email protected]

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.

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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

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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


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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


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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 researchApplied

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)


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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


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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


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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.


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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.”


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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.


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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


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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


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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.


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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.


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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


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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


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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.

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Government & Nonprofit

Performance management study