The Correlation Among Corporate Productivity Assessments Commerce Essay

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In any profit-oriented or nonprofit-oriented organizations, human resources have an important role in achieving organizational efficiency and effectiveness by managing the physical, financial and human resources in the most effective and efficient. To do this, the organization has developed a variety of complex processes and procedures. One to managing human resources is the assessment of performance (also known as performance evaluation, performance appraisal, performance management, reviews or ratings). In a highly competitive era of globalization, companies need high performance. At the same time, employees need feedback about their performance and guidance for future behavior.

Attempts to reach company goals can be realized through increased productivity. Higher productivity will create efficiencies in operations, where the level of productivity itself is highly influenced by the performance or productivity of employees of these companies. One of the important factors that affect employee productivity is motivation. Work motivation is something that can generate enthusiasm and drive to work. Motivation can be sourced from internal and external. External motivation can be obtained from the organization, so the duty manager to create a work environment that can lead to the existence of a motivation. Meanwhile, the productivity can be defined as the ratio of output to input. Work productivity is affected by motivation and, therefore, highly motivated individuals who tend to be more productive than individuals who have low motivation. In the globalization era filled with stiff competition, every organization should improve and enhance the productivity of work. With high productivity competitiveness of the organization is expected to be better and profits also increased.

There is something important in understanding how the performance appraisal system will bring increased productivity. Silberman (2003) said that "an effective performance management program can increase productivity and morale in your organization and help you retain valued high-performers". Meanwhile, according to Bruce (2002) that the way to increase employees' motivation and productivity is to ensure that everyone has a common understanding of what high performance is and to make certain that employees know what is expected of them. Furthermore, she suggests that managers recognize the effect that they have on their employees and the need to use their positions to influence the link between motivation and performance in positive and creative ways.

In order to developing human resource to improve of company performance, expanding some motivation models based on by former motivation theories. Reaching company performance which is maximal to be needed the understanding of the motivation models so that can be made by direction to motivate employees.

Corporate Productivity vs Motivation

Perhaps some of people not really realize that the performance of every employee in the company is very big influence on company productivity. Several factors are believed to affect the productivity of the company are:

Skill, obviously this individual factors that differ from one person to another

Wellness, as well as individual factors of the characters concerned.

Work Attendance / Absenteeism is the last factor is more special because it not only influenced by the character in the play but was influenced by these workers in the company groups that related with motivation of employees

Although many organizational factors contribute to effectiveness of organization, such as turnover, absenteeism, and technology, probably the factor that is described as most important and one that management feels it can influence is job performance. Job performance typically is viewed as partially determined by the motivation to work hard and, therefore, increases in motivation should result in greater effort and higher performance (Mitchell, 1982). Furthermore, Mitchell said before any motivation system is installed, one must be sure (a) that there is a good performance appraisal system available, (b) that motivation is an important contributor to performance, and (c) that where motivation clearly is not the major contributor to performance, a separate measure of motivation or of behaviors clearly caused by motivation is developed.

Employees who work in an organization have the characteristics and backgrounds which different each other. Therefore, every employee has different needs and different desires, so that it can motivate organizational members to perform certain behaviors. Individual differences also cause differences in performance / productivity of their work. The productivity of an employee's work among others affected by their motivation. Differences in behavior among members of the organization make a manager must understand the motivation that is owned by each member of the organization, how to motivate them, who in turn can increase their productivity.

These important questions about employees' behavior can only be answered by managers who have a grasp of what motivates people. Specially, a good understanding of motivation can serve as a valuable tool for understanding the causes of behavior in organizations, for predicting the effects of any managerial action, and for directing behavior so that organizational and individual goals can be achieved. (Nadler and Lawler, 1977).

Motivation can be sourced from internal and external. One of the external sources of motivation is from the organization. Therefore, the management of organizations should be able to create a climate that can motivate their employees. A motivated employee tends to be more productive than those not motivated. Motivation is one important factor to increase work productivity, which in turn would increase profits for the organization or company. There are various concepts or theories of motivation that can be used as reference by the managers to learn and understand the various motivations that are owned by their employees within the organization. All considered, that between the motivation and productivity can be said to be a causal relationship, which is one of the impacts on the other side will make an impact on others.

The productivity of most organizations is a function of the way at least three variables are managed: technology, capital, and human resources (Latham & Wexley, 1994,2). Employee productivity depends on the amount of time an individual is physically present at a job and also the degree to which he or she is "mentally present" or efficiently functioning while present at a job.

Motivation is considered as the main determinant of the important and encouraging increased productivity / performance (Gibson, Ivancevich, and Donnelly, 1996). An employee's productivity depends on employee motivation to work to be done. The higher the motivation for someone to perform a job, the higher the productivity. This is consistent with the goal of formulating the theory that productivity is a function of motivation: P = f (M). While according to the expectancy theory of productivity is a multiplication of motivation with the ability: P = M x A (Suprihanto, 1986).

Productivity represent multiplication function from effort of employees, supported by high motivation, and ability of Human Resource through productivity practices which mounting, meaning good performance, will become feedback to continuing organization activity (Klingner and Nalbandian, 1998).

Feedback (Peformance Appraisal)

Effort

Ability

Productivity

Working Conditions (Safety, Healthful)

X

=

Source : Klingner and Nalbandian (1998)

Figure 1. The Relationship between Productivity and Motivation

According to the results of a survey conducted by the Employers and Manufacturers Association, where they have been reviewed as many as 521 cases that went before the Employment Relations Authority in 2008 showed that 67 percent fall in support of employees. One of the problem is that in many cases when dealing with poor employee performance, because employers do not follow the required process. (Atkins, 2009, p.22). So that the poor performance of employees will affect the company's productivity, team spirit and work culture within the company.

Improving productivity is one big challenge that has engaged the attention of employers' whether private or public by devising appropriate mechanism for motivating their workers. The seriousness of this challenge can be understood from management's perception of the strong functional correlation between employee motivation and organizational productivity.

Motivation vs Assessment System

In the human resources management, performance appraisal systems have a vital role. The performance evaluation is an important mechanism for controlling the organization, where employees can view their performance in the past and take concrete actions for improvement. Performance appraisals also provide important information for the management of human resources to create fair and correct decisions regarding promotions, transfers, compensation, incentives and training programs and career management. Special companies typically require different performance appraisal system tailored to the needs of the functions and processes (Chen & Chu, 2007).

Assessment of performance is related to the motivation of employees, in providing some important components of effective motivational strategies. Especially in this case is the provision of feedback to enable employees to learn how the employee worked; setting specific goals about what employees should do; team-building to enable employees to participate with friends and their managers in solving problems that hinder their productivity, and monetary incentives that reward good performance (Latham and Wexley, 1994).

According to Mathis and Jackson (2000: 81) the factors that affect the individual performance of workers, namely: 1. ability, 2.motivation, 3. support that received, 4. existence of work that they do, 5. Relationship with the organization. Meanwhile, according to Gibson (1987) there are three factors that affect performance: 1) individual factors: ability, skill, family background, experience of employment, social and demographic levels of a person. 2) Psychological factors: perception, roles, attitudes, personality, motivation and job satisfaction 3) organizational factors: organizational structure, job design, leadership, reward systems.

The Individual

Ability

Motivation

Support

The Job

Design

Indvidual vs Team

Job elements

Job Satisfaction / Dissatisfaction

Organizational Commitment

Productivity

Quality

Service

HR Effectiveness

Source : Mathis and Jackson,( 2000, 81)

Figure 2. Model of Individual / Organizational Performance

The performance evaluation (performance appraisal) is basically a key factor in order to develop an organization effectively and efficiently, due to policies or programs that better the human resources that exist within the organization. Individual performance appraisal is very beneficial for the growth dynamics of the organization as a whole, through an assessment can be known about how the actual conditions of employee performance. According to Bernardin and Russell (1993: 379) "A way of measuring the contribution of individuals to on their organization." The performance evaluation is a way of measuring the contribution of individuals (employees) to the organizations where they work.

According to Cascio (1992: 267) "performance evaluation is a systematic description or a description of the relevant strengths and weaknesses of a person or a group." Meanwhile, according to Wahyudi (2002: 101) "a performance appraisal evaluations are conducted periodically and systematically about their work performance / position of a workforce, including its development potential."

Furthermore, regarding definition of performance appraisal Grote (2002) says that "Performance appraisal is a formal management system that provides for the evaluation of the quality of an individual's performance in an organization". Performance appraisal is "the process of evaluating how well employees perform their jobs when compared to a set of standards, and then communicating that information to those employees "(Mathis and Jackson, 2000, 384).

Regarding how to make a good performance appraisal, Messmer (2000) state that there are several elements of a good performance assessment: 1) formulation of the goals that will be done by workers or leader at the end of the assessment, 2) a list of specific competencies or skills to be measured with a successful example of the behavior / performance, 3) scale ranking or rating is right for the organization, 4) the space for workers in assessing for themselves, 5) the space for the assessment supervisors / managers, 6) space for special events from the manager about performance of their employees, 7) encourage the development of worker / employee, 8) the goal to align with the next valuation date.

Furthermore, in ACAS booklet (2005) that there are several the general principles in formulating a good performance assessment system: what is the purpose of performance assessment?, who should be assessed?, who conducted the assessment?, how often should the assessment take place?, what methods are used in assessing employee performance?, how the interviews conducted?.

Regarding the objectives of performance appraisal system, in ACAS Booklet (2005), states that the primary purpose of assessment system used for reviewing performance, assessing potential employees and identify training needs and career planning. Besides the performance appraisal system can be used to determine whether the employees eligible to receive financial rewards for their performance or not.

Klatt, Murdick, and Schuster (1978) report on a study conducted by Schuster and Kindall (1974) in which the performance appraisal practices of Fortune's 500 largest corporations are described. Of the 403 corporations surveyed, 316 (78%) reported the use of some type of formal performance appraisal system. Futher, they report the performance evalutions were used for a variety of purposes, as showed below :

Table 1. The purposes of appraisal system

No.

Uses of Appraisal

Responses

Number

Percentage

1.

Merit increases or bonuses

238

75,3%

2.

Counseling employees

278

88,0%

3.

Planning training or development for employees

270

85,4%

4.

Considering the promotion of employees

266

84,2%

5.

Considering the retention or discharge of employees

184

58,2%

6.

Motivating employees to achieve higher levels of performance

269

85,1%

7.

Improving company planning

178

56,3%

8.

Other

28

8,9%

Total company reporting

316

Source : Klatt, Murdick, and Schuster (1978, p.367)

Other surveys similarly conducted by Lazer and Wikstrom (1977), based upon a survey of 300 companies, that 82% of the respondents had used performance evaluation for feedback, 70% for compensation decisions, 67% for promotions, and 65% for indetifying training and developmental needs. Another researcher found similar results in their survey, Locher and Teel (1977) said that 71% of respondents had used performance appraisal for compensations decisions, 55% for performance improvement programmes, and 11% for documentation.

To summarize, the literature suggests that performance appraisal serves two main purposes: the administrative (on the organizational level) and the developmental (on both the organizational and individual level).

The major administrative purposes of performance appraisal are :

To provide back-up data for management decisions regarding salary increases, promotions, transfers, and sometimes demotions or terminations (McGregor, 1957; Levinson, 1976).

To identify promotable employees within the organization for effective workforce planning and utilization (Thomson, 1969; Schneier and Beatty, 1979).

To provide information that will facilitate decisions regarding training and development needs (Oberg, 1972).

The major developmental purposes of performance appraisal are:

To provide adequate feedback to the employees about how they've conducted job and to suggest needed changes in behaviour, attitudes, skills, or job knowledge (McGregor, 1957; Thomson, 1969; Oberg, 1972, Levinson, 1976; Schneier and Beatty, 1979).

To provide a basis for the coaching and counseling of employees by supervisors (McGregor, 1957).

To provide information regarding both individual and organizational development needs (Oberg, 1972).

Formal performance appraisal can be accomplished after any period, although it is normally conducted on an annual basis. Sometimes organizations require that it be done more frequently, quarterly, or semiannually. Frequent performance appraisals can result in greater understanding of the job and improvement in job performance (Nathan et al., 1991. B.R. Nathan, A.M. Mohrman and J. Milliman, Interpersonal relations as a context for the effects of appraisal interview on performance and satisfaction: a longitudinal study. Acad. Manage. J. 34 (1991), pp. 352-369. Full Text via CrossRefNathan et al, 1991). Mathis & Jackson (2000, 387) state that appraisal typically are conducted once or twice a year, most often annually. For new employees, common timing is to conduct an appraisal 90 days after employment, again at six months, and annually thereafter. Also Anderson in Towers (1996, 196) says that the most common corporate practices are to hold performance appraisals every twelve months or every six months, although more-frequent and less frequent variations can and do occur.

According to Bhatia (2010), based on the results of his research where he has worked with many companies and found that each step in the assessment process should be no more than 4-5 working days. Further, he said that in assessing the performance of at least six stages which totally takes over 15 - 35 days. The different steps in the assessment process and their time-line might be:

No

STEPS

Proposed Time-Line

1

Employees finishing their self assessment and submit it to their managers

2 days

2

Managers finishing the assessment process and submit it to Heads of Departments

5 to 10 days (depending on the team size)

3

Head of the Departments completed the score of their employees and then submit it to the HR department

2 to 5 days

4

HR do normalization (removal of departmental bias) throughout the organization, complete the assessment scores and submit it to the managers

3 to 12 days (depends on the level of interaction required)

5

Managers to discuss the appraisal with the employee and then give those results to the employee for final acceptance

2 to 5 days (depending on the team size)

6

Employees receive their assessment results and sign it

1 day

Total Time Taken

15 to 35 days

Source : Bhatia, 2010

Futhermore, performance appraisal can conduct into two ways, informal or formal. The informal appraisal is conducted whenever the supervisor feels it necessary. A systematic appraisal is used when the contact between manager and employee is formal, and a system is in place to report managerial impressions and observations on employee performance (Mathis & Jackson; 2000, Anderson in Towers; 1996, Oberg; 1972). Although informal appraisal is useful, it should not take the place of formal appraisal.

Performance can be appraised by a number of methods. Winston & Creamer (1997) said that there are numerous methods to measure employee's performance appraisal but some of these methods are not suitable in some cases. Effective appraisal system should include clarity, transparency, and justice; give recognition to productivity through the reward; and realize the leadership qualities of appraisers.

According to Mathis and Jackson (2000;393), various methods are categorized into four major groups:

Category Rating Methods

Comparative Methods

Narrative Methods

Behavioral/Objective Methods

Source : Mathis and Jackson, (2000, 393)

Figure 3. Performance Appraisal Methods

Rating - is a performance appraisal technique in which evaluators assess employee performance using a scale for measuring the performance factors (performance factor). For example is in measuring the level of initiative and responsibility of employees. Scale used is 1 to 5, ie 1 is the worst and 5 is the best. If the level of initiative and responsibility are casual employees, for example, then he was given a value of 3 or 4 and so on to evaluate other performance factors.

Critical incidents - a performance assessment technique, in which the evaluator noted about what behavior / achievement of the best and worst (extremely good or bad behavior) for employees in the assessment period.

Ranking - is a performance appraisal technique by comparing employee to another employee with the aim of putting them in order of value of a simple level.

Narrative report - a performance assessment technique, in which the evaluator write a description about the strenght of employees, their weaknesses, their performance in the past, its potential and provide suggestions for the development of employees.

Behaviourally Anchored Rating Scales - a performance assessment technique, in which evaluators assess the employee based on some type of behavior that reflects the dimensions of work performance and make the scale. It is a combination of the rating scale and critical incident techniques of employee performance appraisal.

Management By Objectives (Comparison with objectives) - is an appraisal method that oriented to the achievement of employment targets. In the MBO method, each individual employee is given his own target, which corresponds to the work unit goals in one period of work. MBO performance assessment methods conducted at the end of the period refers to the realization of the target.

According to Jafari, Bourouni and Amiri (2009), they propose a framework for the selection of appraisal methods and compare some performance appraisal methods in order to facilitate the selection process for organizations. The framework is based on six factors which are training needs evaluation, coincidence with institutes, excite staff to be better, ability to compare, cost of method, and free of error. This framework is theoretical in nature, and is build based on a review of related literature. The framework called Simple Additive Weighting (SAW), and the final result of their research as shown below:

Table 2. The Grade of Performance Appraisal Method based on SAW

No.

Methods

Method's Grades

1

Management By Objective

0.91

2

360 Degree Feedback

0.87

3

BARS

0.82

4

The checklist

0.72

5

Forced choice, Ranking

0.66

6

The critical incident

0.54

7

The graphic rating scale

0.51

8

The essay

0.40

Source : Jafari, Bourouni and Amiri (2009)

The table above shows that the method of MBO has top grade, because the MBO is the best method of performance assessment. Next, 360-degree feedback, BARS and checklist are the most suitable method for the assessment. Forced choice method and Ranking, include group order ranking, individual ranking and paired comparison, are indifferent. It means that if the human resource manager uses each of them for their employees' performance appraisal, his (or her) consent will be the same. The critical incident, the graphic rating scale and the essay are the worst method to use.

The process of performance appraisal and employee motivation are related. Futhermore, in all too many cases the relation is negative; that is, the supervisor who does the rating may attach little importance to the process and may even resent having to carry it out. When this attitute rubs off on the employee, there is a negative overall motivational effect. Under berhaviorally based systems, more positive results can be achieved (Burgess,1984).

Motivation vs Salary System

Typically organizations use compensation to motivate employees. Compensation is a benefit received by employees for services that have been given to the company, it could be financial benefits in the form of salary, wages, wage incentives, bonuses, insurance, and allowances, and benefits non-financially in the form of physical conditions of work environment, and payroll systems applied by the company. Motivation cannot be imposed, the rewards can motivate some employees but not necessarily able to motivate other employees. Employees will be motivated to do better work when they feel that the benefits granted distributed fairly. Grant a perceived lack of fair and worthy cause various problems, for which the company must realize that the system of compensation that is applied will affect employee motivation. High employee motivation will improve employee performance which ultimately will improve performance of company.

Fairness is a fundamental of the compensation or salary system (Newman & Milkovich, 2004: 8). A statement such as "fair treatment for all employees" reflects a concern for justice. The purpose of justice seeks to ensure fairness of compensation to all individuals in employment relationships. The purpose of justice focus on making compensation systems that recognizes both the contribution of workers (the higher the performance or experience or training the higher the compensation given) and the needs of workers (giving minimum wages, or health insurance).

According Simamora (2004: 449), equity compensation is divided into three, namely:

1. External equity

Appropriate wage rates with salary applicable to similar jobs in the external labor market. Assessed by comparing the external equity jobs similar between organizations unparalleled. Two conditions must be met: (1). work is being compared must be equal or nearly equal, and (2). the surveyed organizations have a similar size, mission, and its sector.

2. Internal equity

Salary levels are appropriate / inappropriate to value the internal work for the company. Internal justice is a function of the relative status of a job in the organization, the economic value of the work, or social status of a job, such as power, influence, and its status in the hierarchy of the organization. Associated with a plurality of internal equity in salaries between different jobs within an organization.

3. Individual equity

Individual worker feels that he is treated fairly compared to his colleagues. When a worker receives compensation from the companies, the perception of fairness is influenced by two factors: (1) the ratio of compensation to the input of effort, education, training, resistance to adverse working conditions of a person, (2) comparison of this ratio with the ratio of other workers who come into contact with him directly.

Salary system created and organized to achieve certain goals (Newman & Milkovich, 2004: 7). These objectives include efficiency, fairness (equity) and compliance in accordance with the laws and legislation in force. Efficiency objectives specifically include increased productivity and control cost of labor. Compliance, as a goal, related to the implementation of all laws and regulations on compensation. When the legal and statutory regulations are changed, then the compensation system itself also needs to be adjusted, so that eligibility purposes can continue to run.

Salary is a key factor that can affect relationships in the workplace. The level and distribution of salaries and allowances can have a major influence on the efficiency of any organization, as well as on the morale and productivity of labor. Therefore it is important that organizations develop pay systems that suit them, that gives value for money, and that reward workers fairly for the work they do.

Salary system is a method in giving the award to someone for his contributions to the organization. Ideally, the system must be simple and clear to follow and understand, so workers can easily find out how they are affected. (ACAS Booklet, 2005; Simamora, 2004).

Conceptual Framework

The conceptual model of this research company productivity has relationships with performance of employees, and employees performance linked with motivation. The linkage can be throught of as follows:

Corporate

Productivity

Employee

Performance

Salary

System

Performance Appraisal System

Employee

Motivation

Fair / Equity

Clear / Understandable

Competitive

Objectives

Periodically

Appropriate method

Source : Created by Author, adopted from many source.

Figure 3. Linkage among corporate productivity, performance appraisal system and salary system

Based on the picture can be explained that the company productivity has relationships with performance of employees, where the assumption that the better performance of the employee will make an impact that company productivity will be better. Furthermore, employees' performance is not regardless of the motivation owned by employees. Several factors can affect the motivation of employees associated with the performance of one of them is the implementation of performance appraisal and pay system. Although many factors that influence employee motivation and performance. Furthermore, from the image above with the assumption that with the implementation of an objective performance assessment, use of appropriate methods, the periodic execution, and implementation of compensation that is fair, clear and competitive results will be rewarding and motivating employees to work better. With high employee motivation, it is expected that the performance of employees will increase productivity of the company which later rose as well. High productivity is one of the goals of an organization.

Purpose Of This Research

The purpose of this study is to know the correlation among, corporate productivity, performance assessment and salary system, and also to develop quantitative relationships among them, then can measure how motivated someone at work.

Methodology adopted

The type of research is experimental research. Regarding the experimental research, according to Landman (1988: 82) that experimental research is research designed to study the causes and consequences. The basic structure of this kind of research is the two situations (the causes and consequences) are assessed to make comparisons. Research experiments in principle can be defined as a systematic method to build relationships that contain the phenomenon of cause and effect. The concept of the research experiment begins with understanding a simple example on questions relating to how the relationship of one or more variables in certain conditions.

Location of research

This research conduct on number of companies in Jakarta and Surabaya, Indonesia. Why did Jakarta and Surabaya? First, It might be assumed that Jakarta, as the national capital city, possessed every necessary attribute to support a developing economy: skilled labor (many university graduates went to Jakarta together with other job-seekers), a capital market, transportation and communication networks, a seaport, airport, banking system, and central government. Most foreign and domestic investment was allocated to this region. Between 60 and 70 per cent of Indonesia's money supply circulated in the Jakarta megalopolis (Santosa, 2004). Second, Since the 1940s, East Java has been Indonesia's second major centre of industrial development after Jakarta. Surabaya, the provincial capital, its second biggest modern city after Jakarta. Benefiting from a business-friendly, dynamic provincial government, East Java's industry sector contributed to a provincial growth rate higher than for the Indonesian economy as a whole. The average annual growth rate in East Java in 2005-2006 was 5,8 %, and in 2007-2008, 6,1 %. These figures were higher than the growth rates for Indonesia, which were 5,5% and 6 % respectively. (Source : Planning Board of East Java Province (Bappeprov), 2009)

Sampling

The sample is part of the population. That means there will not sample if there is no population. Population is the element or elements which we shall carefully. Research conducted over the entire element is called a census. Ideally, that research results more trustworthy, a researcher should conduct the census. But for one thing investigators could not examine all elements that, thus he can do is examine some of the whole element or elements earlier.

According to Sekaran (1992), various plausible reasons why the researchers did not conduct a census among other things;

the population so much so that in practice it is not possible all the elements studied;

limited research time, cost, and human resources, the researcher must have been satisfied if the study examines some of the elements;

even, sometimes, a study of samples can be more reliable than on the population.

if the elements as well as a homogeneous population, a study of all elements of the population to be unreasonable

Futhermore, Roscoe (1975) in Sekaran (1992) provides guidance on determining the number of samples as follows:

We recommend that sample sizes between 30 to 500 elements,

If the sample was split again into a subsample (male / female, elementary school, Junior / Senior High School, etc.), the minimum number should be 30 subsample,

In the multivariate study (including multivariate regression analysis) the sample size should be several times larger (to 10 times) than the number of variables to be analyzed.

To study a simple experiment, with strict controls, the sample size can be between 10 to 20 elements.

Following Roscoe (1975), due to the kind of this research is experimental research, hence sample sizes between 10 and 20 are appropriate for this research. Thus, it is decided to target a total of 13 companies, which is have location at Jakarta and Surabaya conducted in randomize. The surveyed corporations have different type of ownership and are from different sectors. The corporations can be state-owned, local, private, a foreign-owned or join venture and belong to service and the manufacturing sectors. The number of samples is considered effective based on the available number of institutions, research questions investigated (Cavana, Delahaye & Sekaran, 2001), and also this matter because of limitation of cost and time in this research. The respondents of this research are HRD Managers / HR Specialist / HR Supervisor in the sampled firms.

Source of Data and Instruments of Research

In this research, the source of data divide into two kinds; primary data and secondary data. Primary data include questionnaire survey for analyzing implementation of performance appraisal system and salary system, also conduct interviews with respondents sampled. For secondary data include company report, document that relevant, and literature reviews.

The major instruments used for data collection in this research were questionnaire and interview. However, the interview method was only used to supplement the questionnaires that were distributed to the respondents. The researcher made the questionnaires anonymous by deliberately omitting such sensitive questions like name of the respondent because of its usefulness to the research.

In data collection not only by using questionnaire and interview, but also documentation. Data collecting of obtained boldness of this research place organization is done, that is documentation concerning data of employees' performance, company profile, company location, and others.

In preparing the questionnaire in this study, the researcher refered to the ACAS booklet (2005) which explained the general principles in formulating a good performance appraisal system: what is the purpose of performance assessment?, who should be assessed?, who conducted the assessment?, how often should the assessment take place?, what methods are used in assessing employee performance?, how the interviews conducted?. Also regarding to the salary system: Is a salary system fair, simple and clear to follow and understand, so workers can easily find out how they are affected?

The researcher determines the weights of instrument based on literature survey, which is each of the answers in the questionnaire is given weight with scale interval 1-10. Then, from each of those answers made rank, in which items that have answers highest weight is the result of the most ideal or suitable according to the researchers, and so on. The weight is given to determine the position of each of the answers compared to other answers.

For the purpose of this study, productivity was treated as the dependent variable while performance assesment system and salary system as independent variable. The definition of variable operational are :

Dependent Variables is coporate productivity

Corporate Productivity (Y) : dependent variable has been measured by how much net profit from trading divided by the total number of employees of the firm.

Independent Variables have been defined as follows:

Performance assessment system (X1) : This variable has been defined as the performance assessment that implemented by the company, include the objective of performance appraisal, kind of performance appraisal, frequence of performance appraisal have been conduct, the time consume for for complete the process of performance appraisal, the methods that used to evaluate employees performance, implementation of performance appraisal system.

Salary system (X2) : This variable has been defined as salary system which conduct, about fairness, competitiveness, and clarity of salary system

Factorial Design

In this study, researchers used a factorial design to investigate the influence of two independent variables on a single dependent variable. Factorial design is very useful for researchers and field scientists in conducting preliminary studies, which allows them to assess whether there is a relationship between variables or not, while reducing the possibility of experimental error and confounding variables.

Factorial design represent application equation of regresi that is technique to give relation model among respon variable with one or more independent variable. Factorial design used on trial to determine simulationly effect from some factor and significant interaction ( Bolton, 1997). Factorial design two level mean there is two factor (for example A and B) what is the each factor tested at two different level, that is low level and high level. Equation of factorial design shall be as follows :

Y = b0 + b1XA + b2 XB + b12 XAXB

Y = Corporate productivity (NPAT/number of employees).

XA = Performance assesment system

XB = Salary system

b0 , b1, b2, b12 = coefficient or constanta, can calculate from result of experiment.

OR

Y = α*X1 + β*X2 +γ*X1 X2

Field Study

Table 1. The Companies Name, Status, Location and Type as Sampled

NO

COMPANY NAME

STATUS

LOCATION

TYPE

1

PT. KG

POE's

Surabaya

Retail

2

PT. CF

POE's

Surabaya

Retail

3

PT. WA

POE's

Gresik

Cement Distributor

4

PT. IN

POE's

Jakarta

Printing & Publishing

5

PT. TK

SOE's

Mojokerto

Manufacturing, Pulp & Paper

6

PT. MAC

POE's

Surabaya

Services /Health

7

PT. RZ

POE's

Surabaya

Services / Advertising & Event Organizer

8

PT. PG

SOE's

Jakarta

Manufacturing, Instalation

9

PT. HAI

POE's

Jakarta

Manufacturing, Food

10

PT. ABDA

POE's

Jakarta

Finance & Insurance

11

PT. TMP

POE's

Jakarta

Printing & Publishing

12

PT. WK

SOE's

Jakarta

Construction Services

13

PT. UM

POE's

Malang

Manufacturing, Tobbacos

Note :

POE's = Private Owned Enterprise

SOE's = State Owned Enterprise

From the table above can be explained that in this study the number of firms selected randomly sampled, located in Jakarta, Surabaya and its surrounding areas with various types and areas of production. Where there are 10 companies are private-owned companies and 3 state-owned companies.

No

Company Name

Net profit 2009 / year (IDR)

Number of employees

Productivity / Year

1

PT. KG

7.800.000.000,00

155

50.322.580,65

2

PT. CF

9.000.000.000,00

150

60.000.000,00

3

PT. WA

49.440.000.000,00

121

408.595.041,32

4

PT. IN

108.199.710.608,00

700

154.571.015,15

5

PT. TK

378.580.000.000,00

12.844

29.475.241,36

6

PT. MAC

54.000.000.000,00

187

288.770.053,48

7

PT. RZ

523.000.000,00

55

9.509.090,91

8

PT. PG

6.229.043.496.319,00

1.700

3.664.143.233,13

9

PT. HAI

3.000.000.000.000,00

3.009

997.008.973,08

10

PT. ABDA

14.087.000.000,00

450

31.304.444,44

11

PT. TMP

3.000.000.000,00

195

15.384.615,38

12

PT. WK

132.621.941.132,00

6.000

22.103.656,86

13

PT. UM

59.825.400.000,00

600

99.709.000,00

Source : Primary Data, 2010

Explanation how the survey was done

Result

NO

COMPANY NAME

X1 TOTAL

X2 TOTAL

PRODUCTIVITY / YEAR

1

PT. KG

33

18

50.322.580,65

2

PT. CF

42

18

60.000.000,00

3

PT. WA

48

24

408.595.041,32

4

PT. IN

72

24

154.571.015,15

5

PT. TK

78

21

29.475.241,36

6

PT. MAC

85

24

288.770.053,48

7

PT. RZ

34

18

9.509.090,91

8

PT. PG

54

18

3.664.143.233,13

9

PT. HAI

36

21

997.008.973,08

10

PT. ABDA

60

24

31.304.444,44

11

PT. TMP

56

21

15.384.615,38

12

PT. WK

44

18

22.103.656,86

13

PT. UM

48

24

99.709.000,00

Development of Correlation Function

Conclusion and Recommendations

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