Human Resource Management

Human resource management (HRM or HR) is the strategic approach to the effective
management of people in a company or organization such that they help their business gain a competitive
advantage. It is designed to maximize employee performance in service of an employer's strategic
objectives. Human resource management is primarily concerned with the management of people within
organizations, focusing on policies and systems. HR departments are responsible for overseeing
employee-benefits design, employee recruitment, training and development, performance appraisal, and
reward management, such as managing pay and benefit systems. HR also concerns itself with
organizational change and industrial relations, or the balancing of organizational practices with
requirements arising from collective bargaining and governmental laws.

Harvard Model

The Harvard Framework for HRM is one of the most significant HR models. It began 1985, when
Richard Walton published an article in the Harvard Business Review called ‘From Control to
Commitment in the Workplace’, which popularized soft HRM as a distinctive approach to managing
human resources. His argument was that effective HRM depends not on strategies for controlling
employees but on strategies for winning employees’ commitment.

The Harvard model proposes that many of the diverse personnel and labor relations activities can
be dealt with under four human resource (HR) categories: employee influence, human resource flow,
reward systems and work systems. These are general issues that managers must attend to regardless of
whether the organization is unionized or not, whatever management style is applied, and whether it is a
growing or declining business.

Employee influence
Employee influence is the question of how much responsibility, authority, and power is voluntarily
delegated by management and to whom. One of the critical questions here is, if management share their
influence, to what extent does this create compatibility of interests between management and groups of
employees? The assumption the authors make is that any influence employees have should be compatible
with management’s purpose and priorities.
Human resource flow

Human resource flow concerns managing the flow of people into, though, and out of the organization.
This means making decisions on recruitment and selection, promotion, termination of employment, and
related issues of job security, career development, advancement, and fair treatment. Managers and
personnel specialists, according to the Harvard model, must work together to ensure that the organization
has an appropriate flow of people to meet its strategic requirements.

Reward systems

Reward systems regulate how employees are extrinsically and intrinsically rewarded for their work.
Extrinsic rewards are tangible pay and benefits: pay, overtime pay, bonuses, profit sharing, pensions,
holiday entitlement, health insurance; and other benefits, such as flexible working hours. Intrinsic rewards
are intangible benefits and are said to strongly influence employees’ motivation, job satisfaction, and
organizational commitment. Intrinsic rewards are rewards from the work itself, such as sense of purpose,
achievement, challenge, involvement, self-confidence, self-esteem, and satisfaction. The Harvard model
recommends that employees should be highly involved in the design of an organization’s reward systems
but observes that final decisions, besides meeting employees’ needs, must be consistent with the overall
business strategy, management philosophy, and other HRM policies.

Work systems

Work systems are the ways in which people, information, activities, and technology are arranged, at all
levels of the organization, so that work can be performed efficiently and effectively.

Policies in these four areas must be designed and applied in a coherent manner because, Beer and his co-
authors argue, HRM is considerably less likely to be effective where policies are disjointed, made up of
odd combinations of past practices, and are ad hoc responses to outside pressures. The four policy areas
must satisfy the many stakeholders of the enterprise – for example, shareholders, employees, customers,
suppliers, communities, trade unions, trade associations, and government. Employees are major
stakeholders of the enterprise and it is the responsibility of managers to establish systems that promote
employee influence. Some people would say that managers do not consider enough how to facilitate
employee influence: indeed, Beer et al. claim that, of the four issues discussed, employee influence is the
central feature of an HR system.

A further recommendation of the Harvard model is that, when making HRM policy decisions, managers
should consider the ‘four Cs’: commitment, competence, congruence (compatibility), and cost-
effectiveness. That is, managers should ask to what extent the policies they implement will: enhance the
commitment of people to their work and the organizations; attract, retain, and develop people with the
needed competence; sustain congruence (compatibility) between management and employees; and be
cost-effective in terms of wages, employee turnover, and risk of employee dissatisfaction.

The Harvard model is ‘soft’ HRM because it concentrates attention on outcomes for people, especially
their well-being and organizational commitment. It does not rank business performance or one of the
stakeholder interests – for example, shareholders – as being inherently superior to other legitimate
interests, such as the community or unions. Organizational effectiveness is represented in the Harvard
model as a critical long-term consequence of HR outcomes, but alongside the equally important
consequences of individual and societal well-being. An organization putting this model into practice
would therefore aim to ensure that its employees were involved in their work and were able to participate
in decision making. HRM policies would be developed and implemented to meet employees’ needs for
influence, but within the limitation of having to be consistent with the overall business strategy and
management philosophy.
Harvard HRM in PT Wijaya Karya

PT Wijaya Karya (Persero) Tbk (WIKA) is a construction company owned by the Government of
Indonesia. Starting as a sub-contractor, in the late 1960s WIKA developed into a contractor to install low,
medium and high voltage electricity networks. In the early 1970s, WIKA expanded its business to
become a civil contractor and residential building company.

To WIKA, every employee is considered as human capital. The concept of Human Resources
adopted by the Company recognizes that the quality of employees can be improved by investing in them
and providing them with competencies, knowledge, attributes, and abilities, embodied in the ability to
perform labor to produce economic value through providing a suitable development program. The
leadership factor plays the biggest role in determining the Company’s performance and success. For that
reason, the Company believes that a leader shall be created intentionally through a series of development
programs, trainings or systematic assignments in WIKA’s Advance Leadership Program that provides all
aspects of hard and soft competency in “Wikapratama Learning Center” and “Wikasatrian Leadership
Center”. In addition to the good qualities of the leaders, the best work ethic and values of local wisdom
are also adopted to be applied in the Company’s good governance with the aim to improve the
competitiveness in order to face the global challenge.

HUMAN RESOURCES MANAGEMENT STRATEGY

In 2018, restructuring of the WIKA organization was carried out in response to growing business
needs. To fulfill the required position, fulfillment of Human Resources needs is carried out through
recruitment of new employees, both fresh graduates and experience workers. Recruitment is done through
cooperation with universities (University Career Centers) throughout Indonesia, advertisements, job fairs,
general applications, and collaboration with recruitment agencies. In addition, recruitment is also carried
out through scholarship programs for outstanding students, who after graduation will be given the
opportunity to work at WIKA. The selection process is carried out with several stages intended to get
candidates who are in accordance with WIKA’s culture. WIKA’s basic human character that must be
fulfilled by everyone at WIKA is “Self-Motivated People” which is characterized by Persistent,
Adaptable and Learner traits. The selection process involves independent institutions and recruitment
teams consisting of representatives of all work units, which are intended to maintain the objectivity of the
results of values and uphold the principles of good corporate governance. After going through the
selection process, prospective employees are included in the prospective Employee Training Program
(PPCP) which aims to instill WIKA’s human character and WIKA’s values namely Agility, Caring, and
Excellence (ACE). In addition, it also provides debriefing and an introduction to the basics of WIKA’s
management system in order to help prospective employees adjust themselves to the rhythm of work and
corporate culture. In this program material is given in class, Outbound and On The Job Training
accompanied by the Mentor and making presentations. At the end of the PPCP, prospective employees
must meet the set passing grade to be able to graduate and be appointed as a permanent employee.

CORPORATE VALUE

In 2017, WIKA changed its corporate values from Commitment, Innovations, Balance,
Excellence, Relationship, Teamwork, Integrity (CIBERTI) to Agility, Caring, Excellence (ACE). In
WIKA’s Human Resources management, the corporate values have significance in achieving the Vision
and Mission of the Company. WIKA’s ACE values must be well understood and become a guide for all
WIKA’s people. The elaboration of these values happens in everyday life, are embedded into Corporate
Culture and have become the personality of WIKA and the Company’s brand image.
COMPETENCY DEVELOPMENT COSTS

Throughout 2018, WIKA has realized the cost of education and training for employees amounting to
Rp13.92 billion, a figure which increased 17% compared to the realization of the cost of education and
training in 2017.

CAREER DEVELOPMENT POLICY AND IMPLEMENTATION

Human Resources Development

To prepare employees for the development program, the Company observes the employees’
career development through coaching results from work assessments and competency evaluations, and
these drive the training needs in accordance with actual operational conditions. In addition, the Company
determines the development program composition of hard and soft competency corresponding with
applicable job title position. For staff level, hard competency portion is larger than soft competency. The
higher the structural position and expertise, the lower the hard competency composition compared to soft
competency. The development syllabus is adjusted to the vision, mission, long-term plan, WIKA’s
Human Resources fast track development, business dynamics as well as competency requirements of job
titles, and self-expertise, either from soft or hard competency.
WIKA Talent Development Process

Since 2015, WIKA has had a Talent Development Bureau specifically to manage employees with
superior Performance and Competence. In the Management of Employee Talents, WIKA’ talent
development path is

1. Talent Identification & Selection: WIKA’s identification process on all WIKA staff performance and
competency. This can be seen in WIKA’s Talent Box.

2. Talent Development: WIKA’s systematic and continuous development process for employees who are
included in the Talent program.

WIKA has 5 categorized/cluster positions Senior Manager, Middle Manager, Junior Manager, Supervisor,
and Staff. WIKA prepares a “dik-duk” method, meaning employees are educated first before occupying
their position. This method is expected to more prepare employees for the task before rotation and
promotion. At the Middle Manager level, WIKA not only prepares the domestic program, but also the
overseas program, as a benchmark for knowledge and skills.
EMPLOYEE ENGAGEMENT

WIKA applies the principle of “More for More” when carrying out its remuneration policy for
employees. Every employee has set cascade duties and responsibilities as Key Performance Indicators
(KPI). KPIs will be reviewed and formulated each year in accordance with the stages of achieving the
longterm plan towards the Company’s Vision achievement. Employee targets are set out in a work
agreement and are assessed each semester. Target achievement forms part of the year-end appraisal and
used as a review for remuneration.

In addition to the results/performance achievement (EK), the remuneration review also considers
the Competency Evaluation (PK) results and psychological assessment conducted for every employee.
The EK and PK resulted are weighted, with EK representing “ability” and PK representing
“results/performance”. Since 2014 the Company has restructured the payroll system, using grading. With
this system, the Company can measure the level of employee income considering fair internal and
external aspects. The EK and PK assessment mechanism using multi-rater is calculated, and the results
are communicated to the employee for feedback and to establish agreed upon improvements. The
Company also shows its appreciation to employees who have devoted themselves over time, through the
Satya Karya awards, which are presented annually during the company’s anniversary celebrations.

CONCLUSION

WIKA utilizes the Harvard model to a significant result. This is supported by the result of the
Employee Engagement Survey. Employee engagement surveys are conducted by WIKA periodically to
measure employee engagement level. The results of this Employee Engagement Survey, in addition to
describing the level of employee engagement, is also used as a feedback for the programs being run by
the Company and input for preparation of subsequent programs. WIKA employee level engagement
target is set at 10% above other companies’ average engagement level in Indonesia.
 Aon Hewitt's research indicates that organization with Engagement Scores above 73%
consistently deliver better business result. Employee Engagement levels below 51% tend to erode an
organization's ability to deliver on its objectives.