THE INDONESIAN JOURNAL OF

BUSINESS ADMINISTRATION
Vol. 2, No. 13, 2013:1570-1579

FORMULATINGCOMPANYHEALTHASPIRATION
TOACHIEVEORGANIZATIONALEXCELLENCEBYUSINGORGANIZATIONAL
HEALTHINDEX(OHI):CASESTUDYATPTBIOFARMA(PERSERO)

VonnyFranciskaandJohnWelly
SchoolofBusinessandManagement
InstitutTeknologiBandung,Indonesia
vonny.franciska@sbmitb.ac.id

AbstractMcKinseyCompanyfoundthatifanorganizationwanttosustainforalongterm,itneedstokeeps
notonlytheirperformancebutalsoitshealth.Asthecompanythathasbeensustainedformoreover122years,
PT.BioFarmaneedsnotonlysustainbutalsoexcellencetoachievetheirvisiontobecomeaglobalcompany.
PT. Bio Farma needs to knows and then maintains their organizational health in order to keep having high
performanceforalongterm.ByusingOrganizationalHealthIndex(OHI)thathasbeenformulizedbyMcKinsey,
PT.BioFarmacouldfindouttheirorganizationalhealthlevelandthentakesomeactionrelatedtotheresult.
BusinessrecommendationdevelopedasactiontakenwillhelpPT.BioFarmatokeephavinghighperformance.
Organizational Health Index (OHI) contains nine elements that consist of direction, leadership, culture and
climates,accountability,coordinationandcontrol,capabilities,motivation,externalorientation,innovationand
learning. There are 37 organizational health practices under the nine elements that measure organizational
effectiveness.ThisresearchfoundthatPT.BioFarmahassurpassedtherequirementofhealthyorganizationbut
notexcellenceyet.Thecompanyneedstoapplysomemanagementpracticestobecomeitshealthaspiration.
Fromtheanalysis,PT.BioFarmahealthaspirationrecommendedisleadershipdriven.Byfocusanddonewellin
leadershipdrivenarchetypemodel,PT.BioFarmaisbelievedcanbecomeasustainableexcellenceorganization.

Keywords:OrganizationalHealthIndex(OHI),healthaspiration,sustainableexcellenceorganization,McKinsey.

1.Introduction
PT. Bio Farma (Persero) is a stateowned enterprise which is owned 100% by Indonesian
Government.PT.BioFarmaistheonlyvaccineproducerinIndonesiaandasthebiggestinSoutheast
Asia.ItspositionastheonlymanufacturerofvaccineandantiserainIndonesiadoesnotmakeBio
Farmacomplacency.Tofacetheglobalcompetition,PT.BioFarmakeepstoadaptableandinnovates
invariousways.Byproducingnewproductswithbiotechnologybasetomeetthemarketneeds,PT.
Bio Farma believes it becomes the key success in the future. Being one of 30 companies that has
prequalificationfromWorldHealthOrganization(WHO)fromtotal200vaccineproducercompanies
oftheworldmadePT.BioFarmashowsitsexistence.Asstatedbytheboardofdirectorsatannual
report2011,theprospectofvaccineindustryisstillpromising,howeverPT.BioFarmashouldaware
toglobalcompetitionbydoingseveralrefinementsinorganization.Theyalsostatedthatoneofthe
main focus aspects in management to support company performance improvement is Human
Resources.

A. CoreBusiness
PT. Bio Farma core business is to produces vaccine and anti sera that are classified in five
categories, vaccine, anti sera and diagnostic, which are viral vaccine, bacterial vaccine, combination
vaccine, anti sera and diagnostic. The distribution of its products cover the national needs and has
enteredinternationalmarket.Inrecenttime,PT.BioFarmahas12distributorsfordomesticmarket
andfiveinternationalagentsforglobalmarket.
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Refer to some researchers and evidences by McKinsey Company, there is finding that if an
organizationwantto sustainforalongterm, itneedsto keeps notonlytheirperformance butalso
health. Scott Keller and Collin Price, senior executives of McKinsey Company, stated in their book,
BeyondPerformancethatforcompaniestoachievesustainableexcellencetheymustbehealthy;this
meanstheymustactivelymanageboththeirperformanceandtheirhealth(2011:5).

B. BusinessIssue
SomemayknowthatinIndonesia,MinisterofStateownedEnterprisehasregulatedhowtomeasure
thehealthylevelofStateownedEnterprise.BasedonDecisionMinisterofStateownedEnterprise,
PT.BioFarma(Persero)gotscore94whichmeansHealthAAforyear2012,alittlebitlowerthan
thepreviousyear,thecompanygotscore95,1thatmeansHealthAAA.Thehealthlevelcriteriaare
assessedinthreeaspects,financial,operationalandadministration.Unfortunatelythisthreeaspects
onlymeasuretheperformancelevelofthecompany.

As the company that has been sustained for more over 122 years, PT. Bio Farma needs not only
sustainbutalsoexcellencetoachievetheirvisiontobecomeglobalcompany.Authorhasinterviewed
anddiscussedtoHeaddivisionofHumanResourcesrelatedtothisissuethatPT.BioFarmaneedsto
knowsandthenmaintainstheirorganizationalhealthinordertokeephavinghighperformancefora
longterm.ThelowerscoreofStateownedEnterpriseMinistersassessmentin2012mightbecause
PT.BioFarma hasnot concerned yet totheirorganizationalhealth. Byusing Organizational Health
Index (OHI) that has been formulized by McKinsey Company, PT. Bio Farma could find out their
organizational health level and then takes some action related to the result. Business
recommendationdevelopedasactiontakenwillhelpPT.BioFarmatokeephavinghighperformance
(AAA)inordertobecomeasustainableexcellencecompanyinthefuture.

2.BusinessIssueExploration
In this part, authorattempts to find out factors so assumed to be the root of business issue. Such
factors form conceptual framework of his/her final project. By analyzing factors found in such
conceptual framework, the student could identify one or several significant factors affecting the
businessissues.Descriptionconcerningconceptualframeworkandanalysisisdescribedasfollows.
C. ConceptualFramework
This research started from nine element of Organizational Health Index (OHI) that has been
developed by McKinsey Company to measure the healthiness of organizations. There are 37
organizational healthpractices underthe nine elements that measure organizational effectiveness.
Organizational effectiveness is measured from the process of 37 organizational health practices in
thismodel.Therearetwooutcomesoforganizationaleffectiveness,thosearehealthyandunhealthy
organization. The organization needs to be healthy first to have a change for being sustainable
excellenceorganization.Oncetheorganizationmeasuredhealthy,thenitneedstochooseandapply
the archetype driven of the company. The archetype drive is the formula to help companies to
becomesustainableexcellenceorganizations.

D. MethodofDataCollectionandAnalysis
Authorusesmixedmethodresearchthatiscombinedthequantitativeandqualitativeresearch.
Quantitativeresearch
Thequantitativeresearchisconductedbyprocessthequantitativedatafromquestionnaires.
ThevalidateddataisanalyzedtofindtheexistingOHIresultofPT.BioFarma.Thisexisting
resultthencomparedwiththearchetypesmodeltobechosen.
Qualitativeresearch
ThequalitativeresearchisconductedbydoinggapanalyzingofcurrentOHIresultofPT.Bio
Farma with the archetype chosen. The gap analysis is used to formulate the solution that
wouldbevalidatedbyexpertjudgementinPT.BioFarma.

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The primary data that is used in this research were obtained directly by the author through
questionnairesdistributionandinterviewanddiscussionwithseniormanagersandmanagersinPT.
Bio Farma. The questionnaire is developed by interpreting from the definition of organizational
healththatisconsistsofnineelementsand37organizationalpractices.ThenineelementofOHIand
37practicesasfollows:

Table1.OrganizationalHealthIndex

Elements
1.Direction

2.Leadership

3.Cultureand
climates

4.Accountability

5.Coordinationand
control

6.Capabilities

7.Motivation

8.External
orientation

9.Innovation&
Learning

Practices
1.Sharedvision
2.Strategicclarity
3.Employeeinvolvement
4.Authoritativeleadership
5.Consultativeleadership
6.Supportiveleadership
7.Challengingleadership
8.Openandtrusting
9.Internallycompetitive
10.Operationally
disciplined
11.Creativeand
entrepreneurial
12.Roleclarity
13.Performancecontracts
14.Consequence
management
15.Personalownership
16.Peopleperformance
review
17.Operational
management
18.Financialmanagement
19.Professionalstandards
20.Riskmanagement
21.Talentacquisition
22.Talentdevelopment
23.Processbased
capabilities
24.Outsourcedexpertise
25.Meaningfulvalues
26.Inspirationalleaders
27.Careeropportunities
28.Financialincentives
29.Rewardsand
recognition
30.Customerfocus
31.Competitiveinsight
32.Businesspartnership
33.Governmentand
communityrelations
34.Topdowninnovation
35.Bottomupinnovation
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36.Knowledgesharing

37.Capturingexternal

ideas
The questionnaire was developed into two types of instruments based on OHI model as describes
above. The first type is about health outcomes which ask about respondents extent to which they
agree.ThisquestionnaireconsistofnineelementsofOHIwhichhasfivepossibleresponseasfollows:

Table2.HealthOutcomesScale

LikertScale
PossibleAnswer
1
Stronglydisagree
2
Disagree
3
Neutral
4
Agree
5
Stronglyagree

The second type is about organizational health practices that are consist of 37 practices which
areasks the respondents how often the practices are demonstrated at their organization.
Respondentsareaskedtheextenttowhichitistrueoftheirorganizationwherethereare5possible
responsesasfollows:

Table3.OrganizationalPracticeScale

Likert
PossibleAnswer
Scale
1
Never
2
Seldom
3
Sometimes
4
Often
5
Always

Thequestionnaire isrepresented into 48itemsthataccommodatebothhealthoutcomes (9items)

andorganizationalhealthpractices(39items).Theorganizationalhealthpracticeshave37variables
that interpreted into 39 statements in the questionnaire. There are 36 variables represented 36
statements and there is one variable people performance review that represented three
statements. People performance review represented into three statements due to its description
couldnotberepresentedinsinglestatements.Characteristicoftherespondentsarethepermanent
employeeswhohaveastrategicpositioninthecompanysuchas,DivisionHead,DepartmentHead,
SectionHead,StaffandYoungStaff.PT.BioFarmahasfivedirectoratesthatconsistof24divisions
where there are 489 people that meet that respondents characteristic. As much as 115
questionnairecopiesofrespondentsvalidtobeanalysis.Therespondentsparticipatedareshowedas
follows:
1.DivisionHead(9)
5.YoungExpert(5)
2.DepartmentHead(17)
6.YoungStaff(16)
3.SectionHead(31)
7.Staff(26)
4.MediumExpert(8)

E. AnalysisofBusinessSituation
KellerandPriceexplainedintheirbookthatwhenanorganizationsetsaspirationsforitshealththat
areasclearandexplicitasthoseforitsperformance,itsignificantlyincreasesitschanceofachieving
a successful transformation (2011:58). McKinsey research indicates that organizations need to
achieveathresholdlevelofhealthacrossallnineelementsoforganizationalhealth.Specifically,the
organizations need to be above the bottom quartile on each of the 37 practices that drive the
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outcomesontheseelements.Intheotherwords,anorganizationmustbeabovethethresholdlevel
of health on all 37 of the management practices defined in the survey. The threshold level of the
bottom quartile is 1,25. The research has shown that organizations do not need to excel in every
aspectofhealth.Theyfoundthatacompanythatisinthetopquartileforsixormorepracticehas
80%likelihoodofbeinginthetopquartileforoverallhealth,whichinturndrivessuperiorbusiness
performance.Sothehealthminimumstandardisabovethebottomquartileonallpractices,butthey
needtohavesixpracticesatthetopquartiletoachieveexcellentorganizationalhealth.

Thereare fourrecipes thatcanbe used as foundationtobuild theexcellent organizational health.

Therecipesarelabeledasarchetype.Thefourarchetypesareleadershipdriven,executionedge,
marketfocus,andknowledgecore.
Afterfilteringthetopquartile,thenitneedstobesortedfromthebiggestmeanvaluetothesmallest
to find out what is the strength priority practices of PT. Bio Farma (Persero).There are 13 top
practicesthatarespreadin3differentarchetypesasfollow:
1. Leadershipdriven,thereare5practicesfitandhasthehighestscore,193.Thepracticesare:
Openandtrusting,Performancecontract,Operationallydiciplined,Operationalmanagement
andConsultativeleadership.
2. Knowledge core, there are 3 practices fit and has score102.The practices are: Role clarity,
Performancecontract,Professionalstandard
3. Execution edge, there are 3 practices fit and has the lowest score, 73. The practices are:
Creativeandentrepreneurial.Talentdevelopment.Topdowninnovation.
a. HealthAspiration
Thequestionnaireresultfoundthatallof37itemspracticesofPT.BioFarmaareabovethebottom
quartile(1,25)andthereare13itemsarelayingonthetopquartile(above3,75).ItismeanthatPT.
BioFarmahasmettherequirementconditionofhealth.
Leadership driven reached the highest score and become as the dominant archetype in PT. Bio
Farma which mean the company strength. Keller and Price also mention at their finding, that it is
harder for an organization to change its archetype than to go from unhealthy to healthy within its
archetype(2011:71).ItmeansthateasierforPT.BioFarmatobeasustainableexcellencecompanyby
doingtheleadershipdrivenarchetyperatherthanhavetomovetotheotherarchetypes.
b. RootCause
Asdiscussedbefore,tobeasustainableexcellenceorganization,PT.BioFarmaneedstoachieve
wellintheirperformanceandhealth.Tomakelimitationinthisresearch,PT.BioFarmaisassumed
has a high performance due to its achievement score of Stateown Enterprise health level
assessment got Health AAA in 2011 and Health AA in 2012. Refers to this assumption, this
researchdiscussionfocustohealthaspectsoftheorganization.
DuetotheOHIresultwherePT.BioFarmahassurpassedtherequirementofhealthyorganization
butnotexcellenceyet,thenitneedstodeterminewhicharchetypethatshouldbechosenanddone
well in the company. This archetype will be the health aspiration to be focused in order enable
peoplereachtheperformanceaspirationoftheorganization.
Asahealthyorganization,PT.BioFarmadoesnothavetochangetheirbusinessstrategy,sothatit
does not need to make a transformational change. The needs of PT. Bio Farma is choosing the
archetypetobefocusedandappliedwellinthecompanyinordertobecomeexcellenceandachieve
theirvision.

3.BusinessSolution

F. AlternativeofBusinessSolution
Refers to the archetypes model, leadership driven has the biggest result of aspiration in PT. Bio
Farma. This archetype is recommended to be applied due to its domination rather than the other
archetypeexecutionedgeandknowledgecoreintheorganization.Asdiscussedattheprevious
chapter, PT. Bio Farma would easier to become organization excellence by keeping on the line of
theirstrengthatleadershipdrivenarchetypemodel.Theydonotneedtomakeatransformational
changewhilestillontheirdominantarchetypetodevelop.
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G. AnalysisofBusinessSolution
To achieve the priority as same as the archetype model, there should be a target to be designed.
ComparingthetargetwithOHIexistingresult,table4showsthegapswithinit.

Table4.LeadershipDrivenGap

No.
LeadershipDriven Mean Target Gap
1
Careeropportunities
3,43
4,25 0,82
2
Open&trusting
4,04
4,04 0,00
3
Performancecontract 3,90
4,00 0,10
4
Inspirationalleaders
3,69
3,90 0,21
5
Strategicclarity
3,48
3,85 0,37
Peopleperformance
3,47
4,00 0,53
6
review
Operational
7
3,76
3,76 0,00
management
Operationally
8
4,21
4,21 0,00
disciplined
Consultative
9
3,87
3,87 0,00
leadership
Consequence
3,29
4,00 0,71
10
management

Targetisdeterminedbyconsideringthepriorityofthepracticesinitsarchetype.Thetargetisusedto
knowthegapbetweenexistingsituationandfutureconditionrecommendedtoPT.BioFarma.Atthis
archetype,therearefourpracticesthatPT.BioFarmahasalreadyachievewellcomparedwiththe
model,whichareopenandtrusting,operationallydisciplinedandconsultativeleadership.Openand
trustingisatthesecondplaceasmatchasthearchetypemodel.Theotherpracticeoperationally
disciplined is at the first place, much higher than the archetype model. It is also happened to
consultativeleadershipandoperationalmanagementwhichareatthefifthandsixth,higherthanthe
archetypemodelwhereplacedatseventhandninth.Itmeansthatthereisnogaptobefilledinthis
archetype.PT.BioFarmaneedstokeepmaintainingthesefourpractices.

Ontheotherside,performancecontractisinPT.BioFarmatoppracticesbutthereisgapwiththe
priority of the archetype model. Its rank fifth are lower than the requirement third, so this
practice also needs development to fill the rank gap. Five practices remain career opportunities,
inspirationalleaders,strategicclarity,peopleperformancereviewandconsequencemanagement
intheleadershipdrivenmodelarelayinginsecondquartile,notinthetoppracticesofPT.BioFarma.
Sothat,itneedsmoreefforttofillthegapsbecausethecompanyhavetoleverageitfromsecond
quartiletothetopquartilefirst.
CareerOpportunities
Thecompanyneedstodevelopthispracticeandmakeittobethehighestpriority.Itisbecause
thehighestpriorityoftheleadersinthisarchetypeistobuildapipelineoffutureleaderbycreating
career opportunities. This archetype guide people in the company to be a leader where the
leadershipislearnedbydoing.PT.BioFarmashouldprovidingcareeranddevelopmentopportunities
inordertomotivateemployee.
Thecareerpathprogramsrecommendedare:
1. IndividualCareerPath
2. InternalMovementProgram
3. JobTenderProgram
Thedevelopmentcareerprogramrecommendedare:
1. ManagementTrainee(MT)
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2. ManagementDevelopmentProgram(MDP)
PerformanceContract
Thefollowingarethestrategytodevelopperformancecontract(JimJoseAssociate,2003):
1. Startwithperformanceexpectationsgoals.
2. Includemilestones.
3. Scheduleaccountabilitiessessions.
Attheendoftheevaluationperiod,individualsandgroupsareevaluatedbasedonhowcloselythe
actualperformancemettheperformancecontract.
InspirationalLeadership
Theinspirationalleaderprogramwillhelpleadersbuildtheleadershipskillstheyneedtoinspire
andmotivatetheirteamstogreatersuccess.Todeveloptheinspirationalleaders,themanagement
has to understanding what qualities that are necessary. Training and development program are
necessarytocreateinspirationalleaderscontinuously.

StrategicClarity
PT.BioFarmashouldensurefivestepsofstrategymanagementprocess(BatemenandZeithaml,
1990:185) internal assessment, environmental analysis, strategy formulation, strategic control
arerunningwelltoachievethestrategicclaritytarget.Themostimportantstepishowtoimplement
andcontrolthestrategy,becausenomatterhowgreatthestrategyplanitmeansnothingifitdoes
notimplementandcontrolwell.
Themanagersshouldcreatestrategymaptodescribethestrategiesformulatobesharedtotheir
people. An integrated system connected to all divisions can be used for sharing all the strategies
information(e.g.,goals,targets)toallemployees.Thestrategiesareaccessibletoallpartiesofthe
companywithsomeprivilegebasedonjobposition.Themonitoringstepisalsodoneinthissystem,
wherethemanagersshouldreportallthestrategiesprogressthroughthesystem.

PeoplePerformanceReview
As part of performance management system, this practice are strongly related to performance
contract practice. The deficiency in recent appraisal system can be enhanced by using the result
approach. The result approach focuses on managing the objective, measurable results of a job of
workgroup.
The subjectivity can be minimized from the measurement process, relying on objective,
quantifiable indicators of performance where the result are the closest indicator of ones
contributiontoorganizationaleffectiveness.
Throughthispractice,PT.BioFarmashouldhas:
1. Peopleperformanceassessmentprogram
2. Peopleperformancereview
3. Individualappraisal
ConsequenceManagement
Consequence management program is linking rewards and punishment to individual
performance. Consequence management practice is divided into positive consequence (rewards,
incentiveandrecognition)andnegativeconsequence(punishment).Anappropriateconsequenceis
whentheemployeesachievetheirperformancecontract,thecompanypraise,encourage,recognize
andrewardthem.Ontheotherhand,whentheyarenotdoingwhattheycommittedinperformance
contract, the company gives them negative consequence and engages them in a conversation to
understandwhyprogresshasnotbeenmade.
PT. Bio Farma has to ensure the rewards and punishments are given as the objective
consequencesofindividualperformance.Itistheessentialofconsequencemanagementpractice.

ExpertJudgement
Tovalidatethebusinesssolutionrecommendation,authorconductedinterviewanddiscussionto
managersfromHumanResourcesdivisionandseveralseniormanagersinPT.BioFarma.

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4. ConclusionandImplementationPlan
H. Conclusion
Thereareseveralpointstobeconcludedinthisthesisresearch:
PT. Bio Farma is measured as a healthy organization based on Organization Health Index (OHI)
model.
The highest score of management practices PT. Bio Farma is operationally discipline and the
lowestisemployeeinvolvement.
PT. Bio Farma has 13 management top practices recognized as the strength spread into 3
archetypesmodelleadershipdriven,executionedge,knowledgecorewherethedominantis
leadershipdriven.
PT. Bio Farma should apply and done well the leadership driven archetype to be a sustainable
excellenceorganizationinthefuture.
TherearesixmanagementpracticesinPT.BioFarmathatneeddevelopmentandfourpractices
needtokeepmaintaining.Thesixmanagementpracticesneeddevelopmentare:
1. Careeropportunities
2. Performancecontract
3. Inspirationalleaders
4. Strategicclarity
5. Peopleperformancereview
6. Consequencemanagement
PT. Bio Farma has validated the result and agreed to consider implement the business solution
recommended.
PT. Bio Farma should conduct the OHI survey again after one year implementation of the
program.Itpurposestoevaluateandmeasuretheprogrameffectiveness.
I. Implementationplan
Aftervalidatedthebusinesssolutionrecommendation,theimplementationplanoftheprograms
areshowedattablebelow:

Table5.ImplementationPlan

Leadership Programto
No
PIC
Time
driven
develop
Careerpath
1.Individual
careerpath
Oct
TM
2013
2.Internal
Career
movement
1
opportunitie
3.Jobtender
s
Development
Sept
Management
KM
2013
Development
Program(MDP)
Oct
Performanc Performance
PM
2
2013
econtract
contract
1.Assessment
program
People
Oct
2.Performance
PM
3
performanc
2013
review
ereview
3.Performance
appraisal

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No

Leadership
driven
Consequenc
e
managemen
t

Programto
develop

PIC

Time

Consequenceto
individual
performance

PM

Oct
2013

KM

Jan
2014

CS,
OD,
IT

Oct
2013

1.Training
Inspirational program
leaders
2.Development
program
Implementing
Strategic
Strategic
clarity
Management
Process

PersoninCharge(PIC)
TM : TalentManagementDepartment
PM : PerformanceManagementDepartment
KM : KnowledgeManagementDepartment
OD : OrganizationDevelopmentDepartment
CS : CorporateStrategyDivision
IT : InformationTechnologyDepartment

Budgeting
Budgetingisneededforproposingtheprogramsbudgetthathavenotallocatedin2013.Careerpath,
performance contract, people performance review and consequence management already have
allocatedthebudgetin2013.TheseprogramsareplannedtobefinishedatSeptemberandwillbe
implementedatOctober2013.TheotherprogramsMDP,inspirationalleadersandstrategicclarity
havenotallocatedthebudgetin2013,sothattheseprogramneedtosetbudgetingtobeproposed
in2014.
Socialization
Socialization isnecessary forall programproposed.Itneedstobeunderstoodwelltoall peoplein
entire company to meet the objectives of the programs. The PICs of the programs have minimum
duration onemonthbefore implementationtoensurethesocialization is received and understand
welltoalldivisionofPT.BioFarma.

Evaluation
Evaluationistheimportantpartoftheimplementationplan.Theevaluationisdonebyconducting
OHIsurveyattheendof2014.Thissurveywillmeasuretheeffectivenessoftheprogramsandhow
closetheprogramseffectivenesstomeetthetargettobeasustainableexcellenceorganization.

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13th
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18th
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