PERFORMANCE EVALUATION FACTORS ON PROJECT-BASED ORGANIZATION:A CAUSAL STUDY IN INDONESIA

Abstract

Companies need to be formed by organizations with superior human resources to implement tasks and responsibilities effectively. In project-based organizations, employees are expected to control costs, quality, and time according to the development of the project. The purpose of this study is to evaluate the relationship between variables that affect employee performance in a project-based organization, including organizational culture, knowledge management, and teamwork. Data were collected from 150 respondents at various levels in a project-based organization in Indonesia. The analysis using Structural Equation Modeling showed that there is a significant influence of these variables on employee performance, except between knowledge management and teamwork.

Keywords: Project-based Organization, Organizational Culture, Teamwork / Team Cooperation, Knowledge Management, Employee Performance

INTRODUCTION

Employee performance determines the success and failure of a company. According to Al-Musadieq et al. (2018), performance is the result of the work of employees cooperating, setting goals, evaluating results, and giving rewards. In project-based organizations, it is assessed at each stage according to project development. These organizations are bound by cost, quality, and time in case the project is being implemented. Employees in project-based organizations need to work according to a predetermined budget, fulfill specifications or minimum quality limits, and complete tasks on time as scheduled.

Furthermore, employees in informal project-based organizations need to send knowledge from one project to another. Their advice is vital for developing a new project and improving the ones ongoing (Vilasini and Neitzert, 2016). Such activities can be built through organizational culture since it has an impact on morale, motivation, and willpower, the level of productivity and effectiveness; Work quality, innovation and creativity, and employee attitudes at work. In general, organizational culture is widely used to achieve the goals set (Ibironke, 2016).

Organizations consist of several employees in different sections and levels. Conducting organizational activities requires collaboration between all workers in line with their respective goals and responsibilities. The success of a project depends on collaboration by each part and levels of the organization (Assaf et al., 2014).

Knowledge management is needed in project-based organizations, and it is shared from one project to another. Zouari & Dakhli (2018) stated that knowledge management is a concept of organizational practice with a significant effect, not only in gaining competitive advantage but also in contributing to the success and sustainability of the organization in a highly competitive business environment. According to Dahou et al. (2019), knowledge management creates a learning process at several levels in the organization. Well-Designed knowledge management perfects the project and therefore helps companies gain long-term benefits (Chao, 2017).

LITERATURE REVIEW

1.      Employee performance

Performance measurement is the basis for providing performance-based rewards, and it is perceived as a critical component of strategic human resource management (Stojadinović et al., 2014). Employee performance is built on a multidimensional basis, referred to as the Iron Triangle, which consists of cost, time, and quality. Cost and time are measured on the percentage of deviations from work towards the initial plan, while quality is determined based on the suitability of the work results on contractual agreements and technical standards. Unterhitzenberger and Bryde (2018) stated that the lack of focus on time, cost, and quality has the potential to limit employee performance by impacting actions and decisions.

Performance in project-based organizations is demonstrated in the quantity and quality of an employee with reference to timeliness based on criteria and job responsibilities. It can be measured through selected indicators regarding the process of coordinating and communicating with members of the project organization, the planning and execution process, and understanding the responsibilities in implementing a project.

2.      Organizational culture

Hofstede & Hofstede (2005) define culture as a joint program of thought patterns that distinguish or categorize members of a group and one person from another. It is expressed in different forms in an organization, starting from attitude to shared values (Yazici, 2011). Project-based organizations have a pattern of reciprocal relationships, authority, and responsibility between contributors, including clients, supervision, and contractors, to achieve project goals. However, a project-based organization is carried out by many individuals from diverse backgrounds. Therefore there are different human behaviors and expectations on the projects implemented.

In project management practices, culture needs to be treated as an essential aspect of controlling conflict, increasing quality results, and driving innovation. It needs to align the goals and objectives of the organization with the individuals involved. This is believed to reduce conflict, improve communication and coordination, and increase the ease of achieving project objectives (Nguyen and Watanabe, 2017). Organizational culture helps organizations to be more stable, advanced, and anticipatory to environmental changes (Varcko, 2015). It plays a crucial role in the organization by helping to achieve success and creating job satisfaction (Dinesh, 2014). It is measured by a climate of caring, flexibility, and sensitivity to customers.

3. Teamwork

According to Hanaysha, J. (2016), teamwork positively and significantly influences company decisions. It makes the environment conducive and motivates employees to work as desired. This certainly increases performance, autonomy, and job satisfaction.

Collaboration in an organization is characterized by mutual help, coordination, a joint approach, open communication, and friendliness (Busseri and Palmer, 1999). Aveling et al. (2017) established that poor team behavior has a sensitive effect on performance, leading to poor events and results. Similarly, Symon et al. (2012) established that good teamwork reduces the poor events in the division of tasks, even though it is not only limited to it.

Teamwork is needed in project-based organizations since successful projects depend on interactions between individuals. Stapley (2006) stated that teamwork in project-based organizations improves communication, share knowledge, team ties, and make project members enthusiastic about implementing the projects. It consists of factors that form a psychosocial environment, providing a sense of inclusion and emotional support to project members.

According to Wu et al., (2018), the diversity of organizational members, consisting of knowledge, experience, and values, positively support the success of a project. However, teamwork is needed to create a synergy from the start of the project to the completion. Team collaboration in project-based organizations can be measured through communication, member diversity, leadership, roles, and responsibilities of the team.

4. Knowledge Management

Knowledge management is a systematic approach of capturing, organizing, managing, and disseminating knowledge within an organization to work faster, reuse best practices, and reduce expensive rework from one project to another (Nonaka and Takeuchi, 1995; Paternack and Viscio, 1998; Pfeffer and Sutton, 1999; Ruggles and Holtshouse, 1999). However, according to Jain and Moreno (2015), knowledge management needs to be supported by appropriate strategies, structures, systems, culture, and human resource management to codify and explicitly increase organizational effectiveness.

Knowledge management is needed in an organization since knowledge is an asset and a resource for creating value for the company. It is dynamic and needs to be built by internal organizations. Nonaka et al. (2000) stated that knowledge is an asset of direct experience by members of the organization, conceptual assets derived from explicit, systemic assets in the form of systematized technology, and routine assets that arise naturally in organizational actions and practices.

In project-based organizations, knowledge management aims to increase organizational effectiveness through the controlling and sharing of knowledge. In general, knowledge is shared from an individual to the organizational level and can be measured through four indicators, including socialization, externalization, combination, and internalization.

RESEARCH MODEL

This research was carried out in Bakrie Construction, an industry in Indonesia with a project-based organization. It evaluates three variables, including organizational culture, teamwork, and knowledge management, and explain the relationship between variables and employee performance (Figure 1).

Picture 1

Research model

From the research model, a theoretical framework (Figure 2) that shows the relationship between indicators that support variables (X) between variables and employee performance (Y) was formed.

H1: Organizational culture has a significant effect on performance

H2: Team collaboration has a significant impact on performance

H3: Knowledge management has a significant effect on performance

H4: Organizational culture has a significant effect on teamwork

H5: Knowledge management has a significant effect on teamwork

H6: Organizational culture has a significant effect on performance through teamwork

H7: Knowledge management has a significant effect on performance through teamwork

Figure 2

Theoretical Framework

This quantitative research collected primary data through interviews and questionnaires from 150 employees. Secondary data were obtained from the literature on theories relevant to the study. Respondents were selected using proportionate stratified random sampling techniques considering the heterogeneity of the population. There is one endogenous variable in the formulation of the problem, which is employee performance (Y1), and three exogenous variables in the form of organizational culture (X1), teamwork (X2), and knowledge management (X3). The relationship between variables was determined using the Structural Equation Modeling (SEM) analysis model with the Partial Least Square (PLS) approach.

Each research variable is formed from several indicators (Table 1). Each indicator was formulated into questions in the questionnaires tested for validity and reliability. A validity test using the Pearson Product Moment correlation technique was conducted to ensure each question on the questionnaire would be able to reveal the condition of a variable to be measured. The reliability test using the Cronbach Alpha coefficient was carried out to measure the consistency of each question on the questionnaire repeatedly.

Table 1

Indicators of Each Research Variable

There is three stages in the Partial Least Square (PLS) analysis, including 1) inner model analysis, 2) outer model analysis, and 3) hypothesis testing. The inner model analysis is carried out to ensure the research model is accurate, shown through the coefficient of determination (R2), predictive relevance (Q2), and goodness of fit index (GoF). Outer model analysis ensures the research model is feasible and reliable for use as a measurement tool, through the validity of convergent, discriminant, and unidimensionality. Hypothesis testing is carried out to assess and examine the significance of each hypothesis in the structural path of the research model.

DATA ANALYSIS AND FINDINGS

The collected data is processed to test the model and hypothesis, as shown in Figures 3 and 4. Table 2 compares the value of each correlation in the expected model.

Figure 3

Model Testing Results

Figure 4

Hypothesis Testing Results

Table 2

Comparison of Test Results from Models and Hypotheses

1. The Effect of Organizational Culture on Performance

The test results show that X1 has an original sample estimate score of 0.2430 with a t-statistic value of 3,448, which is greater than 1,960 for a significance of less than 5%. This means the first hypothesis (H1); organizational culture variables (X1) have an effect of 0.2430 on performance (Y1) is accepted. The result is in line with Yazici (2011), which stated that organizational culture is significantly related to project and business performance. According to Fong and Kwok (2009) that organizational culture in the construction industry has a dependency on the team and network collaboration.

2. The Effect of Teamwork on Performance

The test results show that X2 has an original sample estimate score of 0.3779 with a t-statistic value of 5.5375, which is greater than 1,960 for a significance of less than 5%. This means the second hypothesis (H2); the teamwork variable (X2) has an effect of 0.3779 on performance (Y1) is accepted. This is in line with Larsson et al. (2017) assertion that project organizations need to be conducted by groups for excellent performance, which result from strict planning and control. Likewise, Assaf et al. (2014) established that the success of a project was strongly associated with effective teamwork. High-performing organizations have clearly defined roles and can be understood by every employee.

3. The Effect of Knowledge Management on Performance

The test results show that X3 has an original sample estimate score of 0.5070 with a t-statistic value of 9,571, which is greater than 1,960 for a significance of less than 5%. This means the third hypothesis (H3) is accepted, which is knowledge management (X3) has an effect of 0.5070 on performance (Y1) is accepted. These results are in line with Kianto et al. (2018), which stated that knowledge management influences workers’ knowledge productivity significantly but does not depend on gender, managerial position, and level of education. Jain and Moreno (2018) also stated that knowledge management is part of strategic planning since employees need to get direction, feeling more aligned, and connected with organizational goals.

4. The Effect of Organizational Culture on Teamwork

The test results show that X1 has an original sample estimate score of 0.8441 with a t-statistic value of 13.2289, which is greater than 1,960 for a significance of less than 5%. This means the fourth hypothesis (H4) is accepted, which is, organizational culture (X1) has an effect of 0.8441 on teamwork (X2). These results confirm Yazici’s (2011) assertion that teamwork strengthens organizations and produce sustainable competitive advantages by completing projects on time, following the budget, and with satisfactory results. According to Supriyatin et al. (2019), organizational culture determines the way a person behaves, including the leadership style that influences teamwork.

5. The Effect of Knowledge Management on Teamwork

The test results show that X3 has an original sample estimate score of -0.0652 with a t-statistic value of 0.8657, which is greater than 1,960 for a significance of less than 5%. This means the fifth hypothesis (H5) is rejected, which is, knowledge management (X3) does not affect teamwork (X2). Unlike research in non-project-based organizations, knowledge management does not affect teamwork in project-based organizations (Khanghahi, 2014; Babnik et al., 2014; Bastos and Cordeiro, 2016).

6. The Effect of Organizational Culture on Performance through Teamwork

The test results show that X1 has an original sample estimate score of 0.5617 with a t-statistic value of 40,932, which is greater than 1,960 for a significance of less than 5%. This means that the sixth hypothesis (H6) is accepted, which is, organizational culture (X1) has an effect of 0.5617 on performance (Y1) through teamwork (X2). This is in line with findings from Ghorbanhosseini (2016), which stated that human resources could mediate organizational culture with teamwork, organizational development, and commitment. Teamwork improves individual and collective learning that affects performance (Saad and Abbas, 2018).

7. The Effect of Knowledge Management on Performance through Teamwork

The test results show that X3 has an original sample estimate score of 0.4820 with a t-statistic value of 31,195, which is greater than 1,960 for the significance of less than 5%. This means the seventh hypothesis (H7) is accepted, which is, knowledge management (X3) has an effect of 0.4820 on performance (Y1) through teamwork (X2). These results support Jamshed et al. (2018), which stated that to create performance, all members of the organization are encouraged to exchange knowledge, opinions, paradigms, and expertise. Teamwork is the solution of a system since it involves not only members of the organization at the team level, but also individuals, functional departments, organizations, a community of practice, and interactions (Sapsed et al., 2002).

DISCUSSION, CONCLUSIONS, AND IMPLICATIONS

Organizational culture significantly influences performance in a project-based organization. Therefore, there is a need to create organizations concerned with management and employees, providing work flexibility, and instill employee care for customers.

Teamwork created in project-based organizations encourages employee performance. There is a need to establish clear communication among diverse members and provide measurable roles and responsibilities for each employee. Leadership in project-based organizations also determines teamwork.

Knowledge management needs to be managed properly, especially when socializing a job, externalizing knowledge, combining, and internalizing it. Proper knowledge management drives employee performance in project-based organizations. Team collaboration is not formed because of direct knowledge management but by organizational culture. Therefore regular meetings are needed to discuss the developments, constraints, and improvements.

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