The HRM Practices of Indonesian Medium-Sized Companies in The Tex PDF

Southern Cross University
ePublications@SCU
Theses
2013
The HRM practices of Indonesian medium-sized

companies in the textile industry in Java
Asminah Rachmi
Publication details
Rachmi, A 2013, 'The HRM practices of Indonesian medium-sized companies in the textile industry in Java', DBA thesis, Southern
Cross University, Lismore, NSW.
Copyright A Rachmi 2013
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THE HRM PRACTICES
OF INDONESIAN MEDIUM-SIZED COMPANIES
IN THE TEXTILE INDUSTRY IN JAVA
By
ASMINAH RACHMI
BSc of Management, Brawijaya University, Indonesia

MBA, Monash University, Australia
Submitted to
The School of Business
Southern Cross University, Australia
In fulfilment of the requirements for the degree of
Doctor of Business Administration
January 2013
STATEMENT OF ORIGINAL AUTHORSHIP
I certify that the substance of this thesis has not been submitted for either in whole or in part
for any degree.
I also certify that to the best of my knowledge and belief, any help received in preparing this
thesis and all kinds of source used have been acknowledged in this thesis.
Signature :____________
Asminah Rachmi
Date : 28 January, 2013
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java i
Dedication
This thesis is dedicated to the memory of my late parents - my late father, alm. bapak.
Mochamad Sudjai bin Ali Zuhdi, and my late mother, almh. Ibu Siti Fatichah binti
Mochamad Ishak. I have a deep appreciation for both of them for their dedication to
providing me with a great childhood and for encouraging me to realise my full
potential.Their love and encouragement has enabled me to pursue my study and complete
this thesis for which I thank them with all my heart.
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java ii
ACKNOWLEDGEMENTS
In the name of Allah, the Most Gracious, the Most Merciful
First and foremost, I would like to extend my greatest gratitude to God, Allah SWT. Only His
will helped me to complete this thesis. It was a long and tiring journey and there was a stage
when I almost gave up.
I would like to express my sincere thanks to the dedicated individuals and organisations that
assisted me throughout each stage of my study. This thesis would not have been possible
without their support and assistance.
I would like to thank the Directorate General of Higher Education of the Ministry of National
Education of the Republic of Indonesia for sponsoring my doctoral study through the Higher
Education Scholarship program.
I would also like to thank Politeknik Negeri Malang (Polinema) for allowing me to pursue my
DBA degree. Thanks also go to the Faculty of Business, Southern Cross University for
accepting me into the DBA program.
I wish to express my heartfelt gratitude to my supervisor Associate Professor Michelle

Wallace for her encouragement, inspiring ideas, thoughtful suggestions, priceless critical
comments, and professional guidance offered throughout my doctoral journey.
I would also like to thanks to Dr. Don McMurray and Dr. Margo Poole for their invaluable
insights regarding the quantitative data analysis. My particular thanks are also extended to Dr.
Leonie Jennings for contributing her knowledge and insights about research paradigms.
I am very grateful to the DBA staff, the library staff, the administrative staff, the International
Office staff, and IT staff at Southern Cross University. Their dedication created a supportive
environment and an academic community.
I owe a debt of gratitude to the four enterprises that dedicated time and support in the first
stage of my data collection, and to all respondents who participated in the interviews and the
questionnaire survey, they provided invaluable information and enabled the findings of this
study to be grounded on a firm and realistic basis.
I would like to acknowledge the support and cooperation of my family who have provided
invaluable assistance, support and prayer throughout the course of my study. In particular, I
would like to extend my sincere appreciation to Siswandari, Ulfah Juniarti, Siswanto,
Susilaningsih, Mahmud Yunus, Umi Zakiyah, Ahmad Nurdin Aulia, and Mochamad
Iqbal. Their limitless patience and understanding were critical in completing the thesis.
Finally, I would like to thank my fellow DBA alumni and candidates – to Nama Polum,
Yootanat Boonyachai, Sumeth Tuvadara, Mahmud Hassan and Yahya Al Anshari, who
shared this journey, and special thanks to my colleague friends - to Joni Dwi Pribadi and Eny
Widiyowatie who helped me with administrative works in Indonesia and lastly, thanks to my
tweed friends – to Hefni Soleha, Dyah Haley, Teddy Agung, Johan and Tema
Nadesalingam, who supported me throughout my stay in Tweed Heads.
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java iii
Abstract
This exploratory research investigates human resource management (HRM) practices in

medium-sized enterprises in the textile industry in Java, Indonesia. The three specific
research questions are: ‘What HRM practices in terms of recruitment and selection,
training and development, remuneration and rewards, performance appraisals and
industrial relations are implemented in medium-sized textile companies in Java?’, 'Do
Javanese cultural influences have an impact on the way HRM is practised in medium-sized
textile companies in Java?', and ‘What are the relationships between HRM practices in
medium-sized textile companies in Java and perceptions of company performance?’
Small and medium-sized enterprises (SMEs) play an important role in Indonesian

economic development. They contribute the greatest part of national GDP, are the primary
source of employment, support export growth and help the development of
entrepreneurship, industry and the rural economy. SMEs in the textile industry supply the
domestic market and for SMEs producing batik products, they support the existence of
batik as an Indonesian heritage. This study focuses on companies that are medium-sized
with between 20 and 99 employees or with assets of between US$500,000 and US$1
million.
The literature review describes HRM in Western and Indonesian contexts and also possible
Indonesian cultural influences on HRM practices in Indonesia. Previous research has been
dominated by studies on the adoption of sophisticated HRM practices by multi-national
companies and attention is mostly focused on the influence of culture on the HRM
strategies of big businesses. The literature review identifies a gap in the knowledge about
the HRM practices of medium-sized enterprises in the Asia Pacific especially Indonesia.
Recent research on the development of Indonesian HRM and has focuses on the adoption
of strategic HRM practices as a course of action for solving companies’ problems after the
Global Financial Crisis. However, these studies have not addressed the development of
HRM practices in Indonesian medium-sized enterprises in the textiles industry.
This research uses a mixed methods approach to explore the HRM practices of medium-
sized enterprises in the Textile Industry in Java, Indonesia. The research employs an
exploratory sequential mixed method approach combining case study and survey methods.
The philosophical paradigm of pragmatic realism that underlies the mixed method
approach is examined and justified. Triangulation is enabled through the combination of
case study and survey methods as well as through accessing other data sources such as
company records. The multiple case study method was employed and four companies were
examined. A survey was conducted to test the generalisability of the case-based findings.
The findings of the within-case analysis of each company and the cross case analysis
confirmed that medium-sized proprietary limited (Pty. Ltd.) companies implemented
formal HRM practices while family businesses had more informal practices. The
characteristics of proprietary limited companies that differed from those of family business
became the source of differences in HRM practices that is, formal organisational structures
and clearer job description for each department. Furthermore, national and Javanese
culture had a major influence on the companies’ HRM practices.
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java iv
The case study findings and previous studies from the literature were then used in
designing the questionnaire for the survey. Six hypotheses were also created to examine
the relationships between HRM practices and culture and the company managers’
perceptions of performance. The first data collection yielded 228 responses (a response
rate of 46.5%) and the second data collection which focused on proprietary limited
companies, gathered data from 131 respondents (a response rate of 87.5%). The entire first
survey findings from 228 respondents showed little evidence for the adoption of Western
HRM practices. The disproportionate proportion of the family businesses compared to
proprietary limited companies led to weak statistical results. Separate analysis of the
family businesses (sample size: 147) also showed no empirical evidence of the adoption of
Western HRM practices. However, analysis of the proprietary limited companies sample
(81 respondents) indicated a significant positive relationship between the dependent
variable of perception of company performance and the six independent variables of HRM
practices including culture. This led to the decision to expand the number of proprietary
limited companies in the sample and so additional data gathering occurred.
An analysis of proprietary limited companies using a larger sample (combined data - 209
respondents) confirmed the adoption of Western HRM practices. The correlations between
each of the six independent variables and the dependent variable of perception of company
performance showed positive results.The hypothesis testing was then applied only to the
full sample of proprietary limited companies. The regression analysis generated a model
that predicted company performance based on six independent variables of HRM practices
and culture. The model suggested that four predictor variables (recruitment and selection,
training and development, performance appraisal and industrial relations) significantly
contributed to perception of company performance while the other two predictor variables
(remuneration and rewards; and culture) did not.
Limitations of this study are concerned with the scope of the research which only covers a
sample of firms in the textile industry in Java. HRM practices may be different in other
industries and in other parts of Indonesia. Generalisations are therefore not made.
Implications for practice include supporting family business to adopt more formal HR
practices and record keeping. Finally, the findings of this study make important
contributions to both research and practice. This study has contributed to the body of
knowledge by enhancing our understanding of some medium-sized enterprises in
Indonesia and their HRM practices which were found to be more developed in proprietary
limited companies than in family businesses. This study has also added to the
understanding of relations between the dominant Indonesian-Javanese cultural values and
HRM practices in medium-sized companies in the textile industry.
Keywords: HRM practices, divergence approach to HRM, medium-sized enterprises, Javanese
culture, proprietary limited companies, the family business, textile industry, Java,
Indonesia
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java v
TABLE OF CONTENTS
Statement of original authorship ........................................................................................... i

Dedication ............................................................................................................................. ii
Acknowledgements ............................................................................................................. iii
Abstract ............................................................................................................................... iv
Table of Contents ................................................................................................................ vi
List of Tables ..................................................................................................................... viii
List of Figures ..................................................................................................................... xi
List of Appendices ............................................................................................................. xii
Abbreviations .................................................................................................................... xiii
CHAPTER ONE: OUTLINE OF THE STUDY ............................................... 1

1.1 Introduction ................................................................................................................... 1
1.2 Research Background .................................................................................................... 3
1.3 Research Objectives ...................................................................................................... 6
1.4 Research Focus, Research Question and Hypotheses ................................................... 6
1.5 Justification for the Study.............................................................................................. 9
1.6 Research Methodology ................................................................................................ 11
1.7 Contribution of the study ............................................................................................. 12
1.8 Thesis Outline .............................................................................................................. 12
1.9 Conclusion ................................................................................................................... 14
CHAPTER TWO: LITERATUREREVIEW ........................................... 15

2.1 Introduction ................................................................................................................. 15
2.2 HRM Practices in Business Organisation.................................................................... 18
2.3 Culture in HRM Practices ........................................................................................... 36
2.4 Culture in Indonesian HRM Practices ......................................................................... 44
2.5 HRM Practices in Indonesian Medium-sized Companies ........................................... 51
2.6 Indonesian Textile Industry ......................................................................................... 55
2.7 Research Gap ............................................................................................................... 63
2.8 Research Focus, Research Questions and Hypotheses ................................................ 64
2.9 Conclusion ................................................................................................................... 66
CHAPTER THREE: RESEARCH METHODOLOGY ......................... 68

3.1 Introduction ................................................................................................................. 68
3.2 Quantitative, Qualitative and Mixed Methods ............................................................ 70
3.3 Choice of Paradigms.................................................................................................... 71
3.4 Mixed Method Approach............................................................................................. 76
3.5 Case Study Design ....................................................................................................... 80
3.6 Survey Design ............................................................................................................. 94
3.7 Reliability and Validity of the Methods Selected...................................................... 105
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java vi
3.8 Data Analysis ............................................................................................................. 106
3.9 Ethical Consideration ................................................................................................ 109
3.10 Conclusion ................................................................................................................. 110
CHAPTER FOUR: QUALITATIVE DATA ANALYSIS ...................... 112

4.1 Introduction ............................................................................................................... 112
4.2 Within-Case Analysis ................................................................................................ 114
4.3 Cross-Case Analysis .................................................................................................. 144
4.4 Discussion of the Findings ........................................................................................ 152
4.5 Conclusion ................................................................................................................. 158
CHAPTER FIVE: QUANTITATIVE DATA ANALYSIS ................... 163

5.1 Introduction ............................................................................................................... 163
5.2 Data Analysis of the Initial Combined Sample ......................................................... 167
5.3 Family Business Analysis - Initial Combined Sample .............................................. 176
5.4 Proprietary Limited Companies Analysis - Initial Combined Sample...................... 181
5.5 Proprietary Limited Companies Analysis - Combined Data ..................................... 186
5.6 Hypotheses Testing of Proprietary Limited Companies – Combined Data .............. 194
5.7 Multiple Linear Regression Analysis of Proprietary Limited Companies –
Combined Data.......................................................................................................... 196
5.8 Conclusion ................................................................................................................. 200
CHAPTER SIX: DISCUSSION AND CONCLUSION ......................... 202

6.1 Introduction ............................................................................................................... 202
6.2 Discussion of Research Question One....................................................................... 204
6.3 Discussion of Research Question Two ...................................................................... 214
6.4 Discussion of Research Question Three .................................................................... 218
6.5 Implications for Practice............................................................................................ 228
6.6 Contribution of the Thesis ......................................................................................... 232
6.7 Limitations of the Study ............................................................................................ 234
6.8 Suggestion for Further Research ............................................................................... 236
6.9 Conclusion ................................................................................................................. 237
REFERENCES ............................................................................................ 241
APPENDICES ............................................................................................. 260
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java vii
LIST OF TABLES
Chapter 2 Review of the Literature
Table 2.1 Population 15 years of age and over by type of activity 2006 -2010 (in
millions)..................................................................................................... 26
Table 2.2 Population 15 years of age and over by education attainment 2008 -2010
(in millions)................................................................................................ 27
Table 2.3 The number of enterprises by size category 2005 – 2009................. 53
Table 2.4 The number of employees in micro, small, medium and large enterprises
2005-2009.......................................................................................... 53
Table 2.5 Number of enterprises by industrial origin and scale of enterprises 2008 54
Table 2.6 The leading textile exporters 2004-2008........................................ 55
Table 2.7 Indonesian exports of textiles & textile products to top 5 countries 2005-
2009..................................................................................... 56
Table 2.8 Percentage of distribution of GDP at current market prices by industrial
origin (in millions Rp)................................................................................ 56
Table 2.9 Indonesian textile & apparel industries at a glance.................................... 57
Chapter 3 Research Methodology

Table 3.1 Definition of ontology, epistemology and method..................................... 72
Table 3.2 Companies selected as case studies............................................................ 90
Table 3.3 Interview participants’ details.................................................................... 92
Table 3.4 Periods of time for data collection on this research................................... 93
Table 3.5 Measures of recruitment and selection....................................................... 95
Table 3.6 Measures of training and development...................................................... 96
Table 3.7 Measures of remuneration and rewards..................................................... 96
Table 3.8 Measures of performance appraisals.......................................................... 96
Table 3.9 Measures of union and labour relations..................................................... 96
Table 3.10 Measures of culture.................................................................................... 96
Table 3.11 Measures of Firm Performance.................................................................. 97
Table 3.12 Questionnaire development sources........................................................... 99
Table 3.13 Relationship between sample and population sizes using probability
sampling techniques................................................................................... 101
Table 3.14 Guidance to check the validity and reliability of data............................... 103
Table 3.15 Analysis of items of variables of the pilot study....................................... 103
Table 3.16 The four tests for judging the quality of case study................................... 105
Chapter 4 Qualitative Data Analysis
Table 4.1 Summary of the employers’ and employees’ interviews on HRM
practices of Case A.................................................................................... 119
Table 4.2 Summary of the employers’ and employees’ responses on HRM
practices of Case B.................................................................................... 125
practices of Case C.................................................................................... 130
practices of Case D..................................................................................... 134
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java viii
Table 4.5 Summary of interviews on the Javanese cultural influence on the HRM
practices of Case A..................................................................................... 137
practices of Case B..................................................................................... 140
practices of Case C..................................................................................... 141
practices of Case D.................................................................................... 143
Table 4.9 Summary of case comparison of HRM practices...................................... 148
Table 4.10 Summary of cases comparison of the key person who manages and
implements the HRM practices.................................................................. 149
Table 4.11 Summary of Case comparison of the Javanese cultural influence on
HRM practices............................................................................................ 153
Table 4.12 Overall HRM practices and the Javanese culture patterns in proprietary
limited companies and family 160
business..................................................................
Chapter 5 Quantitative Data Analysis
Table 5.1 Mean scores and Standard deviation of variable - initial combined
sample......................................................................................................... 169
Table 5.2 Correlation matrix of variables-initial combined sample........................... 171
Table 5.3 Composite variables - initial combined sample......................................... 171
Table 5.4 The statistical and standard error of skewness-initial combined sample... 172
Table 5.5 The statistical and standard errors of skewness after normality- initial
combined sample........................................................................................ 172
Table 5.6 Correlations of recruitment and selection and performance - initial
combined sample........................................................................................ 173
Table 5.7 Correlations of training and development and performance - initial
combined sample........................................................................................ 174
Table 5.8 Correlations of remuneration and rewards and performance - initial
combined sample....................................................................................... 174
Table 5.9 Correlations of performance appraisals and performance - initial
combined sample........................................................................................ 174
Table 5.10 Correlations of industrial relations and performance - initial combined
sample ....................................................................................................... 175
Table 5.11 Correlations of culture and performance - initial combined sample…...... 175
Table 5.12 Mean scores and Standard deviation of variables - family businesses …. 177
Table 5.13 Correlations of recruitment and selection and performance – family
business………………………………………………………………….. 179
Table 5.14 Correlations of training and development and performance of the family
business…………………………………………………………………. 179
Table 5.15 Correlations of remuneration and rewards and performance of the
family business.......................................................................................... 179
Table 5.16 Correlations of performance appraisals and performance of the family
business...................................................................................................... 180
Table 5.17 Correlations of industrial relations and performance of the family
business.................................................................................................... 180
Table 5.18 Correlations of culture and performance of the family business.............. 180
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java ix
Table 5.19 Mean scores and Standard deviation of variables of 81 proprietary
limited companies – initial sample.................................................. 182
Table 5.20 Correlations of recruitment and selection and performance – sample of
78 proprietary limited companies.......................................................... 184
Table 5.21 Correlations of training and development and performance – sample of
78 proprietary limited companies........................................................ 184
Table 5.22 Correlations of remuneration and rewards and performance – sample of
78 proprietary limited companies........................................................ 185
Table 5.23 Correlations of performance appraisals and performance – sample of 78
proprietary limited companies................................................................... 185
Table 5.24 Correlations of industrial relations and performance – sample of 78
proprietary limited companies............................................................ 185
Table 5.25 Correlations of culture and performance – sample of 78 proprietary
limited companies ............................................................................. 186
Table 5.26 Mean scores and Standard deviation of variables of proprietary limited
companies combined sample..................................................................... 188
Table 5.27 Pattern Matrix of proprietary limited companies combined sample.......... 190
Table 5.28 The summary of composite variables with the items of proprietary
limited companies combined sample................................................. 191
Table 5.29 The statistic and standard error of skewness before normality-
proprietary limited companies combined sample............................ 191
Table 5.30 The statistic and standard error of skewness after normality of
proprietary limited companies combined sample............................... 192
Table 5.31 Correlations of recruitment and selection and performance of
proprietary limited companies combined sample.............................. 192
Table 5.32 Correlations of training and development and performance of
Table 5.33 Correlations of remuneration and rewards and performance of
Table 5.34 Correlations of performance appraisals and performance of proprietary
limited companies combined sample.............................................. 193
Table 5.35 Correlations of industrial relations and performance of proprietary
limited companies combined sample............................................. 194
Table 5.36 Correlations of culture and performance of proprietary limited
companies combined sample......................................................... 194
Table 5.37 Model summary of proprietary limited companies combined sample.... 197
Table 5.38 ANOVA of proprietary limited companies combined sample.......... 197
Table 5.39 Coefficients of proprietary limited companies combined sample..... 198
Chapter 6 Discussion and Conclusion
Table 6.1 The summary results of the accepted hypothesis 219
Table 6.2 The summary results of the rejected hypothesis 219
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java x
LIST OF FIGURES
Figure 1.1 Structure and map of Chapter 1.................................................................... 2

Figure 1.2 HRM practices and perception of company performance relationship
model............................................................................................................. 9
Figure 2.2 The growing number of companies in the textile industry 2005-2009........ 58
Figure 2.3 Growing manpower in the textile industry in period of 2005-2009............. 58
Figure 2.4 Composition of textile industry 2009............................................................ 59
Figure 2.5 Distribution of Indonesia textile industry by region 2009............................ 59
Figure 3.2 Exploratory design: taxonomy development model (QUAL emphasised).... 79
Figure 5.2 The normal P-P (probability) Plot of Regressions Standardised
Residual......................................................................................................... 198
Figure 5.3 The Scatter Plot of Regressions Standardised Residuals.............................. 199
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java xi
LIST OF APPENDICES
Appendix A1 Information sheet................................................................................ 261

Appendix A2 Informed consent to participate in the research project...................... 263
Appendix A3 Human Resource Ethics Committee (HREC) Notification................. 266
Appendix A4 Interview guide for the owner/managers........................................... 268
Appendix A5 Interview guide for the employees..................................................... 270
Appendix B1 Observation photos of Case A ............................................................ 272
Appendix B2 Observation photos of Case B............................................................. 273
Appendix B3 Observation photos of Case C............................................................. 274
Appendix B4 Observation photos of Case D............................................................. 275
Appendix C1 The questionnaire for pilot Survey...................................................... 276
Appendix C2 Covering letter to Indonesian reviewers............................................. 283
Appendix C3 Covering letter to survey respondents................................................. 286
Appendix C4 The questionnaire for Survey............................................................... 288
Appendix C5 The questionnaire for survey (Indonesian language).......................... 294
Appendix D1 Demographic of the initial combined sample – 228 respondents...... 301
Appendix D2 Descriptive of HRM practices of the initial combined sample – 228
respondents.......................................................................................... 302
Appendix D3 Reliability and matrix correlations of the initial combined sample –
228 respondents................................................................................ 303
Appendix E1 Demographic of the family businesses – 147 respondents................ 307
Appendix E2 Descriptive of HRM practices of the family businesses – 147
respondents.......................................................................................... 308
Appendix E3 Reliability and matrix correlations of the family businesses – 147
respondents.......................................................................................... 309
Appendix E4 Preliminary analyses of the family business– 147 respondents........ 313
Appendix F1 Demographic of proprietary limited companies – 81 respondents..... 315
Appendix F2 Descriptive of HRM practices of proprietary limited companies – 81
respondents.......................................................................................... 316
Appendix F3 Reliability and matrix correlations of proprietary limited companies
– 81 respondents................................................................................ 317
Appendix F4 Preliminary analyses of the proprietary limited companies – 81
respondents........................................................................................... 321
Appendix G1 Demographic of proprietary limited companies combined sample –
209 respondents........................................................................... 323
Appendix G2 Descriptive of HRM practices of proprietary limited companies
combined sample – 209 respondents.......................................... 324
Appendix G3 Reliability and Matrix correlations of proprietary limited companies
combined sample – 209 respondents........................................... 325
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java xii
ABBREVIATIONS
ACFTA ASEAN-China Free Trade Agreement

ASEAN Association of Southeast Asian Nations
BPS Indonesia Centre of Statistic Board
CEO Chief Executive Officer
GDP Gross Domestic Product
HRM Human Resource Management
JAMSOSTEK Social security insurance
K3 Occupational Health and Safety
OJT On-the-job Training
PCA Principal Component Analysis
PELITA Five years development program
PPH Income Tax Law
PPBI Centre for Working Class Struggles
PT Limited company
RBV Resource Based View
SBSI Indonesian Prosperous Workers Union
SMEs Small Medium Enterprises
SPN National Labour Union
SPBI Indonesian Labour Movement Union
SPSI Indonesian Trade Union
TPT Textile and Textile Product
UKM Small medium enterprises
UMR Regional Minimum Wage
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java xiii
Chapter 1: Introduction
CHAPTER ONE
OUTLINE OF THE STUDY
1.1 Introduction
Chapter 1 provides the foundations for this research. The purposes of the chapter are to
describe the factors that influenced the formulation of the approach used in this study; to
clarify definitions and to outline the structure of the thesis. This chapter has nine sections.
Section 1.1 is an introduction. Section 1.2 provides a background to the research, and
Section 1.3 discusses the research objectives. Section 1.4 outlines the research problem
and research questions. Section 1.4 justifies the research. A brief description of the
research methodology is set out in Section 1.6. Definitions of terms used in this study are
presented in Section 1.7. Section 1.8 presents the thesis outline. Finally, Section 1.9
presents the conclusion.
Figure 1.1 provides a visual outline of the structure and map of Chapter 1.
The HRM practices of Indonesian medium-sized companies in the textile industry in Java 1
Figure 1.1 Structure and map of Chapter 1
1.1 Introduction
1.2 Research Background
1.3 Research Objectives
1.4 Research Focus, Research

Questions and Hypotheses
1.5 Justification for the Study
1.6 Research Methodology
1.7 Contribution of the study
1.8 Thesis Outline
1.9 Conclusion
1.2 Research Background
Indonesia is one of the Southeast Asian countries that is continuing to rebuild its economy
following the Asian Economic Crisis of 1997. More than a decade after the crisis, the
recovery process still continues, however the economic outlook is still difficult to forecast,
especially in the light of the 2008-2009 Global Financial Crisis. This crisis has hit almost
all Indonesian companies including small and medium-sized enterprises. Some large
companies have successfully overcome the crisis by adopting new strategies and making
significant changes to their business orientation and their HRM practices, but many
companies are still struggling with the effect of the 1997 and 2008 economic crises and
need to further develop strategies to keep themselves in business.
Habir and Larasati (1999) studied three large Indonesian organisations which were
overcoming the 1997 crisis and improving their future competitiveness by developing
specific organisational strategies. Their study suggests that the key to dealing successfully
with such a crisis lies in the strategic models developed by these organisations including
the global strategic model, the long-term national strategic model and the empowerment
model. The study also suggests that to overcome crises, change is needed not only to
business strategies but also to HRM policy and practices. Furthermore, in the global
environment HR managers need to apply strategic HRM as a means of strengthening
company effectiveness and competitiveness (Nankervis & Putra, 2006).
Habir and Larasati (1999) argue that applying HRM practices in Indonesian organisations
requires great effort since Indonesian cultural characteristics do not easily accommodate
such a change. They claim further that “However, they offer intriguing management
possibilities in a developing country context where cultural and political assumptions
could discourage ideas such as empowerment, participation, and transparency” (p. 561),
therefore implies the more nuanced argument that "...participation, bottom-up decision
making, local knowledge creation, and incentive-based HRM strategies could apply
equally well to Indonesian business entities." (p. 550) and that the challenge "to identify
those cultural traits that could help provide competitive advantage and to integrate them
effectively into the workplace." (p. 549). In addition, Nankervis and Chatterjee (2006)
claim that Indonesian HRM processes and practices as well as those of other Asian nations
are still influenced to varying degrees by strong cultural and religious traditions which
favour paternalistic managerial styles and collectivist work groups rather than individual
contracts and regulated employment protection. Nankervis and Chatterjee (2006) argue
further that these nations have adapted and modified their HRM practices according to
local historic, political, economic and social circumstances, and varying degrees of
exposure to foreign perspectives.
Prior studies of HRM practices in Indonesia focus on large companies and pay little
attention to Indonesian SMEs (Habir & Larasati, 1999; Hartono, 2010; Sitalaksmi & Zhu,
2010; Sutiyono, 2007; Thoha, 2005). Therefore, there is limited information available on
the development of HRM practices in Indonesian SMEs. In fact, Indonesian SMEs play an
important role in economic development. They contribute more to Indonesia's GDP than
any other sector, and they are the primary source of employment (Tambunan, 2009). They
also support export growth and the development of entrepreneurship, industry and the rural
economy (Harvie, 2004). Indonesian SMEs account for more than 90% of all firms and
thus they are the biggest source of employment, providing livelihood for over 90% of the
country’s workforce, especially women and the young (Tambunan et al., 2008).
SMEs in the textile industry in Indonesia supply the domestic market with textile products
as they still capture a large share of the national market (Indonesia, 2005). Hill (2001)
claims that SMEs in the Indonesian textiles industry operate according to a clustering
model that is believed to have a significant impact on SMEs’ efficiency. Furthermore, they
contribute to the growth of manufactured exports. Hill (2001) argues that SMEs’ share of
the textile market is up to 20%. However, these SMEs are influenced by the fluctuations
of the Indonesian economy and changes to government policies. Most of them rely on
government protection and policies related to textile import.
Small and medium-sized enterprises appear to have suffered due to the Indonesian
monetary crisis of 1997. Many SMEs collapsed as they could not afford the high price of
raw materials and high production costs. However, some other SMEs survived as they
were more flexible and less burdened by expensive overheads (Hill, 2001). Small and
medium-sized enterprises also experienced a huge decrease in their number in 2005 and
2006, but their numbers increased gradually from 2006 to 2009. From 2006 to 2009, the
number of employees in small enterprises increased gradually while medium-sized
enterprises experienced fluctuations in their numbers of employees (Tambunan, 2009).
The majority of SMEs in Indonesia are family businesses with low levels of education and
limited management skills and knowledge on the part of the owners (Hafsah, 2004). The
owners appear to manage all of the operations including performing management functions
such as finance, marketing, personnel and production. There is also another category of
company. These are proprietary limited (Pty. Ltd.) companies or companies which are
partnerships that have more formal organisational structures and higher levels of education
among their managerial employees. However, the problems common to all SMEs are a
lack of capital, marketing difficulties, low technological capabilities, long and costly
bureaucratic procedures, and a lack of management skills (Tambunan et al., 2008). As their
focus is on improving their business by overcoming problems such as market access
difficulties and lack of financial access, they pay little attention to employees. Most recent
studies of SMEs focus on problems such as capital access, technology, and marketing. In
many small businesses functional areas, such as finance, marketing and production; seem
to take precedence over HRM (McEvoy, 1984).
There are very few previous studies on the HR practices of SMEs in Indonesia. De Kok
and Uhlaner (2001) claim that small firms usually face impediments to structuring HRM
because they lack the time, money and employees to formalise their HR practices. They
might lack HR expertise, and are often badly informed about the possible impact of HR
practices, because they lack professional HR staff. Further, there is evidence that the
ownership structures of SMEs determine the nature of HRM practices and policy
implementation and HRM outcomes (Mazzarol, 2003)
General observation suggests that some SMEs do attempt to make their HR practices more
professional; however, they still have to adjust to their limitations and culture. It appears
culture still influences the HRM practices of Indonesian companies (Habir & Larasati,
1999). According to the divergence theory of HRM, the need for firms to standardise
practices and policies as well as take culture into consideration will lead to different
implementation of HRM practices (Nankervis & Chatterjee, 2006). SMEs in the textile
industry, especially batik companies, are managed under the strong influence of Javanese
culture (Elliott, 2004). This might relate to the long history of the batik industry in Java.
Some characteristics of Javanese culture have been recognised as counter-productive to the
adoption of more Western management practices and HRM practices (Zifirdaus &
Nankervis, 2003). Given these facts, Indonesian HRM practices appeared to be more
divergent than those in Western countries.
Several studies present empirical evidence on the relationship between HRM practices and
organisational performance (Delaney & Huselid, 1996; Wright et al., 2003). Some similar
studies have been conducted for SMEs in Vietnam and China (King-Kauanui et al., 2006;
Zheng, 2001). However, there is a little evidence that similar research has been conducted
in Indonesian SMEs.
1.3 Research Objectives
This study has three main objectives. The first objective is to conduct an in-depth
investigation into the implementation of HRM practices in medium-sized enterprises in the
textile industry in Java. The above introduction is a brief overview of HRM practices in
Indonesia and the factors that research reveals to be the barriers to improving HRM
practices within Indonesian SMEs. Expanding on prior research, this study explores the
implementation of HRM practices in Indonesian medium-sized enterprises. It also takes
into consideration the Indonesian and Javanese cultural influences on HRM practices of
Indonesia medium-sized enterprises. It examines whether national and ethnic sub-cultural
contexts significantly affect human resource management in Indonesia.
The second objective is to test for a possible relationship between HRM practices and
perception of company performance. The testing of the hypotheses developed to explore
this question will determine whether HRM practices are seen to have a significant
influence on company performance in Indonesian medium-sized companies.
The third objective is to develop a conceptual model to measure the effect of HRM
practices on the performance of Indonesian medium-sized companies in the textile
industry in Java. The aspects of HRM that are examined are: recruitment and selection,
training and development, remuneration and rewards, performance appraisals and
industrial relations. Through this model, the question of which aspects of HRM practices
contribute the most to company performance can be investigated.
1.4 Research Focus, Research Question and Hypotheses
Based on the review of the literature, the following research problem, research questions
and hypotheses were developed.
1.4.1 Research focus
Formal HRM practices are likely to be implemented by large enterprises rather than SMEs
(De Kok & Uhlaner, 2001). As was discussed, previous studies on HRM practices in
Indonesia focus mainly on larger companies rather than SMEs especially medium-sized
companies. Therefore, this study explores the adoption and the implementation of Western
HRM practices in medium-sized companies of textile industry in Java. As divergence
theory of HRM takes cultural differences into consideration, the influence of Javanese
culture on the HRM practices of medium-sized companies were also examined. The
analysis of the convergence - divergence dichotomy in Asian countries including Indonesia
by Chatterjee and Nankervis (2007b) shows that at the micro level, divergent management
paradigms will be expressed more clearly as a consequence of nations’ particular
geographical, historical, political, social, cultural and industrial legacies. From previous
studies, Indonesian culture appear to contribute to the barriers to adopting Western HRM
practices (Habir & Larasati, 1999). The investigation of Javanese cultural influences on
HRM practices of medium-sized companies will ascertain whether Indonesia follows the
divergence theory of HRM and also whether the findings of this research are consistent
with previous findings on the influence of Indonesian culture on the adoption of Western
HRM practices. Furthermore, several studies have found evidence of the relationship
between HRM practices and company performance (Delaney & Huselid, 1996; King-
Kauanui et al., 2006; Zheng, 2001). This study will also examine the contribution of HRM
practices to company performance. Given these facts, the research focus is stated as:
To explore the nature and extent of human resource management practices in

medium-sized enterprises in the textile industry in Java, to examine the influence, if
any, of Javanese culture on the way in which HRM is practised in these companies,
and to examine the contribution of HRM practices to perceptions of company
performance.
1.4.2 Research questions

The research focus leads to a number of research questions:
1. What HRM practices in terms of recruitment and selection, training and
development, remuneration and rewards, performance appraisals and industrial
relations are implemented in medium-sized textile companies in Java?
Research Question 1 was formulated to examine the implementation of HRM

practices in Indonesian medium-sized enterprises of the textile industry in Java. A
case study approach as a first stage of the mixed-method approach was used to
investigate selected medium-sized companies and also to examine the key persons
who manage their HRM practices. The findings in the case study were tested with
survey questionnaire using larger samples as a second stage of the mixed-method
approach employed in this study.
2. Do Javanese cultural influences have an impact on the way HRM is practised in
medium-sized textile companies in Java?
Research Question 2 was formulated to investigate the influence of culture on the
HRM practices of Indonesian medium-sized companies. Indonesian cultural
dimensions based on Hofstede’s (2001) study and also Javanese culture were
investigated to assess their influence on the HRM practices of selected medium-
sized companies. This was done using the case study method and then a
questionnaire survey using a larger.
3. What are the relationships between HRM practices in medium-sized textile

companies in Java and perception of company performance?
Research Question 3 was formulated to examine the relationship between HRM
practices and company performance in medium-sized textile companies in Java. A
conceptual model of the relationship between HRM practices and company
performance was developed. This was done using a questionnaire survey on a
larger sample. This was the main focus of the survey as the second stage of the
mixed method approach used in this study.
1.4.3 Hypotheses
Based on the third research question above and the literature fully discussed in Chapter 2,
the following six hypotheses related to company performance were developed. The aim of
these hypotheses is to examine the effectiveness of the HRM practices in supporting
company performance in medium-sized textile companies. The six hypotheses are:
H1: There is a positive relationship between the implementation of recruitment and

selection processes and perceptions of company performance.
H2: There is a positive relationship between the implementation of training and

development processes and perceptions of company performance.
H3: There is a positive relationship between the implementation of remuneration and
rewards processes and perceptions company performance.
H4: There is a positive relationship between the implementation of performance
appraisals processes and perceptions of company performance.
H5: There is a positive relationship between the implementation of union and labour
relations processes and perceptions of company performance.
H6: There is a positive relationship between the influence of Javanese culture on
HRM practices and perceptions of company performance.
The conceptual framework developed for this research suggests that the perception of
company performance is related to a number of factors. The aspects of HRM practices
include recruitment and selection, training and development, remuneration and rewards,
performance appraisals, industrial relations, and culture. Figure 1.2 shows the model of the
relationship between aspects of HRM practices and perceptions of company performance.
Figure 1.2: HRM practices and perception of company performance relationship model
Recruitment Training and Remuneration Performance Industrial Culture

and selection Development and rewards appraisals relations
H5
H1 H2 H3 H4 H6
Perception of company
performance
Source: Developed for this study
1.5 Justification for the Study
This research is justified for the following reasons:
Human resources are regarded as the most important asset of a company (Byrne, 2001).
High quality human resources enable organisations to be competitive in the market
through their high quality products and services. Identifying HRM practices will be useful
for the employers/HRM managers in their daily practices.
Most Asian studies of HRM practices in SMEs have been conducted in other countries
such as China and Vietnam. Few studies have investigated HRM in SMEs in Indonesia. It
appears the focus of studies of Indonesian HRM practices is still on large companies. A
recent study conducted by Hartono (Hartono, 2010) investigated strategic HRM in
Indonesia in 63 large companies but did not consider SMEs. Therefore, conducting a study
on HRM practices in Indonesian SMEs has the potential to enrich the knowledge of
Indonesian HRM.
SMEs play an important role in the Indonesian economy. SMEs make a significant
contribution to Indonesian GDP and help the government to reduce unemployment by
absorbing a lot of labour. To study HRM practices in Indonesian medium-sized companies
can contribute to the development of Indonesian human resources in general and it can
lead the way to improving SME performance.
By understanding HRM practices in Indonesian medium-sized enterprises, the study can

offer a much greater understanding of the factors influencing the success of HRM practices
implementation. It is important to know whether Western models may be adapted or
applied within the Indonesian context, or indeed if they are being adopted. If they are not,
there is also a possibility to find out what factors have prevented Indonesian medium-sized
enterprises from implementing formal Western HRM practices. One factor that will be
investigated is national and Javanese cultural influences. Understanding which factors are
at work offers not only a significant contribution to our knowledge of HRM, but will also
have significant implications for HRM practices in Indonesia.
Examining the relationship between HRM practices and the performance of medium-sized
textile companies, can offer insights as to the extent (if any) HRM practices contribute to
company performance including which practices contribute most to company performance.
By developing a model of the relationship between HRM practices and company
performance, it is possible to investigate which practices support company performance
and which practices do not.
The focus of the research to medium-sized enterprises is because small-sized enterprises

only have very small number of employees and are deemed to have very limited or no
HRM practices (Nguyen & Bryant, 2004). The term of SMEs is used in the discussion in
the literature review and other chapters because the statistical data and information about
medium-sized enterprises are embedded in that regarding SME; they are not decoupled in
the literature or Indonesian statistics. Therefore the literature and references cited on SMEs
cover medium-sized companies as well. Thus the overall SME literature in general and in
the Indonesian context has been used. The few studies that specifically focus on medium-
sized enterprises in Indonesia are discussed later in the thesis.
1.6. Research Methodology
This study uses an exploratory sequential mixed-method approach (Creswell & Clark,
2011) involving two stages. A case study approach was the principal method in the first
stage. A small-scale case-based investigation was conducted to examine the
implementation of HRM practices in five areas: recruitment and selection, training and
development, remuneration rewards, performance appraisals and industrial relations. This
study also examines cultural influences on HRM practices. Multiple case studies were
done involving four medium-sized Indonesian enterprises in the textile industry in Java.
This study collected data from twenty - eight participants including owner/HR managers
and employees across four types of textile products (yarn, textile, batik, textile, and
garments), from two cities in different provinces in Indonesia: Solo in Central Java, and
Malang in East Java.
Semi structured interviews were used to collect insights and understandings of the HRM
practices from employers who were owners and often HR managers, and also from the
employees from the production departments of the case study firms. The semi-structured
format provided guidance to the interviewer to ensure that interviews kept on track. Onsite
observations were also undertaken to gain a better picture of the everyday HRM practices.
As an alternative source of data, the information collected through observation can be used
to achieve a full understanding of relevant insights arising from subsequent interviews
(Yin, 2009b). Document analysis was also employed to support the data from the other
sources.
A sample-based survey was used as a complementary inquiry approach in the second stage
of the research. Based on findings from the case studies and from the relevant literature,
critical variables were identified and a survey questionnaire was formulated. The
hypotheses, which are related to company performance, were also developed. Employers
in the textile industry in Java were used as the population and stratified random sampling
was applied. The survey was administered by mail and by a drop-off pick-up method using
a large sample to enhance the representativeness of the findings. This provided a means of
offsetting the limitations of investigating a small number of cases.
1.7 Contribution of the Study
The main contribution of this study is to generate empirical data on the HRM practices of
Indonesian medium-sized enterprises in the textile industry. Furthermore, the study
provides useful evidence on the adoption of convergence/divergence approach of HRM.
Based on the view that Asian countries have diverse experience in their adoption of
western influences in the development of their management practices (Chatterjee &
Nankervis, 2007b), the study examines the adoption of Western HRM practices of
Indonesian medium-sized enterprises in relation with convergence and divergence theories
of HRM. Therefore, the study contributes to a range of applied HR theory in a new
context.
This study also contributes to the knowledge of HRM practices in Indonesian SMEs
especially medium-sized enterprises in terms of providing a new empirical evidence of the
relationships between the HRM practices and company performance including the degree
of formality the HRM practices in SMEs that currently becomes the main issues.
The study may also contribute to the body of knowledge published on Indonesian HRM
practices and the effect of transferring HRM practices loaded with foreign culture values
and expectation to the work environment in Indonesia.
Furthermore, the research findings of this study support the use of existing theory and
HRM models as a guideline model for cross-cultural transfer of practices in business
environment especially medium-sized enterprises and for developing Indonesian human
resources management in general.
1.8 Thesis Outline

The thesis was structured using the outline advocated by Perry (1998) and also by Perry
and Cavaye (2002) and conforms to the structure generally used for dissertations within
the discipline. Chapter 1 presents the Introduction. It provides a summary of the thesis
including the research background, research objectives, research problem, research
questions and hypotheses, a justification of the study, the research methodology,
definitions and terms used in this study, thesis outline and a conclusion. The research
hypothesis section provides the perception of company performance model used in the
thesis.
Chapter 2 provides a review of the literature related to HRM practices in Western and
Indonesian contexts, culture in HRM, the influence of national and Javanese cultures on
HRM practices, the development of HRM practices in Indonesian medium-sized
enterprises in the textile industry and also the characteristics of medium-sized family
businesses and proprietary limited companies. The research problem, research questions
and hypotheses were subsequently developed from the review literature.
Chapter 3 presents the research methodology employed for this study. It explains the
paradigms for each type of research and the one that was judged to be best suited for a
mixed method approach. It also justifies the exploratory sequential mixed method
approach including the choice of case study for the qualitative method followed by a
survey for the quantitative method. A case study strategy was adopted in the initial stage of
this study. Semi structured interviews and onsite observations as well as document
analysis were employed to collect qualitative data. Qualitative details also are presented in
this chapter to establish the foundation of the patterns outlined. Perry (1998) argues that
the requirement for trustworthiness in qualitative research make it necessary to provide
detailed evidence for the patterns found in the data. A sample-based survey was
administered in the follow-up stage of this study, and quantitative data was gathered.
Chapter 4 presents the case study analysis directed by the research questions. Within-case
analysis and cross-case analysis were undertaken to verify case study findings. The
discussion on the case study findings is also provided to draw out tentative patterns
regarding HRM practices in medium-sized textile companies in Java.
Chapter 5 presents the results of the survey directed by the research hypotheses. The
analysis was divided into four data samples: the initial combined sample (228
respondents), the family business segment from the initial combined sample (147
respondents), the proprietary limited companies segment from the initial combined sample
(81 respondents) and the proprietary limited companies combined sample which included
additional proprietary limited companies from further sampling (209 respondents overall).
The reason for segmenting the original sample and further data gathering will be fully
explained in Chapter 5. The analysis of each sample included the demographic of the
sample, descriptive statistics and analysis of the correlations between the independent
variables of HRM practices including culture and the dependent variable of perception of
company performance. The hypothesis testing was applied only to the proprietary limited
companies combined sample to examine the relationship between the dependent variables
of HRM practices including culture and the dependent variable of perception of company
performance. Reasons for not further statistically analysing the family business sample
will be further explained in Chapter 5. The regression model generated from proprietary
limited companies combined sample describes the contribution of the independent
variables of HRM practices including the influence of culture on the dependent variable of
perception of company performance.
Chapter 6 provides a discussion of the qualitative and quantitative result based on theory
and also examines whether the survey results support the case study findings. This chapter
summarises findings from qualitative and quantitative analyses, states the implications and
limitations of this study, and provides suggestions for further research.
1.9 Conclusion
This chapter has sets out the industrial context and historical background in which the
subject matter of this study was conceptualised and crystallised. The objectives of this
study have been defined and its contributions to the body of knowledge regarding the
HRM practices of medium-sized companies in the textile industry in Java have been
described.
The research design and methods of data collection have also been outlined in this chapter.
Certain key terms have been defined to diminish confusion to a minimum extent. Lastly,
the thesis outline has been presented. The next chapter reviews the literature on HRM
practices in Western and Indonesian contexts and explores the influence of national and
Javanese culture on Indonesian HRM practices.
Chapter 2: Literature Review
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
In Chapter 2, the theoretical literature on Human Resource Management (HRM) is

reviewed. It discusses the general theory of HRM, especially HRM practices in a Western
context. It also elaborates further on the strategic role of the HRM manager in the
organisation. National and organisational culture is discussed prior to elaborating on HRM
practices in Indonesia. Culture is a very important factor to be considered when
organisations in Indonesia adopt HRM practices which originally came from the US and
were developed by other Western countries. Thus, this chapter discusses culture in terms
of national culture and Javanese culture; and also examines their influence on Indonesian
management and HRM. The history of HRM practices in Indonesia is reviewed in terms
of the economic, the political and the demographic context. The discussion moves to the
development of the Indonesian textile industry as this will be the central focus of the
research. This chapter also discusses Indonesian SMEs with a focus on medium-sized
enterprises in the textile industry. The limited literatures on medium-sized enterprises itself
and the inclusion of medium-sized enterprises in SMEs has enabled the researcher to use
SMEs' data and information in the literature review and also cite few studies that
specifically focus on medium-sized enterprises in Indonesia. The HRM practices of
Indonesian medium-sized enterprises, especially in the textile industry are elaborated upon
to reveal the research gap. Finally, the research problem and research questions are
formulated for this thesis.
The chapter is divided into nine sections. Section 2.1 serves as an introduction. Section 2.2
provides a background to the discussion of HRM practices in business organisations.
Section 2.3 reviews the theoretical literature related to culture and the cultural differences
in HRM practices between countries. Section 2.4 reviews Indonesian culture with special
focus on Javanese culture as this is the case culture. This section also examines the
influence of culture on Indonesian HRM practices. Section 2.5 provides specific a
discussion of HRM in Indonesian SMEs with a focus on the textile industry. Section 2.6
reviews the development of HRM practices in Indonesian medium enterprises. Section 2.7
discusses research gaps. Section 2.8 provides a discussion of the research problem and
research questions. Section 2.9 provides the conclusions reached from the discussion. The
structure of chapter two is shown in Figure 2.1
Figure 2.1. Structure and map of Chapter 2
2.1 Introduction
2.2.1 HRM practices in Western context

2.2 HRM Practices in Business 2.2.2 HRM practices in Indonesian context
Organisations 2.2.3 HRM practices in SMEs
2.3.1 National culture

2.3.2 Cultural differences between countries
2.3 Culture in HRM Practices
2.3.3 Organisational culture.
2.3.4 Cultural differences in HRM practices
2.4.1 Indonesian culture

2.4.2 Javanese culture
2.4 Culture in Indonesian HRM 2.4.3 The influence of culture in Indonesian
Practices HRM practices
2.5.1 Definition of Indonesian medium-

sized companies
2.5 HRM Practices in Indonesian
2.5.2 HRM practices in Indonesian
Medium-sized Companies
medium-sized companies
2.6.1 The development of the textile

2.6 Indonesian Textile Industry industry in Indonesia
2.6.2 Indonesian medium enterprises of
the textile Industry
2.6.3 The Javanese family business of the
textile industry
2.6.4 Proprietary limited companies of
2.7 Research Gaps the textile industry
2.6.5 HRM practices of Indonesian
companies in the textile industry
2.8 Research Focus, Research

Questions and Hypotheses
2.9 Conclusion
2.2 HRM Practices in Business Organisation
The following discussion on HRM practices is divided into HRM practices in the Western
context and the Indonesian context. It is important to know the differences between them
as HRM practiced originated in Western nations and Western practices are often is used as
the benchmark to measure the level of sophistication of the practices worldwide. Indonesia
as a developing country is still in the process of adopting Western HRM practices although
some big companies have already become more like Western HRM firms in order to be
able to compete globally. Due to the differences of culture, policies and law, it may be
assumed that not all HRM theories and practices from Western contexts are directly
applicable to Indonesian enterprises.
2.2.1 HRM practices in the Western context
Originally, HRM was a US-based concept which very much developed out of normative,
humanistic management philosophies of human relations and behavioural science
approaches (Braun & Warner, 2002). The recognition of the importance of human capital
along with the improvement of the US economy after the 1990s, led US scholars to focus
on the strategic role played by HRM (Feng, 2005). From a survey of the literature, it can
be seen that most HRM theory and practice has been developed within a Western context.
Thus, HRM processes and practices usually reflect the business organisation of Western
countries.
The following definitions and approaches to HRM are based on a Western context because
the majority of HRM literature and research is derived from practices and contexts in
Western nations.
Definition of HRM: There are various definitions to HRM which attempt to describe the
role of what the HRM manager in an organisation. HRM is broadly defined as a formal
relationship between employer and employee (Clark & Seward, 2000). More specifically,
Mathis and Jackson (2008, p. 4) claim that Human Resource (HR) management deals with
'the designing management systems to ensure that human talent is used effectively and
efficiently to accomplish organisational goals'. HRM aims to make sure the organisation
obtains and retains skilled employees, supports the development of knowledge and skills
as a result of the organisation’s learning processes, enhances rewards management, and
creates a climate in which productivity and harmonious relationships can be maintained
through partnership between management and employees and their trade unions
(Armstrong, 2006).
HRM has been characterised as diverse, strategic, commitment-oriented and based on the
belief that people should be treated as human capital (Armstrong, 2006). Therefore, the
role of the HR manager is to make sure that all HRM functions are performed in
accordance with the organisational objectives.
Strategic HRM: The term strategic HRM (SHRM) is used broadly to signal the view that
human resource management activities should contribute to business effectiveness
(Schuler & Jackson, 2007). SHRM should be directly linked to business issues and
strategies as part of management thinking, planning and action (York, 2010). This means
SHRM formulates and executes HR policies and practices that produce the employee
competencies and behaviours the company needs to achieve its strategic aims (Dessler,
2011). To achieve advantage over its competitors, strategic HRM directs a firm in what it
must do given the firm’s own HR strengths and weaknesses and the opportunities and
threats that HR must deal with in its environment (Dessler et al., 2007). DeCenzo and
Robbins (2007) suggest that HRM must balance two primary responsibilities: assisting the
organisation in its strategic direction and representing and advocating for the
organisation’s employees. They suggest further that HRM must take the lead in assisting
management with the people component of the organisation and also serve the
organisation by determining lower-cost strategies in its HRM practices.
Today, HR managers are more involved in strategic issues because employers want them
to be the firms’ internal consultants that help employees contribute to the company’s
success (Dessler, 2011). The strategic role of HR management emphasises that the people
in an organisation are valuable resources representing significant organisational
investments (Mathis & Jackson, 2008). As HRM emphasises its contribution to strategic
business, the implementation of effective HRM practices should enhance business
performance, expand human capital, and deliver cost-effective compliance systems
(Mathis & Jackson, 2008). Human capital refers to the sustainability of people
management systems which are likely to have an impact on the share price of a firm
(O'Donnell & Royal, 2010). Human capital is used to define the practices used in
organisations which work towards the long-term sustainability of organisations. Due to the
effect of political changes on HRM is many organisations started to consider their
employees as human capital and HRM function started to be recognised as strategic

function (Habir & Rajendran, 2008).
Two guiding assumptions of strategic human resource management are that (1) effective
human resource management requires an understanding of integration with an
organisation’s strategic objectives, and (2) effective human resource management leads to
improved organisational performance (Schuler & Jackson, 2007).
Hartono (2010) mentions three approaches to formulating SHRM. They are the best
practice or universal approach, best fit or contingency approach and the configurational
approach. The best practice uses basic idea of universalism meaning there is a general
pattern that can be adopted for managing human resources. The best fit approach integrates
HR strategy with its surrounding context, especially the business strategy to be more
effective. For this approach, different companies might implement different HR strategies
as they have different business strategies. The configurational model assumes that
successful HR strategy relies on the business strategy to take account of external factors to
be adapted to the internal environment.
HRM functions and practices: Roehling et al (2005) argue that HR function is

transforming its focus from the management of human resources or people to the
development and maintenance of organisational effectiveness. HRM practices and policies
are needed to carry out the personal aspect of the management job such as acquiring,
training, appraising, rewarding, and providing a safe, ethical, and fair environment for
company employees (Dessler, 2011). York (2010) claims that HRM has four basic
functions: recruitment and selection, employee training and development, motivation and
employee health and safety. However, other authors add more functions to broaden its
activities. Other arguments mention seven functions of HRM that concentrate on:
staffing/recruitment, performance appraisals, compensation and benefits, training and
development, employee and labour relations, safety and health, and human resource
research (Heathfield, 2009; Jahn, 1999; Mathis & Jackson, 2008).
HRM and firm performance: There is a growing consensus that organisational human
resource policies can provide a direct and economically significant contribution to firm
performance (Huselid, 1995). Kramar and Jones (2010) claim that HR practices have been
identified as critical for the success of an organisation, particularly its financial success.
Therefore, strategic HRM and the development of HR practices have been shaped by an
economic rationale, with the enterprise forming the primary unit for the development of
HR policies and initiatives. Despite evaluating a firm’s performance through the financial
criteria, the Resource-based View (RBV) approach to HRM uses competitive advantage as
the measurement of the firm’s performance. Delaney and Huselid (1996) use the
perception of organisational performance based on product quality, development of new
products, ability to attract essential employees, customer satisfaction and relations between
management and employees as indicators of the effectiveness of HRM practices.
Approaches to HRM: HRM has been approached from different standpoints. Rooney et
al (2010) argue that there are four approaches to HRM namely the resource-based view
(RBV) approach, the best practice approach, the behavioural approach and the cybernetic
system approach. They mention further that the RBV approach focuses on the
organisation’s human and non-human resources as the source of competitive advantage.
RBV encourages the firm to have an inside-out mindset leveraging from internal resources,
that is, employees (Sitalaksmi & Zhu, 2010). The best practice approach assumes a
universal set of practices that can enhance organisational performance. This approach
considers itself to be generalisable and not firm specific; thus it has a role in benchmarking
practice. The behavioural approach focuses on the employee’s role and behaviour as a
mediator between strategy and firm performance. The cybernetic system approach is an
‘input-throughput-output’ model based on cybernetically open systems. The input within
this system is employees’ competency, the throughput is the behaviour, and the output is
performance outcome.
On the other hand, there is an argument about whether HRM should be unitarist or
pluralist. Legge (2005) argues that HRM involves more commitment in the psychological
contract, having a self-control system and employee relation perspective which is unitarist,
individualistic and involves a high degree of trust. However, Nankervis et al claim that a
unitarist approach, often reflected in American models of HRM and practices, assumes
common interests between employers and employees, and attempts to encourage
commitment by both parties. Countries that adopt a unitarist approach to HRM include
Singapore, Malaysia and Indonesia. They claim further that HRM is an organic structure
that devolves and has flexible roles.
The difference between HRM and personnel management: In essence, HRM differs
from personnel management models in its focus, its principles and its application
(Nankervis et al., 2002). Legge (2005) argues that in some countries such as the US the
terms HRM and personnel management are used interchangeably. However, other authors
differentiate HRM from personnel management despite their similarities. Guest (1987) as
cited in Legge (2005) makes a comparison between personnel management and HRM
stereotypes showing characteristics of HRM that are long term with proactive, strategic
and integrated planning perspectives.
Storey (1992) as cited in Desler et al (2007) mentions 27 points of difference between

personnel management and HRM. The 27 points are classified in four dimensions namely
beliefs and assumptions, strategic aspect, line management and key levers. In the
dimension of beliefs and assumptions, some important points that differentiate HRM from
personnel are that HRM tends to be more unitarist in terms of relations, has values or
mission behaviour, aims to go beyond contract, and refers to business needs in action. In
contrast, personnel management is more pluralist, has by custom behaviour, careful
delineation of written contracts, and involves taking procedural action.
In the strategic aspect dimension, HRM focuses on the customer, has integrated initiatives,
a central corporate plan and makes quick decisions. On the other hand, personnel
management focuses on labour management, involves piecemeal initiatives, a marginal
corporate plan and is slow in making decisions.
In the line management dimension, HRM performs a transformational leadership role, has
a line or general manager and direct communication, and also low standardisation.
Personnel management adopts a transactional leadership role, has a personnel manager and
indirect communication, and also high standardisation.
In the key levers dimension, HRM carries out integrated selection, performance related
payment and harmonisation of conditions, focuses on individual contracts and teamwork
job design, and has wide-ranging cultural, structural and personnel strategies. Personnel
management on the other hand has separate selection, on-the-job evaluation payment and
negotiated conditions, and focuses on collective labour management, is based on division
of labour in job design and more personnel procedures.
Convergence and divergence of HRM: The divergence and convergence theories of

HRM came about as the Western theory of HRM practices was adopted by other countries.
There are cultural differences that should be taken into consideration and may become the
source of different forms of HRM practices.
The convergence theory of HRM assumes that globalisation and consequent economic
interdependence will lead to a universalistic approach to management and HRM styles,
processes and practices, regardless of national differences (Nankervis & Chatterjee, 2006).
This theory is essentially based on the belief that universalist- management theories and
styles are culture free (Warner and Joynt in Nankervis & Chatterjee, 2006). On the other
hand, local customs and so forth create serious constraints on the degree of convergence
and may lead to increasing levels of divergence (Rowley and Benson in Nankervis &
Chatterjee, 2006)
Chatterjee and Nankervis (2007b) illustrate the convergent-divergent process model for
management in Asia to address all complexities in Asian management systems and styles
by incorporating macro-, meso- and micro-level perspectives within an overall analytical
framework for the understanding of management patterns and processes in eight Asian
countries namely, China, India, Japan, Singapore, South Korea, Malaysia, Thailand and
Indonesia. In the macro-level perspective, global imperatives represent the convergent
management paradigm, whilst the forces of heritage (regional, national and local) provide
divergent influences. In the meso-level perspective, innovations are usually established
progressively as societies develop. These initiatives occur, such as: economic, legal, and
educational infrastructure; the role of government, levels of global linkages; the system of
corporate governance; and the relative dominance of national, regional or global values.
Global imperatives exert continuous pressure to introduce modifications in these areas to
reflect transnational and regional business goals and objectives.
At the micro-level the divergence-convergence dichotomy is expressed principally in the

managerial cultures which have developed as a consequence of a nation's particular
geographical, historical, political, social, cultural and industrial legacies. The issue that is
associated with the influence of the Western managerial system is that different Asian
countries have diverse experiences in their adaption or incorporation of Western influences
in the development of their managerial cultures and practices.
2.2.2 HRM practices in Indonesian context
Previously, HRM in Indonesian has not had an important role and dealing with employees
have been regarded as a personnel function which is administrative in orientation (Habir &
Larasati, 1999). This means HRM activities are much more like administrative work such
as managing employees’ records. Some researchers argue that HRM is not highly regarded
in Indonesia because Indonesian culture puts constraints on the adoption of such practices
(Budihardjo, 1996).
Besides being shaped by its culture, the development of HRM in Indonesia is influenced
greatly by the economic and political conditions. Change in the Indonesian political
climate automatically affects the Indonesian economy and vice versa. In the last three
decades, Indonesia has experienced big changes in its economic and political
circumstances and these have brought changes in the development of HRM practices. In
addition, external forces such as technological development and globalisation may make
Indonesian companies change to become more competitive. Such modernisation in
business practices, which take a more Western form, has brought understanding of the
importance of HRM. Furthermore, a survey of Indonesian state and private companies has
shown that the shift in organisations’ consideration of employees from being merely a
factor of production to being human capital has effected a transition towards HRM (SWA
2006 cited by (Habir & Rajendran, 2008). As human capital becomes important in
determining organisational performance, its quality will be taken into consideration.
Therefore, the demographic structure of Indonesia also influences the degree of absorption
of new knowledge and technology and this will determine the implementation of HRM
practices in Indonesian companies.
2.2.2.1 Economic background
The Indonesian economy grew enormously before the economic crisis of 1997. The GDP
from 1985 to 1996 grew by more than 7% per annum (Munandar, 2003). The main source
for this rapid economic growth was not only political and economic stability, but also a
series of continued deregulation efforts that encouraged investment activities (Munandar,
2003; Prijadi & Rachmawati, 2002). In 1997 the Asian financial crisis hit several Asian
countries including Indonesia. In 1999, Indonesia’s GDP grew by less than 1% and growth
climbed to 4.8% in 2000 followed by a slowdown to 3.3% in 2001 (Munandar, 2003;
Wengel & Rodriguez, 2006). The unemployment rate was 6% in 2000, compared with
4.9% in 1996 (Stone & Stone-Romero, 2008). The percentage of the population living
below the poverty line was 19.92% in 1996 increasing to 26.03% in 1999 (Munandar,
2003).
All businesses from private to state-owned enterprises including banks experienced great
suffering from this economic crisis. Companies affected by the devaluation of the
Indonesian currency went bankrupt (Nankervis & Putra, 2006). By early 1998 many banks
had suspended operations (Munandar, 2003). The central Bureau of Statistics in Jakarta
estimated that 650 Indonesian companies were folded between 2001 and 2002, with a
further 673 reducing operations especially in the labour-intensive textile, garment and
leather industries (CIA, 2005).
Companies which had to struggle with the crisis tried to overcome the problem by
changing their business strategies including their HRM strategies in order to survive.
Some big companies such as Astra have succeeded overcoming their problems and have
become more competitive (Habir & Larasati, 1999; Habir & Rajendran, 2008; Sutiyono,
2007). It seems that the challenge of economic recession in 1997, tight competition and
globalisation have led Indonesian companies to change their business strategies and start to
develop their HRM practices (Sutiyono, 2007).
2.2.2.2 Political background
The political system in Indonesia was stable during Soeharto’s “new order” era from 1966
until 1997. Munandar (2003) claims that Soeharto concentrated on policies of economic
rehabilitation and development by introducing an economic development program called
Pembangunan Lima Tahun (PELITA), the five year development program) and making a
series of deregulations that encouraged investment activities. PELITA which had run for
30 years and the economic reform policy succeeded in bringing Indonesian GDP growth
up to 7.8% in 1996 (Prijadi & Rachmawati, 2002). Besides the success of bringing
Indonesia to rapid economic growth, the tight control policy towards all aspect of
employment relations contributed to the difficulties of transition from personnel
management to human resource management (Habir & Rajendran, 2008)
Soeharto’s “new order” era ended and the economic crisis in 1997 brought chaos to
Indonesia. Many companies collapsed and others needed restructuring. This situation also
brought changes in the political system. The year 1998 marked the end of the “new order”
period and the beginning of the “reformation” period (Munandar, 2003). This reformation
era brought new developments in democracy; however, the unstable political situation
caused suffering in civil society and led to difficulties in economic recovery. The
replacement of Soeharto in short succession by the presidents Habibi, Abdurrahman
Wahid and Megawati led to a dramatic decline in the economic growth rate (Munandar,
2003). President Susilo Bambang Yudhoyono has made a significant attempt to
restructure the Indonesian economy with a more global orientation, the development of
independent, democratic ideas and an active effort to solve the Aceh insurgency
(Nankervis & Putra, 2006). Currently, the Aceh insurgency has been resolved and that
region continues to develop its economy.
It appears that the development of HRM in Indonesia has been accelerated by the
economic crisis and the change of political climate. In any firm, the degree of strategic
HRM developed and HRM practices adopted depend on the HR managers’ ability to align
HRM with corporate strategies. Different strategies applied by the three kinds of business
organisations that operate in Indonesia. The three types are subsidiaries of multi-national
business organisations, private business organisations and state-owned business
organisations. For private businesses HRM is steadily gaining ground and is managed by
competent HR professionals (Habir & Rajendran, 2008). Some state-owned companies
started to develop HRM to be more professional along with the reduction of the
government control and political influence (Sutiyono, 2007).
2.2.2.3 Demographic background
The main issue of HRM in Indonesia is the availability and competency of its human
resources. Among Asian countries Indonesia has a low level of skilled labour (77%), low
wages, minimal employment legislation, and a serious shortage of management skills
(Nankervis & Chatterjee, 2003). Table 2.1 shows the employment pattern of individuals
15 years of age and over.
Table 2.1 Population 15 years of age and over by type of activity 2006 -2010 (in millions)
Description 2006 2007 2008 2009 2010
Population 15 years of age and over 160.81 164.12 166.64 169.33 172.07
Economically active population* 106.39 109.94 111.95 113.83 116.53
Employment 95.46 99.93 102.55 104.87 108.21
Unemployment 10.93 10.01 9.39 8.96 8.32
*Economically active population is the total of labour force (the sum of employment and
unemployment)
Source: Adapted from Indonesia Centre of Statistics Board (BPS, 2011)
As the fifth largest population in the world, Indonesia experiences the problem of a large
labour market not matched by job availability. This has caused high unemployment and
underemployment. Although unemployment is declining, it is still considered high.
Nankervis and Chatterjee (2003) argue that countries with significant unemployment and
underemployment levels such as Indonesia may need to develop job creation programs or
significant industry restructuring schemes, to utilise properly the skills and potential of
their workforces. In the Soeharto era, there was a labour-intensive program to reduce
unemployment; however, the results were insignificant. The high level of unemployment
may be caused by the scarcity of jobs and low levels of education. Manning (1999) cited in
Bennington (2001) argues that most unemployment is in towns and cities and occurs
among young senior high school and tertiary graduates. Education, skills and competency
of the labour supply do not match with demand and this is one reason for unemployment.
Table 2.2 shows the working population that is dominated by low levels of education.
Table 2.2 Population 15 years of age and over by education attainment 2008 -2010 (in
millions)
Educational attainment 2008 2009 2010
Primary school (SD) 55.62 55.43 55.31
Junior high school (SMP) 19.39 19.85 20.30
Senior high school (SMA) 13.90 15.13 15.63
Vocational school (SMK) 6.71 7.19 8.34
Diploma (1/2/3) 2.66 2.68 2.89
University 3.77 4.22 4.94
Source: Adapted from Indonesia Centre of Statistic Boards(BPS, 2010)
This situation happens because two-thirds of all employment is absorbed by small

enterprises that can only pay low wages and therefore employs workers with low levels of
education (Bennington, 2001).
White (1990) cited in Bennington (2001) claims that there is also an increase in the
proportion of women in the formal sector. Women dominate the workforce in industries
such as tobacco, textiles, and food and beverages. There is a preference for employing
women due to their perceived dexterity, patience, unassertiveness and deference to
authority.
Currently, compulsory education has been raised from six years to nine years, but the law,
passed in 1994, has not been implemented fully because of inadequate school facilities and
the lack of family financial resources to support children staying in school (Bennington,
2001). This condition affects the ability to compete in the global market place and to
adopt more professional HRM practices. The development of HRM practices in Indonesia
can be viewed through the process of recruitment and selection, training and development,
pay and benefits, and employee relations that are currently practised by business
organisations.
2.2.2.4 Indonesian HRM practices
Looking at the four dimensions of HR practices, it appears that most Indonesian

companies especially medium-sized companies still adopt personnel management, rather
than HRM. The characteristics of personnel management such as taking procedural
contracts, focusing on labour management, having a personnel manager and focusing on
collective labour management still occur in Indonesian business organisations. In addition,
Zifirdaus and Nankervis (2003) argue that some Indonesian companies carry out HRM
practices in an ad hoc manner meaning they do not conduct HRM practices
comprehensively. Issues such as family domination and nepotism still arise in the
recruitment process. However, large Indonesian companies are starting to adopt HRM
practices in order to be competitive in the global market especially after the economic
crisis in 1997 (Habir & Larasati, 1999).
A recent study of Indonesian strategic HRM conducted by Hartono (2010) found that most
Indonesian organisations used a best fit approach meaning they adopted their HRM
practices to their own specific context. Further, he claims that HRM should fit with
business strategy, and either internal or external contexts. Internal factors that influenced
the HR strategy included the organisation’s size, structure, and firm's stage in the
organisational life cycle. The external environmental context needs to be monitored and
adjusted carefully when formulating HR strategy. Aspects of this context include market
competition, technological changes, government rules, global changes, economics
condition, culture, and the role of trade unions.
Sitalaksmi and Zhu (2010) found that the transformation of HRM in Indonesian state-
owned enterprises was determined by the firms’ relationship with both internal and
external stakeholders. Rhodes et al. (2008) found evidence that the successful
implementation of the Western strategic management practices, such as a balanced
scorecard, needed adjusting to suit the Indonesian context and some critical factors that
should be taken into consideration are the national culture, leadership style, organisational
culture, and current HRM practices.
Recruitment and selection: Nankervis and Putra (2006, p. 193) claim that:
“The recruitment and selection systems of Indonesian organisations are governed by
regulations which require transparent, objective and non-discriminatory processes, and
specify the minimum conditions of employment, which apply to all organisations and their
outsourced service providers”.
There was a change in recruitment practices in the early 1990s in terms of the need for
better qualified, more skilled employees. There are several methods of recruitment used by
companies ranging from advertising to hiring recruitment consultants (Habir & Rajendran,
2008). Stone (2007) claims that the recruitment source determines success in targeting a
particular labour group. Regardless of the recruitment method, the recruitment process for
blue collar workers is less complicated since the supply of labour exceeds demand (Prijadi
& Rachmawati, 2002). In regard to recruitment strategy, it appears that state-owned and
private companies have different strategies. Sutiyono (2007) claims that state-owned
companies follow civil service practices and recruited high school and university graduates
at base level. She claims further that some private companies such as Astra recruit not only
fresh graduates but also skilled and experienced people from outside for senior positions.
Education and training: There are various types of education provided by the Indonesian
government to increase the knowledge and skills of the younger generation as a future
labour force. The types of education provided in the national education system include
general education, vocational education, professional education, and academic-oriented
education (Prijadi & Rachmawati, 2002).
Most Indonesian companies still conduct in-house training or on-the-job training for new
employees to match their skills with the organisation’s requirements. One type of on-the-
job training performed is skill-based training to familiarise them with the company’s
equipment or machinery. Stone (2007) argues that the aim of entry training for new
employees is to provide them with the skills necessary to meet the performance standard of
the job. In addition, some companies may perform informal training by including the new
employees in a team so they can learn their jobs informally from other employees. As part
of the personnel function of scheduling and organising training programs, some companies
conduct training programs which tend not to be based on training need analysis (Habir &
Rajendran, 2008). This results in a failure to improve employees’ competencies.
Big companies such as Astra have developed their employees to be a major asset. Astra
has created the Astra Management Development Institute to provide a uniform training
system that ensures a strong quality-oriented culture for all staff (Habir & Larasati, 1999).
By contrast, state-owned companies tend to follow regular training activities dedicated to
fostering the culture of the government (Sutiyono, 2007). These two different approaches
to training programs result in different attitudes and values among employees.
Compensation and reward system: Tjiptoherijanto (1998) in Bennington (2001) argues

that in comparison with other Asian countries such as Thailand, the Philippines, South
Korea, Taiwan, Hong Kong and Singapore, the average wages of Indonesian workers are
significantly lower.
Currently the Indonesian government has set the regional minimum wage (UMR) that is
supposed to be followed by all companies as a basis for determining their employees’
wages. Nankervis and Putra (2006) argue that previously the nominal payment
determinations were based upon regional cost of living estimations. However, since 2003,
the Indonesian government has defined Upah Minimum Regional (UMR), the regional
minimum wage) as combining ‘minimum wage, overtime pay, absence fee due to certain
conditions, wage for doing work outside his or her job description, and holiday allowance’
(NICC-ACE, 2004).
Based on Indonesian labour laws and regulations on payment, the government provides
payment protection for workers by establishing the minimum wage based on what is
needed to have decent living (Menteri Tenaga Kerja dan Transmigrasi, 2006). The amount
of the UMR varies for each city or area depending on the cost of living of those cities. The
amount of UMR is increased by the government every year to follow the increased cost of
living.
Priyadi and Rachmawati (2002) claim all salaries and wages paid are subjected to income
tax and the social security system is based on income tax law (PPH pasal 21). Rahayu and
Sumarto (2003) explain that there is a social security system (Jamsostek) legislated for
under law No. 3/1992.It is applied to protect employees against any risks that may cause
death, occupational sickness or accidents. There is also a pension program for retired
employees under law No 11/1992 (Prijadi & Rachmawati, 2002). However, many
employers only pay social security contribution fees (which cover old age, death,
disability, permanent disability, occupational accident and diseases contracted in the
workplace) with respect to permanent workers and not to those employed on a contract
basis (Bennington, 2001).
The other minimum employment conditions include: paid annual vacation leave of not less
than two weeks per year; 12 paid public holidays per year; prescribed working hours of
seven hours per day or 40 hours per week with one hour of rest for each four hours of
work; incremental overtime rates; sick leave up to 12 months is not all fully paid; accident
compensation, which covers all medical costs, including death benefits; social insurance
(the employer must contribute five per cent and the government contributes two per cent of
the amount insurance paid) and service pay based on organisational performance
(Bennington, 2001).
Performance appraisals: Currently, many big companies use performance-based

payments to encourage employees to be more productive. High technology companies
such as PT Rekayasa have established knowledge-based compensation systems which
include the criteria of employees’ level of knowledge and problem solving ability in
determining employees’ salary levels (Habir & Larasati, 1999). A study conducted by
Nasution and Marzuki (2011) on an Indonesian university's academic staff showed that
there were positive relationships between behaviour and also work results and staff's
performance. This indicates that employee's behaviour and work results are important
factors of performance appraisals. Behaviour aspects consist of knowledge, skills, attitude
and habits while work results aspect are in terms of quantity, quality and timelines. By
improving those aspects of both behaviour and work results, the organisation can expect a
better performance of its employee.
Union and labour relations: Sharma (2000) reports that Indonesia introduced a single
union system with the All-Trades Union (SPSI) in 1974. This unitary structure was
introduced to promote the principle of unity in the labour movement in line with the
Pancasila philosophy. Fehring (1999) cited in Benington (2001) claims that the national
Pancasila ideology has a rhetoric which suggests that industrial relations should be
conducted in the context of partnership and production; partnership and profit; and
partnership and responsibility towards: God the Almighty, the nation and state, the
community, fellow employees and family, and the employee. This unitary structure
worked fine in the 1970s and the 1980s; however, a gradual decline in the state’s capacity
was accompanied by a rise in the formation and growth of independent trade union
federations (Sharma, 2000). The PPBI (Centre for Working Class Struggles) and SBSI
(Indonesia Prosperous Workers Union) are examples of this development (Rodan, 1997).
Sharma (2000) points out that the 1997 economic crisis contributed to a deterioration of
the industrial relations systems in Indonesia in a number of ways. Firstly, the paid-
employment sector has been declining in relative terms. Secondly, the crisis has given rise
to a fragmentation of the labour movement in its political orientation. Thirdly, the crisis
has provided employers with an opportunity to increase their offensive against the labour
movement and try to reshape industrial relations in a new order more to their liking.
The resulting major strikes, imprisonment of union leaders, violence and military
intervention drew international attention to the repressive nature of Indonesian industrial
relations (Isaac & Sitalaksmi, 2008). In an attempt to appease international criticism, the
Manpower Act of 1997 was passed at the onset of the financial crisis. Under the Law on
Manpower Affairs enacted in October 1997, private sector workers are now free by law to
form unions with other workers’ organisations (Bennington, 2001). However, the
Indonesian Prosperity Trade Union (SBSI) claims that companies are continuing to fire
SBSI members because of their affiliation with the union or because they seek to organise
SBSI units within their factories (Buerau of Democracy, 1999).
Trade Union Act No. 21/2000 provides that unions, federations and confederations shall be
free, open, independent, democratic and responsible, able to engage in collective
bargaining and the settlement of industrial disputes, and to defend the rights and interests
of their members, including civil servants (Isaac & Sitalaksmi, 2008). In 2003, the
Ministry of Manpower and Transmigration enacted labour legislation in the Manpower Act
No.13/2003. According to this act, employees have the right to join unions and the
employers should not persecute those becoming members of unions (Menteri Tenaga Kerja
dan Transmigrasi, 2006). Furthermore, the act regulates on a wide range of issues ranging
from working conditions within companies to working hours and the determination of the
minimum wage (Isaac & Sitalaksmi, 2008).
Collins et. al (2011) claim that Indonesian employees today face significantly different
challenges from those prior to 1998 both internally and externally. They further state that
internally, the unions suffer from lack of organising skills and organizational capability as
well as the emergence of new types of union and union exclusivity, which are believed to
have led to further fragmentation, inter-union rivalry, and internal break-ups. Externally,
less powerful government in terms of political and economic interventions, as well as the
greater penetration of globalization have created other challenges. This condition will
affect employees in general including employees in medium-sized companies who had
joined unions.
2.2.3 HRM practices in SMEs
Research suggests that smaller entrepreneurial firms generally have problems with HRM
because small firms often do not have professionals dedicated to HRM practices (Hornsby
& Kuratko, 1990). SMEs face challenges in business administration, particularly in the
efficient and effective utilisation of resources to achieve organisational objectives. Firm
size is also considered as a major determinant of a number of human resource management
practices in small firms (Nguyen & Bryant, 2004). The available empirical information on
HRM within SMEs suggests that smaller firms make less use of high performance HRM
practices than larger organisations do (De Kok, 2003). Hill and Stewart (1999) suggest that
smaller firms should be more flexible and informal to enable them to cope with the higher
levels of environmental uncertainty.
There have been contradictory concepts regarding the nature of managerial control and
employee flexibility in SMEs. The concept of 'small is beautiful' comes from an argument
that working relationships are much more harmonious in SMEs than in larger firms since
SMEs provide a better environment with a 'family' atmosphere which involves easier
communication, greater flexibility and lower levels of conflict (Wilkinson, 1999). The
'Bleak house' concept addresses the question whether HRM practices are applied with a
specific goal in mind and integrated with other (HRM) practices or whether they are the
result of legal obligations and ad hoc decisions (Wiesner & Innes, 2010). The general
notion seems to be that the way in which SMEs manage their employees resembles the
“bleak house” concept, where employment relations can be “typified by direct
management control, poor terms and conditions, high staff turnover and little training”
(Bacon et al., 1996, p. 82). Another concept comes from Edwards et al. (2003) cited by
Harney and Dundon (2006). Edwards et al. argue that HRM in SMEs is best described as
‘complex’ because in reality SMEs are characterised by complexity and unevenness with
HR practices mediated through a web of social and economic relationships.
In general, the characteristics and challenges of SMEs between Western and Asian
countries have similarities especially for western countries which are more divergent in
their HRM practices. Andersen (2003) claims that Danish SMEs have characteristics such
as democratic management style, informal organising, and flexible working arrangement,
which are like Asian SMEs. The management practices of small firms have stereotypically
been identified as being informal, short-term, and non-strategic compared with large firm
practices (Massey, 2004). These characteristics might associated with the limitation of
SMEs in term of financial resources and managerial skills for the development and
operation of people management system and procedures (Gilbert & Jones, 2004)
Regarding recruitment and selection, Cassel et al. (1999) claim that SMEs use recruitment
and selection procedures more than any other practice. SMEs try to use those sources for
recruitment and selection that are convenient, inexpensive, and directly controllable by the
company (Heneman & Berkley, 1999; Hornsby & Kuratko, 1990). Research on
recruitment in SMEs shows that smaller firms tend to use ‘tried and trusted methods’ such
as word of mouth and hiring people who have family or friendship connections with
existing employment (Carroll et al., 1999) and are more likely to use personal and
employee referrals, and newspaper ads (Heneman & Berkley, 1999). Furthermore, small
firms heavily rely on individual one-to-one interviews for the selection of employees
(Golhar & Deshpande, 1997).
Training and development in SMEs is considered as informal and on the job, with little or
no provision for management development (Kotey & Slade, 2005). Despite the perceived
importance of training to improved SME performance, there is a general reluctance among
SMEs to provide formal employee training (Kotey & Folker, 2007). Groups of employees
in small firms are less likely to have access to structured training provision, than their large
firm counterparts (Cardon & Stevens, 2004). Some researchers explain that training often
is perceived as high cost involving not only course fees but also the cost of unproductive
labour in small firms (Kotey & Slade, 2005). However, some of them have also revealed
that firms that invest in training and development including formal performance appraisals,
and which link these to incentive compensation and reward are likely to have lower
employee turnover, and higher productivity, resulting in increased financial performance
(Chandler & McEvoy, 2000). The results of formal training indicate that training can
improve firm performance, as long as employees receive enough training support (De Kok,
2003).
Remuneration and reward systems in SMEs are sometimes classified as short-term pay, in
which incentives in small firms may include profit sharing and stock sharing, where a
significant portion of employee pay is only given when organisational-level profits meet
specific pre-set targets (Cardon & Stevens, 2004). Cassell et al., (2002) report that
managing incentives is not necessarily a priority for the SMEs. In some cases specific
incentives were seen to do "more harm than good". On average, smaller firms pay lower
wages to employees than larger firms do.
It appears that performance appraisals in SMEs are conducted informally. A study on

exploring HRM practices in SMEs in the UK, suggest that, although some form of
appraisals is used by half of the respondents, overall, formal systems are rare. In some
SMEs appraisals are used for senior managers only but on the other hand some think they
are appropriate for all the employees. Perhaps this is due to the rarity of formalised
procedures in small firms for managing performance reviews, disciplinary processes, or
dismissals of workers (Cardon & Stevens, 2004). According to Bacon et al. (1996), SMEs
make performance reviews of employees using formal schemes informally. Furthermore,
they identify that small businesses use multiple method for employee appraisals and
medium-sized businesses tend to use rating scales, narrative essays, and goal settings.
Informality characterises SMEs' employment relations (Wilkinson, 1999). Individual

membership of trade unions and recognition of trade unions are less common in small
firms than in large ones. The reasons usually are given for low membership relate to the
ideological opposition of owner-managers as well as difficulties in organising unions,
rather than harmonious relations rendering, union involvement in SMEs then is irrelevant
(Dundon et al., 1999). Historically unions have found it hard to organise in the SME sector
but, given the vulnerability of some workers in this area, union protection is important.
Regarding company performance, only a few studies have identified a link between the
adoption of HRM practices and small firm performance (Nguyen & Bryant, 2004). When
there is a focus upon SMEs, studies tend to examine the existence of HRM practices
without examining the impact of the HRM practices on firm performance. Zheng (2006)
argues that even though there appears to be a recognition of the importance of HRM
among SMEs, the empirical evidence on the extent of the impact of HRM practices on
SMEs performance is inconclusive. Chandler and McEvoy (2000) find a positive effect of
a more advanced HR system – defined as ‘Total Quality Management’ – on firm
performance when supported by high training participation and group-based incentive

compensation.
2.3 Culture in HRM Practices
The definition of culture: Culture has many definitions based on many points of view.
Culture has been defined as shared behaviour and shared human-made aspects of society
(Triandis & Wasti, 2008). Hofstede (2001) defines culture as the collective programming
of the mind that distinguishes the members of one group or category of people from
another. Culture is constituted of characteristics such as behaviour, values, perception,
attitudes and beliefs (Hopkins, 2009; Thomas, 2008). Features of culture are that it is
shared, learned, systematic and organised (Thomas, 2008). Cultures differ from one
society or country to another because of the different interaction between society and the
environment. Factors that may influence the transmission of culture include the survival
of groups in their environment, language and religion (Thomas, 2008). Furthermore,
culture conveys a sense of identity for an organisation's members, and facilitates the
generation of commitment to something larger than one’s individual self-interest (Robin et
al., 2004). Values as part of a culture characterise individual and social behaviour in
general. Value is defined as attitude and beliefs (Rokeach, 1972 in Hofstede, 2001), a
conception (Kluckholm, 1967 in Hofstede, 2001) or a mental programming (Hofstede,
2001).
Culture seems a difficult concept to capture and to understand in business research.

However, the work of Hofstede (2001) analysed a large-scale questionnaire-based survey
of one large American corporation and its 40 subsidiaries.
2.3.1 National culture
National culture refers to the culture specific to a national group. It is shaped by a number
of factors unique to a country, some of which are the history and political background,
social norms and customary beliefs that are passed on from generation to generation in a
particular racial or ethnic group (Chew & Sharma, 2005). Hofstede (2001) claims that
national cultures exist because nations vary in terms of institutions, forms of government,
legal systems, educational systems, labour and employment relation systems. When
considering the concept of national culture there is a possibility that a large number of sub-
cultures exists within some nations and also that variations, conflicts and dissent exist
within national cultures (Thomas, 2008).
The convergence and divergence of national culture: Some authors identify cultures
around the world as becoming either more similar or different. This has created the term
culture convergence or divergence. Thomas (2008) argues that convergence of culture is
the tendency of national cultures to have more in common because of modernisation and
economic and technological development. Since economic development is measured by
Western economic standards, there is a possibility that countries are adopting Western
ideological values. On the other side, in divergent approach where companies in each
country can adopt to their specific context; therefore there are different ways to manage
people in organisations (Hartono, 2010). The specific contexts that have an influence
include the institutional, political, structural, cultural, and social differences which exist
within both the organisational and national context (Paauwe & Boselie, 2003). The
argument is that culture has nothing to do with modernisation. Although economic
development brings significant cultural changes, traditional elements of a culture still exist.
The study of the impact of culture on HRM practices in the case of Indonesia conducted by
Suharnomo (2009) supports the divergence theory that human resource management
practices are culture-bound.
2.3.2 Cultural differences between countries
There are many studies trying to describe cultural differences between countries.
Kluckhohn and Strodtbeck (1961) cited in Thomas (2008) identify six dimensions along
which a society can be categorised. First, by nature, people may tend to dominate,
subjugate or harmonise. Second, depending on beliefs about human nature, people are
inherently good, evil or a mixture. Third, in relationships between people, people may
tend to be individualist, collateral or hierarchical. Fourth, in terms of human activity,
people may concentrate on living (being), striving for goals (achieving), or reflecting
(thinking). Fifth, in the conception of space, space can be conceived of as public, private or
a mixture of public and private. Sixth, in relation to time, people may respect events in the
past, present or future. Based on this dimension, the society of a country may develop a
pattern by adopting a certain value in each dimension.
Hofstede (2001) in his study on cultural differences among countries has created five
dimensions of culture namely individualism-collectivism, power distance, uncertainty
avoidance, masculinity-femininity and long-term - short-term orientation. He describes

individualism-collectivism as dealing with characteristics of an individual reflecting
whether she/he is a part of the group or more individualistic. Power distance is the extent
to which power differences are accepted and sanctioned in a society. Uncertainty
avoidance is the way a society focuses on reducing uncertainty and creating stability.
Masculinity-femininity concerns the traditional male orientation of ambition and
achievement emphasised over the traditional female orientation of nurturing and
interpersonal harmony. Long-term/short-term orientation was added later and deals with
one’s value orientation towards the future for the long term and towards past and present
for the short term, such as respect for tradition and fulfilling social obligations (Hofstede,
2007). These four dimensions (excluding long-term/short-term orientation) were used to
identify the cultural differences of more than 50 countries by scoring each dimension from
1 to 100. The scores achieved in each dimension described the cultural variation of each
country.
Based on one study of Hofstede (2001), Western countries such as the United States of
America (USA), Australia, and New Zealand have similar cultural characteristics in terms
of individualism, masculinity, short-term orientation, low uncertainty avoidance and low
power distance. European countries, for example Germany and the United Kingdom (UK),
vary in their cultural characteristics. They are similar in low power distance, individualism,
masculinity and short-term orientation, but different in uncertainty avoidance.
According to Hofstede (2001), Asian countries have similarities in cultural characteristics

such as collectivism, high power distance, femininity, low uncertainty avoidance and long-
term orientation. Only a few countries have masculine characteristics, such as Japan and
the Philippines, short-term orientation such as Singapore and high uncertainty avoidance
such as South Korea, Taiwan and Thailand. Thus, in general, Asian countries are
relatively similar and have small differences in their cultural characteristics.
Hampden-Turner and Trompenaars (1998) identify seven important dimensions in which

cultures differ namely universalism vs. particularism, analysed specifics vs. integrated
wholes, individualism vs. communitarianism, inner-directed vs. outer-directed orientation,
time as sequence vs. time as synchronisation, achieved status vs. Ascribed status, and
equality vs. hierarchy. Universalism is a belief that what is true and good can be
discovered and applied universally whereas particularism is a belief that unique
circumstances determine what is right or good. Individualism/collectivism concerns the

extent to which people plan their actions with reference to individual benefits versus those
of the group. In neutral cultures, emotion is supposed to be held in check and maintaining
an appearance of self- control is important, whereas in affective cultures, it is considered
natural to express emotions. Specific/diffuse refers to the extent to which individuals
allow access to their inner selves to others. Achievement/ascription is about how status
and power are determined. A further two dimensions were added namely time and
environment. The time dimension is about past versus future orientation. Environment
relates to the extent to which people feel that they themselves are the primary influence on
their lives or that the environment has more power over them.
The seven cultural dimensions conceptualised by Hampden-Turner and Trompenaars

(1998) have been used to indicate the organisational characteristics expected from firms
based in particular countries that are dominated by certain nationalities. In general, western
countries such as US and Australia are characterised by universalist, individualist, neutral
and specific cultures. They are also characterised as striving towards achievement,
synchronic and with a cultural emphasis on control. Asian countries have been recognised
as having opposite characteristics compared to western countries (e.g. collectivist). Japan
is the exception in Asian cultures and has been moving away in its cultural characteristics
to be more oriented towards western culture, for example achievement orientation is on the
increase alongside some elements of individualism (Ono & Spindle, 2000). HRM practices
in Japan have been characterised by the three pillars: lifetime employment, a seniority-
based wage structure and enterprise unionism, however this is changing somewhat (Vo &
Hannif, 2012).
Lewis (2006) categorises countries’ cultures in three dimensions namely linear-active

culture, multi-active culture and reactive culture. The characteristics of people with linear-
active culture for example are to do one thing at a time, to concentrate hard on that thing
and do it within a scheduled time period. Countries with linear-active cultures include
Germany, the US, the UK, Canada and Australia. People with multi-active culture are not
very interested in schedules or punctuality. They consider reality is more important than
man-made appointments and they do not like to leave a conversation unfinished. The Latin
America and Arabic countries, India, Pakistan, Spain, Italy and Polynesia are examples of
countries with multi-reactive cultures. In reactive cultures people usually listen before they
leap, so they prefer a monologue mode of communication. They have introverted
behaviours and are adept at non-verbal communication. Countries with strong reactive
cultures are for example Japan, China and Taiwan. There are countries that have a hybrid
culture, a mix between two cultural dimensions, such as Indonesia and the Philippines that
have a combination of multi-active and reactive cultures. Countries such as Belgium and
France have a combination of multi-active and linear-active culture, while Singapore and
Hong Kong have a combination of linear active and reactive characteristics.
Regarding the cultural characteristics of south-east Asian countries including Indonesia,

Lewis (2006) claims that the south-east Asian worldview is relatively relaxed, time is seen
as a limited commodity, the value of efficiency is often ambiguous and gentleness and
virtue are prized above all. Furthermore, they have a patronage system, and in addition to
security, harmony and cooperation, they are characterised by politeness and gentleness.
Southeast Asians have deep cultural dynamics embedded in deeply-rooted practices and
customs. Chatterjee and Nankervis (2007b) argue that all Asian countries have strong
familial values, respect for their elders, avowed responsibilities to their nation,
communities and kin, and commitment to the sustainability of their physical environment
and to different degrees have traditional cultures, based upon moral, religious, ideological
and political systems and beliefs.
2.3.3 Organisational Culture
The definition of organisational culture is a reflection of the national culture in which the
organisations were first founded (Chew, 2000). Organisational culture refers to the way in
which attitudes are expressed within a specific organisation (Trompenaars & Hampden-
Turner, 1998). There are characteristics of organisational culture such as a conditional
relationship of the members in the organisation, shared behaviour, something to be
socialised into and individuals being partly involved with their organisations (Thomas,
2008). Another characteristic of organisational culture is team orientation- the degree to
which work activities are organised around teams, rather than individuals (Robin et al.,
2004).
Organisational culture is socially constructed and difficult to change (Thomas, 2008).

Organisational culture is different from national culture that organisational culture shares
behaviours not meanings; the relationship is conditioned by people in the organisation, it is
socialised and people may be partly influenced by the organisational culture (Thomas,
2008). People are born into their national culture and when they join the organisation, they
adopt the organisational culture through selection and socialisation. The organisational
culture in some respects is influenced by national culture.
Since Indonesia is a country with high power distance and low uncertainty avoidance, the
organisational culture of most companies has a tendency to give much attention to some
factors such as family relationships, social relation and personal background (Suharnomo,
2009). A study on organisation culture and entrepreneurial orientation of Indonesian SMEs
conducted by Shihab et. al (2011) found that organisation culture affects entrepreneurial
orientation, and influences the members of organisation to achieve their goals and develop
its competitiveness.
2.3.4 Cultural differences in HRM practices
Stone and Stone-Romero (2008) argue that the individual cultures of group members as
well as the organisational culture of the dominant or non-dominant groups influences
HRM processes and practices. They claim further that regional and ethnic cultures also
play an important role in influencing HRM practices. Sparrow and Wu (1998) claim that
HRM practices are located within an external environment of national cultural value
systems, varying institutional factors, national business systems, structures and labour
markets, and variations in the role and competence of HRM decision makers. Countries
with Western culture (US) as the origin of HRM will find it easier to adopt Western HRM
practices than countries with different cultures. For example countries such as Australia,
the UK or New Zealand find it relatively easier to adopt Western HRM practice than Asian
countries. Furthermore, big companies in Asian countries may have adopted Western
HRM practices but their local culture and values still influence them very much.
Furthermore, Yaw, McGovern and Budhwar (2000) claim that the effectiveness of HRM
practices is dependent on how well these methods fit with the culture in which they are
implemented.
There are some Asian values that characterise Asian management, such as valuing family
relationships, consensus decision-making and respect for authority, that differ very much
from Western values such as an emphasis on individual achievement, political and
economic freedom and respect for the rule of the law (Chatterjee & Nankervis, 2007a).
Some authors believe that excessive reliance on these characteristics will impact
negatively on economic development. For example, valuing family may cause nepotism,
the overbalance of consensus over autocracy may led to corruption, and the value of
conservatism and respect for authority over individualistic behaviour may create rigidity
and the inability to innovate (Nankervis & Chatterjee, 2003). These negative sides of
culture and values become challenges for Asian managers in their efforts to combine the
traditional strengths of Asian values with the strength of Western values.
Recruitment and selection: Recruitment and selection is one of the important HRM
practices in every company. Its purpose is to attract the right candidates to the right job in
the organisation. In relation to the development of human capital in organisations,
countries with high individualism such as the US and the UK consider their employees as
critical resources (Elliott, 2004). Furthermore, for managers in individualistic Western
cultures competence is the key characteristic for an applicant (Hill, 2001). Therefore, they
might emphasise individual characteristics related to performance.
Collectivist and high power distance countries tend to place greater importance on
recruitment criteria such as ascribed status and socio-political connection than on
knowledge, skills and abilities (Budhwar & Khatri, 2001). In recruitment decisions,
managers in collectivist countries such as Germany may place more weight on group
cohesiveness. There are more cases of in-group recruitment because there is so much
social pressure to help out friends in need (Hill, 2001). Moreover, integration in the group
is important; therefore, firms do not hire foreign employees but hire locals (Sutiyono,
2007).
Training and development: The study of the cultural effect of training on self-efficacy
and performance conducted by Earley (1994) with managers from Hong Kong, China and
the USA showed that group-focused training was more successful and had a greater impact
on collectivist rather than individualist cultures. Furthermore, the study of nine dimensions
of societal culture and their influence on firms’ HRM practices in 19 countries (Australia,
Europe and Asia) conducted by Papalexandris and Panayotopoulou (2004) shows that
countries with high power distance and collectivism pay more attention to quality
management training. They argue further that health and safety training is applied strictly
by countries with high uncertainty avoidance such as Germany
Compensation and benefit: Compensation is used to describe the money paid for work
(Dessler et al., 2007). The compensation and reward system always becomes an important
issue for companies and often becomes a source of competition to attract highly skilled
workers. Employers must be reasonably competitive in several types of compensation in
order to hire, keep and reward the performance of individuals in the organisation (Mathis
& Jackson, 2006). Furthermore, a reward system must motivate employees to perform in
ways that contribute to a company’s successful execution of its strategy (Chen & Hsieh,
2006 ). The design and implementation of compensation and reward systems in each
country usually rest on the assumption that the workforce is homogenous with respect to
cultural values (Joshi & Martocchio, 2008).
Brewster (1992) claims that US individualistic culture and achievement orientation results
in US reward systems that adopt individually-based rewards and performance-related pay.
Countries with strong femininity such as Denmark, France and most of the Asian countries
would be more inclined to have a mechanism guaranteeing equal treatment in pay
(Papalexandris & Panayotopoulou, 2004). This also happens in countries with high power
distance.
Performance appraisals: Stone (2008) argues that performance appraisals result in

rewarding employees who have good achievement records and egalitarian pay plans
tolerate poor performance. Countries with collectivist characteristics may not relate
performance appraisals to individual training needs (Papalexandris & Panayotopoulou,
2004).
Employee and labour relations: Employment relations deal with the formal and informal
rules which regulate the employment relationship and the social processes which create
and enforce the rules (Waring, 2010). Unions are continuous associations of employees
that seek to advance the economic, social and sometimes political interests of their
members (Waring, 2010). Some European countries have a collectivist orientation which
leads to trade union recognition and collective bargaining characterising their industrial
relations (Elliott, 2004). In Asia, there is a high degree of informality in employment
relations and historically, compliance with labour laws has been extremely weak in Asian
countries such as Vietnam, Malaysia and Indonesia (Waring, 2010). Furthermore, trade
unions and the labour movement more generally are quite diverse in Asia with varying
levels of independence and legitimacy across the region.
2.4 Culture in Indonesian HRM Practices
2.4.1 Indonesian culture
Indonesia has a complex culture that is distinct from other Asia countries. Zifirdaus and
Nankervis (2003) claim that there is an extraordinary complexity in some of the latent
belief systems that guide Indonesian work cultures and institutional frameworks. The
national motto of ‘unity in diversity’ reflects both Indonesia’s geographic and socio-
cultural divergence and commonality (Nankervis & Putra, 2006).
Indonesian culture is formed by many influences including ethnicity, religion, trading and
colonial history (Munandar, 2003). Its multiracial, multilingual and geographically
dispersed nature has created a unique amalgam in the Asian context (Zifirdaus &
Nankervis, 2003). Lewis (2006) describes Indonesia as being a ‘hybrid’ society which is
both ‘multi-active and reactive’. He mentions further that values held by Indonesians
include hierarchy, family, friendly hospitality, unity and conformity, avoidance of
confrontation, respect for age, courtesy, gentleness and following adat or customary laws
(Lewis, 2006).
Indonesian culture and values are reflected in its ideology namely Pancasila. Pancasila
has five basic principles which consists of (1) belief in one supreme God; (2) a just and
civilised humanity; (3) the unity of Indonesia; (4) sovereignty of Indonesia and (5) social
justice for all (Prijadi & Rachmawati, 2002).
The strongest influence on Indonesian culture is from various ethnic group cultures
because Indonesia is a multi-ethnic and multicultural society. Geographically, Indonesia is
the world’s largest archipelago and comprises around 17,508 islands (Prijadi &
Rachmawati, 2002). From this number, the largest islands are Sumatra, Java, Kalimantan,
Sulawesi, and Papua (Munandar, 2003). Almost half of Indonesia’s 220 million people live
on Java (Prijadi & Rachmawati, 2002). Indonesia has several ethnic societies with the
majority Javanese (45 per cent), Sundanese (14 per cent), Madurese (7.5 per cent), coastal
Malays (7.5 per cent), Chinese (peranakan- 3 per cent) and others (23 per cent) (Nankervis
& Putra, 2006). For the current generation, the categorisation of ethnic Chinese into
"peranakan" (more acculturated) and "totok" (less acculturated) has become less clear.
There are about 583 languages spoken by as many distinct ethnic groups across the
archipelago. To unite all the different language groups, bahasa Indonesia is used as a
national language (Hutchings & Ratnasari, 2006). The intensive use of the Indonesian
language has resulted in several changes in the culture the ethnic groups towards the
development of a set of common values and norms which constitute the Indonesian
national culture (Munandar, 2003).
There are four major religions predominant in Indonesia: Islam, Christianity, Hinduism,
and Buddhism. The influence of these religions forms an assimilative cultural heritage
(Nankervis & Putra, 2006). Munandar (2003) explains that historically, Hinduism was
brought by Indians centuries ago before Buddhism. He continues further that this situation
stood until the fourteenth century, when Islam took over as the dominant religion.
Christianity was brought by the Dutch in the sixteenth century. In the era of Abdurrahman
Wahid's presidency, Confucianism was accepted as one of the religions recognised in
Indonesia. The majority (about 85 per cent) of the population follows Islam (Hutchings
and Ratnasari, 2006).
Indonesia with Islam as the dominant religion respects the following principles: the family
is the basic unit of life; harmony is important in social and business life; society is
organised hierarchically based on age and seniority; collectivism prevails over
individualism, and etiquette, good manners, and gentleness are mandatory (Lewis, 2006).
Furthermore, Islam affects the social and business life of Indonesian Muslims on a daily
basis. Currently, the Islamic culture of Indonesian Muslims has become more hybrid as a
process of cultural interactions between local culture and Islamic culture (Saluz, 2007).
Contemporary Indonesian Islam is being synthesized with some lifestyle characteristics of
late modernity as the effect of modernisation and globalisation (Nilan, 2006).
Beside ethnic group cultures and religion, Indonesian culture also reflects the influence of
Islamic traders, European traders such as the Portuguese, Chinese merchants and also the
Dutch and the Japanese during the colonisation era and the Pacific war period. Indonesian
ethnic groups consist of Indigenous Indonesians (pribumis), Chinese, Arabs, Indians and
others, each with their own tradition, historical background, identities and attitudes.
Pribumi Indonesians are again subdivided into many subethnic groupings. However, the
most successful entrepreneurs are Chinese (Tarmidi, 1999). Zifirdaus and Nankervis
(2003) argue that indigenous Islamic businessmen and Chinese had the potential to
promote commercial activities and to develop the Indonesian economy, however they both
had problems. Islamic indigenous businessmen were not supported by the Soeharto new
order government and the Chinese occasionally experienced discrimination, manipulation,

and exploitation. Currently, Chinese Indonesians constitute the only ethnic minority that
has sustained a dominant position in the nation’s economy (Habir & Rajendran, 2008).
Munandar (2003) claims that there are two groups of Chinese in Indonesia: one consists of
big traders and industrialists who have retained their Chinese culture and religion, and the
second group consists of intellectuals, university graduates and scientists with a
predominant Western orientation. Chinese domination of the Indonesian economy often
causes resentment. The assimilation program created by the government to blend Chinese
Indonesian culture with indigenous ethnic cultures seems to have failed to bring them into
a harmonious relationship.
2.4.2 Javanese culture
Javanese culture has dominated Indonesian culture because it has the biggest population in
Indonesia. It is a blend of animism, Hinduism, Buddhism and Islam (Zifirdaus &
Nankervis, 2003). Animism influences the Javanese belief in a supernatural power outside
people that exists in many objects and places. Hinduism influences the Javanese belief that
everything has been determined. This has created the Javanese attitude that is known as
nrimo (accept what is given). It also introduced feudalism and patrimonialism in which
power rested in the palace and was held by the king. Islam suggests the belief that man is a
khalifah on earth (Hariyanto, 2011), which indicates that people have to maintain a
harmonious relationship with the universe and that has created the Javanese culture of
building a harmony with people and environment. Hindu's thought of class division in
society also has influenced the existence of classes in Javanese society. Therefore,
Javanese society has developed two classes of society namely the royal society and the
common society. Social status can be measured by the number of dependents one has
under one's purview. The status of these dependents within society is also directly
correlated with the status of the benefactor (Wessing, 1977). The difference between royal
society and common society in the current Javanese society is less clear today. However,
the term "priyayi" is still used to mention people with high status and power (Amir, 2000).
Javanese culture holds its philosophy and values that are rooted in its traditions, guiding
the way Javanese people interact with other people, nature and God who creates the
universe. Mulder (2005) mentions that the Javanese values that are strongly evident in
society are for example respect for elders and cooperation (gotong-royong). Other socio-
cultural factors reinforcing the decision-making process in Javanese culture are acting by
mutual consultation and deliberation (musyawarah), consensus decisions (mufakat) and
family-like situations (kekeluargaan) (Mulder, 2005; Nankervis & Putra, 2006).
Maintaining social harmony is an important aspect of life on Java. In many instances, one
will avoid a negative verbal response to a question, but will instead show a corresponding
facial expression that denotes an actual negative answer. Javanese generally try to avoid
expressing displeasure or confrontation directly, favouring a more indirect approach using
irony or omission (Sutarto, 2006).
Javanese relationships are built upon showing respect and manners to individuals of higher
status. This characterises Javanese society as hierarchical, and that is reflected in
identifiable Javanese leadership and management styles (Nankervis & Putra, 2006). The
style of leadership experienced by most Javanese tends to be authoritarian paternalistic
leadership (Mulder, 2005). Furthermore, the characteristic of patriarchal authoritarianism
leads dependents to search for support from a leader in return for loyalty, which is
expressed as one of the major tenets of “being Javanese” (Sutarto, 2006).
Javanese culture influences the way of life of most Indonesians, and the Javanese dominate
cultural, business, social and political activities in Indonesia (Mann, 1996). Grant (1996 p.
131) claims that:
“Javanese life, which sets the pattern in Indonesia, especially in official circles, is disciplined
by a set of ideals and stylized behaviour patterns which are sophisticated as any of the great
aristocratic fashions of Western civilization”
In addition, Grant (1996) mentions five Javanese values that have been widely accepted by
Indonesian people as Indonesian customs; co-operation (gotong-royong), discussion
(musyawarah), consensus or anonymous agreement (mufakat), harmony (kecocokan), and
paternalism (bapakism).
Zifirdaus and Nankervis (2003) argue that the dominant Javanese culture is not favourably
aligned to modern management because in this culture seeking commercial profit is not an
ideal. Furthermore, traditional Javanese society does not value trading as a respected
career and this discourages a willingness to be an entrepreneur. The most respected
occupation for the upper class is being a public servant. Other values that give weight to
family lead to refusing a job if it means leaving family behind.
Compared with the Chinese and Bataknese (an ethnicity from north Sumatra), the Javanese
have the weakest motivation to progress (Zifirdaus & Nankervis, 2003). This is because
aggressiveness for personal interest is undesirable, and considered egoistic and ambitious.
Therefore, it is rare to see an Indonesian employee promoting himself or herself before a
superior.
Studies of HRM practices in Indonesian large companies (most of which were proprietary
limited companies) found that Javanese culture was embedded in their organisational
culture and influenced the implementation of HRM practices and HR strategies of the
company (Hartono, 2010; Sitalaksmi & Zhu, 2010). For medium-sized proprietary limited
companies the influence of Javanese culture might be stronger as they adopt less formal
HRM practices than large companies.
2.4.2 The influence of culture on Indonesian HRM
The research findings of Hofstede (2001) can be used to describe Indonesian culture
relating to the personal and cultural values among Indonesian managers. Indonesia scored
high in the dimensions of ‘collectivism’, ‘power distance’, and ‘femininity’ and low on
‘uncertainty avoidance’. Habir and Larasati (1999, p. 549) summarise Indonesian scores in
Hofstede’s (2001) study on the culture of countries as follows:
1. “The relationship between employer and employee as moral rather than calculative,
implying mutual obligations of protection from the employer (irrespective of the
employee's performance), and loyalty towards the employer from the employee.
2. Employees having strong obligations towards relatives.
3. Relationships taking precedence over task.
4. Having a strong need for harmony and the preservation of face.
5. Paternalistic.
6. Acceptance of status differences.
7. Reluctance to plan ahead.”
As a result, the impact on HRM practices will significantly differ from Western HRM.
Trompenaars and Turner (1998) find similar results in their research. They found that 66
per cent of Indonesian managers perceive the organisation as a system rather than a social
group; half of them experience the organisation as a means to be able to work rationally,
efficiently and effectively. They also tend to be more particularist and more collectivist.
These characteristics imply that their leadership style is likely to be more directive or
authoritative, however, in some other ways they support common agreement as the
decision-making process. Lewis (2006) claims that Indonesian leaders are expected to be
paternalistic and often choose consensus in the decision-making process.
Study conducted by Suharnomo (2009) on 108 HR managers in large companies found

that Indonesian national culture dimensions tended to be high for collectivism, power
distance, masculinity and uncertainty avoidance. This result was quite different from
Hofstede findings. This suggests there has been a shift of the culture dimension that
reflects on behaviour of Indonesian HR managers. Political and economic hardship, free
trade agreement as well as globalisation may be causing this shift. Furthermore, from those
four culture dimensions, three dimensions (collectivism, power distance and uncertainty
avoidance) were confirmed as dimensions of national culture.
Beside the dimension of culture explored by Hofstede and Trompenaar that shapes
Indonesian managers in managing employees in their organisation, the implementation of
HRM practices is also influenced by the national culture and in particular, Javanese
culture. These Javanese concepts have significant collectivist implications for Indonesian
cultural notions of leadership, management, decision-making and performance, in both
public and private organisations. According to Lange (2010) Indonesian people have a
lower practice score on performance orientation because they value societal and family
relationships and view merit-based pay as potentially destructive to harmony.
Furthermore, assertiveness is viewed as socially unacceptable, and there is an emphasis in
the performance appraisal system on integrity, loyalty, cooperative spirit and tradition.
The Javanese dominate Indonesian culture because of they have the biggest numbers in
terms of population and Java has been a centre of government since the Dutch colonial
government (Zifirdaus & Nankervis, 2003). Furthermore, Javanese culture is embedded in
Pancasila that has been socialised through schools, tertiary education, the media, and
through training, seminars and workshops in government and private institutions.
Rohdewohld (1995) cited in Bennington (2001) says that one of the major features of
culture in the Indonesian organisation is the keluarga besar (big family) concept, which
means that staff are seen as part of one big family which shares common purposes, and
friendly and familiar relationships. The practice of this concept is clearly seen in the
organisations of the public sector in which the government pays married workers more
than unmarried workers by providing extra allowances for those with spouses and children.
This feature also creates a concept of the manager as bapak (father) or ibu (mother) who
will take care of, protect and provide guidance for everyone in the company (Zifirdaus &
Nankervis, 2003). They argue further that she or he has the responsibility to keep
harmonious relationships among the family members and is expected to be someone who
adheres to moral values because they are expected to set an example for the whole big
family.
Prawirosentono (1998) cited in Zifirdaus and Nankervis (2003) mentions several aspects of
Indonesian culture that are supportive of modern management including being helpful,
friendly, loyal, cooperative (gotong-royong), tolerant, harmonious, fond of deliberation
and consensus, patient and hardworking. These aspects may also have negative impacts if
not managed properly. For example gotong-royong will have a negative impact if it is used
by someone who wants to avoid responsibility and does not contribute to the job because
others will do it.
Indonesian culture and values in some degree become a problem in aligning with modern
management and economic development. Zifirdaus and Nankervis (2003) claim that values
such as collectivism, the central importance of the family and harmony create passive
attitudes among the majority of people and encourage them to refrain from being critical.
They argue further that these characteristics were enhanced by the feudal system, colonial
oppression and the authoritarian Soekarno and Soeharto regimes. Other attitudes that are
negative for management are lack of discipline, irresponsibility and lack of creativity.
In addition, Indonesian society which is a blend of several different cultural and religious
traditions and has a people focus that is passive in its natural orientation (Nankervis &
Putra, 2006). Its employees as well as Asian employees in general tend to use indirect
communication as part of politeness, prefer to be given orders rather than volunteer, are
less open, praise and keep a distance from persons in higher positions and are used to
being in a paternalistic system (Westwood & Lok, 2003). Their priorities focus on
dimensions such as harmony, face and work centrality. Therefore, some Western values
are accepted with difficulty, such as free employee interrelations, equality, regarding
change as opportunity, being free to express an opinion and adopting voluntary systems
(Munandar, 2003). Rhodes et al (2008, p. 1182) suggest that when Asian firms want to
implement strategic management systems, they need to pay close attention in four areas:
“1) conflict avoidance in relation to performance appraisals and rewards; 2) the depth of
feedback given to staff around performance issues; 3) organisational fear of metrics; and 4)
high power distance and conformity”.
2.5 HRM Practices in Indonesian Medium-Sized Companies
In Indonesia, medium-sized companies included in SMEs play an important role in

economic development. They contribute the greatest part of national GDP, are the primary
source of employment creation, support export growth and help the development of
entrepreneurship, industry and rural economy (Harvie, 2004). Indonesian SMEs account
for more than 90% of all firms and thus they are the biggest source of employment,
providing livelihood for over 90% of the country’s workforce, especially women and the
young (Tambunan et al., 2008).
Wilkinson (1999) argues that most of the concepts and literature on HRM and firms are
focused on large enterprises and overlook small enterprises. Most publications on SMEs
focus on finance, marketing and operational management issues. He continues further that
HRM practices tend to be informal in smaller firms and generally can be described as
informal. Smaller firms are still not integrating human resource development plans so
much partly because of a lack of resources and the view that people management is not a
technical matter requiring specialists. Management only needs to examine human resource
issues when there is a problem rather than make contingency plans.
Recently, some researchers started to look at HRM practices in SMEs of Western and
Asian countries such as the UK, Australia, China and Vietnam. Their findings showed
more similarities than differences. The similarity findings on HRM practices in SMEs are
that recruitment is through networks of family and friends of employees (Bartram, 2005;
Cassell et al., 2002; Cunningham & Rowley, 2008); that training and development is
limited and tends to be informal (Bartram, 2005; Cunningham & Rowley, 2008; King-
Kauanui et al., 2006); and that performance evaluation is conducted but not formalised and
incorporated into compensation decisions (Cassell et al., 2002; Cunningham & Rowley,
2008; King-Kauanui et al., 2006).
Even though there appears to be a recognition of the importance of HRM among SMEs,
the empirical evidence on the extent of the impact of HRM practices on SME performance
is inconclusive (Zheng et al., 2006). Despite the emergence of research on HRM practices
in SMEs, there is little evidence of similar research on Indonesia SMEs. Heneman et al.
(2000) conclude from their literature survey that ‘the lack of information about human
resources in SMEs is problematic for theory, research and practice’. It appears that the
research focus for Indonesian SMEs is on developing their access to marketing, technology
and finance.
2.5.1 Definition of Indonesian medium-sized companies
There is no universal definition of small and medium companies because of the difference
in social conditions in each country. A number of indexes are traditionally utilised to
define SMEs: number of employees; invested capital; total amount of assets; sales volume;
and production capability. The most commonly used index, however, is the number of
employees (Harvie, 2004). However, there is no agreement on the size of companies or
enterprises to be classified as micro, small, medium or large enterprises. The definition of
SMEs also varies between countries as they differ in the use of technology, the range of
firms’ growth, and the type of businesses.
In Indonesia, there are several definitions of SMEs, depending on which agency provides
the definition. The State Ministry of Cooperative and Small and Medium Enterprises
(Menegkop and UKM) promulgated the Law on Small Enterprises Number 9 of 1995,
which defines small and medium enterprises based on their asset value. The Indonesia
Statistics Board (BPS), which regularly conducts surveys of SMEs, uses the number of
workers as the basis for determining the size of an enterprise.
With regard to their definitions, a small enterprise is defined by its initial assets of up to
US$20,000 with an annual sales value to a maximum of US$100,000. Furthermore, the
number of employees hired is between 5 and 19 (Tambunan et al., 2008).
Based on the definition of the Ministry of Cooperatives and SMEs, a medium enterprise is
defined as a business unit with assets between US$500,000 and US$1 million, with an
annual value of sales at more than US$250,000 but less than US$5 million (Kementrian
Koperasi dan UKM, 2011). The Indonesia Statistics Board (BPS) defines medium
enterprises by the number of employees hired, between 20 and 99 employees (Tambunan
et al., 2008). Based on the report of Ministry of Cooperatives and SMEs (2011), the
number of micro, small, medium and large enterprises from 2005 to 2009 can be seen in
Table 2.3.
The micro enterprises showed steady increases in numbers from 2005 to 2009. Small and
medium enterprises experienced a huge decrease in numbers from 2005 to 2006, but they
increased gradually from 2006 to 2009. The number of large enterprises decreased
gradually from 2005 to 2008 and only increased slightly from 2008 to 2009. The biggest
number is micro enterprises followed by small enterprises. Their large numbers have
become a focus of government attention. Most government policy and support is
dedicated to improving their performances.
Table 2.3 The number of enterprises by size category 2005 - 2009
Size Category 2005 2006 2007 2008 2009

Σ Micro Es 45,022,084 48,512,438 49,608,953 50,847,771 52,176,795
Σ Small Es 1,694,008 472,602 498,565 522,124 546,675
Σ Medium Es 105,487 36,763 38,282 39,717 41,133
Σ Large Es 5,022 4,577 4,463 4,650 4,677
Total 47,022,084 49,026,380 50,150,263 51,414,262 52,769,280
Source: Ministry of Cooperatives and SMEs Indonesia (Kementrian Koperasi dan UKM, 2011)
On the other hand the number of employees in micro, small, medium and large enterprises
from the year 2005 to 2009 is shown in table 2.4. From the table, it can be seen that only
micro enterprises experienced a steady increase in the number of employees from 2005 to
2009. Small and medium enterprises experienced a big decrease in the number of
employees from 2005 to 2006. From 2006 to 2009, the number of employees of small
enterprises increased gradually while medium enterprises experienced fluctuation in their
numbers of employees. Large enterprises also experienced a similar situation to medium
enterprises and fluctuated in their numbers of employees from 2005 to 2009.
Table 2.4 The number of employees in micro, small, medium and large enterprises 2005 -
2009
Σ employees 2005 2006 2007 2008 2009

Micro Es 69,966,508 82,071,144 84,453,002 87,810,366 90,012,694
Small Es 9,204,786 3,139,711 3,278,793 3,519,843 3,521,073
Medium Es 4,415,322 2,698,742 2,761,135 2,694,069 2,677,565
Large Es 2,719,209 2,441,181 2,535,411 2,756,205 2,674,671
Total 86,305,825 90,350,778 93,027,341 96,780,483 98,886,003
Source: Ministry of Cooperatives and SMEs Indonesia (Kementrian Koperasi dan UKM, 2011)
Indonesia’s SMEs are regionally dispersed, and are mostly located in the rural areas. They
therefore have the potential to exert a favourable influence on rural and regional
development and on income distribution. The number of enterprises based on industrial
origin and scale of enterprises in the year 2008 is shown in Table 2.5 below.
Table 2.5 Number of enterprises by industrial origin and scale of enterprises 2008
Industrial origin Micro scale small scale medium scale large scale
Agricultural, livestock, forestry & fisheries 26,398,113 1,079 1,677 242
Mining and quarrying 258,974 2,107 260 80
Manufacturing industry 3,176,471 53,458 8,182 1,309
Electricity, gas & water supply 10,756 551 315 125
Construction 159,883 12,622 1,854 245
Trade, hotel and restaurant 14,387,690 382,084 20,176 1,256
Transportation and communication 3,186,181 17,420 1,424 319
Finance, real estate & business services 970,163 23,375 3,973 599
Services 2,149,428 27,525 1,796 197
Source: adapted from SMEs statistic 2009 (Pristiyanto, 2009)
Medium scale enterprises have their largest numbers in trading, hotel and restaurant which
account for 20,176 units, followed by the manufacturing industry with 8,182 units.
Financing, renting and business services are the third largest group of medium scale
enterprises, accounting for 3,973.
2.5.2 HRM practices in Indonesian medium-sized companies
The economic recovery from recession seems to have touched Indonesian SMEs only a
little. The economic recession affected SMEs and many of them stopped operations due to
capital and marketing problems. As SMEs were in a stagnant phase during the economic
recession, their organisations might not yet have developed and this has an effect on their
management practices including HRM.
There is limited information on the development of HRM practices in Indonesian SMEs.

It seems that SMEs especially small enterprises have yet to develop their HRM practices
due to their small scale of businesses, lack of management skills and simple organisational
structure or lack thereof.
Most SMEs in Indonesia are family businesses and the owners manage all of the operation.
Usually the owners perform management functions such as finance, marketing, personnel
and production. As their focus is on improving their business by overcoming problems
such as market access difficulties and lack of financial access, they pay little attention to
employees. They perform basic personnel functions such as recruitment, training and
compensation with limited effort. Furthermore, it is difficult for SMEs to have a human
resources department in their organisation because HRM is considered to be too costly in a
small firm (Mazzarol, 2003).
2.6 Indonesian Textile Industry
The textile and textile product (TPT) industry represents one of the strategic industries
which have a very great role in the economy of Indonesia. It supplies a basic commodity
and is a significant source of employment generation. It continues to be a leading textile
and apparel producer in the Association of Southeast Asian Nations (ASEAN) region
(Amaratunga et al., 2002). Before the economic crisis, textiles had become the main source
of export and contributed a lot to Indonesian GDP. Table 2.6 shows the leading exporter
from 2004 – 2008.
Table 2.6 The leading textile exporters 2004-2008

Value in US $,000
Rank Exporters
2004 2005 2006 2007 2008
1 EU27 155,065,330 156,094,800 165,017,780 181,722,160 190,400,830
2 CHINA 87,051,824 105,816,150 136,097,150 163,677,580 177,646,560
3 HONGKONG 37,319,832 38,949,420 40,244,192 40,216,292 38,217,916
4 BANGLADESH 6,923,457 7,683,054 9,896,923 10,662,311 35,165,744
5 VIETNAM 4,781,652 5,303,443 6,522,056 8,592,083 25,199,234
6 INDIA 13,317,727 17,838,528 19,332,570 20,867,960 22,517,010
7 TURKEY 17,437,284 18,719,408 19,531,272 22,424,104 22,550,012
8 USA 21,846,276 21,809,600 22,573,210 21,938,368 22,504,960
9 KOREA 14,778,295 13,572,083 12,902,960 13,146,017 13,025,784
10 TAIWAN 12,418,245 11,700,192 11,687,151 11,509,614 10,812,686
11 PAKISTAN 8,910,998 10,253,217 10,861,550 10,731,676 10,620,842
12 INDONESIA 7,638,418 8,596,406 9,441,035 9,805,269 10,139,040
13 JAPAN 7,918,813 7,690,862 7,752,754 8,120,678 8,399,845
14 THAILAND 6,349,701 6,655,857 6,887,683 6,987,466 7,161,541
15 MEXICO 9,631,199 9,465,551 8,389,548 7,266,770 6,819,598
Source: Directorate of Textile and Textile Product Industry (2010b)
Table 2.6 shows that globally, Indonesia ranked 12th among leading textile exporters with
a value of $10,139,040, and captured 1.74 per cent of total global market share in 2008
(Directorate of Textile and Textile Product Industry, 2010b). It appears that Indonesian
export values increased gradually from 2004 to 2008.
Table 2.7 shows the top five destination countries for Indonesian textile exports from 2005
to 2009. First is the United States, importing 37.57 per cent of Indonesia’s textile and
apparel exports; followed by Germany, 5.73 per cent; Japan, 5.12 per cent; the United
Kingdom, 3.89 per cent, and UAE 3.51 per cent in 2009 (Directorate of Textile and Textile
Product Industry, 2010b).
Table 2.7 Indonesian textiles exports to top five countries 2005-2009

Rank Importer 2005 2006 2007 2008 2009
1 United States 34.06% 38.38% 38.33% 37.43% 37.57%
2 Germany 5.62% 5.38% 5.38% 5.91% 5.73%
3 Japan 5.52% 5.23% 5.13% 5.39% 5.12%
4 United kingdom 4.16% 4.16% 3.78% 3.79% 3.89%
5 UAE 3.61% 2.91% 3.56% 3.59% 3.51%
To be sure, Indonesia’s textile industry continues to be economically relevant domestically

and globally. According to the Bank of Indonesia’s report (BI, 2011) on the percentage of
Indonesia’s gross domestic product (GDP) by industrial origin adapted from the
Indonesian Statistics Board, textiles, leather and footwear made up to Rp 116,5477
million, or approximately 2.08 per cent, of the republic’s 2009 GDP. That was an 11.18
per cent increase over 2008 and a 24.52 per cent increase over 2007. Details of GDP
distribution by industrial origin are shown in Table 2.8.
Table 2.8: Percentage of distribution of GDP at current market prices by industrial origin (in
millions Rp,)
Industrial origin 2006 2007 2008 2009
Agriculture, forestry, fisheries 433,223 541,932 716,656 857,241
Mining and quarrying 366,521 440,610 541,334 591,913
Manufacturing industry 919,539 1,068,654 1,376,442 1,477,674
a. Oil and gas manufacturing industry 172,095 182,324 237,772 209,974
b. Non-oil and gas manufacturing industry 747,444 886,330 1,138,670 1,267,700
1. Food, beverage and tobacco 212,738 264,101 346,186 420,363
2. Textiles, leather and footwear 90,117 93,598 104,830 116,547
3. Wood and other 44,603 54,881 73,196 80,198
4. Paper and printing 39,637 45,403 51,912 61,155
5. Fertilisers, chemical and rubber 94,079 110,770 154,117 162879
6. Cement and non-metallic product 29,013 32,814 40,179 43,531
7. Iron and steel basic metal 20,687 22,908 29,213 26,807
8. Transport equipment and machinery 209,460 254,278 329,912 346,403
9. Other 7,111 7,577 9,126 9,818
Electricity, gas and water supply 30,355 34,724 40,889 47,166
Construction 251,132 304,997 419,712 555,201
Wholesale and retail trade, hotel and restaurant 501,542 592,304 691,488 744,122
Transportation, storage and communication 231,524 264,263 312,190 352,423
Financing, insurance, real estate and bus. services 269,121 305,214 368,130 404,013
Services 336,259 398,197 481,848 574,117
Total 3,339,217 3,950,893 4,948,688 5,603,871
Source: Indonesian Economy and Financial Statistics by Bank of Indonesia (BI, 2011)
2.6.1 The development of the Indonesian textile industry
Indonesia’s textile industry is vertically integrated and is involved in almost every sector
of the textile supply chain from the production of man-made fibres, particularly polyester,
nylon and rayon; man-made and cotton yarn spinning, and weaving and knitting; to
dyeing, printing and finishing; and apparel manufacturing (Mitchell, 2006). The
Directorate of the Textile and Textile Product Industry (2010b) comprises five sub-groups
of the textile and textile product industry namely the fibre industry, yarn industry, fabric
industry, garment industry and other textile articles industry.
According to the Directorate of the Textile and Textile Product Industry (2010b), the
growth of the textile and textile product industry during the period 2005-2008 showed
relatively better conditions, although in the year 2009 it showed lower performance. This
was mainly caused by the decrease in world demand for textiles and textile products
because of the global economic crisis.
However, there was still a surplus of about 0.98 per cent of Indonesia’s textile commerce
over the previous year. The development of the textile and textile products industry in
terms of the number of companies, capital investment, manpower, production capacity and
export value from 2005 to 2009 can be seen in Table 2.9.
Table 2.9: Indonesian textile and apparel industries at a glance

2005 2006 2007 2008 2009
Number of companies (unit) 2,566 2,699 2,726 2,818 2,853
Capital investment (Rp billion) 132,381 135,648 137,906 142,068 146,170
Manpower (persons) 1,176,183 1,191,326 1,234,250 1,289,400 1,337,497
Production capacity (US$ million) 14,117 14,742 15,326 16,740 14,524
Export (US$ million) 8,602 9,445 9,809 10,144 9,261
Source: (Directorate of Textile and Textile Product Industry, 2010b)
The number of companies showed an increase from 2005 to 2009 and reached 2,853 in
2009. Figure 2.2 shows the growing number of companies of the textile industry in the
period of 2005-2009.
A significant increase also occurred in capital investment value reaching Rp. 146,170
billion in 2009. Production capacity increased gradually from 2005 to 2008 and reached
US$16,740 million in 2008, but declined in 2009 to US$14,524 million. The value of
exports also showed similar results, increasing gradually from US$8,602 million in 2005
to US$9,445 in 2006. It increased to US$9,809 million in 2007 and US$10,144 million in
2008. However, it decreased to US$9,261 million in 2009.
Figure 2.2: The growing number of companies in the textile industry 2005-2009
The growing number of companies in

the textile industry period 2005-2009
2,818 2,853
2,726
2,699
u
2,566
n
i
t
2005 2006 2007 2008 2009

Year
Figure 2.3 shows the growing manpower of the textile industry in the period of 2005-2009.
Textile industry workers altogether comprised 1.9 per cent of total employment in the
Republic of Indonesia.
Figure 2.3: Growing manpower in the textile industry in period of 2005-2009.
Growing manpower of the textile industry

period 2005-2009
1,337,497
1,289,400
1,234,250
1,176,773 1,191,326
2005 2006 2007 2008 2009

year
As the largest employer in Indonesia’s industrial and manufacturing sector, the textile
industry employed 1.176 million workers in 2005, and this increased to 1.191 million in
2006, 1.234 million in 2007, 1.289 million in 2008 and 1.337 million in 2009 (Directorate
of Textile and Textile Product Industry, 2010b). The composition of the Indonesian textile
and textile product industry is shown in Figure 2.4.
Figure 2.4: Composition of textile industry 2009
Composition of Indonesian textile industry 2009

Fiber, 30 Yarn, 225
Other, 535
Garment, 996 Fabric, 1067
Of the total of 2,853 enterprises in 2009, there were 30 enterprises in the fibre subsector;
225 enterprises in the yarn subsector; 1067 enterprises in the fabric subsectors; 996
enterprises in the garment subsector and 535 enterprises in other sectors (Directorate of
Textile and Textile Product Industry, 2010b).
The distribution of the Indonesian textile industry by region in 2009 is shown in Figure
2.5.
Figure 2.5: Distribution of Indonesia textile industry by region 2009
Distribution of Indonesian textile industry

by region 2009
EAST JAVA SULAWESI
BALI
5.57% 0.18%
3.08%
SUMATRA
YOGYAKARTA 1.68%
1.12%
JAKARTA
16.54%
CENTRAL JAVA
13.49%
WEST JAVA
BANTEN 43.60%
14.72%
The majority of companies (95.04 %) were located in Java. Of this total, of 43.60 per cent,
were located in the region of West Java, followed by Jakarta, 16.54 per cent; Banten, 14.72
per cent; Central Java, 13.49 per cent; East Java, 5.57 per cent and Yogyakarta, 1.12 per
cent. Other regions with textile-related companies were Bali, Sumatra, and Sulawesi with
percentages less than 5 per cent. This means that Java dominates the textile industry
(Directorate of Textile and Textile Product Industry, 2010b).
2.6.2 Indonesian medium enterprises of the Textile industry
Hill (2001) claims that SMEs in the Indonesian textiles industry operate in a clustering
model that is believed to have a significant impact on their efficiency. External efficiencies
are improving the capacity to innovate and lowering cost-inputs and services.
Furthermore, they participate in the growth of manufactured exports. Hill reports that
SMEs’ share in the textile industry is up to 20%. However, SMEs of the textile industry
are influenced by the fluctuations of the Indonesian economy and of policies. Most of
them rely on government protection and policies related to textile import products.
SMEs of the textile industry usually supply the domestic market for textile products as the
market share of the national textile market is still potentially available for them. However,
SMEs of the textile industry face a big challenge from other countries such as China and
Vietnam that have started entering the Indonesian textile market. The Indonesian
government needs to coordinate with other related institutions to overcome this problem
by providing training and capital aid to increase the quality of the textile products of
SMEs.
Recently, the implementation of the ASEAN-China Free Trade Agreement (ACFTA) hit
SMEs of the textile industry badly as they could not compete with China’s textile products
(Jakarta, 2010). Only a few SMEs were not affected by ACFTA implementation. The
Minister of Cooperatives and SMEs argued that SMEs of the Indonesian textile industry
could not compete in quality and price with China’s textile products. Furthermore,
technology was mentioned as the main factor in the low competitive power of the SMEs.
There are certain problems which are common to all SMEs. The most common problems
are difficulties in financial access, low technological capabilities, limited access to market
as well as entrepreneurial and management skill deficiencies (Harvie, 2004). Tambunan
(2008) argues that common constraints faced by SMEs are lack of access to relevant
business information, high transportation costs, communication problems, costly
bureaucratic procedures and policies and regulations that generate market distortion and
lack of skilled workers. Most entrepreneurs and employees of Indonesian SMEs are
graduates of primary school only. This low quality of education lessens their ability to
obtain skills and knowledge especially in Information Technology (IT). SMEs of the
textile industry face various problems such as a lack of capital, production quality,
standard operating procedures and inventory control (Indonesia, 2005). These problems
cause the low competitiveness of Indonesian textile SMEs compared with other countries.
2.6.3 The Javanese family businesses of the textile industry
A survey on Indonesian companies shows that most of Indonesian big businesses (80%)
belong to families (Bisnis, 2011). According to Susanto (2011), Indonesian family
businesses have characteristics of family control over the management and operation of the
company. As the family members in the organisation had emotional closeness, they did not
set rules and regulations in terms of jobs descriptions, responsibility and profit sharing.
Therefore they often had conflict among the family members. In family business, the key
element to align business interest and family interest relied on the effort to match the
company values with family values.
A survey conducted by Susanto (2011) did not specifically focus on Javanese family
businesses. Therefore it might include the characteristics of family business from other
ethnicities such as Chinese. It also only mentioned organisational culture in general and
did not specifically explain the influence of Indonesian or Javanese culture in its survey.
For medium-sized family businesses of the textile industry, their characteristics might be
different although in the present study the general characteristics of the family business
were similar to the survey findings above.
Most Javanese family businesses in the textile industry came from batik and garments
businesses that were inherited from their family ancestors. Historically, batik arts had been
recognised since the Majapahit kingdom and had been developed in the early 19th century.
Previously, Batik arts had been produced and worn only by the royal family but then was
imitated by common society. Batik started to be produced and sold by Javanese society
along with the coming of Chinese and Arabic traders. In central Java, the Javanese
merchants (saudagar) of batik known as indigenous (pribumi) merchants came from lower
classes of the Javanese society (Brenner, 1991).
Skills in batik arts were derived from family members. Batik arts and Javanese culture
were closely associated because many batik motifs or patterns described the Javanese
culture and philosophy. Therefore, the people who work in batik businesses or inherited
batik businesses from their family usually adhered to Javanese cultural values in their
businesses. Javanese values held by the heads of family businesses included mikul dhuwur
mendem jero meaning the owner glorified his ancestors as a brilliant businessman so that
he could continue their business, and as a successor, the owner kept the secrets of his
ancestors and never say bad things about them.
In traditional Javanese culture the owner of the family business is not only the head of the
family business but also a leader who holds the highest power and responsibility. The
owners of Javanese businesses are usually characterised by having very good knowledge
and skills in business, including the batik arts and none of the family members could
match knowledge and skills. Typically the owners of Javanese family businesses have
'one man show' characteristics and set the goal of the business and operate the business
under his command. The family members and the employees perform their jobs based on
the owner's instructions. The owner is usually a hard working person who puts all of his
efforts into developing the business and is responsible for all aspects of the business. The
family members who work in the business and the employees are considered as a big
family that should be brought together in a harmony.
2.6.4 Proprietary limited companies of the textile industry in Java
Proprietary limited companies have existed since the Dutch colonial times. Proprietary
limited companies in Indonesia mostly exist in the form of PT (Perseroan Terbatas) firm
in which the company's capital is in the form of shares and people who hold shares of the
company (shareholders) have limited responsibility determined by their shares. Several
characteristics of proprietary limited companies, especially PT companies are: they have a
formal organisational structure; managerial level employees are selected from various
sources; they are legally recognised entities and operate under formal laws. Proprietary
limited companies usually have a personnel department that manages HRM practices and
keeps documents related to employees' data and HRM activities. With these
characteristics, medium-sized proprietary limited companies of the textile industry adopt
more formal HRM practices.
2.6.5 HRM practices of Indonesian companies in textile industry
Studies regarding the HRM practices of companies in the textile industry have been
conducted by Hartono (2010) who investigated strategic human resource management in
Indonesia in four types of industries including the textile industry. Although the
companies in his study were large companies and the study did not investigate the
implementation of HRM practices in detail, his findings are significant because they
describe HR strategies of businesses in the textile industry. He found that of the twelve
textile companies that participated in the study, most (75%) utilised the best fit or
contingency approach to SHRM, and 25% used the best practice approach. These findings
show that large companies in the textile industry have adopted HR strategies which align
with their business strategies so that the organisational goals can be achieved. It also
appears that Javanese culture influenced their organisational culture as shown by HR
strategy implementation. An example of an organisational cultural value that comes from
Javanese values is that managers act as role models for their subordinates. The managers
also implemented a leadership motto in the Javanese context that has been adopted
nationally, that is: Ing Ngarso Asung Tuladha, Ing Madya Mbangun Karsa Tut Wuri
Handayani meaning be a role model when in the front, keep harmony when in the middle,
and give support when at the rear.
In conclusion, this study found evidence that most large companies of the textile industry
implemented HR strategies which implies that they also implemented formal HRM
practices with the influence of Javanese culture being embedded in their organisational
culture. As most of the companies applied best fit approach, the external context such as
culture became a critical factor in HR strategy implementation.
2.7 Research Gap
The research literature on HRM practices and the influence of culture on HRM practices as
well as the development of Indonesian HRM practices has been reviewed. The review of
Indonesian culture and values shows that HRM practices are influenced greatly by the
national culture especially Javanese culture. Furthermore, some values and culture are
believed to act as a barrier to adopting modern management practices as well as Western
HRM practices. There has been research on the development of Indonesian HRM and the
adoption of strategic HRM practices as a course of action for solving companies’ problems
after the 1997 economic crisis. However, research on the development of HRM practices
in SMEs especially medium-sized enterprises in the textiles industry are exceptionally
limited. A recent study conducted by Hartono (2010) on strategic HRM in Indonesia only
involved large textile companies and did not include SMEs. It seems research into SMEs
still focuses on their continued existence and the struggle to enter the market. Researchers
and government still pay more attention to their access to capital, marketing and
technological development. There is research into the management of SMEs; however, the
focus is mostly on their financial, production and marketing problems (Harvie, 2004).
Regarding company performance, several HRM strategies applied by Indonesian big

businesses have been identified supporting their business performance (Habir & Larasati,
1999; Sutiyono, 2007). However, research that investigate the relationship between HRM
practices and company performance in SMEs in Indonesia is not currently evident. In fact,
the HRM practices of medium-sized enterprises need more attention as they affect the
companies’ productivity. Furthermore, as SMEs of the textile industry absorb a lot of
labour, there should be more attention paid to the way SMEs manage their employees.
Employees are the key to the success of enterprises whatever their size. Skilled and
motivated employees will enhance SMEs performance. Therefore research into HRM or
HRM practices is needed. Thus there are gaps in what has been researched and gaps in the
research focus on medium enterprises’ issues with HRM practices.
2.8 Research Focus, Research Questions and Hypotheses
Research focus: There is a need to investigate further the HRM practices in medium-sized
enterprises of the textile industry. Furthermore, the influence of culture has played an
important role in the difficulty in adopting Western HRM practices.
This situation has led to the formulation of the following research focus:
To explore the nature and extent of human resource management practices in

medium-sized enterprises in the textile industry in Java, to examine the influence, if
any, of Javanese culture on the way in which HRM is practised in these companies,
and to assess the contribution of HRM practices to perceptions of company
performance.
Following identification of this research problem, the research questions were formulated.
Research questions: The literature review shows that HRM practices are less performed
frequently by medium-sized enterprises than they are by larger organisations. This
problem underpins two research questions:
RQ1. What HRM practices in terms of recruitment and selection, training and
Previous studies show that Western HRM practices have started to be adopted by large
companies to cope with the economic crisis and to compete in the market. They have
changed their recruitment practices, remuneration system, training, performance
management and career development and aligned them with their new business strategies
(Habir & Larasati, 1999; Sitalaksmi & Zhu, 2010; Sutiyono, 2007). In contrast, medium-
sized enterprises appear to pay less attention to their HRM practices. Furthermore, most
medium-sized enterprises have simple organisational structures with unclear job
descriptions. This causes the manager of one department to carry out other jobs that are
not his/her responsibility. In general, the personnel manager conducts the HRM practices,
however, in family businesses; the owners usually conduct the HRM practices.
RQ2. Do Javanese cultural influences have an impact on the way HRM is practised in
National culture is believed to influence the ways companies run their businesses.
Understanding cultural differences leads to the need for adjustment in HRM practices.
Indonesia has a unique culture that is blended from many ethnic cultures especially
Javanese. Indonesia’s culture and values greatly influence the HRM practices of the
enterprises. Furthermore, the development of HRM practices in Indonesia is also
influenced by economic, political and demographic factors.
RQ3. What are the relationships between HRM practices in medium-sized textile
Previous research attention has been directed toward the impact of HRM practices on
company performance. The significance of this study is that it may provide new empirical
evidence of the HRM practices that have positive effect on company performance.
Research hypotheses: As the approach used in this study is a mixed method approach,
there is a combination of qualitative and quantitative methods used in this research. The
qualitative method as the main method uses case studies to look in depth at the HRM
practices in four medium-sized companies. The quantitative method as the secondary
method uses a survey to increase the representativeness of the findings from the case
studies. The quantitative analysis justifies research hypotheses related to perception of
company’s performance.
There have been studies in countries other than Indonesia that have tried to investigate the
relationship between HRM practices and company performance. Several studies found
that there were positive relationships between HRM practices and business unit
performance (Wright et al., 2003) as well as SMEs performance (King-Kauanui et al.,
2006; Massey, 2004; Nhuan, 2001). Other studies found that recruitment and selection
supported company performance (Delaney & Huselid, 1996; Kelly, 2008; Wright et al.,
2003). The positive relationships are also found between training and company
performance (Thang & Buyens, 2008; Wright et al., 2003), and also between
remuneration/compensation and company performance (Wright et al., 2003). Performance
appraisal also appears to have positive relationship with company performance (Nhuan,
2001; Wright et al., 2003). A study conducted by Rizov and Croucher (2009) on European
firms found a positive relationship between industrial relations and company performance.
A study investigating the relationship between corporate culture and organisational
performance has been conducted by Rashid et. al. (2003) which found that corporate
culture significantly influenced organisational performance. Another study conducted by
Sparrow and Wu (1998) on Taiwanese employees found that individual HRM policy and
practice preferences are significantly linked and are predictable from national culture value
orientations. All those studies contributed the formulation of six hypotheses that will be
verified as follows:

rewards processes and perceptions company performance.
H5: There is a positive relationship between implementation of union and labour
H6: There is a positive relationship between the influence of Javanese culture in HRM
practices and perceptions of company performance.
2.9 Conclusion
There has been a shift in HRM practices away from administrative activities and toward
more strategic partnering. This chapter has demonstrated the importance of human
resource practices in business organisation. The recognition of cultural differences
between countries has led many researchers and authors to explore the importance of
adjusting HRM practices according countries’ cultures to determine their best practices.
In Indonesia, there is a trend to move from simple personnel management activities

towards HRM practices. The influence of culture is recognised as affecting the adoption of
HRM practices which are more Western in nature. Some Indonesian companies, especially
the large ones, started changing their HRM practices to be more strategic to cope with the
pressures of global economic crisis and global competition. It appears that the economic
crisis, increasing competition and globalisation have had an impact on the development of
human resource management for large companies (Sutiyono, 2007). On the other hand
SMEs, in particular medium-sized companies, still struggle to exist in the market and
therefore put less focus on HRM practices. Researchers and government focus more on
their problems in getting financial support and marketing than on the development of their
HRM practices. Furthermore, Indonesian culture is believed to act as a barrier to the
adoption of HRM practices. Habir and Larasati (1999) claim that cultural and political
assumptions could discourage ideas such as empowerment, participation and transparency.
Therefore, HRM practices were not highly developed in relation to these values. Although
Indonesian culture does not necessarily act as a barrier to the adoption of HRM practices,
several values in Javanese culture are still considered to discourage the development of
HRM practices.
Chapter 3: Research Methodology
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
The previous chapter examined the literature relating to HRM practices in a Western context
and how cultural differences between countries affect the differences in HRM practices.
National culture as well as organisational culture was also explored and Javanese culture in
particular was considered. The influence of culture on Indonesian HRM practices was
elaborated, especially in medium-sized enterprises of the textile industry. This led to the
emergence of the research problem and the development of research questions. The primary
purpose of Chapter 3 is to develop a suitable methodology to examine the research problem
and these research questions. It also aims to present, describe and justify the appropriateness
of the use of a mixed method approaches as the main research methodology for examining
the HRM practices of medium-sized enterprises in Indonesia.
This chapter has ten sections. It starts with a brief discussion of quantitative methods,
qualitative methods and mixed methods in Section 3.2 followed by a choice of paradigms in
Section 3.3 and approaches to mixed methods in Section 3.4. The case study design is
provided in Section 3.5. Section 3.6 discusses the survey design followed by a discussion of
the reliability and validity of the method selected in Section 3.7. Section 3.8 will discusses
data analysis. Ethical considerations are explained in Section 3.9 and the conclusion is
provided in Section 3.10. The structure this chapter is shown in Figure 3.1.
3.1 Introduction
3.2 Quantitative, Qualitative and Mixed Methods
3.3.1 Paradigms used in research

3.3 Choice of Paradigms 3.3.2 Justification for the selection of pragmatism
paradigm for the study
3.4.1 Justification of the mixed method

3.4. Mixed Method Approach
3.4.2 Mixed method design
3.5.1 Case study as the principal research method

3.5 Case Study Design 3.5.2 Types of case studies
3.5.3 Justification for the case study
3.5.4 Case study design and implementation
3.5.5 Case study research steps
3.6 Survey Design 3.6.1 A surveys as the complementary method

3.6.2 Justification of the survey method
3.6.3 Research hypotheses
3.6.4 Measures of variables
3.6.5 Survey design and implementation
3.6.6 Survey research steps
3.7 Reliability and Validity of
the Methods Selected
3.8.1 Qualitative data analysis of case study

3.8 Data Analysis method
3.8.2 Quantitative data analysis of survey
method
3.9 Ethical Consideration
3.10 Conclusion
3.2 Quantitative, Qualitative and Mixed Methods
In conducting research, the methodology employed must match the particular phenomenon
of interest (Krauss, 2005). Different phenomena may require the use of different
methodologies. Creswell (2003) claims that individual researchers have the freedom to
choose the methods, techniques and procedures of research that best meet their needs and
purposes. There are three major methods that can be adopted by the researcher: quantitative
methods, qualitative methods and mixed methods.
Quantitative methods are characterised by the use of numbers to represent opinions or

concepts (Amaratunga et al., 2002). The primary mode of inquiry is theory testing or
deduction (Perry et al., 1998). The hypo-deductive model involves the a priori deduction of
hypotheses from a theory or a conceptual framework and the testing of those hypotheses
using numerical data and statistical analysis (Teddlie & Tashakkori, 2009). The strengths of
quantitative research are that the subject under analysis is measured through objective
methods, and also that reliability and validity may be determined more objectively than with
qualitative techniques (Amaratunga et al., 2002).
Qualitative methods focus on words and observations to express reality and attempt to
describe people in their natural situations (Amaratunga et al., 2002). Qualitative researchers
typically employ inductive reasoning (Teddlie & Tashakkori, 2009). Patton (2002) claims
that inductive analysis involves discovering patterns, themes and categories in one’s data.
The strengths of the qualitative method are its ability to investigate a situation where little is
known about what is there and to explore complexities that are beyond the scope of a more
controlled approach (Gillham, 2000). Furthermore, qualitative researchers can use a
combination of techniques to provide a broad understanding of a social situation (Ticehurst
& Veal, 2000).
Mixed method research is the use of quantitative and qualitative methods in collecting and
analysing data, integrating the findings and drawing inferences in a single study (Teddlie &
Tashakkori, 2009). Mixed method research has emerged as an alternative to the dichotomy
of the qualitative and quantitative traditions during the past 20 years (Teddlie & Tashakkori,
2009). It assumes that both of the single methodology approaches have strengths and
weaknesses, and therefore, a combination of methodologies can draw on their relevant
strengths and the research findings will be more comprehensive.
This study chose a mixed method approach as its methodology to accommodate both
qualitative and quantitative methods for a comprehensive solution of the research problem
relating to HRM practices in medium-sized enterprises in the Indonesian textile industry and
the influence of national and organisational culture in the implementation of their HRM
practices.
Different research approaches are associated with different paradigms. Quantitative research
mostly adopts a positivist paradigm. On the other hand, researchers who undertake
qualitative research can adopt several types of paradigms such as constructivism or a critical
theory paradigm. In addition, a pragmatist paradigm suits mixed method research, fitting
together the insights provided by qualitative and quantitative research into a workable
solution (Johnson & Onwuegbuzie, 2004).
3.3 Choice of Paradigms
Neuman (2006, p. 81) defines a paradigm as “a general organising framework for theory and
research that includes basic assumptions, key issues, models of quality research, and
methods for seeking answers”. A paradigm is also defined as a perspective, a set of
questions that can be applied to data to help the analyst draw out the contextual factors and
identify relationships between context and process (Corbin & Strauss, 2008). Easterby-
Smith, Thorpe and Lowe (2008) claim that a paradigm reflects what is important, legitimate
and reasonable for researchers, and is an understanding or worldview used to determine
which problems are worthy of research exploration. They argue that understanding different
research paradigms enables the researcher to determine the appropriate research design,
research topics and methods.
Accordingly, a paradigm is a way of breaking down the complexity of the real world (Patton,
2002). A paradigm refers to a fully realised worldview that suggests not only a research
methodology but also a value system or axiology, and ontological and epistemological
premises (Dillon et al., 2000). Axiology deals with ethics, aesthetics and religion and is part
of the basic foundational philosophical dimension of the paradigm proposal (Guba &
Lincoln, 2005). Ontology, epistemology, methodology and methods are defined by
Easterby-Smith, Thorpe and Lowe (2008) as follows:
Table 3.1: Definition of ontology, epistemology and method

Ontology Philosophical assumptions about the nature of reality
General set of assumptions about the best ways of inquiring into the nature
Epistemology
of the world
Methodology Combination of techniques used to enquire into a specific situation
Methods Individual techniques for data collection, analyses, etc.
Source: (Easterby-Smith et al., 2008, p. 60)
Guba (1990) argues decision about ontology, epistemology, methodology and method will
determine the paradigm adopted. He argues that the paradigm adopted by a researcher is
usually based on the research question. This paradigm will then determine the type of
research methods employed, whether quantitative, qualitative or mixed method.
3.3.1 Paradigms used in research
This study reviews and evaluates five paradigms namely positivism, constructivism, critical
theory, realism and pragmatism.
3.3.1.1 Positivist paradigm
A positivist paradigm is closely associated with quantitative research. A positivist paradigm

takes the view that the world is external and that it can be observed objectively by science
(Easterby-Smith et al., 2008). Positivism may be applied to the social world on the
assumption that the social world can be studied in the same way as the natural world, that
there is a method for studying the social world that is value free, and that explanations of a
causal nature can be provided (Mertens, 2005).
A positivist approach implies that the researcher begins with a general cause-effect
relationship that is logically derived from a possible causal law in general theory (Neuman,
2006). The test process in positivism involves relevant tests and obtains supported or
disproved results based on existing hypotheses.
Amaratunga et al (2002) claim that the strengths of positivism are that it can be fast and
economical and also that where statistics are aggregated from large samples, they may be of
considerable relevance to policy decisions. They claim further that positivism has
weaknesses such as not being very helpful in generating theories and not very effective in
understanding processes.
3.3.1.2 Constructivist paradigm
The constructivist paradigm displays multiple constructed realities through the shared
investigation of meaning and explanation (Snape & Spencer, 2003). Constructivism claims
knowledge through an alternative process and set of assumptions (Guba & Lincoln, 2005;
Neuman, 2006). This fulfils one of the basic assumptions underlying qualitative research,
namely that reality is socially and subjectively constructed rather than objectively
determined (Ticehurst & Veal, 2000). This means the researcher should attempt to
understand the complex world of lived experience from the point of view of those who live
in it.
The constructivist paradigm emphasises that research is a product of the values of

researchers and cannot be independent of them (Mertens, 2005).Thus, the constructivist
paradigm focuses on the creation and development of a theory, rather than measurement
(Easterby-Smith et al., 2008).
3.3.1.3 Critical theory paradigm
The critical theory paradigm identifies ways in which material conditions influence beliefs,
behaviour and experience (Snape & Spencer, 2003). Critical theorists claim that the material
world is made up of historically situated structures that have a real impact on the life chances
of individuals (Hatch, 2002). Thus research inquiries are often long-term ethnographic and
historical studies of organisational processes and structures (Golafshani, 2003).
Critical theory aims at critiquing and transforming social, political, cultural, economic,
ethnic, and gender values (Golafshani, 2003). Kezar (2006) argues that according to this
paradigm, a theory does not simply explain a phenomenon but also critiques it and acts as a
guide for effecting change. She argues that theory development within the critical paradigm
focuses on power relationships, domination and emancipation. Examples of research for this
paradigm are feminists and action researchers. Usually researchers who use the critical
approach focus their efforts on outcomes and actions rather than on procedures.
3.3.1.4 Realist paradigm
Realism concerns multiple perceptions about a single, mind-independent reality (Healy &
Perry, 2000). Realists consider there is only one reality although several perceptions of that
reality must be triangulated to obtain a better picture of it (Perry et al., 1998). The researcher
is regarded as a part of the research process and tries to find the probable truth depending on
triangulating various views of the phenomena.
Realism has elements of both positivism and constructivism (Healy & Perry, 2000).
Furthermore, Krauss (2005) argues that rather than being supposedly value-free, as in
positivist research, or value-laden as in interpretive research, realism is value cognisant,
conscious of the value of human systems and of researchers. With realism, the seeming
dichotomy between quantitative and qualitative is therefore replaced by an approach that is
considered appropriate given the research topic and the level of existing knowledge
pertaining to it. The best method for the realist paradigm is the case study method as it can
combine elements of both positivism and constructivism for triangulation.
3.3.1.5 Pragmatic paradigm
The philosophy of pragmatism says that researchers should use the approach or mixture of
approaches that works best in a real world situation. In short, what works is what is useful
and should be used, regardless of any philosophical assumptions, paradigmatic assumptions,
or any other type of assumptions.
Teddlie and Tashakkori (2003) mention that the emergence of pragmatism and the
compatibility thesis is taking place in the period of postmodernism or the present moment.
Maxcy (2003) suggests that pragmatism seems to have emerged as both a method of inquiry
and a device for the settling of battles between research purists and more practical-minded
scientists.
The history of pragmatism started with the long debate between quantitative and qualitative
research purists based on views of which research paradigms was the most ideal. They
advocate a thesis which posits that qualitative and quantitative research paradigms, including
their associated methods, cannot and should not be mixed (Johnson & Onwuegbuzie, 2004).
Recent theoretical work in the qualitative research movement has led to the conclusion that
multiple paradigms are applicable to qualitative research. This supports the emergence of the
mixed method approach, needing a paradigm to cover the weaknesses of both qualitative and
quantitative method paradigms (Creswell, 2003). Mackenzie and Knipe (2006) state that
pragmatism is not committed to any one system of philosophy or reality.
Pragmatism is generally regarded as the philosophical partner for the mixed method
approach (Denscombe, 2008). Pragmatist researchers focus on the what and how of the
research problem, and the data collection and analysis methods are chosen are those most
likely to provide insights into the question with no philosophical loyalty to any alternative
(Creswell, 2003).
Mackenzie and Knipe (2006) characterise the pragmatic paradigm as being: the consequence
of actions, problem-centred, pluralistic, based on real-world practice and oriented towards a
mixed method model. Furthermore, pragmatism rejects traditional dualism such as realism
versus anti-realism and subjectivism versus objectivism, but allows more moderate and
common-sense versions of philosophical dualism based upon how well they work in solving
problems (Johnson & Onwuegbuzie, 2004). Another characteristic of pragmatism is that it
endorses a strong and practical empiricism as the path to determine what works. In the
pragmatic paradigm, knowledge is viewed as being both constructed and based on the reality
of the world we experience and live in.
Comparing these paradigms, it looks as though the most appropriate paradigm for HRM
research is pragmatism or a combination of pragmatism and realism. Watson (2010) argues
that pragmatism provides a methodological base for theory development and research into
HRM processes. On the other hand, he presents the idea of pragmatic realism from the
pragmatist standpoint that all theories are mental modes of adaption to reality; and the aim of
knowledge is not to represent the world but to cope with it. If the world is something to be
coped with, then it must have reality. He claims that pragmatic realism potentially helps the
HRM researcher both to investigate employment management practices and to theorise about
them. Therefore, pragmatic realism modes of inquiry are considered the most appropriate
paradigm for this research.
3.3.2 Justification for the selection of pragmatic realism paradigm for the study
According to Boxall, Purcell and Wright (2007) cited by Watson (2010), analytical HRM is
fully consistent with the pragmatic realist way of thinking. These authors characterise
analytical HRM as an activity which has as its primary task the building of theory and the
gathering of empirical data in order to account for the way management actually behaves in
organising work and managing people across different jobs, workplaces, companies,
industries and societies. There are three characteristics of analytical HRM. The first
characteristic concerns the ‘what and why’ of HRM, the second characteristic concerns the
‘how’ of HRM and the third characteristic concerns ‘for whom and how well’ in assessing
the outcomes of HRM. Each of these concerns invites a social scientific style of research
and analysis.
Pragmatism as a system of philosophy is best at accommodating mixed methods. The logic

of pragmatic inquiry includes the use of induction (or discovery of patterns), deduction
(testing of theories and hypotheses), and abduction (uncovering and relying on the best of a
set of explanations for understanding one’s results) (Johnson & Onwuegbuzie, 2004)
The research problem of this study is about the influence of Indonesian culture on the
adoption and implementation of HRM practices in medium-sized enterprises. Understanding
cultural influence involves a close look at the culture and how it works among the
Indonesian people as a society and as workers in the organisation. The study also needs to
explore HRM practices in medium-sized companies and how culture plays a role in the
implementation of HRM practices. This requires both qualitative and quantitative
approaches to discover patterns and themes of data collected in certain companies and to
explore the complexities of those questions; and also to generalise the findings and confirm
the results in the broader context of Indonesia. These research questions best fit the
pragmatist paradigm because pragmatism accommodates the use of both qualitative and
quantitative approaches to provide the best solution.
3.4 Mixed Method Approach
A mixed method approach is one in which the researcher collects, analyses and integrates
both quantitative (quan) and qualitative (qual) data in a single study or in multiple studies in
a sustained program of inquiry (Creswell, 2003). The researcher believes it will provide the
best understanding of a research problem. Furthermore, Teddlie and Tashakkori (2003)
claim that mixed methods research can answer research questions that the other
methodologies cannot. They claim further that mixed methods help the researcher to
simultaneously answer confirmatory and exploratory questions, and to verify and generate
theory at the same time. Mixed methods research as a methodology is valued for its direct
engagement in the complexity encountered by researchers in culturally diverse communities
when work is focused on a social justice agenda (Creswell & Clark, 2011).
Johnson and Onwuegbuzie (2004, p. 21) list the strengths of mixed method such as:
• Words, pictures and narrative can add meaning and context to numbers.
• Numbers can be used to add precision to words, pictures and narrative.
• It can answer a broader and more complete range of questions because the researcher is
not confined to a single method or approach.
• A researcher can use the strengths of an additional method to overcome the weaknesses in
another method by using both in a research study.
• It can provide stronger evidence for a conclusion through convergence and corroboration
of findings
• Can add insight and understanding that might be missed when only a single method is
used.
• Can be used to increase generalisability of results.
• Qualitative and quantitative research used together produce more complete knowledge to
inform theory and practice.
3.4.1 Justification of the mixed method approach
Bryman (2006) lists five justifications for combining quantitative and qualitative research;
they are triangulation, complementarity, development, initiation and expansion.
Furthermore, the rationale behind the combining and integrating of quantitative and
qualitative research includes triangulation, completeness, credibility, context, explanation
and also confirmation and discovery. This study also uses these rationales forchoosinga
mixed method approach as its methodology. Triangulation is used in this research in terms
of data sources and data collection methods to ensure data validity and trustworthiness.
In addition, the use of both qualitative and quantitative methods will provide the most
comprehensive understanding of the research problem. Furthermore, the research questions
need answers that will be deduced from qualitative and quantitative approaches. The fact that
there was no previous study of HRM practices of Indonesian SMEs led to the supposition
that HRM practices may not yet be applied in SMEs. To answer the three questions about the
HRM practices of selected medium-sized enterprises in Indonesia requires a qualitative
approach and the best method is case study research.
3.4.1 Mixed method design
A research design is the way in which a research idea is transformed into a research project
or plan that can be carried out in practice by a researcher (Sage, 2008). Creswell and Clark
(2011) claim that research designs are procedures for collecting, analysing, interpreting and
reporting data in research studies. Zikmund (2003) argues that a research design needs to
show the overall configuration of the research involving decision about what kind of
evidence needs to be gathered, where the data is to be collected from and how the data will
be analysed. Research design is useful in guiding decisions about methodology and setting
the logic by which the researchers make interpretation at the end of their studies (Creswell &
Clark, 2011).
There are several types of mixed method research that can be adopted such as concurrent
(parallel) and sequential mixed designs. Teddlie and Tashakkori (2009) claim that in
concurrent (parallel) mixed design, the QUAN and QUAL strands of study occur in a
parallel manner or start and end at approximately the same time. They continue further that
in sequential mixed design, the QUAN and QUAL strand of the study occur in chronological
order. On the other hand, Creswell and Clark (2011) propose six types of mixed method
design: convergent parallel design, explanatory sequential design, exploratory sequential
design, embedded design, transformative design and multiphase design.
Convergent parallel design occurs when the researcher uses concurrent timing to implement
the QUAN and QUAL strands during the same phase of the research process, prioritises the
methods equally and keeps the strands independent during analysis and then mixes the
results during the overall interpretation (Creswell & Clark, 2011, p. 70).
Explanatory sequential design occurs in two distinct interactive phases, starting with the
collection and analysis of QUAN data which has as its priority addressing the study
question; and then the QUAL phase of the study is designed so that it follows from the
results of the QUAL phase (Creswell & Clark, 2011, p. 71).
Creswell and Clark (2011, p. 71) claim that exploratory sequential design also uses
sequential timing, and begins with and prioritises the collection and analysis of QUAL data
in the first phase. Building from the exploratory results, the researcher conducts a second,
QUAN phase to test or generalise the initial findings. The researcher then interprets how the
QUAN results build on the initial QUAL result.
Embedded design occurs when the researcher collects and analyses both QUAN and QUAL
data within a traditional QUAN or QUAL design. In an embedded design, the researcher
may add a QUAL strand within a QUAN design. The supplemental strand is added to
enhance the overall design in some way (Creswell & Clark, 2011, p. 71).
Transformative design is a mixed method design that the researcher shapes within a
transformative theoretical framework. All other design (interaction, priority, timing, and
mixing) is made within the context of the transformative framework (Creswell & Clark,
2011, p. 72).
Multiphase design combines both sequential and concurrent strands over a period of time
that the researcher implements within a program of study addressing an overall program
objective. This approach is often used in program evaluation where QUAN and QUAL
approaches are used over time to support the development, adaptation and evaluation of a
specific program (Creswell & Clark, 2011, p. 72)
Comparing the six types of design, it seems that exploratory sequential design is best suited
to the research purpose of this study because it will explore the phenomenon of cultural
influence on HRM practices in Indonesian medium-sized enterprises. The QUAL results will
be tested on a bigger sample to determine whether they can be generalised. The prototype of
exploratory sequential design is shown in Figure 3.2.:
Figure 3.2: Exploratory design: taxonomy development model (QUAL emphasised)
QUAL data QUAN data

collection Builds Interpretation
collection
and analysis to
and analysis
Source: (Creswell & Clark, 2011, p. 69)
Creswell and Clark (2011) argue that the primary purpose of the exploratory design
approach is to generalise qualitative findings based on a few individuals from the first phase
to a larger sample gathered during the second phase. Furthermore, this design is most useful
if the researcher wants to generalise, assess, or test qualitative exploratory results to see if
they can be generalised to a sample and a population.This study adopted exploratory
sequential design where the priority is in QUAL method and the QUAN method was used to
generalise the QUAL findings. In the QUAL design, the case study method was employed
and then the survey method was used in the QUAN design. The rationale behind this
decision was that a limitation of the case study approach which is that it cannot be used to
generalise the findings could be eliminated. The findings in the case study phase might not
represent the condition of all medium-sized enterprises in Indonesia. The survey method
would be applied to a much wider sample of medium-sized enterprises.
3.5 Case Study Design
As the case study method is employed in QUAL design of the exploratory sequential mixed
method, it would be used to answer research questions drawn from the research problem. As
explained in the previous chapter, the research focus of this study is:
To explore the nature and extent of human resource management practices in medium-sized
enterprises in the textile industry in Java, to examine the influence, if any, of Javanese
culture on the way in which HRM is practised in these companies, and to examine the
contribution of HRM practices to perceptions company performance.
Based on a review of the literature and theories of human resource management and culture,
a theoretical framework and research questions have been developed. Research questions
that will be answered through case study method are:

2. Do Javanese cultural influences have an impact on the way HRM is practised in
3.5.1 Case study as the principal research method for this study
There are many definitions of case study research. Creswell (2007) claims that case study is
a qualitative approach in which the investigator explores a bounded system (a case) or
multiple bounded system (cases) over time, through detailed, in-depth data collection. Yin
(2009b, p. 1) writes:
'Using case studies for research purposes remains one of the most challenging of all social
science endeavors. …as a research strategy, case studies will contribute to knowledge of
individual, group, organisational, social, political, and related phenomena'
Essentially the case study research looks in depth at one, or a small number of organisations,
events, or individuals, generally over time (Easterby-Smith et al., 2008). Stake (2005) claims
that case study optimises understanding by pursuing scholarly research questions. In keeping
with its contextual stance, case study research usually examines one or a few cases, and so
case study research can include the context as a significant part of a study (Veal, 2005).
Another feature associated with case studies is the use of multiple data collection methods
(Creswell, 2007)
Some positivists argue that case study research does not have the rigour of natural scientific
design (Easterby-Smith et al., 2008). To avoid that lack of rigour Yin (2009b) suggests that
all case studies should have a clear design produced before any data is collected, and that
these designs should cover the main questions or propositions.
Whilst other commentators argue that case study findings could be analytically generalised,
the findings in case-based research enable the researcher to generate concepts and give
meaning to the theoretical propositions, which might be tested by further study targeting a
large population, or at least certain theoretical implications might arise (Veal, 2005). Case
studies are of value in refining theory, suggesting complexities for further investigations and
for helping to establish the limits of generalisability.
3.5.2 Types of case studies
For research, there are several types of case studies. Dul and Hak (2008) mention three types
of case study: practice oriented, theory building and theory testing. Practice - oriented case
studies are concerned with describing the design, implementation or evaluation of some
intervention. On the other hand case studies can generally be classified into three types
namely exploratory, descriptive or explanatory (Yin, 2003)
a. Exploratory case study is used to create a basis to formulate a more precise question and
usually takes the form of a pilot study.
b. Descriptive case study attempts to describe something that will guide the researchers’
paradigm, access and pre-understanding.
c. Explanatory case study is used to explain why certain events have occurred.
This research is exploratory since the research problem in the context of the influence of
culture in HRM practices of Indonesian medium-sized companies of the textile industry has
not previously been investigated in any depth. Exploratory research is used in areas where
there is limited existing theory or a deficient body of knowledge (Collis & Hussey, 2003).
Therefore it is useful here because there is limited previous research and a lack of existing
knowledge of HRM practices in Indonesia. The case study strategy can comprehensively
provide a depth of knowledge of HRM practices of medium-sized enterprises in Indonesia
without requiring previous knowledge of the variables investigated.
3.5.3 Justification of the case study method
The use of the case study method for this research is justifiable for the following reasons:
Firstly, the case study is the preferred strategy when how, who, why, or what questions are
being asked, or when the investigator has little control over events, or when the focus is on a
contemporary phenomenon within a real life context (Burns, 2000). With these types of
questions, the investigator has little control over them and thus a case study strategy is
preferable (Yin, 2009b).
The four questions in this study could be answered through the case study method. It needs
to be understood what the HRM practices are of selected medium-sized enterprises in
Indonesia and also the details of how Indonesian culture and organisational culture influence
the implementation of HRM practices in medium-sized enterprises. It is also necessary to
know who manages and implements HRM practices in Indonesian medium-sized enterprises
and the implication of the findings from this study for medium-sized enterprises’
owners/managers, training organisations, academic institutions and government.
Secondly, a case study approach is justified based on the consideration of 1) the type of
research questions posed, 2) the extent of control an investigator has over actual behaviour
and 3) the degree of focus on contemporary as opposed to historical events (Yin, 2009a).
This study uses a mixed method design with an emphasis on theory-building. Therefore a
case-study approach was adopted as the principal inquiry strategy.
Thirdly, a case study approach makes it possible to employ different data collection methods
that support triangulation (Gillham, 2000). Triangulation may take the form of using
multiple investigators, multiple sources of data, or multiple methods to confirm the emerging
findings (Merriam, 1998). Merriam claims further that the purpose of triangulation is to
establish validity in case studies. Based on these justifications, the adoption of case study
method was appropriate for data collection and analysis of this study that used a
QUALQUAN mixed method.
3.5.4 Case study design and implementation
This next section details the case study design that best suits this research.
3.5.4.1 Case study selection
Case selection is vitally important in a case-based study. Case selection is comparable to

sampling in quantitative research (Teddlie & Tashakkori, 2009; Veal, 2005). The researcher
may choose a single case study or multiple case studies. However, Stake (2005) argues that a
population of cases can be represented poorly by a single case, or samples of a very few
cases, and such small samples of cases can provide questionable grounds for advancing
grand generalisations. In this case, the researcher needed to establish a rationale for his or
her purposeful sampling strategy for selecting the case and for gathering information about
the cases (Creswell, 2007). When applicable, multiple-case designs are preferred over single-
case designs, because even a two-case design can enhance the chances of producing a good
case study (Yin, 2009a).
This research used a multiple-case design because it sought an understanding of the variety
of HRM practices of medium-sized enterprises in a range of different companies in
Indonesia to provide a reliable result. This result may be replicated to develop a literal
framework. Further, the reason for using multiple-case studies is based on the advantages of
using this design. The advantage of multiple-case design is that the evidence can be more
compelling (Burns, 2000).
The number of case companies selected in multiple-case studies followed the minimum
criteria of the number of cases. In fact, there are no rules for sample size in qualitative
inquiry or for the number of cases selected in case study research. However, Eisenhardt
(1989) recommends that cases should be added until theoretical saturation is reached. He
suggests that the number of cases should be between four and ten. For this research the
number of cases decided on was four companies.
3.5.4.1 Unit of analysis
The unit of analysis is ‘the type of unit a researcher uses when measuring’ (Neuman, 2006).
The determination of the unit of analysis is critical in a case study because it is related to the
level of investigation for a research project (Zikmund, 2003). The levels of investigation in a
research project are various. In other words, the unit of analysis can be individuals, groups,
organisations, social categories, social institutions, societies, speeches, or a geographic area,
event or entity (Neuman, 2006).
Prior to determining the unit of analysis, the target population in this study was the island of
Java in Indonesia. This is based on the fact that almost 90% of companies of the Indonesian
textile industry were located in Java.
Determining the unit of analysis in a case study is similar to sampling in the quantitative
method. Patton (2002) claims that decisions about samples, both sample size and sampling
strategies, depend on prior decisions about the appropriate unit of analysis. There are many
sampling methods that can be used for unit of analysis determination. This study used
stratified purposeful sampling in which the purpose was to capture major variations rather
than to identify a common core (Patton, 2002).
Using the stratified purposive sampling method, the unit of analysis in this research is
determined based on three strata. The first stratum is based on the size of the enterprises.
There are four sizes of enterprises namely micro, small, medium and large companies. This
study focuses on the medium-sized companies.
There are several reasons for selecting medium-sized enterprises. Firstly, medium-sized
companies may have better developed HRM practices compared with small companies but
may not have such comprehensive practices as large companies. Micro and small companies
have yet to develop their HRM practices due to a lack of management knowledge and skills,
lack of organisational structure and simple operation. On the other hand, most large
companies have developed their HRM practices in ways that best suit their organisational
cultures and have developed HRM strategies that support their business strategies. Some
large companies which are multi-nationals may also have adopted sophisticated HRM
practices from their parent companies (Munandar, 2003). Secondly, there is little research in
the area of HRM practices for SMEs in Indonesia. Most research into HRM practices in
Indonesia has been conducted using large companies as the sample (Habir & Larasati, 1999;
Sutiyono, 2007). Thirdly, most medium-sized companies have yet to adopt Western HRM
practices as their organisational culture and management are still influenced by Indonesian
culture. Furthermore, the owners and managers of medium-sized companies may lack of
knowledge of Western HRM practices as they manage the companies in traditional ways
especially in the case of heritage businesses. The example of heritage businesses closely
related to Indonesian culture is batik companies 1.
1
Historically, Javanese batik started to be produced in the 19th century. It achieved its golden age in the period
1885–1939 by producing the finest batiks from imported Dutch cotton. Production declined in 1939 during the
Japanese occupation and the period of World War II. Numerous batik factories were closed. However, after
Indonesia’s independence, the batik industry started to boom until 1970. After 1970, the batik industry declined
due to the breakdown of feudal society, the decline of batik as clothing and competition from Malaysia and
Singapore. In the 1990s batik started to be recognised as a national treasure and today Indonesian batik is
widely developed as a modern-fashionable material (Elliot, 2004).
The second stratum is based on types of industries. From a total of nine types of non - oil and
gas manufacturing industries, this study has chosen the textile industry. The justification for
selecting the textile industry is that previously the textile industry became the primary source
of exports along with natural resources. In the non-oil sector, textiles are the biggest
contributing industry compared to other industries. The textile industry is the most labour-
intensive industry and can absorb more than one million employees. The textile industry also
gets net foreign exchange average of more than US$ 5 billion per annum (Sudrajat, 2009).
The value of Indonesian textile exports in the year 2010 reached U.S$ 11.2 billion
(Indotextiles, 2012).
Furthermore, some companies are heritage businesses and very much influenced by
Indonesian culture. This criterion makes these companies suitable targets for studying the
influence of Indonesian culture on HRM practices of medium-sized enterprises in Indonesia.
The third stratum is the selection of the case companies based on types of products produced.
The textile industry produces several types of products such as man-made fibres, yarn,
fabric, garment and other textile production. As this study used four case companies, these
represented four types of products namely yarn, fabric (textile), garment and batik (other
textiles). To obtain a complete reference on types of business, the companies selected
consisted of family business and proprietary limited companies. Of these four cases of
companies, two were heritage businesses.
The term purposive sampling means the researcher has a clear idea of what sample units are
needed, and then approaches the sample members to check whether they meet the eligible
criteria (Easterby-Smith et al., 2008). In terms of purposive sampling for this research, the
location target of the four case companies was cities that became centres of the textile
industry where most medium companies were located. There were several cities in Java that
became centres of the textile industry for example Bandung, Jakarta, Pekalongan, Surakarta,
Yogyakarta, Surabaya and Malang, and one or two of them could be used as location targets.
3.5.4.3 Data collection techniques
Case study data collection involves a wide array of procedures as the researcher builds an in-
depth picture of the case (Creswell, 2007). There are multiple forms of data collection such
as interviews, observation, reading material, visual study, and personal experience (Denzin
& Lincoln, 2005). However, the most appropriate mixture must be adapted to meet the needs
of the case study. Creswell (2007) suggests using a matrix of information sources for the
data which contains four types of data (interviews, observations, documents, and audio
visual materials) in rows and specific forms of information in the rows. The purpose is to
convey the depth and multiple forms of data collection.
On the other hand, Merriam (1998) claims that the data collection techniques used are
determined by the researcher’s theoretical claims orientation, by the problem and purpose of
the study, and by the sample selected. To follow Creswell’s suggestion, this case study
method used interviews, observation, reading documents and audio visual material.
3.5.4.3.1 Interviews
Neuman (2006) claims that the interview is a method of collecting data in which the explicit
purpose is to obtain specific information from the respondent. The purpose of interviewing is
to allow the researcher to enter into the other person’s perspective (Patton, 2002). An
interview encourages interviewees to share their experiences and provides as much
information as possible in a free-flowing environment. Thomas (2003) claims that the
advantages of interviewing are that it provides the researcher with greater flexibility and
personal control than do questionnaires and also the interviewees can more easily elaborate
on their answers.
There are several types of interviews such as one-on-one interviews or a focus group
interviews. A one-on-one interview is usually more effective in eliciting a respondents’
sincere participation in a research project (Thomas, 2003). On the other hand, the researcher
may conduct a focus group interview to provide information on specific topics (McMurray et
al., 2004). Focus group interviews involve engaging a small number of people in an informal
group discussion focused around a particular topic or set of issues (Wilkinson, 2004).
There are a number of ways to conduct an interview depending on the problem that the
researcher must resolve and how much structure to put into the interview (Easterby-Smith et
al., 2008). The interview may be highly formalised and structured or semi-structured and
even unstructured based on the researcher’s emphasis. Liamputtong and Ezzy (2005) claim
that the structured (highly formalised) interview is usually strongly influenced by positivism
and may yield worthwhile results in large quantitative surveys.
On the other hand, the semi-structured interview is used in qualitative research and aims to
explore the complexity and in-process nature of meanings and interpretations that cannot be
examined using positivist methodologies (Liamputtong & Ezzy, 2005). Bryman (2008)
argues that the semi-structured interview typically refers to a context in which the
interviewer has a series of questions that are in the general form of an interview schedule but
is able to vary the sequence of questions.
According to Easterby-Smith et al. (2008, p. 145) an in-depth interview referred to as an

unstructured interview is appropriate when:
1. It is necessary to understand the constructs that the interviewee uses as a basis for his or her
opinions and beliefs about a particular matter or situation;
2. One aim of the interview is to develop an understanding of the respondent’s ‘world’ so that
the researcher might influence it, either independently, or collaboratively as in the case with
action research; and
3. The step by step logic of a situation is not clear; the subject matter is highly confidential or
commercially sensitive; and there are issues about which the interviewee may be reluctant to
be truthful other than confidentially in a one-to-one situation.
This study collected data using semi-structured interviews. The judgment was made to use
interviews in this study because small numbers of people are involved, they are accessible,
they are key persons (the owners and managers) and also the questions are mainly open and
require an extended response with prompts and probes from the interviewer to clarify the
answers (Gillham, 2000)
Based on the plan, the interviews were conducted one-on-one with each participant or
interviewee. However, to accommodate a company’s preferences and availability, there was
a possibility that the interview would be performed as a group interview. The reason for
conducting a group interview was that the company would not lose much time from its
production hours because of the absence of its employees for interview activities.
Interviewees were the owners or managers of personnel departments who engaged in HRM
practices and employees within the case enterprise. All interviewees were asked a similar set
of questions to ensure no significant data was lost and to enable cross data checks.
3.5.4.3.2 Observations
Observation has been characterised as the fundamental base of all research methods in the
social and behavioural sciences (Angrosino, 2003). Zikmund (2003) suggests some key
elements in conducting observations, namely the participants, the setting, the purpose, the
social behaviour, frequency and duration. In addition, Gillham (2000) claims that
observation has three main elements, namely watching what people do, listening to what
they say and sometimes asking them clarifying questions.
There are two main types of observation: non-participant and participant observation (Lee &
Broderick, 2007). Participant observation creates a situation in which the researcher and the
participants develop a rapport and naturally and comfortably interact with one another over
time (Ridenour & Newman, 2008). On the other hand, non-participant observation is where
the researcher ‘stands to one side’ and views the experience or the environment (Slack &
Rowley, 2001).
This study adopted non-participant observation because the aim of the research was to
examine HRM practices in medium-sized enterprises and the researcher was not involved in
those processes. The participants in this research were the owners and managers and also the
employees of the company. The total participants were seven for each company, however,
the employees under observation were chosen randomly. The observations took place in the
owner’s and manager’s offices and in the production site plants. The purpose of the
observation was to record the activities of the participants regarding HRM practices. The
social behaviour observed included what participants actually did, how they did it and the
effect of behaviours on others. For the owners and managers, the focus of observation
activities was watching what they did in implementing HRM practices on a daily basis and
sometimes asking them clarifying questions. A data diary and recording sheet was provided
and everything they did was recorded in writing. The observations were made every day for
seven days with duration of two hours per day. A camera and video camera were also used
as technical aids for the observations. Easterby-Smith et al. (2008) claim that photographs
are useful for gathering information when there is only a small amount of data on an issue to
begin with. Furthermore, photographs may contribute to a more accurate sequencing of the
process. The common use of video in research is to record naturalistic observations and
capture what people do (Belk & Kozinets, 2005). The video data in this research was used as
a complementary source of data.
3.5.4.3.3 Documentation and archival records
Documentation is a type of information that can take many forms and should be the object of
explicit data collection plans (Yin, 2009b). In this study, the variety of documents that were
used as sources of evidence were administrative documents relating to the HRM practices of
the company. Archival records in the form of organisational records were also collected.
3.5.4.4 Triangulation
Teddlie and Tashakkori (2009) claim that triangulation refers to the combination and
comparison of multiple data sources, data collection and analysis procedures, research
methods, investigations and inferences that occur at the end of a study. Triangulation is the
use of more than one method or source of data in the study of a social phenomenon so that
findings may be cross-checked (Bryman, 2008). Liamputtong and Ezzy (2005) explain data
source triangulation as the use of multiple information sources while methods of
triangulation involve the use of multiple research methodologies. Berg (2009) argues that
many researchers use three data gathering techniques to investigate the same phenomenon.
In the case study method used in this study, triangulation was possible since it employs
several data collection techniques such as semi-structured interviews, observation, and
documenting. These three different data gathering techniques added to the
comprehensiveness of the findings.
3.5.5 Case study research steps
3.5.5.1 Case identification

Based on the stratified purposeful sampling technique, the number of cases for this study
was four medium-sized companies from four types of textile production namely yarn, textile,
batik and garments. Two target locations were selected based on the number of medium-
sized companies of the textile industry in the chosen cities including batik companies as a
heritage business. Surakarta and Malang were chosen with the consideration that Malang is a
centre of the garment industry for medium-sized companies while Surakarta is well-known
as a centre of batik textile and batik industry for medium-sized to large-sized companies.
3.5.5.2 Getting permission

Initially, the case study enterprises were located through the internet, especially via the
website of the Indonesia Trade and Industry Department and the Indonesia Textiles
Association. There were more than 20 medium-sized companies that became target
companies. Four types of companies were contacted one by one by telephone or through
email. They were told the purpose of this research and the data that would be gathered
including the confidentiality of the information gathered. They were also given an assurance
that no identifying information would be disclosed, and the researcher promised to destroy
any written or audio recorded information if requested to do so. The phone calls were
followed by express material sent by mail conveying a standardised invitation to participate

in this study on SCU letterhead with an information sheet and informed consent form.
In practice, it was very difficult to get permission and to find companies that agreed to
participate in the research. There were many reasons for declining the proposal such as that
the company was busy, the director or the owner was going abroad or the data needed were
considered restricted. Some companies simply refused without giving a reason. Often they
held the requests for a month because their directors or managers were away and ended up
with a refusal. Due to these difficulties, the researcher used relatives and friends who had
connections with management-level employees to approach the manager or the owners and
also expanded the search area to other cities further away from the researcher’s city.
Therefore it took several months just to get four companies. Finally, there were four
companies which agreed to participate in this study. Table 3.2 provided the details of the
four companies selected as case studies.
3.5.5.3 Data collection methods

Data collection for case studies can rely on many sources of evidence. There are
documentation, archival records, interviews, direct observations, participant observation and
physical artefacts (Yin, 2009b). In this research, data was mainly drawn from interviews,
direct observations and document analysis.
Table 3.2 Companies selected as case studies
Case Type of product Type of business

Case A Textile - weaving Proprietary Limited company
Case B Textile - spinning Proprietary Limited company
Case C Batik Family business (heritage business)
Case D Garments Proprietary Limited company
Source: developed for this study
The principal source of data for this research came from the interviews. A semi-structured
interview format was employed based on the interview guide that was approved by SCU.
Interviews were conducted with the owners or managers and a number of employees within
each organisation. The interviews were tape recorded and notes were also made by hand.
The duration of each interview was around 60 minutes.
Direct non-participant observation was used to gain an impression of how HRM practices
were conducted on an everyday basis so that, as an alternative source of data, the
information collected through observation could facilitate a full understanding of relevant
information arising from subsequent interviews. The researcher used a video camera to
record the activities employees undertook in their jobs, the production and the office areas,
the signs and symbols relating to health and safety, company regulations and job or
operating instructions.
The documents relating to HRM practices were obtained from the personnel manager and his
staff, such as the company profile, organisational structure, job descriptions, company rules
and regulations, and also employees’ records such as absence and performance scores. Those
documents were used to check the employees’ administration activities and the
implementation of HRM practices.
3.5.5.4 Selection of interviewees
Regarding the number of interviewees, Carson et al. (2001) claim that a stable pattern of
agreement and disagreement is achieved when there are as few as six interviews. This study
used seven interviewees for each case - two from the managerial level and five among the
employees. Therefore, the total number of interviewees was 28. The interviewees from
managerial level consisted of the owner, the owner’s assistant, the personnel managers, the
general affairs manager, the production managers and supervisors. The interviews with
employees focused on the production department. The details of interview participants are
outlined in Table 3.3.
There were problems encountered during the implementation of the interviews. It was
difficult to match the interview schedule with their schedules due to the interviewees’ busy
schedules and in some cases the director or the managers that had given their agreement
suddenly had important duties and so interviews had to be rescheduled.
Most managers had long-standing experience in the company, with all of them having more
than 10 years within the company. The operational employees’ experience varied, but most
had been with their companies for more than 10 years.
Before conducting each interview, the owners or managers were contacted by phone to set
the appointment date. At the meeting the full information and informed consent sheets
including an indicative interview guide were handed over and also the interview schedule
was set. Regarding employees’ interviews, the owners or managers were asked to determine
with whom and when the interview would take place. Interviews mostly took place in the
company office. The reason for this plan was to limit the disturbance to their work because
the interview was conducted during work hours. Conflict might have arisen if the employees
gave negative answers relating to the owners or managers. Due to this issue, the owners or
managers were informed in advance about this possibility and told that strict research
confidentiality will be maintained.
Table 3.3: Interview participants’ details
Case Interviewees Position Age Gender Working

Experience
A 1 Personnel manager 46 male > 15
2 General affairs manager 54 male > 25
3 Operational employee 35 female >10
6 Operational employee 36 male > 12
B 1 Personnel & general 46 male > 20
affairs manager
2 Production manager 47 male > 10
7 Operational employee 33 male >10
C 1 The owner 50 male > 15
2 The owner’s assistant 55 male > 20
3 Operational employee 58 Female > 25
6 Operational employee 23 female <1
D 1 Production manager 56 male > 20
2 Production supervisor 35 female > 10
3 Operational employee 30 female > 10
Source: Developed for this study
3.5.5.5 Interviewing and observation techniques
Prior to the interview, each participant received an information sheet and an informed
consent form. They were given time to read and sign the informed consent form. At the start
of the interviews, the participants were briefed on the purpose of the research. Steps for
conducting semi-structured (in-depth) interviews were as follows:
1. Thank interviewee for granting time and effort for the interview
2. Explain clearly to the interviewee the purpose of the interview
3. Assure interviewee that all data and information gathered are confidential
4. Provide interviewee with the questionnaire and explain the content
5. Place audio-tape recorder in a visible manner if approval is given
6. Begin interview with reference to open-ended questions
7. Seek clarification and illustration with examples wherever necessary
8. Indicate that researcher may call for clarification and additional input after this interview
session.
9. Thank interviewee for his/her cooperation, time spent and arrangements made upon
completion of interview.
The participants were encouraged to give their views freely for the open-ended questions.
There were four participants from the batik companies who were old and had difficulties in
understanding and answering the questions in Indonesian. The researcher therefore translated
the question into the Javanese language and this was done easily as Javanese was also the
mother language of the researcher.
For observation techniques, an observation diary was made. What they did and the meaning
they gave to their behaviour was recorded in writing. The researcher used a camera and
video camera to support the diary.
3.5.5.6 Data collection periods
The time set aside for data collection changed several times due to the difficulties in getting
permission from the companies and the difficulties in matching the interview schedules with
the managers’ availability. Finally all of the interview and observation activities were done
in a four – month periods. Details of the data collection period are shown in Table 3.4.
Table 3.4: Periods of time for data collection on this research
Tasks Periods of time

Interview and observation in enterprise case A 5 Oct ’09 – 23 Oct ‘09
Interview and observation in enterprise case B 27 Oct ’09 – 13 Nov ‘09
Interview and observation in enterprise case C 18 Nov ’09 – 15 Dec ‘09
Interview and observation in enterprise case D 13 Jan ’10 – 26 Jan ‘10
3.6 Survey Design
3.6.1 A survey as the complementary method for this study
Survey are designed to produce statistics about the target population (Fowler, 2009). In
surveys, a researcher samples many respondents to answer the same questions, measure
many variables, test multiple hypotheses, and infer temporal order from questions about past
behaviour, experiences or characteristics (Neuman, 2006).
In this study, the survey was designed and conducted based on the findings from the case
study and the implications of relevant studies in the literature. The findings of the case study
aimed to answer the following research questions:
2. Do Javanese cultural influences have an impact on the way HRM is practiced in
3. What are the relationships between HRM practices in medium-sized textile
For the third question, the hypotheses were generated according to variables that were
developed from the case study findings.
In accordance with the exploratory sequential method used in this study, quantitative
methods were used based on the qualitative results. Therefore, the survey questions were
designed using critical variables identified in the case study findings. A mail survey was
administered to a large sample of medium-sized textiles companies to improve the
representativeness of the findings from the case study research. Hence, the limitations of
generalisability of case study research were avoided. Furthermore, the survey was used to
address the fourth question concerning the implications of the findings from this study for
owners/managers of medium-sized enterprises, training organisations, academic institutions
and government.
3.6.2 Justification of the survey method
The survey method is the best method for obtaining data with a large sample.
Questionnaires can be sent to participants by email, phone or even handed to them directly.
The short amount of time needed to complete a questionnaire is another advantage. The
statistical procedures used for data analysis support the validity of the research.
The survey technique is used to gain specific information quickly through obtaining answers
to the questionnaire from the target group (Kumar, 2005). Questionnaire surveys provide a
convenient, inexpensive, efficient and accurate method of gathering information (Bryman,
2008; Zikmund, 2003). Furthermore, surveys can be quickly distributed by various methods
such as face-to-face, mail, telephone, online or drop-off and pick-up.
3.6.3 Research hypotheses
There were six independent variables: recruitment and selection, training and development,
compensation and rewards, performance appraisals, union and labour relations and culture.
The effect of each of these six independent variables on the dependent variable of company
performance was measured. This research was based on six hypotheses listed in Chapter
Two (page 63) which needed to be verified.
3.6.4 Measures of variables
Variables used in this research were recruitment and selection, training and development,
remuneration and rewards, performance appraisals, union and labour relations and also
culture. This section reviews variables used in previous studies as references in the
development of variables for this research. The original scale used in previous studies and
the scale used for this study are also shown in the table. Previous research into recruitment
and selection is shown in Table 3.5 while previous research into training and development is
shown in Table 3.6. Table 3.7 shows previous research into remuneration and reward and
previous research into performance appraisals is shown in Table 3.8. Table 3.9 shows
previous research into union and labour relations and previous research into culture relating
to HRM practices is shown in Table 3.10. Table 3.11 represents previous research into firm
performance.
Table 3.5 Measures of recruitment and selection

Researcher Variables measured Original scale Scale used
for this study
(Lake, 2008), Recruitment and selection Nominal, Interval 7-points
(Kelly, 2008) interval scale
Table 3.6 Measures of training and development

Researcher Items of variables measured Original scale Scale used for this
study
(Lake, 2008) Existence of formal training, number of Nominal, Interval 7-points
training participants, perceived interval,3- scale
effectiveness of training points scale
(Nhuan, 2001) Number of informal and formal trainings Nominal, Interval 7-points
hours per employee, percentage of interval scale
employee receiving informal training,
average training expenditure per
employee
Table 3.7 Measures of remuneration and rewards

Researcher Items of variables measured Original scale Scale used for
this study
(Kelly, 2008), Percentage of the employees receiving Nominal, interval Interval 7-points
(Connolly & incentive compensation, importance of scale
Connolly, 2005) employees’ performance in determining
the employee’s earnings
Table 3.8 Measures of performance appraisals

Researcher Variables measured Original scale Scale used for
this study
(Nhuan, 2001), Percentage of the employees receiving Nominal, Interval 7-points
(Kelly, 2008) formal performance appraisals, Percentage scale
interval
of the employees having performance
appraisals used in determining their
incentive compensation
Table 3.9 Measures of union and labour relations
Researcher Variables measured Original Scale Scale used for

this study
(Kapur, 2007), The importance of the union to the Interval,7-points Interval 7-points
(Bryson et al., employees scale scale
2005)
Table 3.10 Measures of culture

Researcher Variables measured Original scale Scale used for
this study
(Kelly, 2008), The influence of culture on HRM Interval interval 7-points
(Connolly & practices scale
Connolly, 2005)
Table 3.11 Measures of Firm Performance

Researcher Variables measured Original scale Scale used
for this study
(Storey, 2002) Income per employee, sales per employee, Nominal Interval,7-points
sales growth scale
(Nhuan, 2001) Degree of importance and satisfaction with Interval,7- Interval,7-points
operating profit, return on assets, growth in points scale scale
profit, sales growth, productivity, product
quality, new product development, market
development
(Delaney & Perception of product quality, customer 4-points scale Interval,7-points
Huselid, 1996) satisfaction, new product development, scale
profitability, market share, the association
between HRM practices and firm
performance
(Storey, 2002) Perception of return on sales, return on 5-points scale, Interval,7-points
capital, cash flow and profitability nominal scale
compared with industry average
3.6.5 Survey design and implementation
This section describes the survey design and implementation of the questionnaire and
selection of the population and sample.
3.6.5.1 The questionnaire design
Sekaran (2003) defines a questionnaire as a reformulated written set of questions which

respondents read and then write their answers down (Kumar, 2005; Zikmund, 2003), usually
by choosing from defined alternatives. Every question has to be linked to the research
questions and hypotheses (Kumar, 2005; Ticehurst & Veal, 2000). Questionnaires are widely
used in large-scale investigations to seek reliable responses from a chosen sample (Sekaran,
2003).
In this study, a questionnaire survey was conducted to test the generalisability of the case-
based findings. As the survey strategy was used after the case study method, the formulation
of the questionnaires was based on the case findings and previous research that had been
conducted related to HRM practices. According to Zikmund (2003), questionnaire design is
one of the most critical stages in the survey research process. He mentions further that a
good questionnaire must meet two criteria: relevance and accuracy. Questionnaire design
commonly starts from the research problem and question (Sekaran, 2003). Good
questionnaire design needs to provide abundant items to cover all aspects of the research
problem in the necessary detail.
Some questions were designed with multiple choice answers so that the respondents would
be able to select the option which was closest to his or her point of view (Yuji, 2003).
Closed-ended questions are convenient for collecting factual data, and they are easier for the
respondents to answer (Zikmund, 2003). Likert-scales provide respondents with a series of
attitude dimensions that range from strongly disagree to strongly agree (Brace, 2008). The
questionnaire for this study was designed using a combination of closed - ended questions
and multiple choice answers which used7–point Likert-scales. Multiple choice answers and
close ended questions were designed to obtain detailed information from the respondents and
the company and the 7-points Likert-scale was used to gather information related to HRM
practices conducted by the company including perception of company performance.
All questionnaire items for this research were developed based on the relevant literature and
the research hypotheses. There were 44 questions relating to HRM practices in the
questionnaire that were developed for the survey. These questions were designed to reveal
the implementation of HRM practices through six independent variables namely recruitment
and selection, training and development, compensation and rewards, performance appraisals,
union and labour relations and culture; and one dependent variable namely company
performance. Details of the questionnaire development sources are shown in Table 3.12
below.
In this study, the questionnaire required translation from English to Indonesian. The majority
of Indonesian people normally use the Indonesian language in a formal situation, and in
school or in the workplace. Therefore, the questionnaire was translated into Indonesian
before being distributed. To check content similarities, the Indonesian translation was then
translated back into English by an expert. An English lecturer was chosen as the translator
from Indonesian back into English.
Table 3.12 Questionnaire development sources

No variables Question no. Sources
Q.1 (Lake, 2008)
Recruitment Q.2, Q.3, Q.4 Developed by researcher based on case study
1 and findings
selection Q.5, Q.6, Q.8 (Kelly, 2008)
Q.7 (Lake, 2008);(Kelly, 2008)
Q.9, Q.12 (Lake, 2008)
Q.10 (Nhuan, 2001)
Training and Q.11 (Nhuan, 2001);(Lake, 2008)
2
Development Q.13 (Kelly, 2008)
Q.14 Developed by researcher based on case study
findings
findings
Reward and Q.16, Q.19 (Connolly & Connolly, 2005)
3
compensation Q.17 (Kelly, 2008)
Q.18, Q.20, Q.21 Developed by researcher based on case study
findings
Q.22, Q.24 (Nhuan, 2001)
Q.23 (Lake, 2008)
Performance Q.25 (Kelly, 2008)
4
Appraisals Q.26 (Nhuan, 2001); (Kelly, 2008)
findings
Q.28 (Lake, 2008); (Bryson et al., 2005)
Employee Q.29 Developed by researcher based on case study
5
relation findings
Q.30, Q.31 (Bryson et al., 2005), (Kapur, 2007)
Q.32, Q.35, Q.36, Developed by researcher based on case study
Q.37, Q.38, Q.39, findings
6 Culture Q40
Q.33 (Kelly, 2008)
Q.34 (Connolly & Connolly, 2005)
Firm Q.41, Q.42, (Delaney & Huselid, 1996); (Nhuan, 2001);
7 Performance Q.43,Q.44 (Storey, 2002)
perception
3.6.5.2 Measurement of scale

Generally, research projects of this kind use measurements on a Likert scale, because it is
easy to construct (Kumar, 2005; Zikmund, 2003). Likert-scales are used to indicate
respondents’ attitudes or opinions by measuring their level of agreement or disagreement
(Kumar, 2005; Veal, 2005). Normally in the Likert scale, a categorical scale is used which
has a three-point, five-point, seven-point, or nine-point numerical range depending on how
finely researchers need to rate the intensity of respondent attitudes (Kumar, 2005). This
research used a 7-points scale of agreement measurement for questions related to HRM
practices and perception of company performance.
3.6.5.3 Population and sample
The term population refers to the whole set of entities that decisions relate to, while the term
sample refers to a subset of those entities from which evidence is gathered (Easterby-Smith
et al., 2008). The sample should be representative of the population, so that it is possible to
make general inferences about the properties or characteristics of the population based on the
responses of the sample (Sekaran, 2003). To get a representative sample the researcher can
choose from a range of sampling techniques.
Teddlie and Yu (2008) claim there are four types of sampling procedures namely probability
sampling, purposive sampling, convenience sampling and mixed method sampling. They
define probability sampling as a technique of selecting a relatively large number of units
from the population in a random manner where the probability of inclusion for every
member of the population is determinable. Types of probability sampling are simple random
sampling, stratified random sampling, systematic random sampling, cluster random sampling
and multi-stage random sampling (Black, 1999).
This research used a stratified random sampling technique for the survey as a
complementary research method to support case study. Stratified random sampling was
applied in which the population was subdivided into strata and a proportion of respondents
from each stratum was selected (Fink, 2009). Disproportionate selection of respondents from
particular strata might be applied when the population is not very uniform, and key sub-
groups need with represented to be more precision, when variability within group affects
research results and when sub-group inferences are needed.
The population for this research was the medium-sized enterprises of the textile industry in
Java, Indonesia. Stratified random sampling divided the population of medium-sized textile
companies into four strata based on textiles types: textile-weaving, textile-spinning, garment
and batik companies. Then simple random sampling was implemented from each stratum.
However, this study applied disproportionate random sampling within strata because the
number of companies for each stratum was not very uniform.
Teddlie and Tashakkori (2009) suggest the number of units required to generate a
representative sample of a population in mixed method research as is shown in Table 3.13.
Table 3.13 Relationship between sample and population sizes using probability sampling
techniques
Population size Confident that the sample Confident that the sample
estimates population within (+/- estimates population within (+/-
1%) 5%)
100 99 80
500 476 218
1000 906 278
2000 1656 323
3000 2286 341
Infinity 9604 384
Source: Teddlie and Tashakkori (2009, p. 183)
Data on medium-sized enterprises in the textiles industry was obtained from the Directorate
of Textile and Textile Products and also from The Ministry of SMEs. Based on the company
directory of textiles and textile products in Indonesia for 2009, the number of medium-sized
companies of the textile industry was 536 (Directorate of Textile and Textile Product
Industry, 2010a). The number of medium-sized enterprises obtained from The Ministry of
SMEs was 357 businesses. Therefore, the population of medium-sized enterprises was 893.
Based on Table 3.13 the sample size of this survey should be between 218 and 278
companies with a confidence factor of 0.05. The estimation calculation (using formula: 218
+ (893-500) / (1000-500) * (278-218)) for a population of 901 resulted in a sample of 265.
This was the hoped-for target number.
3.6.6 Survey research steps
This section explains the research steps for case study and interview implementation. It also
explains the details of the steps that were followed in conducting the research. The steps
were as follows:
3.6.6.1 Conducting the pilot study
Before the questionnaire was administered to the respondents, a pilot survey was undertaken.
Pilot studies serve as a guideline for the larger study as they collect data from a small sample
of the population (Zikmund, 2003). Due to the large number of variables explored, the pilot
study aimed to reduce the variables to a more manageable number. Furthermore, although a
pilot survey is only a small-scale trial run of a larger survey, it can test any type of research
procedure (Veal, 2005).
A pilot study is conducted to identify problems in the questionnaire (Lee & Lings, 2008).
The pilot study helps in evaluating questionnaire items and in reviewing the wording of the
questions. Poor wording and ambiguous questions could lead to some misinterpretation by
the respondents. Therefore, by using a pilot study, the researcher can determine the adequacy
of instructions for respondents completing the questionnaire (Bryman, 2008).
The pilot study was conducted prior to the main survey. Stratified random sampling was
used to determine the sample. There were 50 copies of the questionnaire administered to the
selected respondents in Indonesian medium-sized companies of the textile industry in Java.
By doing a pilot study, problems existing in the questionnaire could be identified and revised
for the final questionnaire before it was administered to the main sample. Statistical analysis
via examination of correlations, factor analysis, Kaiser-Meyer-Olkin (KMO), Bartlett’s test
and a reliability test were be provided to test the validity and reliability of variables. Items
that had low scores from those tests were removed.
The pilot study was undertaken a month before the main survey began. Fifty questionnaires
were randomly distributed by the researcher to medium-sized textile companies. To get a
quick response, the drop-off and pick-up technique was applied. The questionnaire in the
pilot study was anonymous. Those who participated in the pilot study put the completed
questionnaires into the sealed envelope provided to be collected by the researcher. The
completion time was approximately 30 minutes. From 50 questionnaires distributed, 37 were
collected, thus the response rate was 74 per cent.
To get feedback on the questionnaire regarding wording and possible ambiguity of

questions, five HRM experts from universities and organisations in Indonesia were asked to
review the questionnaire. Based on the feedback from those experts, some changes were
made particularly in relation to clarifying some ambiguous statements that might be
confusing to respondents. The pilot study further confirmed that there were no wording
problems and no question sequencing problems.
Preliminary data analysis is conducted to check the validity and reliability of data prior to the
main analysis. Common preliminary analysis includes correlation analysis, principal
component analysis (PCA) and reliability analysis. The KMO value and Bartlett’s test of
sphericity are included to support the appropriateness of applying PCA. Guidance in
deciding whether the item should be retained is as shown in Table 3.14.
Table 3.14 Guidance to check the validity and reliability of data

Scale evaluation Value/score
Item-to-total correlations >0.5
Inter-item correlations >0.30
Cronbach’s alpha >0.7
KMO value >0.7
Bartlett’s test <0.05
Loading factor in a component >0.5
Source: Summarised from Manning & Munro (2007)
The reliability analysis of the pilot survey data looked at the value of Cronbach’s alpha. The
Cronbach’s alpha showed a good value of 0.859 (>0.7) meaning the questionnaire was
reliable. Table 3.15 shows the analysis of results of items related to variables including the
rationale for deleting some items from the questionnaire due to the low scores on their scale
evaluation.
Table 3.15 Analysis of items of variables of the pilot study

Composite Number Question in the Rationale for deleting the Items used
variable of item questionnaire items for main
survey
Recruitment and 8 Q1, Q2, Q3, Q4, Q5, Q3 and Q8 were deleted due 6
selection Q6, Q7, Q8 to low correlation value and
appeared in different
component
Training and 6 Q9, Q10, Q11, Q12, Q10 was deleted due to low 5
development Q13, Q14 correlation value and low
loading factor
Compensation 7 Q15, Q16, Q17, Q18, No item deleted 7
and reward Q19, Q20, Q21
Performance 6 Q22, Q23, Q24, Q25, No item deleted 6
appraisals Q26, Q27
Union and 4 Q28, Q29, Q30, Q31 No item deleted 4
labour relation
Culture 9 Q32, Q33, Q34, Q35, Q32, Q33, Q35, and Q36 5
Q36, Q37, Q38, Q39, were deleted due to low
Q40 correlation value, appeared in
different component and low
loading factor
Performance 4 Q41, Q42, Q43, Q44 No item deleted 4
From Table 3.15, there were seven items removed for various reasons such as low values of
correlation, appearing in different components or low loading factors. Finally, 37 questions
remained in the questionnaire for the main survey.
3.6.6.2 Administering the main survey questionnaires to the target sample
The process used in the main survey was similar to the process of the pilot study. This
survey used mail, drop-off and pick-up for the distribution of the questionnaires. Some
questionnaires were mailed directly to respondents to read and return the completed
questionnaires to the researcher via mail (Ticehurst & Veal, 2000; Veal, 2005). Several
students from the University of Sebelas Maret were asked to distribute the questionnaire.
Prior to data collection, those students were trained in how to distribute the questionnaires;
and the researcher followed the guidelines of Southern Cross University HREC. For example
they were informed that their role was only to distribute the questionnaires. They were not
allowed to open the questionnaire or to help the participants to complete the questionnaires.
Those students were paid for every questionnaire collected including transportation cost.
The questionnaires were sent to respondents with a covering letter which explained the
purpose of the study and the potential outcome of the contribution of the respondents. They
were also informed in the covering letter that the survey was anonymous, voluntary and
confidential. Furthermore, a return-addressed, postage-paid envelope was enclosed to
encourage response. If they decided to participate, the respondents could complete the
questionnaire, put their responses in the sealed envelope provided and send it back to the
researcher’s address by mail or wait for it to be collected by the students.
For this survey the researcher distributed 500 questionnaires overall in anticipation of a low
response rate. Firstly, the researcher sent 300 questionnaires randomly by mail. However,
after waiting for three weeks, the questionnaires returned did not achieve the target sample.
Then another 200 questionnaires were sent by mail and also by the drop-off and pick-up
mode. From the 500 questionnaires the researcher was able to collect 228 responses in 2.5
months. The researcher could not achieve the hoped-for target sample because of the low
responses rates. It appeared that Indonesian medium-sized companies tended to keep their
data secret and this was the reason for the source of low response rate.
The analysis of 228 responses did not provide significant results because the number of
family businesses (147 respondents) was larger than the number of proprietary limited
companies (81 respondents). However, the statistical analysis of the proprietary limited
companies on their own provided significant results. This made it possible for further
analysis using larger sample. Therefore, a second data collection process was conducted
which focused only on proprietary limited companies. Using the drop-off and pick-up
method, 150 questionnaires were delivered to proprietary limited companies and 131
responses were gathered.
3.6.6.3 Response Rate
For the first data collection, the researcher used the mail and the drop-off and pick up
methods. From 500 questionnaires the researcher obtained 228 responses. Therefore, the
response rate for the first data collection was 45.6%. For the second data collection, the
researcher used the drop-off and pick-up method only. From 150 questionnaires, the
researcher gathered 131 responses. This resulted on response rate of 87.3%.
3.7 Reliability and Validity of the Methods Selected
Principles of reliability and validity, though common to most qualitative researchers, are
applied differently in research practice. The terms reliability and validity are used because of
their close association with quantitative measurement (Neuman, 2006). Yin (2009b) argues
that since case study research is one form of empirical social research, widely recognised
tests to establish the quality of social research should also apply to case studies. The four
tests for judging the quality of the case study are summarised in Table 3.16.
Table 3.16 The four tests for judging the quality of the case study
Construct validity Establishing correct operational measures for the concepts being
studied
(For explanatory or causal studies only, and not for descriptive or
exploratory studies): establishing a causal relationship, whereby
Internal validity certain conditions are shown to lead to other conditions, as
distinguished from spurious relationships.
External validity Establishing the domain to which a study’s findings can be generalised
Demonstrating that the operations of a study – such as the data
Reliability
collection procedures – can be repeated, with the same results
Source: Yin (2009b, p. 40)
Construct validity deals with the question of whether instruments are accurate measures of
reality (Easterby-Smith et al., 2008). There are three strategies used to increase the construct
validity of case research (Yin, 2009b): firstly, it is suggested that multiple sources of
evidence are used so that the inquiry can be conducted in a converging manner. Secondly, it
is proposed that a chain of evidence be established during data collection. Thirdly, it is
suggested that the draft report of the case study research be reviewed by key informants.
Internal validity is often used for explanatory or causal research. Internal validity requires
that there be no internal errors in the design of the research project (Neuman, 2006). Yin
(2009b) identifies four strategies to enhance the internal validity of a research design: 1) do
pattern-matching, 2) do explanation building, 3) address rival explanations, 4) use logic

models.
External validity is the ability to generalise findings from a specific setting and small sample
to a broad range of settings and people (Neuman, 2006). Yin (2009b) advocates the use of a
multiple case design since it can expand the external generalisability of the findings in
contrast to conducting a single case study. Yin further recommends the use of replication
logic in multi-case studies rather than statistic representativeness to address the external
validity of the case study properly. To offset the limited generalisability which results from
surveying only a small number of cases, a questionnaire survey was conducted on a large
sample in a complementary manner, and in this way the key findings from the case-based
study were tested and the external validity of the case study findings was consolidated.
If a study is reliable then the findings of a piece of research will be repeated if it is conducted
again in an identical or analogous context (Neuman, 2006). The reliability concern in a case
study is to be sure that the same findings or conclusions will be reached if two researchers
conduct the same case study, following the same procedures, but in a tandem manner (Yin,
2009b).
Instead of validity and reliability, the quality of the study will also be judged in terms of
generalisability and confirmability. Generalisability is defined as the ability to draw
inferences and conclusion from data. Generalisability is said to occur when result can be
applied to different populations with the same characteristics in different settings.
Confirmability actually corresponds to objectivity in positivist research. Confirmability
implies that research findings are logical, unprejudiced and unbiased. In this study,
confirmability was achieved by the use of multiple sources of evidence in data collection.
These strategies ensured that this study’s findings are logical and unbiased.
3.8 Data Analysis
Once data are collected, they must be processed in such a way that they form a pattern or
provide results that gave meaningful information to the researcher. Data analysis for mixed
methods involves qualitative and quantitative data analysis. The appropriate data analysis for
mixed method research is based on the model provided by Onwuegbuzie and Teddlie (2003).
This is also appropriate to conduct the final step of mixed-method research design namely
the interpretation of qualitative and quantitative data. The common process for data analysis
includes: 1) data reduction, 2) data display, 3) data consolidation, 4) data integration and 5)
data interpretation. Data reduction for quantitative data includes reducing the information
into an appropriate and simplified configuration. Data display involves computation of
descriptive statistics. This involves tables and graphs. Data consolidation involves
combining both data forms to create new or consolidated variables or data sets. In data
integration, all data are integrated into a coherent whole or two separates sets of coherent
wholes (qualitative and quantitative). Data integration leads to data interpretation, whereby
inferences are made. The data interpretation stage is then subjected to legitimating. Once the
analyst believes that the interpretation represent the most plausible explanation of the
underlying data, conclusions are made.
3.8.1 Qualitative data analysis of the case studies
In order to provide high quality analysis the research should apply four principles. First, the
analysis should show it relied on all relevant evidence; second, it should include all major
rival interpretations; third, it should address the most significant aspect of the case study;
fourth, it should bring the researcher’s own prior expert knowledge to the study (Yin,
2009b). As the first research methodology used multiple case studies, case-oriented analysis
was employed.
In the case study stage, the information gathered from variable sources was analysed in order
to pre-test and refine the questionnaire. Once all the data become available, a ‘relying on
theoretical propositions’ strategy was adopted to guide the data analysis process because
theoretical propositions can help to decide the acceptance or rejection of the raw data and
therefore, this is the ‘first and most preferred strategy’ for case-oriented analysis (Yin,
2009b).
Having decided on a data analysis strategy, the specific procedure appropriate for qualitative
data analysis for this research was based on the model provided by Creswell (2003). A six-
step process was followed when analysing the data collected through qualitative methods
namely: 1) organise and prepare the data, 2) read through all the data, 3) develop a coding
process, 4) use the coding process to generate the description of the setting or people as well
as categories or themes for analysis, 5) put forward how the description and themes will be
represented in the qualitative narrative, and 6) make interpretation or show meaning of the
data.
Coding is a way of using numbers to represent data. During coding, data are transferred from
original notes into a format that facilitates practical analysis. Organising data is conducted to
reduce the possibility of errors when being read. Editing is needed to group the data into
categories before they are ready to be tabulated. Interpreting is used to generate an
understanding of the concepts and theories held by the subject under study.
There are two forms of analysis provided for the case study; they were within-case analysis
and cross-case analysis. Within-case analysis compares data and patterns within one main
case. This analysis revealed the pattern in HRM practices inside one case company. To
facilitate these processes, methods of coding, indexing and reporting the data were
established. Firstly, a coding structure based on the research problem served to organise data
into topics and sub-topics for analysis. This process was undertaken manually. Secondly, a
process of data indexing was adopted so that each case was allocated an alphabetical label
for reporting, to preserve confidentiality. The letters A to D were used to represent the four
types of textiles companies involved in this research. Finally, a number of steps were taken
to facilitate and simplify the reporting of data. To begin the process, the researcher
completed within-case analyses and detailed reports on each of the four cases, covering all
interviewees within each case. This step enabled the researcher to cross-check the accuracy
of findings with participants in each medium-sized enterprise. The reports also provided the
platform for the cross-case analyses presented in this chapter.
The next analysis was cross-case analysis which compared data and patterns within the four
case companies. This revealed similarities and differences of HRM practices in those four
companies. The common factors for both analyses were the national and organisational
cultures. In summary, the four cases were first analysed individually, using triangulation of
data methods, and then two forms of case analysis were used to highlight patterns and
themes emerging from the data. Furthermore, both case analyses created factors that
functioned as the source of variables for the survey method.
3.8.2 Quantitative data analysis of the survey
Quantitative data analysis often deals with statistical analysis techniques especially in the
analysis of behavioural elements of performance (Amaratunga et al., 2002). Common
statistical analysis used such tools as factor analysis, correlation analysis and so forth.
There were five main analyses adopted for the survey method. First, demographic analysis
and descriptive statistics were applied to the survey results. Second, preliminary analysis was
applied to test the validity and reliability of data. The purpose of preliminary analysis was to
clean data prior to the main analysis. In this analysis, the series of analyses such as matrix
correlation analysis, normality test and outliers was applied. Third, the analysis of
correlation was used to test whether there were positive correlations between the
independent variables of HRM practices including culture and the dependent variable of
company performance. If all correlations were positive, further analysis was appropriate.
Fourth, hypothesis testing was undertaken based on correlation values. Fifth, multiple linear
regression analysis was used to determine the nature of the relationship between a dependent
variable and more than one independent variable (Black, 1999).
3.9 Ethical Considerations
Ethics in social research are important when it involves humans as the research subjects.
Ethical issues may arise at any stage of the research process; these issues revolve around the
rights and obligations of the researchers and participants (Creswell, 2003; Zikmund, 2003).
Regarding ethical considerations, the researcher is expected to protect the respondents’ right
to confidentiality and privacy (Zikmund, 2003). To fully address the researcher’s
obligations, approval for the research should be obtained prior to conducting the research.
When conducting data collection, an assurance of confidentiality should be provided
concerning all the information collected, and participants should be told that all the
documents, written notes, and audio tapes containing such information will be destroyed at
the request of the provider.
Regarding ethical considerations in this study, prior to agreement on participating in the

research, the successful interviewees were informed about the purpose of the research and
data gathering process including the use of semi-structured interviews. Interviewees were
also told that they would be protected as to confidentiality and that they had the right to
withdraw from being research interviewees. Informed consent forms were provided to
interviewees prior to interviews taking place. All interviewees were informed about the
nature and purpose of this study, the anonymity of participation, the freedom to withdraw
from the interview at any time, and the procedures to be followed. All interviewees received
an informed consent form as indicated previously. This form was briefly discussed prior to
the commencement of the interview, and completed and signed by the participants and the
researcher, and the form was kept in a filing cabinet of the university. The interview used
audio recording and hand writing to record the answers. However, prior to the interview
session, the interviewee was told that the recorded interviews would be kept confidential and
would be used only for this research. Furthermore, all interviewees remained anonymous.
All data was coded in such a way as to prevent the identification of individual participants. A
research summary was sent to the interviewee on request and as part of the researcher’s
obligations.
For the survey, ethical considerations were also applied in terms of confidentiality, privacy
and anonymity. The respondents were encouraged to fill in the questionnaire but with no
pressure (Salant & Dillman, 1994). Furthermore, since the respondents were anonymous, the
result of data analysis did not refer to specific respondents. This is also part of the survey’s
confidentiality.
Regarding ethical considerations, prior to conducting the data collection, the researcher had
to submit an ethics proposal to the SCU’s committee to get approval. The ethics proposal
consisted of expedited review, informed consent, information sheet, interview guide and
indicative questionnaire for survey. The researcher obtained ethics approval number ECN-
09-106 from the SCU as permission to do data collection.
3.10 Conclusion
This chapter has discussed and justified the research design of this study. The choice of the
pragmatist paradigm for the mixed method approach adopted has been discussed with its
justification. A mixed-method strategy using both qualitative and quantitative approaches
was adopted and the justification of this strategy has been provided. A case study approach
was selected as the principal inquiry strategy and a survey was chosen as a complementary
investigating instrument. This study chose the textile industry because this industry has been
a major source of exports and contributes much to the Indonesian GDP and absorbs a lot of
employees. Furthermore, batik companies that produce specific designed materials are
mostly heritage businesses and their operations are considered to be very much influenced
by Indonesian culture. These criteria made those companies suitable targets for studying the
influence of Indonesian culture on the HRM practices of medium-sized enterprises in
Indonesia. Observations, interviews and a mail questionnaire survey were the three main
techniques used to collect data. Data analyses for the case study and the survey method as
well as relevant ethical issues in this study have also been discussed.
Chapter 4: Qualitative Data Analysis
CHAPTER FOUR
QUALITATIVE DATA ANALYSIS
4.1. Introduction
Chapter 3 described the adoption of the exploratory sequential mixed methodology that
combined case study research with a survey questionnaire. It justified the case study
method as an appropriate research method. In Chapter 3 the qualitative technique used to
collect data was described; and Section 3.8.1 provided the data analysis techniques applied
in this chapter.
This chapter presents the findings from the in-depth analysis of data collected from the
case studies. The effects that each organisation’s HRM practices had on its ability to
increase employees’ productivity and to improve the company’s performance are explored
in five categories. They are Recruitment and Selection, Training and Development,
Remuneration Rewards, Performance Appraisals and Industrial Relations. Javanese
culture's and organisational culture's influences on HRM practices are also explored. These
influences include the company’s philosophy and values, hierarchy, seniority and status,
leadership style, employees’ involvement in decision making processes and the company’s
rules and regulations.
In qualitative data analysis, the challenges are to identify data patterns and to prove
trustworthiness. Triangulated data was obtained by using interview data, observation and
reviews of publicly available documents about the companies. In this case, the patterns in
the data explained the HRM practices of selected medium-sized enterprises in Indonesia
and how Indonesian culture and organisational culture influence the implementation of
HRM practices in medium-sized enterprises.
The chapter begins with an introduction in Section 4.1, followed by a Within-Case

Analysis of each company in Section 4.2. Following this, Cross-Case Analysis is provided
in Section 4.3, which investigates the HRM practices used including cultural influences on
HRM in the four cases study companies by examining the differences and similarities of
their practices. Section 4.4 presents a discussion of the findings. Finally, Section 4.5
presents a conclusion to this chapter. This structure is shown in Figure 4.1.
4.1 Introduction
4.2.1 Data collection on RQ1

4.2 Within-Case Analysis
4.2.2 Data collection on RQ2
4.3 Cross-Case Analysis 4.3.1 Cross case analysis on RQ1

4.3.2 Cross case analysis on RQ2
4.4. Summary and Discussion of Findings
4.5 Conclusion
4.2 Within-Case Analysis
Within-case analysis investigated the HRM practices of each company with respect to
Research Questions 1 and 2. The interview data for the employers' and the employees’
responses supported compare-and-contrast analyses and also enabled some triangulation.
Three of the case study companies were Proprietary Limited (Pty. Ltd.) companies
characterised by formal organisational structures, clear division of jobs, formal
administrative processes and personnel departments that were responsible for HRM
practices. The fourth case company was a family business manufacturing batik materials
and was characterised by a non-formal organisational structure, unclear job division,
limited administrative processes and family members holding managerial positions.
4.2.1 Data on research question 1
Research Question 1:
RQ1: What HRM practices in terms of recruitment and selection, training and
The discussion of HRM practices will also include the key person who manages and
implements the HRM practices in those companies. The analysis will be based on data
collected through semi structured interviews, observation and document analysis.
4.2.1.1 Case A
1. Company profile
Case A was a textile weaving company located in Surakarta city, Central Java. This
company had produced denim material for 29 years and sold it on the domestic market.
Previously it exported the product overseas; however, due to the economic crisis in 1997,
it had cut its operations and ceased exporting. There were 200 employees and most of
them worked in the production department. The ethnic Javanese majority brought Javanese
culture to the work environment.
The company was a Proprietary Limited (Pty. Ltd.) type of business with a line
organisational structure. Under the director, there were five departments that handled the
company’s operations including Production, Accounting, General Affairs, Storage, and

Personnel. The personnel department conducted HRM activities including employees'
record keeping. The General Affairs Department dealt with company logistics, including
providing office equipment and stationery. It also handled all tasks involved with outside
parties such as government and society.
2. Summary of daily recording
Photos taken of the production area (see Appendix B1) showed a rather dark, hot, and
dusty environment. One storage room smelled of chemical. It appeared that more windows
were needed for fresh air to reduce the heat and the smell. The company required its
employees to wear masks in the production area as part of health and safety requirements.
3. Interview participants
The one-to-one interviews with management-level participants involved the Personnel

Manager and the General Affairs Manager. The group interviews of the employees
involved three females and two males from different sections of the production
department. Two of them were chosen by the Personnel Manager while the rest were
chosen by the researcher and were interviewed during their break time. The interviews
were conducted in the office.
4. HRM practices
The analysis of the company’s documents indicated that this company kept detailed
personnel records. There were forms to record the employees’ details such as employees'
biographical data, interview forms and employment contracts. Detailed results of the
interviews with employers and employees on HRM practices are presented below and the
summary is shown in Table 4.1.
Recruitment and selection: The recruitment decisions for operational level employees
were made by the Personnel Manager based on the production department’s advice. For
the managerial level, recruitment decisions were made by the company’s director. External
and internal sources of recruitment were used to get appropriate candidates. The
recruitment system for managerial and operational-level employees was described by the
Personnel Manager as follows:
‘For the managerial level, the company uses advertisements in the newspaper, sends
vacancy letters to universities, or selects from among our employees as part of
promotion. For production employees, we usually use word of mouth.’
The employee participants said they applied through their relatives or friends, who already
worked in the company. The selection process included tests and individual interviews.
For non-managerial positions, selection processes were simple such as numerical and work
sample tests. More complex selection procedures were applied to managerial-level
positions. For example, individual interviews might include questions about work
experience, salary expectancy, and commitment. Managerial-level candidates also had to
undertake written tests; however, these were not necessarily completed by experienced
candidates.
The Personnel Manager appeared to be responsible for operational-level candidates'

acceptance while managerial-level candidates were under the director authority. The
acceptance criteria were mostly based on test’ scores and interviews results, and other
criteria as described by the Personnel Manager:
‘The criteria for managerial position are education and work experience but for non-
managerial positions we do not expect too much; as long as they pass the practice test
they will be hired’.
The findings from the employee participants indicated that their acceptance was
determined by family membership connections.
Training: On-the-job training (OJT) for three months appeared to be the only training for
new employees at the operational level. This involved working under a trainer's
supervision. The trainers were their team leaders or supervisors. OJT mostly aimed to
familiarise new employees with the working environment and to teach them how to do the
job. Regularly, the government or training agencies offer occupational health and safety
raining or Keselamatan dan Kesehatan Kerja (K3) to medium-sized companies at the
companies’ expense. It is a compulsory training for supervisors because they should hold
K3 certificates to be in this position. New supervisors were sent to undertake that training
as qualification requirements. The interview with the Personnel Manager revealed the
selection criteria for the training candidates at the supervisory level:
‘We select training candidates from operators and supervisors who are creative,
productive and disciplined, or from employees who have the potential to be
promoted’.
Remuneration and reward: Wages for operational level employees should follow the
government-determined regional minimum wage or Upah Minimum Regional (UMR)
(Menteri Tenaga Kerja dan Transmigrasi, 2006). UMR is based on monthly living costs of
each region and the amount is adjusted every year. Case A used UMR as the basic wage
for operational-level employees plus allowances such as a tenure allowance that were
added to the basic wage. There were also benefits such as a pregnancy benefit for female
employees who could take maternity leave for two months. This paid leave was provided
after the birth. The remuneration system was explained by the Personnel Manager as
follows:
'Besides UMR as the basic wage, we also give an allowance based on their absence in a
year, for example 1-15 days absence means good, 15-20 days absence means average,
and more than 20 days absence is bad. Then their absences are processed resulting in
score A, B, or C. This score is used to determine the amount of allowance paid for the
next year'.
Employees who had registered for social security insurance or Jaminan Sosial Tenaga
kerja (Jamsostek) (Menteri Tenaga Kerja dan Transmigrasi, 2006), could obtain retirement
benefits. Jamsostek premium insurance was paid monthly from the employee’s salary.
Interviews with employees' participants found that some of them had not yet registered
with Jamsostek. The long registration process appeared to cause dissatisfaction. The
interview with the employees confirmed their dissatisfaction regarding the remuneration
system:
‘Actually we are not satisfied, because our basic wage is the same as new employees
although we have worked for more than 10 years. It also does not consider skills and
working experience. The difference is only on the tenure allowance which is very
small. But I never complain because I am afraid of being fired’.
The General Affairs Manager acknowledged the existence of employees’ complaints in the
interview:
‘Compared with other similar textiles companies, our wage is neither the lowest nor the
highest. The important thing is our basic wage still follows the UMR standard’.
Performance appraisals: The performance appraisals in Case A aimed to determine

increases of each employee’s allowance. In the production department, these activities
were performed by team leaders, supervisors and the Production Manager. The criteria for
the appraisals included discipline, loyalty, cooperativeness, responsibility and productivity.
However, from the perspective of employees the criteria were different. As one employee
participant said:
‘The performance appraisals is based on our output or whether we can achieve our
target or not. Our team leader will only give feedback on our poor performance. Often
the team leaders work together and help us achieving our target because this is also
part of their responsibility’.
Learning and development was very limited for the employees in the production
department. The only possible career pathways led to becoming team leaders or
supervisors. The promotion policy and the selection process were not communicated to the
employees. The employee participants claimed “We have never been promoted”, and that
“The company appointed the new team leader directly”. Therefore they considered the
promotion was unfair.
Union and labour relations: Case A allowed its employees to join one formal union,
namely the National Labour Union or Serikat Pekerja Nasional (SPN). The membership
was automatic and the union fee was deducted from their wages. According to the
Personnel Manager, the union activities included negotiating issues related to employees’
wages and company policy. However, most of the employees were not actively involved in
union activities. Several employee participants said “We do not like the automatic
membership”.
In summary, the findings of HRM practices in this company are shown in Table 4.1.
5. The key person who managed HRM practices
It appeared that the Personnel Manager conducted almost all HRM practices. However, his
job description covered other tasks including performing public relations functions and
implementing company rules and policies. It appeared that the organisational structure of
case A only had a few departments and this led to more tasks and responsibilities being
covered by the same person. As a result, employees in small and medium-sized firms often
have to perform a greater variety of tasks than do employees in larger firms.
6. Analysis of findings
It appeared there were similarities in SMEs' HRM practices implementation. Despite

formal HR practices, informal practices were still applied. For recruitment and selection,
Case A conducted both formal and informal recruitment processes. Barret, Neeson, and
Billington (2007) argue that informal recruitment may use ‘word of mouth’ advertising.
They also report that family membership and friendship may override the official criteria
in selecting new employees. It is likely that hiring candidates in Case A was determined by
family membership connection.
Table 4.1 Summary of the employers’ and employees’ interviews on HRM practices of Case A
HRM practices The employers The employees

1. Recruitment and selection - Using formal and informal - Receiving vacancies
recruitment information from employees
- Using internal and external and applying through them or
sources. by themselves.
- Using both advertisement and - Undergoing practical tests and
word of mouth. interviews for selection.
- Selection criteria for managers - Candidates' acceptance was
were more complex including determined by their family
education, knowledge, skill, membership and friendship
and experience. connection.
2. Training and development - On-the-job training in the work - On-the-job training for three
place for three months. months.
- There was work and safety
training for supervisory level.
- There was no training for
managers.
3. Remuneration and reward - Using regional minimum wage - Complaining about the same
(UMR) as the basic wage. basic wage for all operational
- Using scoring system based on employees.
employee’s absence for - Complaining about wages not
allowance determination. being adjusted to the current
- Providing benefits such as UMR.
pregnancy benefits. - Complaining about small
amount of allowance.
4. Performance appraisals - Conducted by Supervisors and - The appraisals were based on

the Production Manager. employees’ productivity only.
- Aimed to determine the - The promotion policy was not
increase of the allowance. communicated.
- Managers were appraised by
the director
5. Union and Labour relation - National labour union (SPN). - Automatic membership of the
- Union activities including union.
negotiating with the company - They were rarely involved in
on the employees’ issues union activities.
On-the-job training appeared to be the only training for all new employees. Team leaders
and supervisors might undergo health and safety training and the selection process was
under the authority of the Personnel Manager. Schaper and Volery (2004) argue that
training reduces shortfalls and gives the business a greater set of skills than it can
productively use. However, there was no training manager. The economic turbulence was
believed to have caused a decline in the opportunities for potential managers to undergo
training and development (Nankervis & Putra, 2006).
It was claimed that the remuneration and rewards system had provided decent wages for
the employees. However, dissatisfaction existed regarding the same fixed wage for old and
new employees, the low rate of allowance, the failure to adjust to the current UMR and the
long process of Jamsostek registration. Nankervis and Putra (2006) argue that the
regulations concerned with minimum wage requirements were not all fully implemented in
all regions and organisations.
Performance appraisals was implemented to determine future allowances and not to further
employees’ careers and development. Suharnomo (2009) claims that in cultures with high
power distance, loyalty and obedience to supervisors is required; and that therefore
performance appraisals tend to use behavioural criteria. The employees just followed the
established criteria to minimise risks. However, the employees claimed that performance
appraisals were only based on their productivity.
Case A registered all of the employees in the National Labour Union (SPN). The
employees paid the membership fee monthly. Unions rely on membership dues to fund
their activities (Isaac & Sitalaksmi, 2008). The general affairs managers claimed that the
union had engaged in collective bargaining processes on employees’ issues and the
employees believed that the union had protected their rights. However, several employees
complained about the automatic membership.
4.2.1.2 Case B
1. Company profile
Case B was a textile yarn (spinning) company established in 1990. It was a Proprietary
Limited (Pty. Ltd.) type of business or Perseroan Terbatas (PT.) and is a subsidiary of a
large batik company in Surakarta which has produced high quality textiles for decades.
The parent company is owned by a Javanese family who were related to the royal family
of Surakarta (kasunanan) 2. Although the parent company was classified as a large
company, according to the textile industry’s definition, Case B had 300 employees and
was considered to be medium-sized based on its number of employees. This company had
2
Kasunanan is the royal family of the Surakarta Kingdom. The current king is SunanPakubuwono XIII.
Surakarta Kingdom is part of Central Java Province and does not have political authority, unlikeYogyakarta
Kingdom (Kesultanan) that got its special autonomy, called Daerah Istimewa Yogyakarta (DIY) after
independence.The current king of Yogyakarta kingdom, Sultan Hamengkubuwono X, still has political
authority in the region (Jamil and Junaidi, 2008).
a line organisation structure with five departments including Personnel and General
Affairs, Production, Finance, Marketing, and Logistics departments.
Case B produced many types of yarn such as cotton, rayon and polyester and was built to
support the operation of a textile company within the same group and also to supply other
textile companies’ demands. To achieve its production target, the production department
operated for 24 hours a day with three working shifts.
The documents and forms related to employees’ matters provided by Case B included a
collective labour agreement between the company and the union, a Standard Operation
Procedures (SOP) form, a performance appraisals form, work and safety information,
absence list forms, and employment termination forms.
The researcher’s observation of the factory site area (see Appendix B2) showed a clean
and tidy environment. The machine layout supported a smooth production process with
lights in all areas. Information boards were attached on one wall. Fire hoses were placed
in several areas. A motto or slogan of the 5Rs (clean, tidy, concise, careful and diligent)
was framed and attached to the wall. The implementation of the 5Rs seemed to be
succeeding in motivating the employees to keep the environment clean and tidy.
The interview participants from the employer side consisted of the Personnel and General
Affairs Manager and the Production Manager. Both of them had bachelor degree
qualification and had been working for more than 10 years. Five employees (three males
and two females) from different sections of the production department were also
interviewed.
4. HRM practices
The results of interviews on HRM practices were classified under five categories:
recruitment and selection, training and development, remuneration and rewards,
performance appraisals, and also union and labour relations. A summary of the issues
discussed is shown in Table 4.2. The detailed results are discussed below.
Recruitment and selection: The recruitment process in Case B appeared to be informal.

The company never advertised vacancies. The Personnel and General Affairs Manager
clarified this policy and reasons behind it:
‘We never advertise the vacancies. If we advertise the vacancy there will be too many
applications. Without advertisements, there have been many applications coming and
many applications are put forward by our employees. We just use existing
applications’.
Case B applied a multi-staged selection process conducted by the Personnel Department

jointly with the relevant department. The Personnel and General Affairs Manager
described this strategy:
‘Firstly, we do document selection and give a list of candidates who pass the first
selection to the relevant department. Secondly, the department will provide tests and
make a report on candidates who pass the tests. The next step is conducting
psychological tests performed by the outside HR consultant’.
The recruitment process for managerial positions was different. Generally, the vacancy
was offered directly to a person who already had experience in that position. The candidate
was approached by the company to submit CV. The Personnel and General Affairs
Manager described the criteria of the managerial level recruitment as follows:
‘The criteria for managerial positions are more complicated and the process involves
top management’s decision. We will look at their skills certificates first and then their
education and experience. However, we prefer skilled candidates who do not ask for a
high salary’.
The Personnel and General Affairs Manager determined the candidates’ acceptance based
on their test scores. However, the Production Manager described the possibility of hiring
candidates based on family memberships and friendship connection:
‘If there are candidates who have the same scores, I recommend the one who has
relationships with our employees. This will ease our job in monitoring them.’
Training: On-the job-training was conducted for all new employees at the operational
level with no exceptions. The objectives of OJT were to familiarise the employees with the
working environment and their tasks. Other training such as Standard Operation
Procedures (SOP) training was conducted based on needs and aimed to improve skills and
to enable promotion. The Personnel and General Affairs managers described the criteria
for selecting employees for training:
‘The other training is usually for supervisors or team leaders. We select them based on
their talents and records and this is done by each department.’
Currently, there was no evaluation before and after training and no reports provided about
training activities and progress.
Remuneration and rewards: Case B followed government regulations on minimum

regional wage standard (UMR) in its remuneration system. The Personnel and General
Affairs manager explained the remuneration system:
‘We determine fixed wage levels by grades (from grade 1 to 25). Grade 1 is the lowest
and the amount is the same as the regional minimum wage (UMR). Then we calculate
the total wage by adding allowances based on the employee’s position, skills, tenure
and achievement to the fixed wage. We also adjust wages to the current UMR’.
Skills and achievement allowances were determined through employees’ performance

appraisals reports. Achievement was measured in terms of their productivity. All
employees were registered in Jamsostek insurance to receive retirement benefits. Case B
also provided other benefits and rewards as explained by the Personnel and General
Affairs Manager:
‘Other benefits and rewards are premiums provided on every sixth day of the month to
all employees based on their productivity, and a Hari raya allowance (THR) is
provided every year and education support is provided for the employees’ children’.
The employees admitted that their wages were still higher than other similar companies.
However, they still argued that their wages did not match their education and experience.
Performance appraisals: Performance appraisals were conducted by team leaders,

supervisors and managers using a specific scoring system. Scoring factors included
personality (discipline, responsibility, cooperativeness and initiative) and personal skills
(quality and quantity). The Personnel and General Affairs manager described the objective
of the performance appraisals as follow:
‘We conduct performance appraisals so as to determine the achievement allowance or
as a promotion criterion’.
It appeared that the results were not given to the employees and this became the source of
complaints. Due to the promotion system, employees claimed that the possibility of being
promoted was very small and that promotion criteria were unclear.
Union and labour relations: Case B allowed its employees to join the National Labour
Union (SPN). It appeared that employees were actively involved in the union’s activities
and even became union board members. The union conducted collective bargaining with
the company on employees’ issues such as allowance increments. There was a collective
labour agreement between the company and SPN which set the rights and responsibilities
of the employer and the employees. The agreement covered the recognition of the
existence of SPN, working regulations, compensation, holidays and leave, allowances,
social security and welfare, working settlement and termination. It appeared that the union
had protected the employees' rights as they claimed.
The summary findings of the employers’ and employees’ responses on HRM practices in
Case B are shown on Table 4.2.
5. The key person who managed the HRM practices
The Personnel and General Affairs Manager was responsible for HRM practices. Some
practices were conducted jointly with other departments; for instance, recruitment and
selection, training and development, as well as performance appraisals were conducted
jointly with the Production Manager and supervisors. Other responsibilities that actually
were not in the Personnel and General Affairs Manager’s job description included
performing public relations functions and approaching the local government on any issue
such as industrial waste water pollution.
It appeared that Case B conducted comprehensive administrative works and kept all
employees records. The recruitment was informal. However, all candidates still had to
undergo a selection process that was conducted in several stages. This strategy agrees with
Compton, Morissey and Nankervis’s (2002) concept that no matter what selection
technique is chosen, it should aim at ensuring investment made in recruitment activities
will gain skilled and motivated new employees who will contribute to the objectives of the
organisation. Furthermore, Case B accepted employees based on family membership and
friendship. Suharnomo (2009) argues that family relationships with the management of the
organisation is one factor in the staffing process. The benefit of employing family
members is a greater commitment to the long-term survival of the firm and a sense of
security (Schaper & Volery, 2004).
On-the job-training was conducted with all new employees for three months. Other
training was conducted for supervisors and team leaders, for example SOP training. The
objective of training is to ensure that employees have the appropriate sets of skills to
perform their tasks (Schaper & Volery, 2004). Training evaluation was not yet provided
but had been requested by the Personnel and General Affairs Manager.
The remuneration system appeared to comply with the government policy on UMR. Case
B used a specific remuneration system to determine an employee’s wage. Suharnomo
(2009) claims that most companies used a fixed pay and remuneration policy rather than
basing payment on individual performance. Although achievement allowances were based
on an employee’s productivity, the amounts paid were small. Some employees complained
that the allowance did not match their work experience.
Table 4.2 Summary of the employers’ and employees’ responses on HRM practices of Case B

1. Recruitment and selection - Conducting informal recruitment - Obtaining vacancies
only. information from the
- No advertisement. Using available employees.
applications only. - Undergoing all selection
- Difference selection criteria for process.
operational and managerial levels. - Their acceptance based on
- Conducting multi-stages selection family membership or
process. friendship
- Nepotism was still possible.
2. Training and development - On-the-job training for all new - Undergoing on-the-job
employees for three months. training in groups.
- Other trainings such as SOP
training for supervisors or team
leaders.
- No evaluation before and after
training.
3. Remuneration and reward - Using a specific remuneration - Complaints that allowances
system. did not match with their work
- Using UMR as the lowest grade experience in the company.
salary and adjusting every year.
- Other allowances based on tenure,
position and achievement.
- Providing benefits and rewards
such as premiums.
4. Performance appraisals - Using scoring system for each item. - The result (score) was never
- The objectives were to determine given to employees.
the achievement allowance and as a - The promotion criteria were
promotion criterion. not communicated and the
chances for promotion were
very limited.
5. Union and labour relations - Allowing employees to join SPN. - Some employees were union
- Negotiating with the company on board members.
employees’ issues. - Union was believed to protect
their rights.
Case B conducted performance appraisals using a form with items to be scored. However,
the purpose and the results of the appraisals were not communicated to the employees.
Furthermore, the use of appraisals for promotion purposes did not benefit the employees
since the chance of promotion was very small. Case B allowed all employees to join the
National Labour Union (SPN). Indonesian trade unions engage in collective bargaining
and are involved in joint consultations and industrial disputes (Isaac & Sitalaksmi, 2008).
4.2.1.3 Case C
1. Company profile
Case C was a batik company located in a famous batik village, Kampung Laweyan.
Kampung Laweyan is a centre of medium-sized batik industries which has existed since
the 1950s. There are many batik businesses owned by rich families in Kampung Laweyan
and some of them still have a relationship with the royal family of Surakarta (Alpha,
2009).
Alpha (2009) argues that the economic crisis in 1997 stopped the activities of batik
businesses in Kampung Laweyan. However, after the declaration of the Laweyan as
Kampoeng Batik (batik village) on September 25, 2004, batik entrepreneurs who had
experienced a long hiatus restarted their businesses and many of them used new brand
names.
Case C was a business rebuilt from an old batik business established in 1956. This old
business ceased production between 1993 and 2005 after the death of the founders. On
October 1, 2005 the business was rebuilt by the founder’s daughter using a new brand
name. Originally, the business produced and sold famous brand-name handmade and
printed batiks with superior batik patterns. Currently, it produces traditional and modern
batik in the form of fabrics, shirts, tops, domestic accessories, paintings and handicrafts.
The main product is modern batik in addition to traditional and printing batik.
The management was in the hands of the family. The husband was responsible for all
external affairs, production processing and some personnel activities such as recruitment,
selection and training as well as handling employees’ problems or conflicts. The wife
managed financial matters including employees’ remuneration. Marketing activities were
handled by their nephew. The husband’s assistant was their neighbour who had
responsibilities for supervising the employees and conducting training in batik processing.
The total number of employees was 150. Of those, 35 worked in the house including
contract and casual employees; 32 workers worked at the premises of five tailors who
made garments in their homes and 83 workers worked at five small batik businesses
located in different areas. These five businesses produced batik fabrics based on contract
orders and were the clusters of Case C. The cluster system is a common arrangement in the
batik industry to help small businesses to continue their operations and to benefit medium-
sized family businesses which usually do not have enough space to carry out all production
activities in their houses.
It appeared that HRM practices at Case C were very limited. The business had
comprehensive records of its financial and marketing activities but not of its production
and personnel activities. The owner managed the business in traditional Javanese ways
which treat the employees like family members.
The family house is a heritage building full of ancient and antique furniture. It became the
centre of the production process, and the firm’s show room, workshops and training centre.
It is also a batik museum showing the family heritage (see Appendix B3). This is typical of
traditional businesses which use the family house for living and running the business as
well. The show room and the batik museum are located in the centre of the building and
are decorated with batik art works. In the batik museum, visitors can see the collections of
ancient batik, old photos and pictures of the batik village. The owner’s family was living at
the back of the house. The front of the house was used as a production area.
The participants from the employer’s side were the owner and his assistant. The employee
participants consisted of two contract employees and three casual employees. The three
casual employees were all women aged between 51 and 60 years. They had been drawing
batik patterns since they had learned to do so in their childhood.
4. HRM practices
The interview results on HRM practices from the employers and the employees are
discussed below.
Recruitment and selection: Case C applied informal recruitment and selection processes.
Vacancies were never advertised in newspapers; rather, the owner searched for candidates
using word of mouth through friends’ networks, or by visiting vocational schools and
universities. The owner selected candidates based on their skills and experience. There was
no recruitment of managerial-level employees.
The selection process was simple as candidates simply demonstrated their skills or
performed sample work tests. The accepted candidates were asked to work on the
following day. However, experienced candidates might skip those steps, as the employees
said:
‘I was invited by the owner and he asked me to work directly. I have been working in
the batik industry for 25 years’.
Training and development: Training for the new employees was conducted by the owner
or his assistant but there was no fixed schedule. In his interview the owner described the
training activities:
‘I train new employees in all steps of batik processing. It is almost the same as on-the-
job training. When they make mistakes, I show how to do it right'.
Employees who had undergone informal apprenticeships and had experience in batik
design and drawing did not undergo training. For an easy job, the training might only take
one day.
Remuneration and rewards: There were two types of wages-daily wages and by-contract
wages. The daily wages were calculated based on the number of days that the employees
came to work. By-contract pay was calculated based on designs finished or an order
completed, and was paid to by-contract employees, tailors and businesses in the batik
business's cluster. The interview with the owner described how pay for by-contract
employees fluctuated.
‘Because we value art works, we will pay higher wages to by-contract employees who
can make beautiful designs. I usually ask them how much they want to be paid for
certain designs, and they will mention the amount of money. Fortunately, they never
ask for very high rate’.
All employee participants agreed that the payment was good. The interview with the
employees’ participants reinforced this statement:
• 'I think if I sum up my wage for one month, it will be the same as or even higher
than the UMR’.
• 'I work on a casual but I am paid weekly. I do not know how much my daily rate
is, but I think the owner follows the standard’.
Performance appraisals: It appeared that performance appraisals were conducted

informally in Case C. The owner only praised the employees who did a good job. The
interview with the owner described his activities in managing the employees:
‘I never warn or fire my employees because they seem to know when they perform
poorly or have been absent a lot. Usually they quit without being asked to’.
The employees believed that there were no performance appraisals due to the lack of
promotion and that there was no career path in this family business. However, they
accepted this.
Union and labour relations: There was no union membership by employees in Case C.
The owner treated his employees like partners or family members, thus all problems and
conflicts were solved as if they were problems in a family. Furthermore, since the function
of the union is to bridge the conflict of interests between the employer and the employees
in a formal way, the employees did not need a union since these conflicts rarely happened.
The results of interviews with the owner and the employees are summarised in Table 4.3.
It appeared all employee issues were handled by the owner. His assistant helped him in
training and supervision activities. He also determined employees’ wages in consultation
with his wife.
It appeared that the owner conducted only limited HRM practices. This supported the
study of Reid and Adams (2001) who found that family businesses are less likely to have
professional HRM practices, such as the use of references, appraisals systems, a peer
appraisals process, training assessment, or merit-based pay. The business adopted simple
management practices but only in the areas of marketing and finance. The employees’
records and documents were very limited due to the simplicity of administrative
arrangements. Recruitment and selection was mostly conducted informally. The company
employed only people who had batik processing skills and experience in the batik
business. This became a reason why the company only conducted limited training. Reid
and Adams (2001) claim that family business spend less on training than non-family
businesses. In contrast, Carlson, Upto and Seaman (2006) argue that family firms consider
recruitment, training and development as two HRM areas of critical importance to business
success. With regard to Case C, recruitment was important since the owner only hired
skilled and experienced employees. On the other hand, training seemed less important
since those employees have already mastered their jobs. The remuneration system for both
daily payment and by-contract payment fulfilled the employees’ expectations. High
payment was provided for creative artworks. This is consistent with the study of Carlson et
al. (2006) who found that family firms effectively reward employees with cash incentives.
The performance appraisals were conducted informally. This might relate to the lack of
career development and promotion to management level. There was no union membership
by employees in this family business. The parties rarely had conflicts and if they did
occur, issues were dealt with as if they were in a family.
Table 4.3 Summary of the employers’ and employees’ interviews on HRM practices of Case C
1. Recruitment and selection - Only conducting informal - Following a simple process.
recruitment. - On passing the practice test,
- Searching using word of mouth they started to work the next
through friends’ networks or day.
by visiting vocational schools - Experienced candidates were
and universities. invited.
- The selection criteria were
skills and experience.
- Never recruiting manager
positions.
2. Training and development - No formal training. - No training for experienced
- By checking the employees’ employees.
works and showing how to do - Flexible length of training.
it right.
3. Remuneration and reward - Two types of payments: casual - The payment was still higher
and by-contract payment. than UMR.
- Fluctuated rate was applied to - Satisfied payment rate.
contract workers depend on the
design quality.
4. Performance appraisals - No formal performance - No warning for absence
appraisals. - Accepted the absence of
- No career path. promotion and career path.
- No punishment.
5. Union and labour relations - No union membership by - They did not see the need for
employees union.
- All conflicts were solved in
family ways.
4.2.1.4 Case D
1. Company Profile
Case D was a garment company established in 1994. It was a Proprietary Limited (Pty.
Ltd.) company and a subsidiary of a big garment company that produced shirts and denim
clothing. The parent company previously only produced denim jeans. However, the high
demand for garment products made it expand by building subsidiary companies for new
product lines. It also subcontracted its orders to other smaller garment companies. The
business achieved its peak before the monetary crisis in 1997. Currently, the head office
only produces denim jeans and the subsidiary company produces shirts.
The organisational structure of Case D is embedded in the parent company’ organisational

structure. The director was at the top level of the structure. The Production Manager
managed production activities and handled certain HRM practices such as recruitment and
selection, training, and supervision. The number of employees was 105 and most of them
worked in the production section. The company only had one shift, with hours from 8 am
to 5 pm.
Observation of the production areas showed a clean and tidy environment (see Appendix
B4). There was a locker room for employees’ belongings and also a canteen for lunch. A
finger print machine to record employees’ presence was located in the security room. Most
signs were no smoking signs attached to the wall inside and outside of the building. The
sewing buildings had enough light but were crowded and rather hot.
The documents available for analysis were very limited because most of the employees’
records were kept in the head office. The head office managed all administration including
employees’ affairs. This company only performed simple administration and reported the
activities to the head office.
The participants from management level were the Production Manager and three
supervisors. Five employee’s participants came from different sections of the production
department.
4. HRM practices
The employers’ and employees’ interview responses on HRM practices are discussed
below.
Recruitment and selection: The recruitment and selection processes were conducted both
formally and informally. The Production Manager was responsible for recruitment of
operational-level employees only. Management-level recruitment was carried out by the
head office. The interview with the Production Manager described the recruitment process:
‘I recruit new employees if there is a vacancy or an expansion plan (a new machine
addition). I advertise the vacancy through newspapers and ask the employees to bring
applications from family or friends’.
Skills and experience were the primary selection criteria. Most employees had graduated
from senior high schools and only a few of them had graduated from a vocational school
with majors in fashion. Several employees claimed that the jobs they applied for were easy
(such as ironing) and did not match with their education. The selection process involved
document selection, interview and work sample tests. Successful candidates signed work
agreements before starting work.
Training and development: On-the-job training for new candidates was conducted in
groups for the first three months of employment in the workplace. The trainers were the
Production Manager and supervisors. New employees under on-the-job training received
80% of the normal wage. The evaluation after training was made for contract extension
purposes only. The employees claimed that on-the-job training was only to check their
seriousness.
Remuneration and rewards: Remuneration was the responsibility of HR department at

the head office, under. The wage paid accommodated the regional minimum wage (UMR)
standard and was adjusted yearly. A tenure allowance was provided for employees who
had worked for at least three years and increased every five years. In addition, the
employees still received monthly premiums and a Hari Raya allowance (THR) once a
year. Case D also registered all employees for social security insurance (Jamsostek) to
receive retirement benefits. There were complaints from employees’ about the absence of
any difference between the wages of skilled and unskilled employees.
Performance appraisals: Formal performance appraisals were conducted informally by

checking employees’ productivity and work. Feedback was only for unachieved targets,
mistakes or slow work. Career development was limited to the possibility of being a team
leader. The interview with the employees described the promotion system:
‘I never get promotion; it looks like the company has chosen its own candidate’.
Union and labour relations: Case D allowed the employees to join unions but the
membership was not automatic. There were two unions: Serikat Pekerja Nasional (SPN)
and Serikat Perjuangan Buruh Indonesia (SPBI). The Indonesian labour movement union
(SPBI) was created in response to the President’s labour regulation No. 05/1998 about the
freedom to form labour organisations. These unions are intended to protect the employees
from unfair treatment. Most of the employees were active members and sometimes joined
strikes. The interview with the Production Manager described the effect of union’s
activity:
‘The negative effect of the unions’ existence is that when they join strikes, our
production process is disturbed. So I ask the unions to conduct strikes not very often’.
Case D had a policy of forbidding new employees who were still under probation from
joining a union. The summary of the interviews with the employers and the employees is
shown in Table 4.4.
The Production Manager was responsible for HRM practices and handled the employees’
issues in the factory except for remuneration and rewards which were the responsibility of
the head office. Training, supervision and informal performance appraisals were conducted
jointly with supervisors.
In Case D, the Production Manager controlled the production activities and certain HRM
practices. Recruitment and selection were conducted both formally and informally.
Vacancies were advertised through newspapers and word of mouth. In regard to
recruitment and selection, managers made decisions on the spot based on current needs
and the situation (Schaper & Volery, 2004). On-the-job training was the only training
provided for all new employees. This training was important for new employees with no
sewing skills. New employees were rarely fully equipped with complete knowledge and
the ability to perform their work roles perfectly (Schaper & Volery, 2004). The evaluation
of this training was mainly for testing employees’ seriousness and for deciding whether
they would receive a contract extension. The remuneration policy referred to the regional
minimum wage (UMR) standard. There were still complaints about the policy as it did not
distinguish between skilled and unskilled employees.
Table 4.4 Summary of the employers’ and employees’ interviews on HRM practices of Case D
1. Recruitment and selection - Conducting formal and informal - Submitting applications by
recruitment. themselves or through
- Using both advertisement and employees.
word of mouth. - Some jobs applied were easy
- The main selection criteria were and did not match with their
skills and experience. education.
- The selection process was a work
sample test.
2. Training and development - On-the-job training for the first - On-the-job training was to
three months of employment. increase sewing skills and to
- After training evaluation was for check employees’
contract extension purposes. commitment.
3. Remuneration and reward - Adopting UMR standard. - Complained there was no

- It was the authority of the head difference between skilled
office. and unskilled employees.
- Providing rewards and benefits.
4. Performance appraisals - Conducting informal performance - Only in form of feedback for
appraisals. unachieved target, mistakes
- Promotion opportunity was limited or slowly work.
to becoming a supervisor. - Promotion criteria were not
communicated.
5. Union and labour relations - Allowing the employees to join - Some of them became active
SPN and SPBI. members.
- Membership was not automatic - The union was believed to
protect their rights.
Performance appraisals were conducted informally. It seemed that Case D applied on-the-
job assessment mechanisms meaning direct observation of employees while in their usual
work environment (Schaper & Volery, 2004). The feedback was only through their
achievement of production targets. The only limited career opportunities were to become
supervisors and the likelihood of this happening was very small. The employees joined
two unions, namely SPN and SPBI. Most of them were active members and often joined in
strikes. These activities often disturbed the company’s production processes. Isaac and
Sitalaksmi (2008) argue that unions are currently involved in the levels of strike activity.
They also claim that the constraint of loss income on workers may explain this.
4.2.2 Data on research question 2
Research Question 2:
RQ2: Do Javanese cultural influences have an impact on the way HRM is practised in
According to Hofstede (2001) findings the national cultural dimensions of Indonesia are
high in collectivism, high in power distance, moderate in masculinity and low in
uncertainty avoidance. The recent study of Suharnomo (2009) confirmed collectivism,
power distance and uncertainty avoidance as dimensions of national culture, but did not
support Hofstede’s (2001) findings on masculinity. Furthermore, based on those national
culture dimensions, the organisational culture of Indonesian companies in general tend to
have a family-like culture, where power is hierarchical and authority and the superior
subordinate relationship is unequal (Suharnomo, 2009). These characteristics reflect the
Javanese culture that influences most companies’ organisational culture in Java.
Regarding research question 2, the participants were asked to provide information relating
to influences on HRM practices that might reflect Javanese culture. The questions in the
interview guide divided cultural influence into eleven items including the company’s
philosophy, organisation tradition, values shared, hierarchy – seniority –status, relationship
building, leadership style, supervision, individual or teamwork preference, loyalty and
commitment, decision making process and company’s rules and policy.
4.2.2.1 Case A
The Javanese philosophy of mutual cooperation appeared to be shared by the managers

and employees. Another Javanese philosophy mentioned by the General Affairs Manager
was mukti mati bareng (together we succeed or fall). Case A also had slogan and a motto
to motivate the employees as confirmed by the Personnel Manager:
‘Slogan: The employee who has high productivity will get a better living
Motto : If you want to be advanced fix yourselves’.
The employees were encouraged to improve product quality and to focus on production
targets. They worked together to finish their jobs and were helped by their team leaders to
achieve the production targets.
Case A had a tradition of holding a 15-minute ceremony every morning prior to work. The
activities included praying and listening to the manager’s direction about the upcoming
work program or production target plan. Other tradition such as Hari Raya celebrations
had been cancelled due to lack of funds.
The managers expected the employees to be disciplined, honest and loyal. In regard to
respecting others, the General Affairs Manager said:
‘This comes back to the person him/herself. If a manager or a supervisor can cooperate
with and communicate with the employees he/she will be respected’.
Hierarchy, seniority and status were valued highly at the managerial level. The employees
claimed that their working relationship with the managers was good but very formal. The
managers built good relationships by developing cooperation and giving guidance
including counselling.
However, among employees at the operational level hierarchy, seniority and status were
less important. The employees considered their friends and supervisors more like a family
no matter how senior they were. They believed that this created harmony in the workplace.
Furthermore, previously the supervisors were their friends from the same sections and
often worked together to achieve production targets.
The managers claimed they applied democratic leadership for the best results. This
leadership style was believed to create a comfortable work environment for the employees.
Supervision was implemented in flexible ways. However, for high-risk jobs, team leaders
and supervisors applied closed supervision to make sure that the employees did them
correctly.
According to the managers, loyalty and commitment were created by having good
relationships with the employees and by being responsive to employees’ complaints. On
the other hand, the employees had a different understanding about loyalty and
commitment:
• ‘I just want to work until I retire because I'm already old’.
• ‘I do not want to quit because if I move to a new company I start from the
beginning as a contract worker’.
Employees of some sections worked individually, but other sections needed work teams.
The interview with the Personnel Manager reinforced this observation:
‘In the finishing section, they work as a team so they can handle others’ jobs when their
friends are absent. Operators usually work individually’.
The involvement of the employees in the decision-making process was relatively small and
only occurred for less important issues. Case A had formal rules to be obeyed by all staff
and employees. The interview with both managers reinforced the strict implementation of
the rules:
‘For those who do not follow to the rules, they will get sanctioned, for example the
company does not allow for any lateness, thus for the employee who is late even for
five minutes, he/she should go home.’
However, this caused dissatisfaction for the operational level employees, because their
wages were counted on a daily basis and that sanction would reduce their wages. Other
policies such as permission for sick leave required a form signed by the company’s doctor.
If they had this form, absence due to illness, did not reduce their wages.
A summary of the interviews of the employer and employees on cultural influence on

HRM practices is shown in Table 4.5 below.
Table 4.5 Summary of interviews on Javanese cultural influence on the HRM practices of Case A
Culture Employer Employees

1. Company’s philosophy Adopting the Javanese philosophy of Cooperativeness
cooperativeness.
2. Organisation tradition 15 minutes’ morning ceremony prior Praying and listening to
to work. manager’s directions prior to
work.
3. Value shared Discipline, loyalty and honesty. Cooperativeness.
4. Hierarchy, seniority and Valued highly Valued highly for managerial
status level
5. Relationship building By developing cooperativeness, By helping each other.
giving guidance and counselling.
6. Leadership style Democratic. Prefer democratic style.
7. Supervision Flexible Prefer loose supervision.
8. Individual or teamwork Both, depending on the section. Teamwork.
preferences
9. Loyalty and commitment Through a good relationship and By working until retirement.
being responsive to all complaints.
10. Decision-making process Only involved supervisor level. Only for less important decision-
making.
11. Rules and policies It is applied strictly. Too strict in implementing the
implementation rules.
Analysis of findings
In general all cultural issues relating to HRM practices supported Hofstede’s (2001)
findings on Indonesia’s national culture dimensions. According to Hofstede (2001),
Indonesia has a high power distance, and this company reflected this characteristic in the
decision making process which placed the authority in the hands of the managers. Ryan et
al. (1999) claim that countries with high power distance expect and accept hierarchical
decision making. High power distance will lead to less participative decision making
(Suharnomo, 2009). This means the decision making process is likely to be conducted at
the managerial level especially higher positions and does not involve operational-level
employees. The high value placed on hierarchy, seniority and status were rooted in
Javanese culture and confirmed the high collectivism dimension of Hofstede (2001). In
relation to loyalty and commitment, the employees wanted to work until they retired
because there was no chance to get better jobs if they quit. The implementation of the
company’s rules and policies were considered too strict and employees felt they needed to
be more considerate.
4.2.2.2 Case B
Case B’s philosophy was embedded in its 5Rs value principles adopted from the Japanese
5Ss including seiri, seiton, seiso, seiketsu and shitsuke (Kapur, 2007). Seiri (sort) means to
put things in order. Seiton (systematise) means proper arrangement. Seiso (clean) implies
keeping things clean and polished in the workplace. Seiketsu implies purity and focuses on
maintaining cleanliness and perpetual cleaning. Shitsuke is commitment. In Indonesia 5Rs
stands for resik (seiso/clean), rapi (seiri/sort), ringkes (seiton/systematise), rawat
(seiketsu/maintaining cleanliness) and rajin (shitsuke/commitment). This philosophy was
adopted together with the Javanese philosophy of cooperativeness. The implementation of
the 5Rs in the form of cleaning the workplace every Saturday became a tradition. The
Personnel and General Affairs manager explained other traditions the company followed:
‘We have ceremonies in the morning and afternoon (praying before and after working).
Every independence day we give basic food (sembako). Other traditions are
celebration after fasting month (halal bihalal) and sports competition in the company
anniversary celebration’.
Hierarchy, seniority and status were valued highly at the managerial level but not at the
operational level. As Javanese people, the employees are expected to respect their
supervisors and managers. At the managerial level, they showed formal communication
and respect in the workplace although they were close friends outside. The company
appeared to have a paternalistic leadership style. The Production Manager described how
the Javanese culture was in harmony with this leadership style.
‘I tend to be paternalistic, because this makes us close and comfortable to work with,
furthermore, when I am angry with my employees I put myself in a parent’s position
who has a positive attitude’.
It appeared that the managers implemented flexible supervision. The interview with the
Personnel and General Affairs Manager confirmed the implementation of this supervision:
‘I will not supervise regularly but I expect the employees to be disciplined. If
they create problems such as leaving without permission, I will call or warn
them’.
Teamwork was encouraged to accelerate job completion and to enable easy replacement
when one employee was absent. Loyalty and commitment were promoted by
acknowledging employees’ contributions. The employees believed that they were loyal
and committed to the company as a form of thanks to the company.
However, the interview with the Personnel and General Affairs’ manager revealed the
difficulties in maintaining commitment:
‘I have difficulty in building commitment because it depends on their mindset. Some
employees have part-time jobs outside, thus they may not be really loyal or committed
to the company and some of them put their family first’.
In the decision-making process, the employees were involved in general or less important
issues. Formal rules were applied strictly. However, the Production Manager revealed his
preference to be more flexible.
‘I do not always implement formal rules. Sometimes I give consideration for less
important cases’.
The summary of the interviews with the managers and employees about cultural
influences on the HRM practices is provided in Table 4.6 below.
Hofstede’s (2001) findings concerning Indonesia’s national cultural dimensions were

supported by the employers' and employees’ answers. High collectivism was reflected in
the effort to maintain harmony by treating others like family and helping each other to
finish jobs. This also reflected the Javanese philosophy of co-operation (gotong-royong)
(Wirawan & Irawanto, 2007). High power distance appeared in the employers-employees
relationships that emphasised hierarchy, seniority and status. This also meant hierarchical
decision making and very little participatory decision making (Suharnomo, 2009). The
Javanese culture influenced the managers' and employees' interactions and smoothed the
communication and between them.
Table 4.6 Summary of interviews on Javanese cultural influence on the HRM practices of Case B

1. Company philosophy 5Rs adopted from Japanese 5Ss 5Rs supplemented by cleaning
consists of clean, order, sort, activity every Saturday.
systematise, and maintain
cleanliness.
2. Organisation tradition A morning and afternoon A morning ceremony (praying
ceremony. before working).
3. Shared values Discipline, cooperativeness, Cooperativeness.
togetherness.
4. Hierarchy, seniority and Applied at management level. Valued highly to managers.
status
5. Relationship building Friendly but strict to the rules. Cooperativeness.
6. Leadership style A combination of democratic and Prefer democratic.
paternalistic.
7. Supervision Flexible supervision. Prefer loose supervision.
8. Individual or teamwork Teamwork. Prefer teamwork
preferences
9. Loyalty and commitment by personal approach By trying to give their best.
10. Decision-making process Involved team leader and Only for less important decisions.
supervisor for general issues
11. Rules and policies Mostly strict. Comfortable with strict rules.
implementation
4.2.2.3 Case C
In Case C, the Javanese philosophy was reflected strongly in the working environment.
The strong Javanese philosophy they held together involved co-operation (gotong-royong).
Since the owner and the employees held the same cultural values, they rarely had conflicts.
The owner explained his responsibilities under Javanese values:
‘We live under Javanese culture which values cooperativeness, respect and caring for
each other. I even take the responsibility for my employees’ mistakes in their design
if the product cannot be sold. I never ask them to pay for the loss. I just want them to
be more careful next time’.
Other values shared were honesty, discipline and understanding (tepo seliro). Hierarchy,
seniority and status were valued highly and were reflected in the communication and the
interactions between the owner and the employees and also between senior and junior
employees. However, the leadership style appeared to be more laissez-faire than

democratic. The interview with the owner confirmed this style of leadership:
‘I do not apply any kind of leadership, but I give freedom to my employees to manage
their time and I never force my employees to do as I want’.
The owner seemed to have a flexible supervision style. He described his supervision
activities as follows:
‘I supervise them occasionally; I check when they do the design, colouring processing
and also the finishing. I do not have time schedule for supervision’.
The owner preferred his employees to work individually rather than in a team. He wanted
to make sure that everybody was comfortable and responsible for his/her job. The
decision-making process was mostly handled by the family. However, for some issues
related to production processing or design, experienced employees were involved in the
discussion. There were no formal rules. The working hours were set from 8am to 4pm,
however, the contract employees did not stick to those working hours. They had more
freedom in finishing their jobs.
The interview summary of the owner’s and the employees’ responses on the effect of
cultural influences on HRM practices is in Table 4.7 below.
Table 4.7 Summary of interviews on the Javanese cultural influence on the HRM practices of Case C
1. Company philosophy Adopted Javanese philosophy of Respecting others.
cooperativeness, respect and
caring.
2. Organisation tradition There was no tradition. No tradition.
3. Value shared Discipline, honesty, mutual Cooperativeness.
understanding, cooperativeness.
4. Hierarchy, seniority and Valued highly. Valued highly.
status
5. Relationship building Through communication Through communication.
6. Leadership style Tended to be laissez-faire. Laissez-faire.
7. Supervision Occasionally and flexibly. Flexible.
8. Individual or teamwork Individually. Individually
preferences
9. Loyalty and commitment By respecting and caring for the Willingness to work in the
employees. company as long as permitted.
10. Decision-making process Involved subordinates regarding Through sharing ideas with the
production and design. owner.
11. Rules and policies There were no formal rules. There were no formal rules.
implementation
It appeared that Javanese culture strongly influenced the organisational culture of Case C.
The Javanese culture placed the owner in full authority and responsibility over the business
as well as the employees. The owner was also a father figure who not only led, but also
nurtured, and supported the employees.
Ward (1988) cited by Carlson, Upto and Seaman (2006) argues that family businesses
may have a unique ability to create a family-oriented workplace, which leads to greater
employee loyalty. The collectivist characteristics of national culture described by Hofstede
(2001) that are embedded in the organisational culture (Suharnomo, 2009) are; reflected in
how employees saw the company as a big family. The owner involved senior employees
in decision making regarding production and design. This reflected how seniority was
valued in the company.
4.2.2.4 Case D
It appeared that the Javanese philosophy of cooperativeness (gotong-royong) was adopted

by Case D. There was a ceremony performed every day before the company started work.
In his interview the Production Manager described this activity:
‘Every morning at 7.45 all of the employees start cleaning their work areas; after that
they sit and pray, then at 8am they start work.’
Another tradition was celebrating Hari Raya once a year. The values shared by the
manager and the employees were honesty, discipline, cleanliness, and hard work.
Hierarchy, seniority and status were valued at the managerial level but not at the
operational level.
The leadership styles of the Production Manager and supervisors were a combination of
democratic and paternalistic leadership. The Production Manager believed that it was
important to make the employees feel comfortable at the workplace.
Supervision was carried out daily but with no fixed schedule. The interview with the
Production Manager described this strategy:
‘I want them to work regardless of whether I am here or not. I care and give attention to
all employees. I help them when they have difficulties’.
Teamwork was preferred to achieve the production target quickly. Case D had a policy of
rotating employees to different sections regularly. The aim was for them to master other
jobs, so that they could replace employees who were absent and so they could help their
friends to finish their jobs.
The involvement of employees in the decision-making process was limited to production
targets. The interview with the Production Manager described the decision making
process:
‘I usually order them to accept the planned target; if they feel it is hard to achieve then
I start to discuss it with them’.
Formal rules were written into the working contract which was signed before the new
employee started work. It appeared that the employees accepted the rules.
The interview summary of the production manager's and the employees' responses
about cultural influences on HRM practices is shown in Table 4.8 below.
Table 4.8 Summary of interviews on the Javanese cultural influence on the HRM practices of Case D
1. Company’s philosophy Adopted Javanese philosophy of Cooperativeness
cooperativeness
2. Organisation tradition Cleaning working areas and Cleaning and praying every
praying before starting to work, morning prior to work.
‘Hari Raya’ gathering.
3. Shared values Honesty, discipline, cleanliness, Cleanliness, honesty.
and hard work.
4. Hierarchy, seniority and Valued highly. Valued highly for managerial
status level.
5. Relationship building Through trust and openness. By helping each other.
6. Leadership style A combination of democratic and Tended to be democratic.
paternalistic.
7. Supervision Daily but no fixed schedule. Prefer flexible supervision
8. Individual or teamwork Teamwork. Preferred teamwork.
preferences
9. Loyalty and commitment By giving attention and help and They were loyal because the
building a sense of belonging. payment was good
10. Decision-making process Rarely involving subordinates. Only in deciding the production
target.
11. Rules and policies Flexible. Flexible.
implementation
It appeared that the national cultural dimensions of high collectivism, power distance and
uncertainty avoidance reported by Hofstede (2001) were reflected in the interaction and
communication styles amongst the employees and between the employer and the
employees of Case D. The features of the Javanese culture which influenced organisational
culture were those which emphasised family and social relationships. Furthermore,
cooperation (gotong-royong) is the spirit of working together, the drive to combine
everyone’s effort to finish a job or to achieve a common goal (Singleton & Nankervis,
2007). Both the employer and the employees felt comfortable with Javanese culture. The
Production Manager and the supervisor seemed to succeed in promoting harmony in the
workplace. A preference for harmony is positive in that it prevents conflicts from
developing (Singleton & Nankervis, 2007).
4.3 Cross-Case Analysis
In this section, the findings from each case are compared and contrasted to explore the
differences and the similarities in HRM practices in Indonesian medium-sized companies
in the textile industry. The discussion addresses the research questions:
(1) What HRM practices in terms of recruitment and selection, training and development,
remuneration and rewards, performance appraisals and industrial relations are
implemented in medium-sized textile companies in Java?
(2) Do Javanese cultural influences have an impact on the way HRM is practised in
4.3.1 The HRM practices in terms of recruitment and selection, training and
development, remuneration and rewards, performance appraisals and
industrial relations are implemented in medium-sized textile companies in Java
In the previous sub-section, the within-case analysis showed how each case implemented
HRM practices that best suited the company. The following sub-section discusses the
differences and similarities of the practices of the four case study companies. The analysis
will identify patterns of HRM practices. The findings of the interviews used for
comparison come mostly from the employers’ or managers’ side.
1. HRM practices
Recruitment and selection: In general, Case A, Case B and Case D which had limited
(Ltd.) types of business conducted similar recruitment and selection processes. Case C
which was a family business conducted a simple recruitment and selection process. Cases
A and D applied both formal and informal recruitment processes while Cases B and C only
applied informal processes. Heneman and Berkley (1999) argue that SMEs use sources for
recruitment and selection that are convenient, inexpensive, and directly controllable by the
company. Cases A and B conducted recruitment for managerial level positions by using
more complex criteria. Case D left the recruitment process for the managerial level to the
head office and Case C never recruited manager-level employees. Furthermore, the owner
of Case C searched for new employees through universities and vocational schools and no
application documents were needed.
In the selection process, all four companies performed work sample tests and interviews.
Case A and Case B conducted written tests. Only Case B used a multi-stages selection
strategy. Case C focused on the candidates’ experience and creativity because the jobs
offered involved batik art. The other companies only considered candidates’ experience as
an advantage. It appeared family relationship and friendship influenced the acceptance of
the candidates in all cases. According to De Kok, Thurik and Uhlaner (2003) in smaller
firms, recruitment is also simplified to the extent that family members are preferred over
non-family members. Unlike the other three cases, Case C did not perform a formal
administrative procedure such as signing a work contract.
Training and development: Chang and Chen (2002) mention that training and
development are positively associated with employees’ productivity. Training and
development in SMEs is generally informal and on the job, with little or no provision for
management development (Kotey & Slade, 2005). Cases A, B and D conducted on-the-job
training for their new employees in the workplace for at least two months. However, there
was no after-training evaluation except in Case D which had an evaluation report for
contract extension purposes. Case A and Case B conducted other training for current
employees for promotion purposes. Case C did not set a length of training for new
employees. Furthermore, it permitted the new experienced employees to work directly
without training.
Remuneration and rewards: In all cases, remuneration policies for operational level
employees referred to the regional minimum wage (UMR) set by the government. The
level of UMR varies for every city depending on its cost of living (Menteri Tenaga Kerja
dan Transmigrasi, 2006). Cases A, B and D had specific systems for determining wages
including allowances. Case C applied two systems, one for employees who worked by
contract and one for those who worked on a daily basis. A floating wage system was
applied for contract employees who worked as batik art designers. Those employees could
get higher payment if they produced beautiful art work. For casual employees, the
company used a daily fixed rate and paid them weekly.
The employees’ responses to the remuneration systems were similar except for Case C.
They all agreed that their wages followed the UMR standard. However, there was still
dissatisfaction. The sources of dissatisfaction included the small amount of tenure
allowance received; the use of last year’s UMR standard for current wages and the policy
to set the same basic wages for new and old employees who had worked for more than five
years. In contrast, there were no complaints from employees of Case C in regard with the
company’s remuneration system. This exception might be associated with the strong
Javanese culture brought into the business where people preferred to have a comfortable
working environment rather than higher paid but more stressful jobs.
Performance appraisals: Performance appraisal systems can be used for administrative

purposes which are related to employee’s work conditions, including promotion,
termination and rewards (Gomez-Mejia et al., 2004). Only Case A and Case B conducted
formal performance appraisals. Case D conducted informal appraisals and Case C did not
conduct any. A study carried by Cassel et al. (2002) suggests that, although some form of
appraisals is generally used, overall, formal systems are rare. The purposes of performance
appraisals in Cases A and B were to determine the next year’s allowance or to assess
employees for possible promotion. Case B had a specific performance appraisals system
using a form with items that had to be scored. There was a formula to calculate total
scores. Unfortunately, the employees were not informed of their own results. This created
rumours that the company might conduct unfair promotions. Case C did not implement
performance appraisals because the owner did not feel he needed to. Moreover, there was
no career path for managerial-level employees in Case C. Case D conducted informal
performance appraisals at the operational level for promotion purposes although the
chance of being promoted to the position of team leader was very small.
Union and labour relations: Cases A, B and D permitted their employees to join unions.
Case A and Case B registered their employees in the SPN union, and the membership was
automatic. Case D allowed its employees to join SPN or SPBI unions except for new
employees who were still under contract. The unions did collective bargaining for
employees’ issues such as salaries. There was no union in Case C because it was a family
business with a simple management structure and most of the employees were typical
traditional employees who worked for money and did not need career development or
unions to protect their rights. They were satisfied with family style working condition with
no formal rules.
The summary of the case comparison of HRM practices is shown in Table 4.9.
HRM practices conducted in the four cases showed similarities. Cases A, B and D had
similar practices and challenges. The employees’ reactions to their practices were also
almost the same. The challenges came from practices such as compensation and reward,
performance appraisals and union and labour relations. The employees seemed dissatisfied
with the companies’ policies.
Case C which was a family business had different HRM practices. Reid and Adams (2001)
claim that family businesses, perhaps partly due to their limited organisational capability,
have lagged behind their non-family counterparts in implementing HRM policies and
practices. De Kok et al. (2003) argue that in family firms, the social interactions among
family members allow the use of informal and cultural mechanisms that substitute for or
complement the formal administrative systems. Case C had a different system for handling
its employees who were mostly art workers but it also had the least challenges from its
employees. It looked as though the owner knew how to deal with them; therefore he could
manage them without complaints.
2. The key person who managed and implemented HRM practices
The Personnel Managers of Cases A and B played important roles in conducting HRM
practices. For Case B, the Production Manager was involved in some HRM practices such
as training and performance appraisals. The owner of Case C appeared to manage almost
all HRM practices. The Production Manager of Case D handled HRM practices in the
factory site except remuneration and rewards which were handled by the head office. The
summary of the case comparison of the key people who managed and implemented HRM
practices is shown in Table 4.10.
Table 4.9 Summary of case comparison of HRM practices
CASE A CASE B CASE C CASE D

Recruitment and selection
1. Formal and informal recruitment Both informal Both informal
2. Advertisement or word of mouth Both Word of mouth Both Word of mouth
through friends’ network
3. Internal and external sources Both Both Both Both
4. Selection criteria (education. All but not All Skills and All
skills, experience) necessary for experience
operating level
5. Selection techniques (general General test, All Work sample Work sample
test, work sample test, work sample test test test and
psychological test and interview) and interview interview
6. Person in charge with Personnel Personnel and GA The owner Production
recruitments decision Manager Manager and Manager
Production
Manager
Training and development
1. On-the-job training Yes Yes No (informal Yes
training)
2. Trainer Team leader and Team leader and The owner and Supervisor and
supervisor supervisor his assistance Production
Manager
3 Other trainings Yes for Yes for supervisor No No
supervisor
4. Training evaluation No No No Yes
Remuneration and reward
1. referring to UMR standard Yes Yes No Yes
2. Using specific system Yes Yes No Yes
3.Other rewards and benefits Yes Yes No Yes
4. Person in charge with Personnel Personnel and GA The owner Head office
remuneration system Manager manager
Performance appraisals
1. Formal performance appraisals Yes Yes No (informal) No (informal)
2. Performance appraisals as a base Yes Yes No No
of salary/allowance increase
3. Performance appraisals as Yes Yes No No
promotion criterion
4.Person in charge with Team leader, Team leader, The owner Supervisor,
performance appraisals supervisor, supervisor, Production
manager manager Manager
Union and labour relations
1. Union existence Yes (SPN) Yes (SPN) No Yes (SPN and
SPBI)
2. Automatic membership Yes Yes No No
3. Union benefit to employer Yes Yes No Not really
4. Union benefit to employees Yes Yes No Yes
The case comparison of the key persons who managed HRM practices revealed that
persons who handled HRM practices came from different positions including personnel
managers or owners. Furthermore, several practices were conducted jointly with other
departments. A study conducted by Cunningham (2010) found that SMEs several
departments often jointly handled all or several HRM practices/personnel functions for
example the Department of Finance and Personnel Department handled payroll; and also
Personnel and Administration Offices together conducted recruitment, performance
appraisals, training and payroll management. The Personnel Managers of Case A and Case
B carried out most of the HRM practices. Case C had the owner as the key person who
managed HRM practices. De Kok et al. (2003) argue that according to agency theory, in
family businesses, the owner and manager are usually the same person. Thus, in case C the
owner acted as the Personnel Manager who conducted HRM practices. Storey (1989) cited
by Reid and Adams (2001) mentions line managers and Personnel Managers play roles in
operationalising HRM except for HRM strategy. HRM strategy is usually is controlled by
CEO who is the owner of the business. In Case D the Production Manager was the person
responsible for the HRM practices on the factory site except for remuneration and rewards.
Table 4.10 Summary of cases comparison of the key person who manages and implements the HRM
practices.
Recruitment and Personnel manager Personnel and The owner and Production
Selection Production general affairs his manager
manager manager assistance
Production manager
Training and Personnel manager Personnel and The owner and Supervisor and
Development Production general affairs his Production
manager manager assistance manager
Production manager
Remuneration Personnel manager Personnel and The owner Head office
and rewards general affairs (personnel dept.)
manager
Performance Team leader, Team leader, The owner Supervisor and
appraisals supervisor and supervisor and Production
Production Production manager manager
manager
Union and Personnel manager Personnel and NA Production
Labour relation General affair general affairs manager
manager manager
4.3.2 The impact of Javanese cultural influences on the way HRM is practised in
medium-sized textile companies in Java.
Company philosophy and tradition: The managers in all four cases claimed they did not
state their philosophy in words. Case A and Case B had mottos or slogans to motivate
employees to be productive. The majority of the employers and the employees in all four
companies were Javanese and therefore Javanese philosophies and culture were brought
into the workplace. El Kahal (2001) claims that joint responsibility and cooperation known
as gotong-royong (cooperativeness) is embedded in the Indonesian character and culture.
The organisation’s tradition: Case A, Case B and Case D had similar traditions of having
a 15 minute ceremony every morning. This tradition was influenced by the Islamic religion
of praying before starting work.
Organisational values: Values such as honesty, cooperativeness and discipline were

shared amongst the employees of the four cases. Case C and Case D shared other values
including loyalty, cleanliness, togetherness, respect and caring for others. Case B had
specific values namely the 5Rs, adapted from the Japanese 5Ss. The 5Rs stood for clean,
order, systematise, maintaining cleanliness and commitment.
Hierarchy, seniority and status: The employees and managers of all case study firms
agreed that hierarchy, seniority and status were valued highly. Among the employees they
were less valued. In Javanese culture, hierarchy, seniority and status are appreciated
highly. These qualities are also associated with the typical characteristics of Indonesian
people who are high in power distance scores (Hofstede, 2001).
Relationship building: Managers of the four cases had different ways of building their
relationships with employees. The managers of Case A tried to show cooperativeness and
also be ready to give counselling and guidance to the employees. The manager of Case B
tried to treat the employees in a friendly way although he applied strict rules. The owner of
Case C developed respect and care. The manager of Case D developed openness and trust
between himself and the employees.
Leadership styles: Most managers and supervisors in all cases adopted paternalistic or
democratic leadership styles or a combination of both. The Javanese culture that was
brought into the organisation regards the company as a big family and supports such styles.
These kinds of styles led the managers to take roles as father figures. A leader in Javanese
culture has such roles as directing, nurturing, caring, becoming a model, supporting
subordinates and taking all responsibilities.
Supervision: Managers and supervisors of all cases applied flexible supervision. The
reasons were to make employees comfortable in the workplace, to build harmonious
relationships, and to encourage productivity. This might differ from common theories of
supervision in which close supervision is needed for employees at the operational level.
Individual or team work preferences: Team-work refers to a group of people brought

together for the purpose of doing a particular job or solving problems (Gomez-Mejia et al.,
2004). There is a positive relationship between team work and productivity (Chang &
Chen, 2002). The managers of Case A, Case B and Case D preferred team work because it
enabled jobs to be finished quickly. The owner of Case C preferred his employees to work
individually. This preference related to the art work that could not be done in groups.
Loyalty and commitment: The Personnel Manager of Case A built loyalty and
commitment by having good relationships with subordinates and by being responsive to all
complaints. The Personnel and General Affairs manager of Case B built loyalty through a
personal approach, but had difficulty in securing commitment. The owner of Case C built
loyalty and commitment through respecting and caring for others. The Production
Manager of Case D built loyalty and commitment by giving attention to employees and
helping employees to solve problems and also by developing a sense of belonging.
Decision-making process: The managers of Case A and Case B involved their supervisors
and team leaders in decision-making about general issues. The owner of Case C involved
subordinates in the decision-making process with regards to production and design. The
Production Manager of Case D rarely involved his subordinates in the decision-making
process.
Decisions within the firm are generally made at the top management level. These decisions
then flow to middle and lower management for implementation. There are rare occasions
when middle or lower management makes decisions. This hierarchical structure impedes
the group decision-making structure and the subordinate employees are not given a chance
to participate in any decisions
Company rules and regulation: Cases A and B implemented formal rules and regulations
strictly and they had to be obeyed by the employees. They even applied sanctions to the
employees who broke the rules. This had been a source of complaints from employees.
Case D had its rules and regulations written into the working agreement document. Case C
did not even have formal rules and regulations.
The summary of the case comparison of cultural influences on HRM practices is shown in
Table 4.11.
The cross-comparison of cultural influences on HRM practices revealed similarities

between all cases. The national and organisational culture dimensions of collectivism
identified by Hofstede (2001) appeared to be consistent with the values shared and the
employer-employees relationships in all four companies. The high value given to
hierarchy, seniority and status also characterise the Javanese culture and support
Hofstede’s (2001) findings that Indonesian culture has a high power distance dimension.
The employees appeared to have no complaints because both the employers and the
employees were Javanese. In general, the Javanese culture embedded in the organisational
culture has influenced HRM practices of all four cases in creating a harmonious family-
like working environment.
4.4 Discussion of the Findings
The analyses of the HRM practices of the four cases indicate that the major value
orientation in Indonesian society largely explains the differences in HRM practices in
Indonesian medium-sized enterprises. The relationships between the cultural dimension
and HRM practices in the four cases were identified, and thus the empirical findings
answered the research questions. This section aims to discuss further the patterns of HRM
practices in the four companies and the theoretical implications of this study.
Table 4.11 Summary of Case comparison of the Javanese cultural influence on HRM practices

1. Company Adopting 5Rs adopted from Adopted Javanese Adopted Javanese
philosophy Javanese Japanese 5Ss: clean, philosophy of philosophy of
philosophy of maintain cleanliness, cooperativeness, cooperativeness
cooperativeness systematise, order respect and caring. (gotong-royong)
(gotong-royong) and commit.
2. Organisation 15 minute A morning ceremony No tradition. Cleaning working
tradition morning prior to work. areas and praying
ceremony prior Cleaning working before starting
to work. area every Saturday work. Hari raya
gathering.
3. Shared values Discipline, Discipline, Discipline, honesty, Honesty,
loyalty and cooperativeness. mutual discipline,
honesty. Togetherness. understanding, cleanliness and
cooperativeness. hard working.
4. Hierarchy, Valued highly. Valued highly for top Valued highly. Valued highly.
seniority and management level.
status
5. Relationship By giving Friendly to Building Through trust and
building guidance, subordinates but strict communication openness.
counselling and to the company’s with subordinates.
cooperativeness. regulation.
6. Leadership style Democratic. A combination of Tends to be A combination of
democratic and democratic. democratic and
paternalistic. paternalistic.
7. Supervision Loose. Flexible. Occasional and Flexible.
flexible.
8. Individual or Both, depending Teamwork. Individual. Teamwork.
teamwork on the section.
preferences
9. Loyalty and Building a good By personal By respecting and By giving
commitment relationship with approach. Valuing caring. attention and help.
subordinates. the employees as Building a sense
Being responsive human capital. of belonging.
to all complaints.
10. Decision- Only involved Involved team leader Involved Rarely involved
making process supervisors. and supervisor for subordinates subordinates.
general issues. regarding
production and
design.
11. Rules and Strict especially Mostly strict. No formal rules. Flexible.
policy for discipline.
implementation
Since the economic crisis in 1997, there has been an increasing interest in managerial
behaviour of business organisations in Indonesia (Habir & Rajendran, 2008). But most
previous researchers focused their studies on the HRM practices and related institutional
environments of large companies. Medium-sized companies did not attract researchers’
interest because of their slow responses to new knowledge, technology development,
globalisation and changes in the country’s economy. Moreover, medium-sized companies
appeared to focus their activities on finance and marketing rather than HRM practices. In
spite of effect of size on company behaviour, a growing base of research evidence suggests
that far from being homogeneous, small firms vary widely in the professional HRM
practices they use (De Kok & Uhlaner, 2001). Hill and Stewart (1999) suggest that smaller
firms need to be more flexible and informal to be able to cope with the higher levels of
environmental uncertainty.
Habir and Larasati (1999) claim that Indonesian management is characterised by tradition,
and is patriarchally and hierarchically oriented. This was reflected strongly in medium-
sized companies rather than large companies. Medium-sized companies have not yet
adopted sophisticated HRM practices since they focus more on how to survive rather than
on how to improve their management skills especially in HRM. Furthermore, most
Indonesian companies are still in transition from Personnel Management to HRM (Habir &
Rajendran, 2008). The analysis for this research of the four companies revealed that they
had simple organisational and management structures. Robin, Millet and Waters-Marsh
(2004) claim that the simple structures are most widely practised in small businesses in
which the manager and the owner are one and the same.
A formal recruitment procedure is the first step towards a more strategic and value-adding
HRM system (Lake, 2008). In this research it was found that medium-sized companies still
use both formal recruitment through newspapers and informal recruitment through friends’
networks. Informal recruitment is usually conducted for operational-level employees. The
use of formal recruitment for managers is mostly because of the need for suitably qualified
managerial staff to fill gaps in the owner-manager’s skills and to take responsibility for
operational activities (Kotey & Slade, 2005). According to Dessler, Griffiths and Lloyd
(2007) newspapers are used to target suitable applicants and local newspapers are a good
source for blue-collar workers or lower-level administrative employees. Kotey and Slade
(2005) claim that as firms grow, a greater range of formal recruitment sources, such as
newspapers, advertisements and government recruitment agencies are used. For most
Indonesian companies, advertising in the few available newspapers is considered
expensive and is therefore not used as frequently as in Western countries (Bennington &
Habir, 2003).
At the operational level, education, skills and experience are considered when hiring new
employees, although some of the applicants did not have those qualities. For jobs that need
specific skills, the company put skills and experience as priorities. Kotey and Slade (2005)
mention that as most firms grow, selection criteria start to include the skills and abilities of
candidates.
Testing might take place to measure mental, physical, personality and performance ability.
To be useful the tests must predict the job performance of the candidate, otherwise
applicants could be selected at random (York, 2010). All companies studied in this
research did tests for all candidates including written and practice tests as well as
interviews. However, these were not useful in some cases since the acceptance was still
determined more or less by the relationship between the candidates and the employees.
A study conducted by Storey (2004) indicates that levels of training activity in SMEs are
lower than in large firms. Basically, most of the training performed was on-the-job training
as it is the predominant training method in SMEs (Kotey & Slade, 2005). Furthermore,
on-the-job training is important for enabling new employees to familiarise themselves with
their jobs, rules and regulations, and also the workplace. Training allows an employee to
develop skills and abilities that will be used in the workplace. In three of the cases studied
here, companies conducted other training irregularly and based on need. This might relate
to cost efficiency. Hendry et al. (1991) argue that owners of small companies view any
training beyond the level necessary to perform their immediate jobs as a luxury to be
provided only when the firm is making large profits. Furthermore, for medium-sized
companies, which might have the relevant legal and administrative structures for dismissal
in place, it might be cheaper to dismiss than to train poorly performing staff (Kotey &
Slade, 2005).
Habir and Rajendran (2008) claim that the structure of remuneration in most Indonesian
organisations is composed of basic pay and certain fixed allowances. Benefits include
medical reimbursement for outpatient medical care and social security contributions. In
addition, female employees are entitled to extra provisions under employment law, such as
three months’ paid maternity leave and two days’ paid menstruation leave per month
(Habir & Rajendran, 2008).
All firms, small and large, had their own wage and salary administration programs but for
their minimum wage rates have to follow government regulations and regional wage
standards (UMR) that differ from region to region. Manning (1993) cited in Habir and
Rajendran (2008) argues that minimum wages have been set much lower than a level that
would cover the minimum physical needs of a single person. In fact, many medium-sized
companies cannot pay according to the wage standard. Some employers have complained
that their businesses cannot afford increases in minimum wages due to the high cost of
doing business (Bennington & Habir, 2003). This supports the empirical findings from
Case A and Case B in which the employees complained and were dissatisfied with the
companies’ remuneration systems which they said set their allowances too low.
Hofstede cited in Braun and Warner (2002) claims that HRM practices such as promotion
and performance appraisals vary in the criteria used and in their implementation from one
country to another because they are influenced by socio-cultural factors. It appears that in
the four companies studied, the implementation of performance appraisals systems varies
in terms of formality, criteria, mechanisms, schedules, documentation and objectives.
Habir and Rajendran (2008) claim that Employment Relations in Indonesia are currently in
a process of a transition that is in line with democratisation of the political system. There
are a number of labour organisations today including SPN and SPBI which are recognised
by the government as two official unions in Indonesia. Previously, SPSI (now SPN) was
the only union recognised by the Indonesian Government, and it received much of its
funding from the government, with military personnel appointed to its official positions.
The SBSI (now SPBI) was an independent union supported by international agencies such
as the International Labour Organisation (ILO). It came into being because of the
ineffectiveness of SPSI in representing workers’ interests (Bamber & Legget, 2001).
Indonesia has the lowest level of unionisation in Asia (Warner, 2000). For small and
medium-sized enterprises, the formation of unions has met with resistance from owners
and management. Therefore, many enterprises are without unions (Habir & Rajendran,
2008). The union functioned as a mediator between the employers and employees when
there was a conflict of interest. However, Indonesian unions lack experience in collective
bargaining and have had to face the frustration and transaction costs of enterprise
bargaining (Isaac & Sitalaksmi, 2008). Maidment, Mackerras and Schak (1998) argue that
the generally, the greater acceptance of hierarchy in Asia, as opposed to Western countries,
affects such socially significant areas as employment and labour relations. The employers’
intervention in the unions affected the discussions between them and this tends to favour
the employer’s interests. Moreover, strong authoritarianism has effectively controlled and
guided employment relations policies (Bamber & Legget, 2001). The case study findings
show that some employees neither understand the benefits of union’s existence nor
actively involve themselves in union activities. A study conducted by SMERU research
institute (2002) as cited by Habir and Rajendran (2008) shows that in Indonesia the owners
and the management of enterprises, and even employees, are ignorant of the benefits of
unionisation.
With regard to cultural influences on HRM practices, Sparrow and Wu (1998, p. 28) claim
that national culture is linked to HRM through at least six mechanisms:
(1) attitudes and definitions of what makes an effective manager and their
implications for the qualities recruited, trained and developed;
(2) the giving of face-to-face feedback, levels of power and decision-making
devolvement and their implication for recruitment interview, communication,
negotiation and participation processes;
(3) conceptions of the internal career, readiness to accept international
assignments and expectations of what gets people promoted;
(4) expectations of the manager-subordinate relationships and its implications for
performance management and motivation;
(5) pay systems and differential concepts of distributive justice, socially healthy
pay and the individualisation of reward; and
(6) the mindsets used to think about organisational structuring or strategic
dynamics.
Indonesian national culture is described by Hofstede (2001) as being strongly collectivist.

This finding is supported by the findings in this study in regards to; participants’
preferences for working as a team and for helping each other to finish the job. The power
distance characteristic was clearly shown in the high value given to hierarchy, seniority
and status. This shaped the paternalistic supervision models, and communication and
leadership types in all four cases. Maidment et al. (1998) argue that an emphasis on
hierarchy and status results in the employer or supervisor being seen as a father figure. In
addition, the high power distance also creates bureaucratic cultures that encourage
employees to follow rules and regulations (Rhodes et al., 2008).
The ethnic Javanese culture has been embedded in the most companies’ organisational
cultures and its values are shared by all employees. Rhodes et al. (2008) claim that cultural
values may significantly contribute to shaping the customs and practices of organisations
and that they influence how members react to power differences, conflict, ambiguity, and
time and change-related phenomena. The companies’ tradition of praying every day prior
to work is closely associated with the Javanese culture that always starts every activity
with prayer. In the big family or keluarga besar concept, staff are considered to be part of
one big family which shares common purposes and friendly and familiar relationships
(Bennington & Habir, 2003). Such support cooperation and teamwork among employees
also created sense of belonging to the company.
4.5 Conclusion
The findings from the above two analyses indicate that medium-sized companies have
conducted Western HRM practices even though they have not adopted sophisticated or
high level HRM practices as larger companies have done. The type of business appeared to
influence the level of formality of HRM practices. Findings from this qualitative analysis
suggest that companies with proprietary limited type of business used more formal HRM
practices than companies with family type of business. Although they only had simple line
organisational structures, the job descriptions of each department were clearer than they
were in family businesses which had less formal organisational structures and the job tasks
were based on the main activities such as finance, marketing, production and HRM.
Furthermore, proprietary limited companies have more comprehensive employee’s records
which indicate the higher degree of formality of their HRM practices.
Within-case analysis provided a detailed analysis of the HRM practices of each case based
on the employers’ and the employees’ answers. Compare and contrast analysis show that
the actual practices implemented neither follow government regulations nor meet
employees’ expectations. Regarding Research Question 1 about the HRM practices in
medium-sized companies, there were practices conducted by the managers that received no
complaints from the employees. These included recruitment and selection as well as
training and development. A number of arguments and complaints were addressed about
remuneration and rewards, performance appraisals and industrial relations. Regarding
Research Question 2 about the influence of national and organisational culture on the
HRM practices, the answers from the owners/managers and the employees were in
agreement.
The cross-case analysis showed that Case A, Case B and Case D had similar HRM
practices and the key person who managed and implemented the HRM practices held a
similar position in each case. The recruitment and selection processes that were conducted
formally and informally to get the right candidates were similar. These three cases also
conducted on-the-job training for all new employees whilst the existing employees,
especially at supervisor level were sometimes given other training based on needs. The
remuneration rewards systems adopted the regional wage standard (UMR) for the basic
wage. Allowances varied among cases but they all provided similar benefits such as
maternity leave paid for three months. Performance appraisals were conducted with
different systems and objectives. The employees were allowed to join unions but the
membership policies were different.
On the other hand, Case C conducted limited HRM practices with a high degree of
informality. It appeared that Case C was an exception because of the nature of its business
and its management style was very different from the other cases. Interestingly, all four
cases had similar cultural characteristics which were consistent with the Javanese and
Indonesian cultural dimensions identified by Hofstede (2001).
HRM practices and cultural patterns of the four cases can be summarised based on
proprietary limited companies and family business. Table 4.11 illustrates HRM practices
and cultural contrasts between proprietary limited companies and family business.
This qualitative research provided a preliminary examination of the HRM practices of the
medium-sized companies and the influence of culture on the implementation of the HRM
practices. Clearly, the number of cases was too small to verify the actual condition of
medium-sized companies in general, but further examination with a larger data sample will
provide that data. The information from these case studies was utilised to create a survey
for the final phase of this research and the results of the survey are provided in the next
chapter.
The survey investigates the HRM practices and cultural influences on HRM practices in
relation to the company performance. In addition to culture the five HRM practices
discussed in the case study analysis were used as factors that determine company
performance. These practices were: recruitment and selection, training and development,
remuneration and rewards, performance appraisals and union-labour relations.
Furthermore, six hypotheses were drawn from these six factors. Items on the questionnaire
were developed from case study findings with regard to each practice and culture.
Table 4.12 Overall HRM practices and the Javanese culture patterns in proprietary limited companies
and family business
Proprietary
HRM Family
Activities limited
practices business
companies
1. Formal and informal recruitment Both Informal
2. Advertisement or word of mouth through
Both Word of mouth
friends’ network
3. Internal and external sources Both Both
Recruitment 4. Selection criteria (education, skills, Skills and
All
and selection experience) experience
5. Selection techniques (general test, work Work sample
All
sample test, and interview) test
Personnel/Product
6. Person in charge with recruitments decision The owner
ion manager
1. On-the-job training for at least 2 months
Yes No
duration
Training and
2. Supervisor and team leader as Trainer Yes The owner
development
3 Other trainings based on needs Yes No
4. Training evaluation No No
1. Referring to UMR standard Yes No
2. Using specific system Yes No
Remuneration
3.Other rewards and benefits Yes No
and rewards
Personnel
4. Person in charge with remuneration system The owner
manager
1. Formal performance appraisals Yes No
2. Performance appraisals as a base of
Yes No
salary/allowance increase
Performance
3. Performance appraisals as promotion
Appraisals Yes No
criterion
4. person in charge with performance Personnel/Product
The owner
appraisals ion manager
1. Union existence Yes No
Union and
2. Automatic membership Yes/No No
labour
3. Union benefits to employer Yes No
relations
4. Union benefits to employees Yes No
1.Having company philosophy Yes Yes
2. Having organisation tradition Yes No
3. Shared values (discipline, honesty,
Yes Yes
cooperativeness)
4. Hierarchy, seniority and status valued highly Yes Yes
Cooperativeness,
5. Relationship building strategy Communication
trust, openness
Culture 6. Democratic/paternalistic leadership style Both Democratic
7.Flexible supervision Yes Yes
8. Individual or teamwork preferences Teamwork Individual
Responsive, Respecting,
9. Loyalty and commitment building strategy
personal approach caring
10. Involving subordinate in decision-making
Rarely Rarely
process
11. Rules and policy implementation Strict No formal rules
A number of studies have been conducted to investigate the relationships between HRM
practices and company performance (Carlson et al., 2006; Chang & Chen, 2002; Chew &
Sharma, 2005; Delaney & Huselid, 1996; Huselid, 1995). Most studies found evidence for
a relationship between HRM practices and firm performance. However, there are
challenges with regard to the understanding these relationship. Wright and Gardner (2000)
argue that no consensus exists regarding the ways in which HR might impact firm
outcomes and little attention has been paid to exploring the processes through which this
impact takes place.
Generally, HRM practices that are conducted formally and which follow HRM standards
will positively affect company performance. However, medium-sized companies might
have constraints which prevent them from adopting formal Western HRM practices
including a lack of knowledge and experience in HRM, capital shortages and small
business scale and small profits. Other constraints that might be difficult to cope with are
economic hardship, and governmental policy and culture. Based on Hofstede’s study
(2001), the national cultural dimensions of Indonesia, which include a high degree of
collectivism and power distance, work against the adoption of Western HRM practices.
Furthermore, the Javanese culture which is similar to the national culture, values family-
like relationships in the organisation and this could lessen support for the adoption of
formal HRM practices. Both the national culture and the Javanese culture shape the
organisational culture of Indonesian medium-sized companies. Therefore, the cultural
influences on HRM practices might not significantly contribute to the companies’
performance.
Lake (2008) argues that in order to have the best impact on performance many advanced
HR techniques require the selection of workers who have the personality traits to be
motivated by and perform well in teams, who are slightly more educated and who will
respond better and more quickly to training. Delaney and Huselid (1996) claim that there
is a positive association between human resource management practices such as training
and selection, and perceived firm performance. For medium-sized companies, recruitment
and selection could significantly affect the company’s performance if the company hires
the right candidates. Training and development improves employees’ knowledge and skills
for handling tasks and therefore it contributes to the company’s performance.
Remuneration and rewards systems surely have positive relationships with companies’
performances. However, most of the remuneration systems applied created a lot of

arguments and dissatisfaction. On the other hand, the medium-sized companies appeared
to have difficulties improving their remuneration systems due to capital shortage and small
profits. This condition became a challenge for the medium-sized companies. Performance
appraisals could positively affect companies’ performance if they are implemented
formally, transparently and objectively. Furthermore, the objectives and the results of the
appraisals should be communicated to the employees to avoid dissatisfaction. Unions and
labour relations appeared to influence the companies’ performances as long as both the
employer and the employees gained benefits from the unions’ existence.
All of the case study findings will be cross-checked with the survey results in the next
chapter. The next chapter will present a survey analysis of the data collected. Several
analyses such as bivariate correlation analysis and hypothesis testing will be used to
examine the degree of relationship between HRM practices and the company’s
performance. Wright and Gardner (2000) claim that when hypothesising a linear causal
model, one of the challenges is deciding on the appropriate number of mediating variables
between the primary independent and dependent variables. A separate analysis of
Proprietary limited companies and family businesses will also be provided to investigate
whether they show different results indicated in the case study findings. Finally, a
regression analysis will check the contribution of each HRM practice and culture on the
Chapter 5: Quantitative Data Analysis
CHAPTER FIVE
QUANTITATIVE DATA ANALYSIS
5.1 Introduction
Chapter 4 presented a case analysis of HRM practices of four companies in the textiles
industry in Java. It also partially answered Research Question One: What HRM practices
in terms of recruitment and selection, training and development, remuneration and
rewards, performance appraisals and industrial relations are implemented in medium-
sized textile companies in Java? Research Question Two: Do Javanese cultural influences
have an impact on the way HRM is practised in medium-sized textile companies in Java?
This chapter also answered Research Question One and Research Question Two through
quantitative analysis. It also answered Research Question Three: What are the
relationships between HRM practices in medium-sized textile companies in Java and
perception of company performance?
This chapter presents an analysis and interpretation of the overall quantitative data from a
survey of 228 employers/managers of textile firms in Java, comprised of proprietary
limited companies and the family businesses and also from an additional survey of 131
respondents from proprietary limited companies only. The survey tests whether the
findings from the case studies and suggestions from the literature are borne out on a wider
sample of medium-sized textile companies in Java. This triangulation achieved by mixing
qualitative and quantitative methods strengthens the validity of the study (Neuman, 2006).
The chapter is organised into seven sections, commencing with an introduction in Section
5.1, followed by data analysis of the initial combined sample (228 respondents) in Section
5.2. Section 5.3 provides an analysis of the family businesses from the entire sample of the
first survey. The quantitative analyses of the initial combined sample was inconclusive
owing to the fact that a large number of companies were family based and did not possess
identifiable HR departments. Therefore, the analysis was repeated with the proprietary
limited companies segment from the initial combined sample. Section 5.4 provides an
analysis of the proprietary limited companies. This analysis provided support for the
relevant hypotheses but the sample of 81 was judged to be somewhat small and so an
additional 131 respondents were recruited for the final analysis of proprietary limited
companies. This resulted in a combined data sample which amounted to 209 respondents.
The analysis of the combined data sample of proprietary limited companies is provided in
Section 5.5. Section 5.6 reports hypothesis testing of the combined data sample of
proprietary limited companies. Section 5.7 presents multiple linear regression analysis for
the combined sample. Finally, a conclusion to the chapter is provided in Section 5.8. The
structure of this chapter is shown in Figure 5.1
5.1 Introduction
5.2 Data Analysis of Initial 5.2.1 Demographics of the sample

Combined Sample 5.2.2 Descriptive analysis
5.2.3 Preliminary analysis
5.2.4 Correlation analysis
5.3 Family Business Analysis - 5.3.1 Demographics of the sample

Initial Combined Sample 5.3.2 Descriptive analysis
5.4 Proprietary limited 5.4.1 Demographics of the sample

companies Analysis - Initial 5.4.2 Descriptive analysis
Combined Sample 5.4.3 Preliminary analysis
5.5 Proprietary limited 5.5.1 Demographics of the sample

companies Analysis - 5.5.2 Descriptive analysis
Combined Sample 5.5.3 Reliability and Factor analysis
5.5.4 Normality and outliers
5.6 Hypotheses Testing of Proprietary

limited companies - Combined Sample
5.7 Multiple Linear Regression Analysis of Proprietary

limited companies - Combined Sample
5.8 Conclusion
This study explores the implementation of HRM practices in Indonesian medium-sized

enterprises in the textile industry. The extent of those practices was captured in a survey
designed specifically for the purpose. In Chapter Three, it was seen that the questionnaire
items were developed from case study findings and from the literature. The case study
research investigated five areas of HRM: recruitment and selection; training and
development; remuneration and reward; performance appraisals; and union and labour
relations. It also examined the influence of Javanese culture on HRM practices. The
analysis of these six main issues and the literature contributed to the development of the
questions asked in the questionnaire’s survey. The six main issues were expressed as
variables of the companies’ HRM practices.
The quantitative analysis using the survey method also investigated the relationships
between HRM practices in medium-sized textile companies and perceptions of company
performance. Six hypotheses were formulated regarding employers' perceptions of the

rewards and perceptions company performance.
H5: There is a positive relationship between the implementation of union and labour
H6: There is a positive relationship between the influence of Javanese culture on
HRM practices and perceptions of company performance.
This chapter will present four data analyses starting with an initial analysis of the initial
combined sample (228 participants), followed by data analysis of the family businesses
that made up part of that sample (147 participants). This is followed by data analysis of
responses from proprietary limited companies (81 participants) from the initial combined
sample. Finally, an analysis is presented of proprietary limited companies that include the
second sample of proprietary limited companies, boosting the total to 209 employer
respondents.
As was seen in Chapter 3, the analysis of initial combined sample resulted in inconclusive
results. The large number of family business participants in the first sample (228
respondents) was identified as they likely cause of the non-significant results in the first
analysis. Moreover, the results could not be interpreted using sources from the literature
because they were not meaningful in terms of Western HRM practices. Therefore, a
separate analysis of participants from the family businesses in the initial combined sample
was conducted to confirm the case study findings about the family businesses, all of which
had very limited HRM practices. This also led to an analysis of participants from
proprietary limited companies in the initial combined sample (81 respondents) on its own
to ascertain whether they provided different results from those of the family business. The
statistical results of proprietary limited companies (81 respondents) supported the
existence of Western HRM practices. The significant results from this data analysis made
it possible to repeat this data analysis with larger samples. Therefore, second round of data
collection was conducted for proprietary limited companies only. The combined data
analysis of the 209 proprietary limited companies indicated what impact Western HRM
practices had on the performance of Indonesian medium-sized enterprises.
The statistical process and analysis in this study were performed using SPSS version 18.
Tables presented in this section and in the appendices were extracted from the output of
statistical processes.
5.2 Data Analysis of the Initial Combined Sample
The initial combined sample of 228 employer participants comprised 147 managers/owners
from family businesses and 81 from proprietary limited companies. This section begins
with a description of the sample’s demographics including gender, age, education, and
experience in HRM and the business category of the companies. The descriptive statistics
for the 228 employer participants will be provided in the next section. Preliminary and
correlation analyses were used to check whether the data samples were suitable for further
analysis.
5.2.1 Demographics of the sample
Demographic characteristics of the 228 samples classify the respondents according to

gender, age, education, work experience in HRM and business category. These data are
summarised here. A table of these demographic characteristics can be seen in Appendix
D1.
The distribution of respondents based on gender indicated that the majority of

employers/managers who controlled HRM practices in these companies were male (150
out of 228 respondents or 66%). The distribution of the employers/HRM managers based
on age indicated that the largest group of employers/HRM managers were aged between
31 and 40 years (79 out of 228 respondents or 35%) followed by the 41-50 age group (68
respondents or 30%). That is, the number of respondents who were aged between 21 and
50 years was191 or 84%. There were only 5 employers/HRM managers in the over 60 age
category 2% of the sample. The largest group of (113 out of 228 respondents or 50%) of
the employers/HRM managers had a secondary education. Only 69 employers/HRM
managers (30%) had bachelor’s degree or other tertiary qualification. The number of
employers/HRM managers who had 1 to 5 years work experience in HRM was 85 out of
228 respondents (37%). This means a large number of respondents had little knowledge
and experience in HRM. Based on business category, 102 respondents (45%) were batik
businesses.
5.2.2 Descriptive analysis of the initial combined sample
Descriptive analysis involves the transformation of raw data into a form that is easy to
understand and interpret (Zikmund, 2003, p. 436). Descriptive statistics provide simple
summaries about the samples and measures, and form the basis of quantitative analysis.
Descriptive statistics are used to determine whether there is sufficient variation in the 228
responses for each variable to confirm specific relationships and help to demonstrate
whether the underlying distributions of variables are normally distributed and whether the
variance of the distributions that are being compared justify the application of parametric
statistics for subsequent analyses (Matthews 1990). The descriptive analysis checks the
mean score of the variable with a mean score standard of measurement. The formula for
distribution of measurement that is approximately normal is: µ± 1SD where µ=mean of
population and SD=Standard Deviation(Mendenhall et al., 1990). The distribution
measurement can be expected to occur between 0 and 1 SD (Welkowitz et al., 1982).

Therefore, this study will use: µ± 1 SD to describe the variable.
Responses to all items that measured the variables used Likert type scales with responses
ranging from 1 to 7.According to the distribution measurement rule, the standard
measurement for the Likert scale of 1 – 7 in a normal distribution will be: 4 ± 1SD. Under
a normal distribution, 68% of the measurement will be on the range between 3 and 5.
Mean scores which fall within this range are considered acceptable. To check whether the
mean scores of variables of the initial combined sample were within the range, Table 5.1
below shows the mean scores and standard deviation of variables of initial combined
sample.
Table 5.1 Mean scores and standard deviation of variables- initial combined sample
Variables Mean SD
Culture 6.16 0.95
Remuneration and rewards 5.27 1.01
Performance appraisals 5.27 1.50
Training and development 4.78 1.83
Recruitment and selection 4.76 1.63
Union and labour relations 4.63 1.48
The dependent variable of company performance 5.07 1.18
Source: analysis of variables
Table 5.1 shows that three dependent variables had mean scores within the range (µ ± 1
SD) and were considered acceptable. Those variables were training and development,
recruitment and selection and unions and labour relations. The other three variables were
outside the acceptable range (>µ + 1 SD).They were culture, remuneration and rewards,
and performance appraisals. This indicated that the HRM practices in medium-sized
companies were uniformly high. The culture variable appeared to have the highest mean
score while the lowest mean score was unions and labour relations. From this it can be
concluded that culture influenced the HRM practices of the companies the most, and
unions and labour relations appeared to be the lowest concern of medium-sized companies.
The mean scores of the items that measured the variables can be seen in Appendix D2. It
appears that the mean scores of those items supported the inclusion of the variables. The
mean scores of recruitment and selection items ranged between 4.40 and 5.07 while the
mean scores of training and development variable ranged between 4.68 and 4.89. Items
supporting remuneration and rewards variables had mean scores of between4.67 and5.87.
The performance appraisals variable was supported by items that had mean scores of
between 4.90 and 5.60. Items on the unions and labour relations variable had mean scores
of between 4.52 and 4.81. Items on the culture variable appeared to have high mean scores
that ranged between 6.12 and 6.22.
The mean score of the dependent variable of perceptions of company performance was
also above the range, indicating high performance of medium-sized companies. This was
supported by the items for the perceptions of company performance variable which had
mean scores of between 4.14 and 5.25 (see Appendix D2). It can be concluded that
company performance was a major concern of medium-sized companies.
5.2.3 Preliminary Analyses of the initial combined sample
Stages in preliminary analysis included reliability checking, transforming composite

variables, correlation matrix analysis, normality checking and identification of outliers.
These stages follow the recommendation of Tabachnick and Fidell (2007) on data
cleansing prior to further statistical analysis.
Reliability checking
The reliability of the initial data was checked based on a combined Cronbach’s alpha value
for 37 items (from item rs1 to item pp37). To be considered reliable, the value of
Cronbach’s alpha should be > 0.7 (Manning & Munro, 2007). After examining the
reliability, it was found that Cronbach’s Alpha was 0.933, which signified excellent
reliability of the scale (see Appendix D3).
Correlation matrix
Correlation analysis is used to check the validity (homogeneity) of composite variables. If

the composite variable really does represent a single underlying concept, the component
items will be homogenous (Manning & Munro, 2007). The item-to-total correlation and
the inter-item correlation were used in this study (see Appendix D3). Hair et al (1998,
p.118) cited in Manning and Munro (2007) suggest a rule of thumb to check the item-to-
total correlation and the inter-item correlations: that is the item-to-total correlation should
exceed 0.5 and the inter-item correlation should exceed 0.3. Every variable measured by
items is described in Table 5.2. The result of correlation matrix analysis of seven variables
(see Appendix D3) is summarised in Table 5.1 below.
Table 5.2 Correlation matrix of variables - initial combined sample

Variables items Item-to-total Inter-item
correlation correlation
Recruitment and selection rs1, rs2, rs3, rs4, rs5, rs6 all items >0.5 all items >0.3
Training and development td7, td8, td9, td10, td11 all items >0.5 all items >0.3
Remuneration and rewards cr12, cr13, cr14, cr15, cr16, cr17, cr18 all items >0.5 all items >0.3
Performanceappraisals pa19, pa20, pa21, pa22, pa23, pa24 all items >0.5 all items >0.3
Industrialrelation ir25, ir26, ir27, ir28 all items >0.5 all items >0.3
Culture cu29, cu30, cu31, cu32, cu33 all items >0.5 all items >0.3
Performance pp34, pp35, pp36, pp37 item pp34 <.5 item pp34<0.3
The results of item-to-total correlation indicated that the coefficients of six variables were
within the acceptable range. One item (pp34) in perception of company performance
variable had item-to-total correlation <0.5 and inter-item correlation <0.3. Therefore, item
pp34 was deleted.
Creating final composite variables
Following the results on correlation matrix analysis, seven final composite variables (six
independent variables and one dependent variable) were created. The composite variable
of perception of company performance was created using only three items (pp35, pp36 and
pp37). Table 5.3 below shows the final composite variables and the items that make up
each variable. The third column of Table 5.3 showed inter-item correlations and item-to-
total correlations values which followed the guidance to check the validity and reliability
of data (see Table 3.14 in Chapter 3); that gave rise to the choice of that item is
documented. The next step was checking normality and outliers.
Table 5.3 Composite variables - initial combined sample

Composite Variable Items Matrix correlation analysis
Recruitment_selection rs1, rs2, rs3, rs4, rs5, rs6 Inter-item .>0.5, item-to-total >0.3
Training_development td7, td8, td9, td10, td11 Inter-item .>0.5, item-to-total >0.3
Remuneration_rewards cr12, cr13, cr14, cr15, cr16, cr17, cr18 Inter-item .>0.5, item-to-total >0.3
Performance_appraisals pa19, pa20, pa21, pa22, pa23, pa24 Inter-item .>0.5, item-to-total >0.3
Industrial_relation ir25, ir26, ir27, ir28 Inter-item .>0.5, item-to-total >0.3
Culture cu29, cu30, cu31, cu32, cu33 Inter-item .>0.5, item-to-total >0.3
Performance pp35, pp36, pp37 Inter-item .>0.5, item-to-total >0.3
Normality and Outliers
Normality analysis and testing for outliers are generally conducted as part of the cleansing
process before data samples are used for further analysis. Normality of new composite
variables is examined through the values of skewness (by dividing the statistical value of
skewness with its standard error). This yields Z-scores for each variable for interpretation
of normality. If the values of Z-scores exceed the absolute value of 2.58 (p<0.01) for a
variable, then that variable is considered to be non-normal (Zikmund, 2003). The value of
2.58 for the Z-scores is used for data samples of less than 300 (Tabachnick & Fidell,
2007). The number of the initial sample was 228. Therefore the value of 2.58 was
applicable. Skewness values were generated through descriptive analysis of the seven
composite variables. Table 5.4 below shows the statistical and standard errors of skewness.
Table 5.4The statistical and standard error of skewness-initial combined sample

Maximu Std.
N Minimum Mean Skewness
m Deviation Z - scores
Statistic Statistic Statistic Statistic Statistic Statistic Std. Error
Recruitment_Selection 228 1.00 7.00 4.7624 1.63927 -.416 .161 -2.58
Training_Development 228 1.00 7.00 4.7816 1.83520 -.440 .161 -2.73
Remuneration_rewards 228 2.14 7.00 5.2782 1.01306 -.381 .161 -2.37
Performance_Appraisals 228 1.00 7.00 5.2770 1.50448 -1.184 .161 -7.35
Industrial_relation 228 1.00 7.00 4.6327 1.48939 -.461 .161 -2.86
Culture 228 1.40 7.00 6.1675 .95401 -1.919 .161 -11.92
Performance 228 1.67 7.00 5.0746 1.18846 -.799 .161 -4.96
Valid N (listwise) 228
From Table 5.4, it can be seen there were five variables that exceeded the maximum
prescribed absolute values (z-score > ± 2.58). They were: training and development;
performance appraisals; industrial relations; culture; and perception of company
performance. Since they were negatively skewed, they needed to be transformed.
Performance appraisals, industrial relations and perception of company performance
variables were transformed using square root formula because they were moderately
skewed; and culture was transformed using an inverse procedure because it was severely
negatively skewed. The results of the transformation are shown in Table 5.5. After
transformation all variables were normally distributed.
Table 5.5 The statistical and standard errors of skewness after normality-initial combined sample
Minimu Maximu Std.
N m m Mean Deviation Skewness Z-
Statisti Std. scores
Statistic Statistic Statistic Statistic Statistic c Error
TrainingDev_transform 228 .35 2.00 1.2835 .52275 -.094 .161 -0.58
PerformanceAppr_transform 228 1.05 3.00 2.1426 .54319 .012 .161 0.074
IndustrialRel_transform 228 .35 2.00 1.2131 .41826 .126 .161 0.78
Culture_transform 228 2.00 2.85 2.3393 .25222 .008 .161 0.049
Performance_transform 228 .48 2.00 1.3232 .33818 -.416 .161 -2.58
After ensuring all composite variables had normal distributions, the next step was to check
for outliers. The univariate outliers were checked through the Z standard score (±2.58) and
two outliers (respondents. 201 and 226) were found. Those two outliers were removed and
the total data sample for further analysis was 226. A mahalanobis value (22.458, df=6) was
used to check multivariate outliers and none was found.
5.2.4 Correlation analyses
Bivariate correlation analysis is used to examine whether two variables have a significant
relationship between them (Manning & Munro, 2007). Bivariate correlation analysis was
conducted between perception of company performance as the dependent variable and
each of the six composite variables (recruitment-selection, training-development,
remuneration-rewards, performance appraisals, industrial relations and culture). The
analysis was based on a Pearson product-moment (r) correlation value to determine the
strength of relationship.
As shown in Table 5.6 below, there was a negative relationship between recruitment-
selection and perception of company performance (r= -.015, p>.05). The relationship was
non-significant since p>.05.
Table 5.6 Correlations of recruitment and selection and performance – initial combined sample
Performance_transform Recruitment_Selection_
Performance_transform Pearson Correlation 1 -.015
Sig. (2-tailed) .818
N 226 226
Recruitment_Selection Pearson Correlation -.015 1
N 226 226
source: analysis of variables
As shown in Table 5.7, the correlation between perception of company performance and
training-development similarly showed a non-significant negative relationship (r=.055,
p>.05).
Table 5.7 Correlations of training and development and performance – initial combined sample
Performance_transform TrainingDev_transform
Performance_transform Pearson Correlation 1 -.055
N 226 226
TrainingDev_transform Pearson Correlation -.055 1
N 226 226
As shown in Table 5.8 below the bivariate correlation of remuneration-rewards with

perception of company performance showed a positive relationship (r= .251, p<.05). Since
p<.05 the correlation was judged to be significant.
Table 5.8 Correlations of remuneration and rewards and performance– initial combined sample
Performance_transform Remuneration_rewards
Performance_transform Pearson Correlation 1 .251**
N 226 226
Remuneration_rewards Pearson Correlation .251** 1
N 226 226
**. Correlation is significant at the 0.01 level (2-tailed).
As shown in Table 5.9 below, a significant positive correlation was found between
performance appraisals and perception of company performance (r= .142, p<.05).
Table 5.9 Correlations of performance appraisals and performance – initial combined sample
Performance_transform PerformanceAppr_transform
Performance_transform Pearson Correlation 1 .142*
N 226 226
PerformanceAppr_transform Pearson Correlation .142* 1
N 226 226
*
. Correlation is significant at the 0.05 level (2-tailed).
As shown in Table 5.10 below, the bivariate correlation between industrial relations and
perception of company performance showed a significant positive relationship (r= .187,
p<.05). The value of p<.05 indicated that the correlation was significant.
Table 5.10 Correlationsofindustrial relations and performance – initial combined sample

Performance_transform IndustrialRel_transform
Performance_transform Pearson Correlation 1 .187**
N 226 226
IndustrialRel_transform Pearson Correlation .187** 1
N 226 226
**
As shown in Table 5.11 below, a significant negative correlation was found between
culture and perception of company performance (r= -.204, p<.05).
Table 5.11 Correlations of culture and performance – initial combined sample

Performance_transform Culture_transform
Performance_transform Pearson Correlation 1 -.204**
N 226 226
Culture_transform Pearson Correlation -.204** 1
N 226 226
**
In summary, of the six correlations shown in Tables 5.6 – 5.11 above, three correlations
showed significant positive relationships as predicted by the research hypotheses. Those
correlations were: perception of company performance and remuneration reward;
perception of company performance and industrial relations; and perception of company
performance and performance appraisals. The other three correlations were negative. The
absence of positive correlations for these three independent variables suggests that
conducting a multiple linear regression analysis would be inappropriate at this stage.
Overall, there was little empirical support for the view that Indonesian medium-sized
companies had pursued the adoption of Western HRM practices. These negative
correlations also led to difficulties in interpretation based on the literature. In this initial
data collection, the large number of family businesses (147 out of 228 samples)
represented in the samples led to mixed statistical results as they appeared to be obscuring
the effect of the proprietary limited companies. This result also reflected the case study
findings that in general family businesses adopted very limited HRM practices while at
least some proprietary limited companies appear to have implemented Western HRM
practices. Therefore, it was decided to segment the initial combined sample into two
separate samples of proprietary limited companies and the family businesses. By

segmenting the first sample, there was a possibility that the proprietary limited companies
analysis would provide different results. For example, it was possible that the evidence
would indicate that proprietary limited companies had adopted HRM practices as was the
case in the case study findings.
The separate analysis of the family businesses was also important for testing the case study
findings on family businesses. Therefore, the next section will provide a separate analysis
of the data on family businesses (147 respondents) that was extracted from the first
sample.
5.3 Family Business Analysis - Initial Combined Sample
The analysis of family businesses on their own was justified for two reasons: first, the
analysis of the initial data showed little overall empirical support for the suggestion that
medium-sized businesses had adopted Western HRM practices; second, the case study
findings in chapter four also revealed very limited HRM practices. The number of family
business participants extracted from the initial data sample was 147 out of a total of 228.
The analysis included demographic characteristics of the sample, a preliminary analysis
and bivariate correlation analysis.
5.3.1 Demographics of the family business sample
The demographic characteristics of the 147 family businesses are shown in Appendix E1.
The characteristics shown are gender, age, education, work experience in HRM, and
business category of the firm the respondent is associated with.
The gender characteristics show that 102 (61%) of the owners/HRM managers in the
family businesses were male. Age distribution of the owners/HRM managers indicated that
51 (35%) of the employers/HRM managers were aged between 31and 40, and 47
respondents or 32% were in the 41-50 age group. In total, 98 respondents (67%) were aged
between 31 and 50 years. The employers/HRM managers over 60 accounted for only 1%
of the sample. Based on education level, 98 of the owners/HRM managers (66.7%)
received secondary education or less. Only 34 of the owners/managers (23.1%) had
bachelor’s a degree or tertiary qualification. Data distribution based on work experience
showed that the majority of the owners/managers had 1-5 years’ work experience in HRM
(51 respondents or 34.7%). This indicated that most of the owners/HRM managers had
little knowledge and experience in HRM. From the 147 family businesses represented in
the sample, 83 (56.5%) were batik businesses
The demographics of the family businesses in the sample were very similar to the
demographic of the initial combined sample. The majority of the owners/ managers were
male, in the 21– 50 age group, had received a secondary education and had 1-5 years of
work experience. Most of the businesses were also in batik business category.
5.3.2 Descriptive statistics of the family businesses
This section presents the descriptive statistics of current HRM practices of the family
businesses (see Appendix E2 for more detail). The mean scores of variables can be seen in
Table 5.12. The analysis takes the same form as the analysis of initial combined sample.
The summary results are as follows:
Table 5.12 Mean scores and standard deviation of variables - family businesses
Variables Mean SD
Culture 6.51 0.55
Table 5.12 shows that four dependent variables had mean scores within the range (µ ± 1
SD) and were considered acceptable. These variables include: recruitment and selection,
training and development, performance appraisal and unions and labour relations. The
other two variables (culture and remuneration and rewards) were above the acceptable
range (>µ + 1 SD). Compared with the initial combined sample, the HRM practices in the
family businesses were relatively low. The culture variable appeared to have the highest
mean score while the lowest mean score was unions and labour relations. This result was
similar to the initial combined sample. It can be concluded that culture influenced the
HRM practices of medium-sized companies the most, and unions and labour relations
appeared to be the lowest concern.
The mean scores of items measuring the variables can be seen in Appendix E2. The mean
scores of those items appear to confirm the mean scores of variables. The means scores for
recruitment and selection items ranged between 4.22 and 5.17 while the mean scores for
training and development items ranged between 4.22 and 5.10. Items supporting
remuneration and rewards variables had mean scores of between 4.80 and 5.69. The
performance appraisals variable was supported by items that had mean scores of between
4.20 and 4.90. Items for the unions and labour relations variable had mean scores of
between 4.33 and 4.61. Items for the culture variable appeared to have high mean scores
that ranged between 6.48 and 6.54. In summary, the descriptive statistics of the family
businesses appear to have similarities to the initial combined sample for culture, and
unions and labour relations. The family businesses also have similarities to the initial
combined sample in terms of the score variation of items.
The mean score of the dependent variable of perception of company performance was also
above the range, indicating high performance. This was supported by three items on
perception of company performance variables which had mean scores of between 5.05 and
5.87. Only one item had a mean score outside the acceptable range (see Appendix E2).
This can be concluded that company performance was the major concern of medium-sized
companies.
Preliminary analysis of the family business sample can be seen in Appendix E4. The
procedures for the preliminary analysis were similar to procedures already used for the
entire sample. The reliability of the family business sample data had a Cronbach’s alpha of
0.939 (>0.7) meaning all items from the questionnaires were reliable. Correlation matrix
analysis resulted in the deletion of one item. Based on the results of the correlation matrix
analysis, seven final composite variables were created (six independent variables and one
dependent variable).Normality and outliers processes resulted on transformation of two
variables. There were no univariate or multivariate outliers found. Therefore, the 147
members of the sample were judged to be ready for further analysis.
This section investigates the correlations between the dependent variable of perception of
company performance and each of the six independent variables (recruitment-selection,
training-development, remuneration-rewards, performance appraisals, industrial relations
and culture) for the 147 family businesses in the sample. The correlation analysis used a
Pearson-product moment value to determine the strength of the relationship.
The bivariate correlation of the independent variable recruitment and selection with the
dependent variable perception of company’s performance as shown in Table 5.13 reveals a
significant negative relationship (r= -.459, p<0.05). The value of p<0.05 indicated that
the correlation was significant.
Table 5.13 Correlations of recruitment and selection and performance - family businesses
Performance Recruitment_selection
Performance Pearson Correlation 1 -.459**
N 147 147
Recruitment_selection Pearson Correlation -.453** 1
N 147 147
**
According to Table 5.14 below, a significant negative correlation was found between
perception of company performance and training-development (r=-.383, p<0.05). The
value of p<.05 indicates that the relationship was significant.
Table 5.14Correlationsof training and development and performance - family businesses

Performance Training_Development
Performance Pearson Correlation 1 -.383**
N 147 147
Training_Development Pearson Correlation -.383** 1
N 147 147
**.
Correlation is significant at the 0.01 level (2-tailed).
The bivariate correlation of remuneration and rewards with perception of company
performance in Table 5.15 shows a positive correlation (r= .155, p>0.05). The value of
p>0.05 indicates a non-significant correlation.
Table 5.15 Correlations of remuneration and rewards and performance - family businesses
Performance Remuneration_Rewards
Performance Pearson Correlation 1 .155
N 147 147
Remuneration_Rewards Pearson Correlation .155 1
N 147 147
The bivariate correlation between performance appraisals and perception of company

performance in Table 5.16 below shows a positive relationship (r= .057, p>0.05). The
value of p>0.05 shows a non-significant correlation.
Table 5.16 Correlations of performance appraisals and performance - family businesses
Performance Performance_Appraisals
N 147 147
PerformanceAppr_transform Pearson Correlation .057 1
N 147 147
According to Table 5.17, the bivariate correlation between industrial relations and
perception of company performance shows a positive relationship (r=.146, p>0.05). The
value of p>0.05 indicates that the correlation is non-significant.
Table 5.17 Correlations of industrial relations and performance - family businesses

Performance Industrial_Relation
N 147 147
Industrial_Relation Pearson Correlation .146 1
N 147 147
The bivariate correlation between culture and perception of company performance in Table
5.18 shows a negative value (r=-.147, p>0.05). The value of p>0.05 shows a non-
significant correlation.
Table 5.18 Correlations of culture and performance - family businesses

Performance Culture_transform
Performance Pearson Correlation 1 -.147
N 147 147
Culture_transform Pearson Correlation -.147* 1
N 147 147
The correlation of the six independent variables with the dependent variable of perception
of company performance of the family business sample showed three negative correlations
and three positive correlations. These results are similar to those of the overall data
sample. Both had negative correlations for recruitment and selection, training and
development and culture. These negative correlations also indicated that multiple linear
regression analysis would be inappropriate. The negative results also show that there was
no support for the hypotheses being tested.
The correlation analysis of the family business sample also provided little or no empirical
support for the suggestion that companies had adopted Western HRM practices. As it was
decided to segment the analysis into limited company and the family business analyses, the
next section provides an analysis of proprietary limited companies to check whether the
results are different. Additionally, this may provide support for the case study findings on
proprietary limited companies.
5.4 Proprietary Limited Companies Analysis - Initial Combined Sample
The analysis of proprietary limited companies in the initial combined sample aimed to
check whether the result were different from those for the entire combined first sample
(228 respondents) which include family businesses. Meaningful results would lead to the
possibility of increasing the sample and conducting further analysis such as factor analysis
and regression analysis. In the initial combined sample, proprietary limited companies
accounted for 81 participants out of 228. The analysis included demographic
characteristics of the sample, preliminary analysis and bivariate correlation analysis.
5.4.1 Demographic characteristics of 81 proprietary limited companies from the

initial sample
The demographic characteristics of respondents from proprietary limited companies are

shown in Appendix F1. The characteristics listed are gender, age, education, work
experience in HRM, and business category.
Gender distribution of respondents from proprietary limited companies showed that the
majority of employers/HRM managers who controlled HRM practices in these companies
were male (48 out of 81 respondents or 59%). The age distribution of the employers/HRM
managers indicated that 28 were aged between 31 and 40 (34%) followed by 21 in the 41-
50 age group (26%). In total, 49 respondents (60%) were aged between 21 – 50 years. The
majority (46 respondents or 57%) had received a tertiary education. The largest group of
employers/HRM managers had 1-5 years’ work experience in HRM (34 out of 81
respondent or 42%). The largest group of proprietary limited companies (26 respondents or
36%) were from the textile-weaving category.
Compared to the overall sample and the family business samples, the demographics of the
proprietary limited companies were similar in gender, age, and work experience but
differed in education and business category. Most employers/managers from proprietary
limited companies had tertiary qualifications while in the other two samples the most
common education level was secondary school. This difference indicates that
employers/managers of the proprietary limited companies had more knowledge of HRM
practices than employers/managers of the family businesses. Business categories for
proprietary limited companies were distributed almost evenly with textile-weaving having
a slightly larger percentage than the others. On the other hand, for the overall sample and
for family business, the most common businesses type was batik business.
5.4.2 Descriptive analysis of 81 proprietary limited companies from the initial sample
This section presents a descriptive analysis of the HRM practices of the 81 proprietary
limited companies from the initial sample. The mean scores of variables including
standard deviation values are shown in Table 5.19. The analysis performed was the same
as the analysis of the initial combined sample. The summary results are as follows:
Table 5.19 Mean scores and standard deviation of variables 81proprietary limited companies from the
initial sample
Variables Mean SD
Culture 5.53 1.18
Table 5.19 shows that two dependent variables (unions and labour relations, and
recruitment and selection) had mean scores within the range (µ ± 1 SD) and were
considered acceptable. The other four variables (performance appraisals, culture, training
and development and remuneration and rewards) had mean scores above the acceptable
range (>µ + 1 SD). In summary, the HRM practices in proprietary limited companies were
uniformly high. The performance appraisal variable appeared to have the highest mean
score while the lowest mean score was unions and labour relations. These results are
different to those for the initial combined sample and for the family businesses in which
the culture variable had the highest mean score. It can be concluded that proprietary
limited companies are very concerned with performance appraisals, and unions and labour
relations appeared to be of the least concern for proprietary limited companies.
The mean scores of the items for each variable can be seen in Appendix F2. The mean
scores of recruitment and selection items ranged between 4.65 and 5.32 while the mean
score for items in the training and development variable ranged between 4.99 and 5.54
Items supporting remuneration and rewards variable had mean scores of between 4.44 and
5.22. The performance appraisal variable items had means scores of between 5.27 and
5.93. Items for the unions and labour relations variable had mean scores of between 4.78
and 5.17. Items for the culture variable had high mean scores of between 5.37 and 5.74.
The mean score for items of the dependent variable perception of company performance
were within the range indicating proprietary limited companies are concerned with their
performance. These mean scores ranged between 4.12 and 5.42 (See Appendix E2).
5.4.3 Preliminary Analysis
Preliminary analyses for the 81 proprietary limited companies of the initial sample can be
seen in Appendix F4. The reliability analysis resulted in a Cronbach’s alpha of 0.959
meaning that all items from the questionnaires were reliable. Transforming the variables
generated seven composite variables (six independent variables and one dependent
variable) from 37 items. Correlation matrix analysis conducted for the proprietary limited
companies indicated that the coefficients of six variables were within the acceptable range.
Therefore, all items were retained in their composite variables. Normality and outlier tests
conducted for proprietary limited companies found that four variables needed to be
transformed. Three univariate outliers were found and were removed from the data.
Finally, 78 from the initial sample were ready for further analysis.
5.4.4 Correlation Analysis
Bivariate correlation analysis was used to check the strength of the relationship between
the dependent variable of perception of company performance and each of the six
independent variables (recruitment-selection, training-development, remuneration-rewards,
performance appraisals, industrial relations and culture) using Pearson’s product-moment
values. The values ranged from -1 to +1 with significant level standard of p<.05. Data for
78 firms were used for this analysis.
As shown in Table 5.20 below, the correlation between the independent variable
recruitment-selection and the dependent variable of perception of company performance
showed a significant positive value (r= .501, p<.05). The correlation was significant at
p<.05.
Table 5.20 Correlations of recruitment and selection and performance - sample of 78

proprietary limited companies
Performance RecruitmentSel_transform
Performance Pearson Correlation 1 .501**
N 78 78
RecruitmentSel_transform Pearson Correlation .501** 1
N 78 78
As shown in Table 5.21, there was a significant positive correlation between the
independent variable of training-development and the dependent variable of perception of
company performance (r=.532, p<.05). Since p<.05, the relationship was significant.
Table 5.21 Correlations of training and development and performance - sample of 78

Performance TrainingDev_transform
N 78 78
TrainingDev_transform Pearson Correlation .532** 1
N 78 78
Table 5.22 below shows a non-significant positive correlation between the independent
variable of remuneration-rewards and the dependent variable of perception of company
performance (r= .134, p>.05). The value of p>0.05 indicated that the relationship was non-
significant.
Table 5.22 Correlations of remuneration and rewards and performance - sample of 78 proprietary
limited companies
N 78 78
Remuneration_Rewards Pearson Correlation .134 1
N 78 78
The bivariate correlation between performance appraisals and perception of company

performance shown in Table 5.23 below reveals a significant positive value (r= .419,
p<.05). Since p<.05 the correlation was significant.
Table 5.23 Correlations of performance appraisals and performance - sample of 78

Performance performanceAppr_transform
N 78 78
performanceAppr_transform Pearson Correlation .419** 1
N 78 78
According to Table 5.24 below, there was a significant positive relationship between the
dependent variable of industrial relations and the dependent variable of perception of
company performance (r= .430, p<.05). The correlation was significant since p<0.05.
Table 5.24 Correlations of industrial relations and performance - sample of 78 proprietary limited
companies
Performance Industrial_relation
N 78 78
Industrial_relation Pearson Correlation .430** 1
N 78 78
The bivariate correlation between the independent variable of culture and the dependent
variable of perception of company performance shown in Table 5.25 reveals a significant
positive value (r= 0,319, p<0.05). The value of p<.05 indicated that the relationship was
significant.
Table 5.25 Correlations of culture and company performance– sample of 78 proprietary limited
companies
N 78 78
Culture_transform Pearson Correlation .319** 1
N 78 78
The correlation analysis for the relationships between the dependent variable of perception
of company performance and each of the six independent variables of the 78 proprietary
limited companies in the sample showed significant positive relationship values. These
values indicated that all independent variables were positively related to perception of
company performance. Clearly, this constitutes support for the adoption of Western HRM
practices. This made it possible to explore proprietary limited companies further using a
larger sample. This increase in sample size was seen to be instrumental to increasing the
validity and reliability of the whole study. Therefore, the additional data collection for
proprietary limited companies was conducted and an additional 131 survey responses were
gathered. The combined samples of 209 (78 from the first sample plus 131 from the
second data collection process) were used in the next analysis of the proprietary limited
companies described in the following section. The increased sample size made for a more
robust analysis of proprietary limited companies (Heir et. al. inManning & Munro, 2007).
5.5 Proprietary Limited Companies Analysis - Combined Data
In the previous section, the analysis of 78 proprietary limited companies on their own
indicated that all independent variables positively correlated with the dependent variable of
perception of company performance. This section will provide an analysis of combined
data for proprietary limited companies with 209 respondents including the additional 131
respondents from proprietary limited companies that were subsequently surveyed. The
analysis that follows includes factor analysis, correlation analysis, regression analysis and
hypothesis testing. Prior to the analyses, a description of the demographic of the sample is
provided.
5.5.1 Demographic of the sample of proprietary limited companies – 209 samples
The demographic of this sample can be seen in Appendix G1.
Gender distribution indicated that male employers/HRM managers comprised 139 of the
209 respondents (or 67%). The age group distribution showed that approximately 76 of the
employers/HRM managers (36%) were in the 31 to 40 age group followed by 57
respondents (27%) in the 41 to 50 age group. In total, 172 (82%) of employers/HRM
managers were in the 21-50 age group. There were only 6 respondents (3%) over 60.
Most of the employers/HRM managers (133 or 63.7%) received a tertiary education. Of

these 101 (48.3%) had a bachelor’s degree, 27 (13%) had a diploma and 5 (2.4%) had a
master degree. Compared with the family business sample and the initial combined
sample, the proportion of employers/HRM managers in proprietary limited companies who
had received tertiary education was higher. The higher educated levels of these
employers/managers indicated that they had more knowledge and skills related to HRM or
management and that they were more capable of implementing formal HRM practices.
The largest cohort (102 respondents or 48.8%) of employers/HRM managers had 1 to 5

years of work experience in HRM followed by 51 respondents (24.4%) who had 6 to 10
years. The high percentage of the employers/HRM managers who had 1 to 5 years of
working experience in HRM might relate to the high number of employers/HRM managers
in the younger age group (21-40 years).
Sixty six proprietary limited companies (31.6%) were in the batik business followed by 58
(27.7%) in the textile-weaving category and 44 (21.1%) in the textile-spinning category.
Only 37 proprietary limited companies (17.7%) were in the garment manufacturing
category.
5.5.2 Descriptive analysis of proprietary limited companies – 209 samples
This section presents the HRM practices of the proprietary limited companies combined
sample. The analysis follows the steps in the descriptive analysis of the initial combined
sample. The mean scores of variables can be seen in Table 5.26. A summary of descriptive
statistics of the 209 proprietary limited companies in the combined sample are as follows:
Table 5.26 Mean scores and standard deviation of variables - proprietary limited companies combined
sample
Variables Mean SD
Culture 5.68 1.22
Table 5.26 shows that four dependent variables (culture, performance appraisals, training
and development and remuneration and rewards) had mean scores above the range (>µ + 1
SD). The other two variables (recruitment and selection, and also unions and labour
relations) were within the acceptable range (µ ± 1 SD). Compared with the sample of 81
proprietary limited companies, the mean scores of independent variables in the proprietary
limited companies combined sample (209 respondents) were higher. Unlike the 81
proprietary limited companies sample, the culture variable in the proprietary limited
companies combined sample appeared to have the highest mean score while the lowest
mean score was unions and labour relations. From this it can be concluded that culture
influenced the HRM practices of proprietary limited companies the most, and unions and
labour relations appeared to be the least concern.
The mean scores of items for each variable can be seen in Appendix E2. The mean scores
of those items appeared to support the mean scores of variables. The means scores of
recruitment and selection items ranged between 4.66 and 5.12 while the mean score of
training and development items ranged between 5.11 and 5.47. Items supporting
remuneration and rewards variables had mean scores of between 4.66 and 5.65. The
performance appraisal variable items had mean scores of between 5.45 and 5.85. The
unions and labour relations variable items had mean cores of between 4.77 and 4.88.
Items for the culture variable had high mean scores of between 5.63 and 5.75.
The mean score of the dependent variable of perception of company performance was
within the range indicating high performance of these medium-sized companies. This
indicates that in general these companies attached a high priority to their own
performance. This was supported by items for the perception of company performance
variables which had mean scores of between 3.71 and 4.85 (see Appendix E2). It can
therefore be concluded that proprietary limited companies are still concerned with
company performance.
5.5.3 Reliability and factor analysis
Reliability analysis
Reliability analysis was conducted prior to other analyses. For data to be considered
reliable, the value of its Cronbach’s alpha should be > 0.7. The reliability analysis of the
proprietary limited companies sample produced a Cronbach’s alpha of 0.952 meaning all
items used in the questionnaires were reliable.
Factor Analysis
Factor analysis is conducted to identify factors that might explain the pattern of
correlations within a set of observed variables and is often used in data reduction to
identify a small number of factors that explain most of the variance observed in a much
larger number of manifest variables (Allen & Bennett, 2010). For this study, factor
analysis was conducted to check whether items that had been grouped to measure each of
the HRM practices in the questionnaire would appear in the same component. There is a
possibility that one or more items appeared in different components which would mean
those items measured different things.
Factor analysis can be conducted when the number of units in the sample is greater than
100 (Tabachnick & Fidell, 2007). The number of proprietary limited companies in the
combined data samples was 209 and this is considered to be sufficient. Furthermore, the
KMO value was 0.929 and the Bartlett’s test indicated a significant probability level
(p<0.05). These results show that it was appropriate to apply PCA to this data set. This
procedure uses an oblique rotation method which acknowledges the possibility of
correlated factors (Zikmund, 2003). PCA analysis was conducted using oblique promax
rotation and Kaiser Normalisation through SPSS 18 on the 37 items.
When using an oblique rotation, the pattern matrix is the best way of examining factor
loadings. The pattern matrix table of the PCA analysis (see Table 5.23) created seven
components with Eigen values >1.
It appears that each component had a group of items that measured the same factor. The
factor loadings represent the correlation of the variable with the factor. Ordinarily,
loadings of 0.4 constitute the minimum level for acceptance when attempting to assess
practical significance. For this study, items with loading factor >0.4 were included in the
composite variable.
From those seven components in the pattern matrix table of the PCA analysis (see Table
5.27), seven composite variables were created. Six theoretical independent variables were
shown in six components derived from PCA (see Table 5.27). It appears that items that
measured the same thing were grouped in one component. Only item pa24 loaded on two
components with a loading factor less than 0.5. This was considered difficult to interpret.
However, other items were loaded in one component. To conclude, Table 5.27 provides
substantial empirical support, for the contention, derived from the literature review, that
the independent variables were measured by related items.
Table 5.27 Pattern Matrixa of proprietary limited companies combined sample

Component
1 2 3 4 5 6 7
rs1 .735
rs2 .832
rs3 .775
rs4 .868
rs5 .815
rs6 .737
td7 .788
td8 .700
td9 .887
td10 .866
td11 .889
cr12 .396
cr13 .574
cr14 .653
cr15 .744
cr16 .922
cr17 .580
cr18 .515
pa19 .845
pa20 .873
pa21 .773
pa22 .740
pa23 .682
pa24 .383 .529
ir25 .782
ir26 .842
ir27 .773
ir28 .824
cu29 .800
cu30 .732
cu31 .831
cu32 .786
cu33 .842
pp34 .914
pp35 .853
pp36 .763
pp37 .917
Extraction Method: Principal Component Analysis.
Rotation Method: Promax with Kaiser Normalization.
a. Rotation converged in 7 iterations.
Source: Analysis of variable
The details of the composite variables and their items are shown in Table 5.28. Item pa24
was included in the composite variable of performance appraisals because its item-to-total
correlation value was >0.5 and its inter-item correlation values was > 0.3 (see Appendix
G3). These seven composite variables were used in further analysis of proprietary limited
companies.
Table 5.28 The summary of composite variables with the items - proprietary limited companies
combined sample
Variable Items
Recruitment_Selection rs4, rs2, rs5, rs3, rs1, rs6
Culture cu33, cu31, cu29, cu32, cu30
Performance pp34,pp37, pp35, pp36
Training_Development td11, td9, td10, td7, td8
Performance_Appraisals pa20, pa19, pa21, pa22, pa23, pa24
Remuneration_reward cr16, cr15, cr14, cr17, cr13, cr18, cr12
Industrial_relation ir26, ir28, ir27, ir25
Source: Analysis of variable
5.5.4 Normality and outliers
After checking new composite variables the next step was to check for normality and look
for outliers. This step is necessary prior to the conduct of a multiple linear regression
analysis. Normality is checked based on Z-scores of the variables. Table 5.29 shows the
statistic and standard error of skewness for the seven variables.
Table 5.29 Statistic and standard error of skewness before normality- proprietary limited companies
combined sample
Std. Z-score
N Minimum Maximum Mean Deviation Skewness
Std.
Statistic Statistic Statistic Statistic Statistic Statistic Error
Remuneration_Rewards 209 2.14 7.00 5.1224 1.09613 -.404 .168 -2.404
Performance_Appraisals 209 1.00 7.00 5.6443 1.30182 -1.651 .168 -9.827
Culture 209 1.20 7.00 5.6804 1.22414 -1.236 .168 -7.357
Performance 209 1.25 7.00 4.1986 1.64632 -.044 .168 -261
There were four variables that were negatively skewed (Z score >2.58). They were:
recruitment-selection, training-development, performance-appraisals, and culture. These
four variables then were transformed using our log natural process (Manning & Munro,
2007). The results of the transformation are shown in Table 5.30.
Table 5.30 Statistic and standard error of skewness after normality- proprietary limited companies
combined sample
Minimu Std. z-score
N m Maximum Mean Deviation Skewness
Statis Std.
tic Statistic Statistic Statistic Statistic Statistic Error
Remuneration_Rewards 209 2.14 7.00 5.1224 1.09613 -.404 .168 -2.404
Performance 209 1.25 7.00 4.1986 1.64632 -.044 .168 -0.261
RecruitmentSel_transform 209 1.10 3.00 1.9992 .51484 -.103 .168 -0.613
Culture_transform 209 1.08 3.00 2.2841 .49690 -.245 .168 -1.458
TrainingDev_transform 209 1.05 3.00 2.1934 .60441 -.152 .168 -0.904
PerformanceAppr_transform 209 1.05 3.00 2.2716 .49845 -.290 .168 -1.726
Table 5.30 shows that the skewness values of the variables were all less than 2.58. This
means that all variables were normally distributed. The next step was checking for outliers.
The univariate outliers were checked through the Z standard score (±2.58) and four
outliers (numbers 140, 154, 157, and 208) were found. The Mahalanobis value (20.515,
df=6) was used to check multivariate outliers and one outlier (number 149) was found.
These five outliers were removed from the data sample and the new total data sample for
further analysis was 204.
Bivariate correlations between two variables were used to check the relationships between
each independent variable and the dependent variable of perception of company
performance. This called for the use of Pearson Product Moment correlations.
As shown in Table 5.31, there was a positive correlation between recruitment and selection
and perception of company performance (r= 0.436, p<0.05). Furthermore, since p<0.05,
the correlation was significant.
Table 5.31 Correlations of recruitment and selection and performance -proprietary limited
companies combined sample
Performance RecruitmentSel_transform
N 204 204
RecruitmentSel_transform Pearson Correlation .436** 1
N 204 204
Table 5.32 shows that there was a positive correlation between training and development
and perception of company performance (r=0.455, p<0.05). This correlation was
significant since p<0.05.
Table 5.32 Correlations of training and development and performance - proprietary limited
Performance TrainingDev_transform
N 204 204
TrainingDev_transform Pearson Correlation .455** 1
N 204 204
The bivariate correlation of remuneration and reward with perception of company

performance in Table 5.33 shows a positive value (r= 0.156, p<0.05). Since p<0.05 the
correlation was significant.
Table 5.33 Correlations of remuneration and rewards and performance -proprietary limited
Performance Pearson Correlation 1 .156*
N 204 204
Remuneration_Rewards Pearson Correlation .156* 1
N 204 204
*. Correlation is significant at the 0.05 level (2-tailed).
As shown in Table 5.34, there was a positive correlation between staff performance
appraisals and perception of company performance (r=0.341, p<0.05). This correlation
was significant since p<0.05.
Table 5.34 Correlation of staff performance appraisals and company performance -proprietary
limited companies combined sample
Performance PerformanceAppr_transform
N 204 204
PerformanceAppr_transform Pearson Correlation .341** 1
N 204 204
The bivariate correlation of industrial relations with perception of company performance in

Table 5.35 shows a positive value (r=0.363, p<0.05). Since p<0.05 the correlation was
significant.
Table 5.35 Correlations of industrial relations and performance - proprietary limited companies
combined sample
Performance Industrial_relation
N 204 204
Industrial_relation Pearson Correlation .363** 1
N 204 204
As shown in Table 5.36, there was a positive correlation between culture and perception of
company performance (r= 0,023, p>0.05). However, since p>0.05 the correlation was non-
significant.
Table 5.36 Correlation of culture and company performance - proprietary limited companies
combined sample
N 204 204
Culture_transform Pearson Correlation .023 1
N 204 204
It can be seen that bivariate correlations of the six independent variables with dependent
variables of perception company performance showed positive and significant correlations
except for culture which showed a positive but non-significant correlation. This indicated
that a multiple regression analysis could proceed. The next section presents the hypothesis
testing for the proprietary limited companies combined sample.
5.6 Hypothesis Testing of Proprietary Limited Companies – Combined

Data
The literature review chapter developed six main hypotheses (see Section 2.8). This
section presents the results of the analysis of the hypotheses and draws conclusions about
the relationships between HRM practices and perception of company performance.
Each of the hypotheses outlined in Chapter 3 can be tested using the above bivariate
correlations. Specifically, the six hypotheses were tested against the Pearson’s product-
moment correlation coefficient for the relationship between each variable and perception
of company performance, as depicted in Tables 5.31 to 5.36 in the correlation section
above.
5.6.1 Test of Hypothesis 1
H1: There is a positive relationship between implementation of recruitment and

selection processes and perception of company performance.
As shown in Table 5.31, the bivariate correlation between recruitment and selection
processes and perception of company performance had a statistically significant positive
value of 0.436 meaning recruitment and selection was positively correlated to company
performance. This means that changes in recruitment and selection could be expected to
change the company’s performance. Therefore, Hypothesis 1 was accepted.
H2: There is a positive relationship between implementation of training and

development processes and perception of company performance.
As shown in Table 5.32 the bivariate correlation between training and development and
perception of company performance had a significant positive value of 0.455. This
indicates that implementation of training and development processes supported company
performance. It appears that increased training and development could be expected to
increase the company’s performance. Therefore, Hypothesis 2 was accepted.
H3: There is a positive relationship between implementation of remuneration and

reward and perception of company performance.
As shown in Table 5.33,the bivariate correlation between remuneration and rewards; and
perception of company performance had a significant positive value of 0.156. It appears
that improvement to the remuneration and rewards system will improve the perception of
company performance. Therefore, Hypothesis 3 was accepted.
H4: There is a positive relationship between implementation of performance

appraisals processes and perception of company performance.
As shown in Table 5.34 the bivariate correlation between performance appraisals and
perception of company performance had a positive value of 0.341. It can be concluded that
there is sufficient evidence to demonstrate a positive relationship between performance
appraisals and company performance. Therefore, Hypothesis 4 was accepted.
H5: There is a positive relationship between implementation of industrial relations

processes and perception of company performance.
As shown in Table 5.35 the bivariate correlation between industrial relations and
perception of company performance had a positive value of 0.363. It can be concluded that
there is sufficient evidence to demonstrate a positive relationship between industrial
relations and company performance. Therefore, Hypothesis 5 was accepted.
H6: There is a positive relationship between culture in HRM practices and

perception of company performance.
As shown in Table 5.36 the bivariate correlation between culture and perception of
company performance had a non-significant positive value of .023. The relationship
between culture and company performance was non-significant. Therefore, Hypothesis 6
was rejected.
Findings from the hypothesis testing are discussed in greater detail in Chapter 6.
5.7 Multiple Linear Regression Analysis of Proprietary limited

companies – Combined Data
The rationale for conducting multiple linear regression analysis is to create a model to
describe the contribution ...six predictor variables (recruitment and selection, training and
development, remuneration and rewards, performance appraisals, unions and labour
relations and culture) to the dependent variable of perception of company performance. A
rationale for the analysis is to search for predictor variables that help to explain significant
variations in the dependent variable. In this way, it is possible to ascertain how much of
the variances in the dependent variable of perception of company performances can be
accounted for by the independent variables in combination (Manning & Munro, 2007). If a
number of significant predictors can be identified, then the employers/HR managers can
manage risks and maximize the favourable outcomes.
In Table 5.37, the multiple correlation coefficient (R=0.572) was significantly different
from zero, F(6, 197) =15.937, p<.05.
Table 5.37 Model Summaryb of proprietary limited companies combined sample

Change Statistics
Adjusted Std. Error of the R Square Sig. F
Model R R Square R Square Estimate Change F Change df1 df2 Change
1 .572a .327 .306 1.37898 .327 15.937 6 197 .000
a. Predictors: (Constant), Culture_transform, Industrial_relation, TrainingDev_transform, Remuneration_Rewards,
PerformanceAppr_transform, RecruitmentSel_transform
b. Dependent Variable: Performance
The coefficient of multiple determination R squared (R2) represents the proportion of

variance that can be accounted for by the predictor (independent variables) in combination
(Hair et.al. in Manning & Munro, 2007). Here, 32.7% of the variance in perception of
performance could be explained by recruitment and selection, training and development,
compensation and reward, performance appraisals, industrial relations and culture
(R2=.327, adjusted R2=.306)
The ANOVA analysis shown in Table 5.38 below reveals a significant regression value
(sig<0.05). This indicates that predictor variables in combination could account for a
significant amount of the variance in perception of company performance.
Table 5.38 ANOVAb of proprietary limited companies combined sample
Model Sum of Squares df Mean Square F Sig.
1 Regression 181.837 6 30.306 15.937 .000a
Residual 374.611 197 1.902
Total 556.449 203
a. Predictors: (Constant), Culture_transform, Industrial_relation, TrainingDev_transform, Remuneration_Rewards,
PerformanceAppr_transform, RecruitmentSel_transform
b. Dependent Variable: Performance
The subsequent analysis looked at the multicollinearity and explained the regression
output. Multicollinearity was measured through the collinearity statistic section of the
coefficients table (Allen & Bennett, 2010). Table 5.39 shows that none of the variables had
a tolerance < 0.2 and VIF > 5. Therefore, all variables were free from multicollinearity
problems.
Table 5.39 Coefficientsa of proprietary limited companies combined sample
Unstandardized Standardized Collinearity
Coefficients Coefficients Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) 1.291 .610 2.115 .036
RecruitmentSel_transform .861 .286 .264 3.007 .003 .445 2.249
TrainingDev_transform .662 .215 .236 3.073 .002 .580 1.725
Remuneration_Rewards -.176 .115 -.112 -1.539 .125 .647 1.545
PerformanceAppr_transform .526 .284 .154 1.852 .066 .494 2.026
Industrial_relation .247 .080 .205 3.081 .002 .769 1.300
Culture_transform -.769 .244 -.222 -3.157 .002 .689 1.451
a. Dependent Variable: Performance
Data in the Sig. column of Table 5.39 shows that four independent variables, recruitment
and selection, training and development, industrial relations and culture had significant
(sig.) values less than 0.05. This indicates that those related independent variables
significantly and uniquely contributed to the regression equation for the company
performance. An examination of the t-value also indicates that each of the four
independent variables was significantly correlated with company performance. The other
two independent variables of remuneration and rewards and staff performance appraisals
did not make a unique individual contribution to the regression equation since their
significance values were greater than 0.05.
Figure 5.2
.
The normal P-P (probability) plot of regressions standardised residual in Figure 5.2 was
used to assess the assumption of normally distributed residuals. Figure 5.2 above shows
that the point clustered reasonably tightly along the diagonal line, thus the residuals were
normally distributed.
Figure 5.3
The scatter plot of standardised residuals against standardised predicted values in Figure
5.3 was used to assess the assumption of normality, linearity and homoscedasticity of
residuals. The absence of any clear pattern in the spread of points indicates that these
assumptions have been met.
Although there were only four independent variables uniquely contributing to the
regression equation for company performance, in order to explore the relationship
between all six independent variables and company performance, the six independent
variables were used in the following equation.
The regression model was:
Y = 1.291+0.861X1 + 0.662X2-0.176X3+ 0.526X4+0.247X5 -0.769X6
Where:
Y= Perception of company performance
X1 = Recruitment and Selection
X2 = Training and Development
X3 = Remuneration and Rewards
X4 = Performance Appraisals
X5 = Industrial Relations
X6 = Culture
By examining Table 5.39 and the regression model above, it can be concluded that the
variables industrial relations (t=3.08, p=.002), recruitment and selection (t=3.00., p=.003),
training and development (t=3.07, p=.002) and culture (t=-3.15., p=0.02) contributed
uniquely and significantly to the regression equation (i.e. the prediction of perception of
company performance). In this case, culture contributed negatively but significantly to
company performance. Remuneration and rewards (t=-1.54, p=.125) and also performance
appraisals (t=.1.85, p=.066) did not appear to provide any significant contribution to the
prediction of the perception of company performance. Remuneration and rewards appeared
to contribute negatively and non-significantly to the perception of company performance
and performance appraisals contributed positively but non-significant to the perception of
company performance. These findings will be discussed in some detail in the final chapter.
5.8 Conclusion
This chapter presented the data analysis of data collected from the survey and the
interpretation of that data to answer the research questions which were raised in the earlier
chapters. Demographic analysis of the data sample as well as extensive descriptions was
presented to get a better understanding of the data set and the relationships of the variables
under investigation. The section on descriptive statistics described the respondents in the
samples and their response rates. The preliminary data analysis included correlation matrix
analysis, and testing for normality and outliers. Principal component analysis as well as
reliability tests were conducted to analyse and customise the data set for further analysis.
Statistical relationships between HRM practices and company performance, and between
culture and company performance, were explored, guided by the hypotheses set forth in
Chapter 3. A multiple linear regression was conducted to generate a model for predicting
The correlation analysis of the initial combined sample of 228 respondents showed little
empirical evidence of the adoption of Western HRM practices because the relationships
showed negative values. It was thought that these results might relate to the number of
family businesses represented in the sample. This number was larger than the number of
proprietary limited companies in the sample. To test whether this was the explanation, a
separate analysis of the family businesses (147 respondents) was conducted and this
yielded negative values for the relationship between the independent variables of HRM
practices and culture, and the independent variable of perception of company performance.
This result supported the explanation. To check whether proprietary limited companies
provided clearer evidence of the adoption of Western HRM practices, a separate analysis
of proprietary limited companies (81 respondents) was undertaken and the correlation
analysis of this sample identified significant and positive relationships. The strong
empirical result for proprietary limited companies made it possible to further explore HRM
practices in proprietary limited companies using a larger sample.
Additional data collection that focused on proprietary limited companies was conducted
and data was gathered from 131 respondents. The correlation analysis of the combined
sample of proprietary limited companies (209 respondents) focused on the relationships
between HRM practices (including culture), and perception of company performance. The
outcomes suggest the existence of relationships, between HRM practices (including
culture) and perception of company performance. The positive values of the correlations
enabled a multiple linear regression analysis to be conducted. The regression analysis of
proprietary limited companies generated a model of company performance that could be
predicted by predictor (independent variables) of HRM practices and culture. The model
suggested that the four predictor variables of recruitment and selection, training and
development, culture and industrial relations, significantly contributed to company
performance while the two predictor variables of remuneration and rewards and
performance appraisals did not. There were anomalous results for culture since it had a
high mean score in descriptive analysis but it was rejected in hypothesis testing because it
showed a non-significant value and it made a significant negative contribution to company
performance in multiple regression analysis. In Chapter 6, the concluding chapter, the
outcomes and results for the three research questions are discussed further.
Chapter 6: Discussion and conclusion
CHAPTER SIX
DISCUSSION AND CONCLUSION
6.1 Introduction
This chapter discusses the case study and survey findings regarding human resource
management practices of medium-sized enterprises in the textile industry in Java,
Indonesia. In Chapter 4, the analysis of data from the four case studies identified themes
and patterns of HRM practices in medium-sized companies. Major differences were found
between the two types of business categories, namely family businesses and proprietary
limited companies. In Chapter 5 the statistical analysis of the survey sample was broken
into family businesses and proprietary limited companies because the analysis of the initial
sample which comprised both these business types, did not provide significant results.
Analysis of the proprietary limited companies segment of the sample appeared to indicate
the adoption of Western HRM practices; therefore, a larger sample of proprietary limited
companies was sought. The hypothesis testing and multiple linear regressions were also
applied to proprietary limited companies because the correlation analysis of proprietary
limited companies had shown significant positive values indicated it was valid to do so. In
this chapter, the discussion of these two types of businesses will be expanded based on the
analysis in Chapter 4 and 5.
The chapter has ten sections. Section 6.1 serves as an introduction to the discussion.
Section 6.2 discusses Research Question One with separate subsections on proprietary
limited companies and family businesses. Section 6.3 discusses Research Question Two
with subsections on proprietary limited companies and family businesses. Section 6.4
discusses the hypothesis testing presented in Chapter 5 in relation to Research Question
Three. Section 6.5 discusses the multiple linear regression of proprietary limited
companies combined sample that has been analysed in Chapter 5. Section 6.6 discusses the
implications for practice. A discussion of the contribution of the thesis to knowledge is
presented in Section 6.7, followed by an examination of the limitations of the study in
Section 6.8. Section 6.9 provides suggestions for further research. Finally, Section 6.10
presents a conclusion to this chapter. The outline structure of Chapter 6 is shown in Figure
6.1
The HRM practices of Indonesian medium-sized companies in the textiles industry in Java 202
6.1 Introduction
6.2.1 Case study findings

6.2.2 Survey findings
6.2 Discussion of Research Question One 6.2.3 Discussion

6.3 Discussion of Research Question Two 6.3.2 Survey findings
6.3.3 Discussion
6.4.1 Survey findings on

Hypothesis testing
6.4. Discussion of Research Question Three 6.4.2 Survey findings on multiple
linear regressions
6.5. Implications for Practice
6.6 Contribution of the Thesis
6.7 Limitations of the Study
6.8 Suggestions for Further Research
6.9 Conclusion
6.2 Discussion of Research Question One

RQ1: What HRM practices in terms of recruitment and selection, training and
development, remuneration and rewards, performance appraisals and
industrial relations are implemented in medium-sized textile companies in
Java?
In the previous two chapters, qualitative and quantitative analyses attempted to answer
research questions one. In this chapter, the discussion will compare data from the case
study findings and the survey findings about the implementation of HRM practices. The
discussion examines the companies' HRM practices in terms of recruitment and selection,
training and development, remuneration and rewards, performance appraisals, and union
and labour relations. The findings in the case study analysis, as the first stage of the
exploratory mixed-methods approach employed in the study, were tested with the findings
in survey analysis as the second stage. The discussion focuses on proprietary limited
companies as the family businesses segment showed very limited HRM practices.
Case study analysis investigated four cases of medium-sized companies in which three out
of four case study companies were proprietary limited companies. The findings of within-
case analysis showed that the three case study proprietary limited companies had formal
organisational structures with a personnel or HRM department, clear job descriptions and
formal HRM practices. The fourth case study company, which was a family business, did
not have a formal organisation structure or formal HRM practices. The key person for HR
management usually was a personnel manager or a production manager who was
responsible for overseeing manufacturing activities. According to Compton, Morissey and
Nankervis (2002), in small-to-medium-sized companies, production managers usually
recruit factory labour. Managers of two of the case study companies had bachelors' degrees
and the manager from the other limited company had received a secondary education. This
indicated that proprietary limited companies employed more educated people at
managerial level. Further, all of the managers had more than ten years working experience.
Despite the formal HRM practices conducted in three case proprietary limited companies,
there was informality in some of their HRM practices. Informality usually related to cost
efficiency, simple HRM practices or a lack of HRM knowledge (De Kok, 2003). Most
SMEs focus more on finance and marketing than on HRM. HRM tends to be seen as less
important when resources are limited. It appears the employers/HRM managers of small
and medium-sized companies concentrate more on survival than on developing their
human resources.
As was discussed in Chapter Four, the case study findings about recruitment and selection
showed that proprietary limited companies used both formal and informal methods of
recruitment. The formal process was shown in recruitment activities such as publicising
the vacancies through newspaper, interviewing candidates and assessing candidates'
knowledge and skills. The informality was shown in the use of word of mouth as the
complementary way of publicising the vacancies. This supported the findings of Cassel et
al. (2002) and Jameson (2000) that word of mouth was seen to be an entirely appropriate
way of getting the right employees for SMEs. One case study company did not advertise
its vacancies because there were a lot of applications sent by newly graduated alumni or
unemployed people regardless of whether there were vacancies or not. The company
usually kept the applications and used them when recruitment was needed. All four case
companies applied criteria for selection, conducted tests and individual interviews.
According to Ryan, McFarland, Baron and Page (1999), the employment interview is one
of the most widely used selection methods. Although all case companies would hire
candidates who passed the selection process, a preference for employing family members
and friends of existing staff still existed.
The case study findings indicated that employees reported having on-the-job-training
(OJT) as their formal training with duration of between two and three months. This
confirms Kotey's and Sheridan's (2004) assertion that at the operational level, the majority
of employers provided on-the-job training for their employees. On-the-job training
methods predominantly involve owner-managers watching and correcting employees on
the job. The company rarely evaluated OJT because the purpose was to familiarise the new
employees with their jobs and working environment. Other training was conducted based
on needs for example occupational health and safety training or Keselamatan dan
Kesehatan Kerja (K3) training for supervisors that are offered regularly by the
government. This training provided benefits for both supervisors and the company because
occupational health and safety was the main issue for manufacturing companies. It
appeared that medium level firms tend to provide external training for managerial levels
because of a concern for their training and development (Kotey & Sheridan, 2004), and
possibly enhance their ability to contribute to organisational success (Rowden, 2002).
Regarding remuneration and rewards, proprietary limited companies used UMR as the
determinant of their basic wages. The formality of remuneration and rewards practices was
shown on the implementation of wage systems to determine employees’ payment
including rewards and benefits system that followed government regulations. The findings
indicate that the owner/HRM managers reported they gave their workforce specific
benefits such as allowances, premium benefits, and those female employees, were eligible
for maternity leave benefits. All limited case companies registered their employees in a
social security insurance scheme offered by government (Jamsostek) to get retirement
benefits.
It appears that performance appraisals were conducted formally. Kotey and Sheridan
(2004) argue that medium level firms conduct performance appraisals for both operational
and managerial level employees and the most used method is rating scales. One case study
company used forms to be filled in by supervisors or managers. Other companies used
production achievement to evaluate employees' performances. There were criteria for
appraisals using forms and the results were usually used for allocating wage increases or
promotions. However, the results of appraisals were not relayed back to the employees
and this often caused dissatisfaction among employees. This is another example of the
paternalistic practices of the three case companies, especially regarding promotion.
The findings on industrial relations showed that employees of the proprietary limited
companies could join unions (SPN or SPBI).It appears that all proprietary limited
companies allowed unions regulated by the government. The formation of unions was
regulated under The Manpower Act No.13/2003. Union membership was automatic and
some case study employees became union board members. There were employees who
were actively involved in union activities such as strike action but most employees did not
involve themselves actively.
The demographics of the 209 respondents from proprietary limited companies showed that
the employers or persons who had HRM responsibilities were mostly male (67%). This
confirmed that in Indonesian SMEs, entrepreneurs'/managers' roles were dominated by
men although there has been an increasing number of women entrepreneurs since 1980
(Tambunan, 2007). The largest group of respondents were between 31 and 40 years of age
(36%) and had received a tertiary education (63.7%). The majority of the
employers/managers had at least 1 to 5 years of experience in HRM practices (48.8%).
Reynolds et al. (2000) found that individuals aged 25-44 years were the most
entrepreneurially active. Most respondents had a tertiary education, indicating that the
owners/HRM managers of proprietary limited companies had knowledge and skills that
were useful for the companies and this might have contributed to the implementation of
formal Western HRM practices. Also, for SMEs, education was found to have a significant
relationship with business success (Indarti & Langenberg, 2004). This was not the case in
family businesses where the majority of the owners/managers had received a secondary
education or less.
As was discussed in Chapter 5, the descriptive analysis of proprietary limited companies

showed mean scores of variables fell within the range of µ ± 1SD or above. This indicates
that the implementation of HRM practices was uniformly high. From five dependent
variables of HRM practices analysed in the proprietary limited companies combined
sample, three variables had mean scores above the range (>µ + 1 SD). These variables
included performance appraisals, training and development and remuneration and rewards.
The other two variables (recruitment and selection, and also unions and labour relations)
were within the acceptable range (µ ± 1 SD). The performance appraisal variable appeared
to have a high mean score while the lowest mean score was for unions and labour
relations. From this it can be concluded that proprietary limited companies are very
concerned with performance appraisal while unions and labour relations appeared to attach
the least concern from proprietary limited companies.
The high mean score of performance appraisals was supported by the high mean scores of
performance appraisals' items. Since the survey questionnaire measured the formal HRM
practices of proprietary limited companies, it can be concluded that proprietary limited
companies are concerned with formal performance appraisal activities. The formal
performance appraisals activities included the use of performance appraisal for wage
increment purposes and for career development purposes. Criteria for appraisals were
applied to all employees and the results of performance appraisals were revealed to the
employees
The high mean score for the training and development variable indicates that proprietary
limited companies are concerned with training and development practices. All items that
measured training and development appeared to support the important of training and
development activities. Proprietary limited companies appeared to be concerned with
evaluation before and after training. Further, on-the-job-training was conducted for
duration which ranged from 1 to 3 months. They also provided other training based on
needs and conducted training on a regular basis for skills improvement.
The mean score for recruitment and selection was within the range indicating the
proprietary limited companies were concerned with recruitment and selection activities but
did not put a lot of effort into them. Proprietary limited companies appeared to apply
formal HRM practices, conduct individual interviews, and apply criteria for selection and
they appeared to use external sources of recruitment. According to Kotey and Sheridan
(2004), at the managerial level, selection techniques such as interviews, review of
application letters and assessment of candidates’ qualifications were conducted frequently
in medium-sized firms.
The high mean score for remuneration and rewards showed that the proprietary limited
companies were also concerned with remuneration and rewards systems. Items which
measured remuneration and rewards appeared to support the existence of remuneration and
rewards activities. Proprietary limited companies appeared to provide fair remuneration
systems, and to provide rewards and benefits as regulated by the government. There were
criteria for determining the pay rate of each employee and government standards on
regional minimum wage (UMR) were followed Proprietary limited companies intended to
pay higher wages every year in line with the annual increase to the UMR.
The mean score for unions and labour relations appeared to be the lowest indicating
proprietary limited companies had only a little concern with unions and labour relations.
Items measuring concern for unions and labour relations might be not fully agreed, such as
allowing their employees to join and participate in the union or unions have functioned as
expected by the employers and the employees and both the employer and the employees
got benefits from the union’s existence.
6.2.3 Discussion
Dessler (2011) claims that HRM consists of the policies and practices that organisations
use to recruit, train, reward, appraise, and develop employees. Like large organisations,
medium-sized businesses have to recruit and select employees, assess and reward
performance and provide opportunities for training and development. To be effective
‘people managers’, the owner-managers of small and medium-sized companies need to
develop sound ‘people-management’ skills, including inter-personal skills, decision
making skills, leadership skills and team management skills. While many small business
owner-managers may have good technical and entrepreneurial skills, they tend to have had
few opportunities to develop similarly effective ‘people skills’ (Thoha, 2005).
In general, the case study findings on the HRM practices of proprietary limited companies
were supported by the survey findings in terms of formal HRM practices. As was analysed
in Chapter 5 and discussed in the survey findings above, in general, the HRM practices in
medium-sized proprietary limited companies were uniformly high. The informality of
HRM practices revealed in the case study findings could not be confirmed by the survey
findings because the survey findings only examined formal practices.
HRM begins with the recruitment and selection of employees. Recruitment and selection
procedures were used by SMEs more than any other practice (Cassell et al., 2002).
Jameson (2000) claims that the management of human resources in small firms is
characterised by vague hiring standards and unsystematic recruitment. There was a
possibility that the new employees were not the best available for the jobs offered.
The case study findings on recruitment and selection showed that proprietary limited
companies conducted both formal and informal recruitment processes. It appears that there
is a correlation between the size of a firm and level of formality of its HR practices
(Jameson, 2000; Nguyen & Bryant, 2004). The formal practices conducted by three case
study proprietary limited companies included the use of external sources of recruitment,
advertising the vacancies and application submission requirements. These were confirmed
by the survey findings through the presence of good practices of formal recruitment, the
use of external sources of recruitment and the use of newspapers as the media for
advertisements. A study conducted by Kotey and Sheridan (2004) found that the use of
newspaper advertisements in the majority of medium level firms indicated the importance
of employee competency.
The case study findings also showed that proprietary limited companies conducted formal
selection processes. The formal selection processes that were confirmed by the survey
findings were the use of selection criteria, the use of individual interviews and conducting
tests to ascertain candidates’ skills. The survey findings showed that these formal selection
processes were consistently followed. However, the details of the selection processes were
not covered in the survey findings. Rather, those were discussed in the case study analysis.
The case study findings revealed that for operational employees especially in production
departments, selection criteria might be very simple and often did not mention education
level requirements. Thus primary or secondary school education could be acceptable and
skills and experience were not always required. These criteria usually applied for simple
and repetitive jobs such as ironing for garment companies. For job vacancies that needed
specific skills, proprietary limited companies applied more criteria, including work
experience. This policy also occurred for managerial level positions, for which proprietary
limited companies applied more complex selection criteria.
The case study findings on training and development showed that the three case study
proprietary limited companies conducted formal training and development. These formal
training and development practices were confirmed by the survey findings Formal training
and development activities conducted by proprietary limited companies included
conducting training on regular basis, conducting on-the-job training (OJT) with duration of
between 1 and 3 months, evaluation before and after training, conducting other training
based on need, and conduction training for skills improvement purposes.
It appears that on-the-job training was the most frequently used training method, especially
in smaller businesses and among manufacturers (Blanchard & Thacker, 2010; Jameson,
2000). The benefit of OJT is it provides new employees with a rapid orientation on how
the company operates. It also has the potential to develop a more positive relationship
between old and new employees and between supervisors and their subordinates
(Blanchard & Thacker, 2010).
The case study findings on formal remuneration and rewards were supported by the survey
findings. In the survey findings, proprietary limited companies were shown to be
concerned with formal remuneration and rewards systems. Formal remuneration and
rewards systems that were used by proprietary limited companies included providing fair
remuneration, using the regional minimum wage (UMR) policy set by the government in
determining the basic wage, increasing the wage every year, using criteria in determining
employees’ pay rates, and providing rewards and benefits. The case study findings
revealed that although the three case study proprietary limited companies had formal
remuneration and rewards systems, their practices were different. For example, allowances
were provided by all proprietary limited companies but the amounts added to the basic
wage were not standard and there were no laws that regulated the size of allowances. The
case study findings indicated that one case company provided only a small allowance to
operational employees. This also occurred for rewards and benefits such as maternity
leave benefits that were provided according to government regulations.
The case study findings on formal performance appraisals were confirmed by the survey
findings which were that proprietary limited companies were very concerned with
performance appraisals. The formal performance appraisal activities included conducting
performance appraisals of all employees on a regular basis, using criteria for the
performance appraisals, conducting performance appraisals for wage increment and career
development purposes and also revealing the results to the employees.
The case study findings on unions and labour relations were also confirmed by the survey
findings although this area was of low concern to proprietary limited companies. It
appeared that proprietary limited companies paid little attention to unions and industrial
relation practices. Their actions included allowing their employees to join and participate
actively in the unions. Unions did not function properly as expected nor did both the
employers and the employees get benefit from the union existence. Although the case
study findings showed that all case study companies allowed their employees to join
unions and in some cases the membership was even automatic. However, it appeared that
the unions still had limited roles in mediating conflicts of interests between employers and
the employees.
In Indonesia, unions and labour relations are still in the development stage. Previously
labour relations were controlled by the government. The changing economic and political
situation has brought with it a change in labour laws which now give more protection to
employees and more freedom for unions to act on behalf of the employees. Waring (2010)
argues that in unstable economic conditions, higher labour mobility and weak labour laws,
human resource managers will need to use all their negotiation and creative thinking skills
to develop practical strategies.
In Asian countries there is a wide variety of labour regulation, bargaining structures and
trade union activity. This means that firms require human resource managers who typically
have a strong sense of cultural sensitivity combined with a strong appreciation for the
ways in which markets are rapidly developing (Waring, 2010). Ram (1991) cited by
Wilkinson (1999) argues that workplace relations in SMEs may be complex, informal and
contradictory rather than simply either harmonious or autocratic.
However, the case study findings also revealed informal HRM practices that could not be
confirmed by the survey findings. The survey findings only confirmed the formal HRM
practices in proprietary limited companies and did not cover the informal practices that
occurred in limited textile companies. The informal HRM practices in proprietary limited
companies may still be found due to problems including lack of resources and
management skills (De Kok & Uhlaner, 2001). It appears that formal HRM practices are
more costly and time consuming to implement in small firms than in larger firms (Reid et
al., 2002), especially as they are unlikely to have the managerial resources and expertise in
the area of HRM (Chandler and McEvoy, 2000; Hornsby and Kuratko, 1990; 2003).
The case study findings revealed that proprietary limited companies used informal
recruitment such as employees' network channels and word of mouth to publicise
vacancies for production employees. Barret et al. (2007) claim that the uses of “word-of-
mouth” advertising, family membership or friendship as the overriding criteria for
selecting new employees are an example of an informal selection practice. This informality
might relate to cost minimisation especially when job vacancies do not require specific
skills. In Indonesia, which has a high unemployment rate, searching for new candidates
was easy particularly in regard to operational employees who do not need high
qualification. Compton, Morissey and Nankervis (2002) claim that external recruitment of
unskilled labour might use referrals from existing employees because it reduces
advertising costs and they can inform potential employees what the organisation requires
and what a job entails.
The informal selection processes occurred when proprietary limited companies used
internal sources of recruitment. Compton, Morissey and Nankervis (2002) claim that the
advantages of internal recruitment are that it can simplify the recruitment process, it
supports the development of a career path and it is cheaper. Internal recruitment might
become informal if proprietary limited companies do not set the selection criteria clearly
and do not inform all eligible employees of the vacancies. The case study findings also
show that the acceptance of the candidates in proprietary limited companies was based on
the selection process but there were possibilities that family and friend connection still
influence the acceptance process. However, Jameson (2000) argues that informal
recruitment practices and inappropriate selection can lead to high labour turnover because
informal procedures do not guarantee that the new employees would perform well and
might result in employing people who are inappropriate in the long run.
The case study findings show that informal training and development occurred when
proprietary limited companies did not set the training objectives clearly. One limited
company conducted on-the-job training just to familiarise new employees with their jobs
and working environment and to check the candidates’ seriousness. Informal OJT
programs consider training to be completed after try-out step (Blanchard & Thacker,
2010). Furthermore, it appears that many organisations do not follow a structured approach
of on-the- job-training. In these organisations, instruction by supervisors occurs at the job
site on an informal basis and is characterised by the following: no objectives or goals are
developed or referred to during training; trainers are chosen on the basis of technical
expertise, not training ability, and trainers have no formal training in how to train
(Blanchard & Thacker, 2010).
The employers/HRM managers of proprietary limited companies believed that they paid
higher wages than other companies. Although the employers/HRM managers believed that
there were no complaints from the employees, since the respondents of the survey were
only the employers/HR managers, their opinions might not have been accurate. In fact, the
case study findings reveal that not all proprietary limited companies satisfied their
employees. The findings from one case study limited company showed that its employees
in the production department were dissatisfied with their wages. The dissatisfaction was
because there was no differentiation of basic wage between new employees and the
employees who had worked for more than five years. Furthermore, the allowance provided
was very small. Other dissatisfaction also came from the delays to Jamsostek insurance
registration. A study conducted by Kartikasari (2008) on PT Jamsostek Semarang branch
found that there were many companies that did not report their actual employees’ wages to
avoid registering their employees to Jamsostek and there were complaints addressed to PT
Jamsostek as a social security provider due to its bad service. It appears that proprietary
limited companies should take this into consideration and address employee dissatisfaction
about the remuneration system especially when it is used as a work motivator. Appelbaum
and Kamal (2000) argue that while adequate pay maybe sufficient to reduce
dissatisfaction, it may not be sufficient as a stand-alone motivator.
The study findings showed that the criteria applied to the performance appraisals in one
case study limited company were not clear and that this company did not use appraisal
forms. Rather they used achievement targets as the basis of performance appraisals. Cassel
et al. (2002) argue that although some forms of appraisal are used, SMEs rarely apply
formal systems and some firms consider this practice appropriate only for managerial level
employees. Furthermore, the case study findings reveal that not all case study companies
showed the results of the appraisals to their employees and this caused dissatisfaction
when it related to promotion. The results were different in the survey findings which were
that companies revealed the results to their employees. This indicated that the case study
findings might be specific to that company. When the larger sample was taken, the results
were different to the case study findings.
It appears that formalised HRM practices are to some degree more costly and time
consuming to implement in small firms than in larger firms (Reid et al., 2002), especially
as they are unlikely to have the managerial resources and expertise in the area of HRM
(Chandler & McEvoy, 2000; Hornsby & Kuratko, 1990, 2003). In terms of the debate
around formality and informality of small firm HRM, the findings suggest that in these
small firms formalising some or all recruitment, selection, evaluation and reward practices
helped them to overcome the problem of finding the right staff (Barrett et al., 2007).
However, it is suggested that as firms grow in size, they tend to develop and adopt formal
HR practices, such as structured training programs, written policies or procedures for
recruitment and performance appraisals, and systematic management of greater numbers of
employees (Westhead & Storey, 1996). There is evidence of a positive relationship
between formalised HRM and productivity, and employee retention (Way, 2002), profit
growth (Nguyen & Bryant, 2004) and sales (Barrett & Mayson, 2007).
6.3 Discussion on Research question two

RQ2: Do Javanese cultural influences have an impact on the way HRM is practised in
Research Question 2 aimed to investigate the influence of Javanese culture on the HRM
practices in medium-sized textile companies. It also investigated whether Indonesian HRM
in medium-sized companies followed a divergence approach to HRM. As discussed, the
case study analysis and survey analysis in the previous chapters found some Javanese
cultural values were held by the managers and employees. Those characteristics were
similar to Indonesian cultural values described by Hofstede (2001). This section will
discuss whether the survey findings supported the case study findings.
East Asian and Southeast Asian cultures tend to be hierarchical, strongly collectivist,
strongly oriented towards harmonious relationships, and strongly relationship-based for
social control (Steers et al., 2010). Culture impacts behaviour, morale, and productivity at
work, and includes values and patterns that influence company attitudes and action (Moran
et al., 2011). Research adopting a cultural focus has to point out with a reasonable degree
of precision, which elements of the national culture are seen to influence business
organisation (Vo & Hannif, 2010). Three characteristics which one can be used to define a
culture are: (1) culture is shared by members of a group and sometimes defines the
membership of the group itself; (2) culture is learned through membership in a group or
community; and (3) culture influences the attitudes and behaviour of group members
(Steers et al., 2010).
Hofstede's (2001) research shows that national culture dimensions of Indonesia, which
were high in power distance, collectivism and femininity, can be used to explain HRM
practices. The research findings from this study indicate that Indonesian culture does
influence HRM practices in medium-sized companies. Besides Hofstede’s (2001)
dimensions of culture, Javanese culture which dominates Indonesian culture appears to
have coloured Indonesian HRM (Nankervis & Putra, 2006).
Cultural influences also appear to have affected the HRM practices of medium-sized
proprietary limited companies. Hofstede’s (2001) cultural dimensions of high power
distance and collectivism also affect the implementation of HRM practices in Indonesian
medium-sized proprietary limited companies. The national cultural characteristics of
Indonesia are similar to Javanese culture that views companies as big families. As
Indonesian culture is different to Western culture where HRM was developed (e.g. in the
US) the effect of culture on HRM practices in Indonesian medium-sized companies might
also be different. The next subsection will discuss in detail the Javanese cultural influences
on the implementation of HRM practices based on the case study findings and the survey
findings.
The case study findings on three proprietary limited companies showed there was a strong
cultural influence in their HRM practices. These cultural practices included a paternalistic
leadership style, a preference for collective work rather than individual work, and a high
value placed on hierarchy, seniority, and status and a view of the organisation as a big
family. The perception of the company as a big family placed the employers/managers at
the same level of the head family with great power and authority. They acted as father
figures or leaders that should be obeyed. With this cultural characteristic, the case study
companies' managers tended to apply paternalistic leadership styles although one of them
had begun to combine this with a democratic leadership style. The case study findings
showed that managers had roles of nurturing and caring as elements of their paternalistic
leadership style. Those managers also built the employees’ loyalty and commitment
through cooperativeness and trustworthiness. Cooperativeness or gotong-royong appeared
to be a core value of Javanese culture because it was a manifestation of collectivism and
harmony that characterised Indonesian people especially the Javanese and gotong-royong
was evident in these companies. According to Singleton and Nankervis (2007) these
cultural characteristics discourage the adoption of Western HRM practices.
The descriptive analysis of culture indicates that culture influenced the implementation of
HRM practices the most. The majority of the employers/HRM managers of medium-sized
proprietary limited companies appeared to believe that employees will perform well in a
group (collectivism). They also built cooperative relationships and mutual trustworthiness
among employees. Cooperativeness was one of the Javanese characteristics that is
embedded in most Indonesian organisations. The majority of the employers/HRM
managers considered their employees as part of a big family and most of them used a
paternalistic leadership style.
6.3.3 Discussion
It appears that the case study findings on culture were confirmed by the survey findings.
The survey findings were that culture influenced HRM practices in proprietary limited
companies. Those cultural characteristics included a preference for teamwork, building

trustworthiness and cooperativeness, regarding the employees as a part of a big family and
using a paternalistic leadership style. Most managers of proprietary limited companies
promoted trustworthiness among employees to increase their loyalty and commitment to
the organisation. Teamwork was preferred to accelerate job completion except for specific
jobs that had to be handled by certain employees. The preference for teamwork was also
associated with cooperativeness. Case study findings indicate that cooperativeness was
associated with the Javanese culture characteristic known as gotong-royong. This was
adopted by managers and employees because it encouraged people to help others and
involved the belief that a big job would be easier and finished quicker if it was done by
many people. Considering people in the organisation as a part of a big family was a
Javanese cultural characteristic. The Javanese cultural ideal of the family depend on
cooperativeness or mutual obligation (gotong-royong) as the basis of social harmony
(Singleton & Nankervis, 2007). Mulder (2005) argues that in Javanese thinking, the family
is more than a little moral world characterised by mutual obligation (gotong-royong).
The Javanese cultural characteristic of gotong-royong is reflected the Indonesian cultural

dimension which is high in collectivism (Hofstede, 2001). Collectivism sees the spirit of
self-reliance subordinated to the collective interests of the work group, whether at the
workplace, company or national level (Lewis et al., 2003). The big family concept
provides a key for the practice of Javanese-inspired leadership in Indonesia. Javanese
leadership, sees leaders/owners/managers as father figures who must have the qualities of a
guardian who should be honoured and followed (Mulder, 2005). This Javanese leadership
concept is closely associated with paternalistic leadership. Tong and Yong (1997) cited by
Menkhoff and Kay (2000) claim that the authoritarian and paternalistic style of
management and control of the firm is facilitated by the strong overlapping of ownership
and management. However, the case study findings indicate that the employers/managers
of proprietary limited companies start to change their leadership style along with the
organisational development. Some managers of the case study proprietary limited
companies did not fully apply a paternalistic leadership style; rather they tried to combine
it with more democratic leadership.
In conclusion, the case study findings and survey findings confirm the Javanese cultural
influence on the HRM practices of proprietary limited companies. These findings also
imply that HRM practices of medium-sized proprietary limited companies of textile

industry in Java followed a divergence approach to HRM.
6.4 Discussion of research question three
RQ3: What are the relationships between HRM practices in medium-sized textile
Responding to Research Question 3 involved hypothesis testing and multiple linear

regression analysis. The hypothesis testing checked the relationship between the dependent
variable of perception of company performance with independent variables of the range of
HRM practices and culture. Each hypothesis was tested using the value of the correlation.
If the correlation value was positive and significant, the hypothesis was accepted and if the
correlation value was non-significant, the hypothesis was rejected. A multiple linear
regression analysis examined a conceptual model of the relationship between the
dependent variable of perception of company performance and independent variables of
HRM practices and culture. From the regression model created, independent variables of
HRM practices and culture that contributed the most to the dependent variable of
perception of the company performance were investigated. Both the hypothesis testing and
multiple linear regressions were conducted on the combined sample of proprietary limited
companies (209 respondents).
6.4.1 Hypothesis testing
From the correlation analysis of six independent variables and the dependent variable of
company performance, there were five correlations that showed positive values at
significant levels (p<.05). Only one correlation that is non-significant (p<.05). It appears
that five HRM practices had positive and significant correlations with company
performance. The summary results of the accepted hypothesis through the SPSS analysis is
shown in Table 6.1 below:
Table 6.1: The summary results of the accepted hypothesis

Hypothesis Description Result
There is a positive relationship between the implementation
H1 of recruitment and selection processes and perceptions of supported
H2 of training and development processes and perceptions of supported
H3 of remuneration and rewards and perceptions company supported
performance.
H4 of performance appraisals processes and perceptions of supported
There is a positive relationship between implementation of
H5 union and labour relations processes and perceptions of supported
One correlation that had a non-significant positive value (p>0.5) was culture, therefore
this hypothesis was rejected. It appears that culture did not support company
performance. Table 6.2 below is the summary result of the rejected hypothesis:
Table 6.2: The summary results of the rejected hypothesis

Hypothesis Description Result
There is a positive relationship between the
Not
H6 influence of Javanese culture in HRM practices
supported
and perceptions of company performance.
The first hypothesis stated that there is a positive relationship between the implementation
of recruitment and selection processes and perception of company performance. The
bivariate correlation between recruitment and selection processes and perception of
company performance had a statistically significant positive value of 0.436 (p<0.05)
meaning recruitment and selection was positively correlated to the company’s
performance. This means that changes in recruitment and selection could be expected to
change the company’s performance. Therefore, Hypothesis 1 was accepted. This related to
formal recruitment and selection that was conducted by proprietary limited companies. By
conducting formal recruitment and selection, the likelihood of getting the right candidates
was higher. The hypothesis supports the findings of Delaney and Huselid (1996) that
employee selection is associated with perceived market performance. According to Katou
and Budhwar (2007) recruitment is the most powerful HR practice for achieving
sustainable competitive advantage based on human capital.
The second hypothesis stated that there is a positive relationship between the
implementation of training and development processes and perception of company
performance. The bivariate correlation between training and development and perception
of company performance had a significant positive value of 0.455 (p<0.05). This indicates
that implementation of training and development processes support company performance.
Changes in training and development could be expected to change the company’s
performance. Therefore, Hypothesis 2 was accepted. The implementation of formal
training and development appears to have a significant impact on company performance. It
appears that new employees get benefits from on-the-job training conducted by proprietary
limited companies. Other trainings provided and also the purpose of training indicate that
proprietary limited companies are concerned about their employees' skills and improved
skills will increase employees’ productivity and support company performance. This was
similar to a review of 66 studies conducted in different countries by Thang and Buyens
(2008) which concludes that training leads to improved knowledge, skills, abilities,
attitudes, and behaviour of employees that ultimately results in excellent financial and non-
financial performance of the organisations.
The third hypothesis stated that there is a positive relationship between the implementation
of remuneration and rewards processes and perception of company performance. The
bivariate correlation between remuneration and rewards; and perception of company
performance had a significant positive value of 0.156 (p<0.05). Therefore, Hypothesis 3
was accepted. The remuneration and rewards appear to have a positive relationship with
company performance although the value was small. This small value of the correlation
might relate to the difficulty of motivating employees through remuneration and rewards
because medium-sized proprietary limited companies had difficulties in earning a profit.
Furthermore, most proprietary limited companies used the regional minimum wage (UMR)
as a platform wage.
The fourth hypothesis stated that there is a positive relationship between the
implementation of performance appraisal processes and perception of company
performance. The bivariate correlation between performance appraisals and perception of
company performance had a positive value of 0.341 (p<0.05). It can be concluded that
there is sufficient evidence to demonstrate a positive relationship between performance
appraisals and company performance. Therefore, Hypothesis 4 was accepted. The
discussion on performance appraisals showed that proprietary limited companies

conducted performance appraisals to increase wages or to use as promotion criteria. This
shows the importance of the performance appraisals although there was still informality in
it and the results of the appraisal were not revealed to the employees.
The fifth hypothesis stated that there is a positive relationship between the implementation
of union and labour relations processes and perception of company performance. The
bivariate correlation between industrial relations and perception of company performance
had a positive value of 0.363 (p<0.05). It can be concluded that there is sufficient
evidence to demonstrate a positive relationship between industrial relations and company
performance. Therefore, Hypothesis 5 was accepted. The discussion on the case study
findings supported this hypothesis as case study proprietary limited companies had unions
in their companies and they allowed their employees to join them. Although Indonesian
unions and labour relations in the current situation are still in the developing stage,
improving the unions' role and activities can make a significant contribution to company
performance.
The sixth hypothesis stated that there is a positive relationship between cultures in HRM
practices and perception of company performance. However, the bivariate correlation
between culture and perception of company performance had a non-significant positive
value of .023 (p>0.05). Since the relationship between culture and company performance
was non-significant, Hypothesis 6 was rejected. It appears that the rejection of culture in
the hypothesis testing did not support the descriptive analysis which suggested that culture
was the variable that influenced the HRM practices of proprietary limited companies the
most.
It appears that the strong influence of Javanese culture on the implementation of the HRM
practices of medium-sized proprietary limited companies did not support company
performance. However, studies on Indonesian culture and specifically the Javanese
cultural influence on management have identified the tendency of the Javanese culture to
hinder the adoption of Western management practices (Habir & Larasati, 1999; Nankervis
& Putra, 2006; Singleton & Nankervis, 2007; Zifirdaus & Nankervis, 2003). On the other
hand, company performance was measured by formal management practices that in some
degree are characterised by Western cultures and values. When the Javanese culture and
Western culture differ, this creates gaps and difficulties for employers/HRM managers
wanting to adopt Western management practices including Western HRM practices. That
may be why the Javanese culture did not significantly correlate with company
performance.
Several Javanese cultural characteristics and values have been identified as the sources of
difficulties in adopting Western formal HRM practices as they prevent the improvement of
employees' performance and productivity and in the end they do not contribute to company
performance. For example, teamwork preferences as a manifestation of collectivism
discourage employees from giving their best performance since they are not comfortable
competing individually and prefer to be recognised as group members. Javanese people,
who are considered as collectivist regard individual assertiveness as undesirable (Singleton
& Nankervis, 2007). Furthermore, the high power distance and paternal leadership style of
Javanese culture leads to a feeling of powerlessness among those in lower positions. As a
result, these factors do not promote company performance since the lower level employees
had feelings of inferiority and did not show their true capabilities (Zifirdaus & Nankervis,
2003).
For proprietary limited companies, these cultural characteristics could hamper company
performance because the employees are not encouraged perform to their full potential.
When the culture becomes stronger, the effect is worse. Although the case study findings
show that some managers tried to change their leadership style to be more democratic, the
Javanese custom of being passive and obedient was embedded and was reflected in the
employees' behaviour. Furthermore, the preference for group recognition rather than
individual recognition might also have caused the employees to avoid taking
responsibilities (Singleton & Nankervis, 2007) and this attitude has a negative effect on
company performance. This makes change difficult to achieve. It appears that limited
medium-sized companies in Indonesia have not found the positive qualities of Indonesian
and Javanese cultures and find it difficult to make changes in order to be able to adopt
Western HRM practices. Singleton and Nankervis (2007) argue that a collectivist approach
might be counter-productive if it does not combine collective goals with individual
responsibility.
In conclusion, all of the five hypotheses which investigated the relationship between the
dependent variable of perception of company performance and five variables of HRM
practices were accepted. This indicates that recruitment and selection, training and
development, remuneration and rewards, performance appraisals and unions and labour
relations were correlated to company performance. The hypothesis which investigated the
relationship between the dependent variable of perception of company performance and
the independent variable of culture was not supported.
6.4.2 Discussion on Multiple Linear Regression Analysis
A standard multiple linear regression performed between company performance as the

dependent variable and the independent variables of recruitment and selection, Training
and development, Remuneration and rewards, performance appraisals, industrial relation
and culture indicated that there were no multicollinearity problems in the regression.
Based on the R2 value, 32.7% of the variance in perception of performance could be
explained by recruitment and selection, training and development, compensation and
reward, performance appraisals, industrial relations and also culture (R2=.327, adjusted
R2=.306).
Data in the Sig. column of the coefficient table (see Table 5.39) in Chapter 5 showed that
four independent variables had sig. values less than 0.05. This indicates that related
independent variable significantly contributed to the regression equation for company
performance. Furthermore, an examination of the t-value indicates that each of the four
independent variables, recruitment and selection (t=3.00, p=.003), training and
development (t=3.07, p=.002), industrial relations (t=3.08, p=.002) and culture (t=-3.15,
p=0.02) were significantly correlated with company performance and those four
independent variables uniquely contributed to the regression equation. The other two
independent variables of remuneration and rewards (t=-1.54, p=.125) and performance
appraisals (t=.1.85, p=.066) did not make a unique individual contribution to the
regression equation.
Although there were only four independent variables uniquely contributing to the
regression equation for company performance, in order to explore the relationship
between all six independent variables and company performance, the six independent
variables were used in the following equation.
The regression model was:
The company’s performance = 1.291+ 0.861 x recruitment and selection + 0.662 x Training
and development - 0.176 x Remuneration and rewards + 0.526 x performance appraisals +
0.247 x industrial relations - 0.769 x culture.
The model indicates that recruitment and selection, training and development, industrial
relations, and culture all contribute to company performance. The use of formal
recruitment and selection processes appears to result on the hiring of better candidates.
Although there was still the possibility of family and friends being chosen, the criteria of
selection including interview and work sample tests still determined the quality of the
candidates accepted. Therefore, it can be seen that the practice of formal recruitment
supports company performance and the improvement of recruitment and selection will lead
to a better performance.
The positive coefficient of training and development indicates that training and
development contributed to company performance. This supports the finding by Storey
(2002) which indicates that education, training and development are positively associated
with better performance. This is also consistent with the findings of a study conducted by
De Kok (2003) which finds that an increase in training support will increase performance.
It also supports the case study findings that all the proprietary limited companies
conducted on-the-job training for all new employees. It appears that on-the-job training has
benefits as the new employees became familiar with the workplace, the tasks they were
required to perform, and the company's regulations. This was likely to lead to better job
performance and productivity. The improvement of training and development supports
company performance because it improves employees' knowledge and skills and as result,
it improves the employees' job performance. This reduces the number of product defects
and increases the company's resource efficiency.
As discussed in the literature review, remuneration and rewards appears to have a positive
relationship with company performance. This is supported by the hypothesis testing on
remuneration and rewards which shows a positive and significant correlation value. It is
also supported by the qualitative findings in which the managers and the employees were
both really concerned with the remuneration rewards system. Accordingly, remuneration
and rewards individually contributed to the company performance; however, this
contribution was reduced when other five predictor variables were included in the
regression model. This was shown through its negative coefficient and non-significant
value. In the case of Indonesian medium-sized proprietary limited companies,
remuneration and rewards did not contribute to company performance because most
medium-sized proprietary limited companies might have difficulties increasing their wage
payments due to the economic hardship which meant that their businesses hardly obtained
profits. Although the managers believed that the company paid their employees according
to the government laws and regulations, the employees felt they were underpaid. This
supported the case study findings in which the employees of proprietary limited companies
were dissatisfied about their wages. They believed their allowances were too small and did
not like the fact that there was no differentiation between the basic wages of new
employees and old employees. This might have reduced the employees' motivation to
work, thereby reducing company performance. They did not express their dissatisfaction to
the managers due to their fear of being fired. Cooke (2005) argues that when the skill
requirement of the jobs are low and businesses are highly cost-sensitive, most employers
can offer low wages and operate in a hire and fire mode. As consequences, the companies
might face low productivity and in a long run this might cause low performance.
The positive coefficient of performance appraisals was non-significant, which means

performance appraisals in the regression model did not uniquely and significantly
contribute to company performance. This was not supported the hypothesis testing that
showed a positive and significant correlation between performance appraisals and
perception of company performance. Furthermore, the case study findings and descriptive
analysis of the survey confirmed that proprietary limited companies conducted
performance appraisals for all employees. The possible explanation for these inconsistent
results was that medium-sized proprietary limited companies did not always conduct
performance appraisals formally. The case study findings showed that in one case, the
company only used feedback on production targets that were not achieved. The results of
the performance appraisals were used to determine wages and promotions, however in
practice, proprietary limited companies might not use them as planned. Rather they may
use different procedures for wage increments or promotion. The case study findings
indicated that proprietary limited companies increased their wages by following regional
minimum wage (UMR) which was increased every year by the government. Furthermore,
internal promotions were likely to be done by direct appointment rather than thorough
selection processes.
A focus on industrial relations also contributed positively to company performance. The

positive coefficient of industrial relations in the regression model and also the positive
value of the correlation of industrial relations and perceptions of company performance
meant that Hypothesis 5 was supported. This conclusion was also supported by the case
study findings that all proprietary limited companies allowed their employees to join
unions. It appeared that most employees understood that unions were there to protect their
rights and interests from the company's unfair treatment. Although many employees were
not actively involved in union activities, they understood the benefits of the unions.
Furthermore, improvements to Indonesian labour laws meant more freedom for Indonesian
unions to help employees through collective bargaining. The improvement of union and
industrial relations practices helps companies in terms of mediating conflicts of interests
between the employer and the employees and accelerates the negotiating process, meaning
that conflict resolution can be faster and this can improve company performance.
The culture variable appeared to contribute negatively to company performance. Since the
value was significant (p<0.05), this indicated that culture had a significant impact on
company performance. In descriptive analysis, culture had high mean score which meant it
strongly influenced HRM practices of proprietary limited companies; however, the
correlation analysis showed that it had non-significant relationship with company
performance and so Hypothesis 6 was rejected. The possible explanation for these
inconsistent results is that in the real situation, responses from respondents may vary that
reflected variety on their culture perception. This unstable conditions are common in social
research specifically for people’s behaviours (Siswandari, 2010). The Javanese cultural
characteristics and values that differed from Western cultural characteristics appeared to
become a source of the non-significant relationship with company performance. Regarding
the regression model, it appeared that when the Javanese culture to strongly influenced
HRM practices, it could negatively and significantly affect company performance. This
was because company performance was measured by the level of formality in HRM
practices and formal HRM practices were to some degrees characterised by Western
culture.
The discussion on cultural influences on the HRM practices of proprietary limited

companies revealed that strong Javanese cultural values inhibited the implementation of
formal Western HRM practices. One characteristic of Javanese values that discouraged
hard work was nrimo which is a view that a person should accept any condition they
experience. This cultural value discourages people from working to achieve a better living
standard. Under this value, employees will make no attempt to work harder to increase
their productivity. That is why most of the employees did not complain about the low
wages but they also did not have the motivation to work hard.
The correlations between culture and company performance showed a non-significant

positive value. This indicates that if the current culture continues to characterise the HRM
practices of proprietary limited companies, it will negatively affect company performance.
Therefore, proprietary limited companies might have to bring in the positive sides of the
culture to support company performance. They could start to build a more supportive
culture and gradually discard the Javanese values that discourage their employees from
performing better. For example, the prevailing paternalistic leadership style might be
replaced with a democratic leadership style that supports fairness and equality. The high
value of hierarchy, seniority and status might be changed to proportional respect based on
the people's capabilities. By building a new culture in the organisation that supports high
productivity, the company performance may improve.
In conclusion, the regression model of the relationship between the dependent variable of
perception of company performance and independent variables of HRM practices and
culture showed that the three variables of recruitment and selection, training and
development, and industrial relations appeared to contribute significantly to perception of
company performance. This indicates that medium-sized proprietary limited companies
can improve their performance by improving and formalising these three aspects of their
HRM practices. The variable of culture appeared to contribute negatively and significantly
to company performance, meaning the strong presence of Javanese cultural characteristics
in the HRM practices implementation might hinder proprietary limited companies' efforts
to improve their performance. The two variables of remuneration and rewards and
performance appraisals appeared to make no contribution to company performance. This
indicates that proprietary limited companies performance is not affected by these two
practices.
6.5 Implications for Practice
Research has shown that there is a positive relationship between HRM practices and
company performance. Formal HRM practices conducted by proprietary limited
companies appeared to have a significant impact on company performance. Despite this,
the case study findings also revealed that there was also informality in proprietary limited
companies' HRM. Hornsby and Kuratko (2003) suggest that managerial incompetence in
handling HRM issues is a major source of firm failure. In this study, the researcher has
pointed to the issue of managerial capacity and Javanese cultural influence on proprietary
limited companies' HRM practices. Further research is needed to examine this issue so that
it may be better understood.
The regression model suggests that three practices including recruitment and selection,
training and development, and also union and labour relations contribute significantly to
company performance. This finding can be used as a basis for suggesting that proprietary
limited companies formalise those three practices to improve their company performance.
Although there is an argument that formalising HRM practices might be costly, the impact
of those practices on company performance is of value.
The regression model also showed that performance appraisals and remuneration rewards
did not contribute significantly to the company performance although their relationships
were significant. Further research may be needed to confirm these findings as the findings
in most studies, specifically those involving large companies, point to the contribution of
these practices to company performance. Javanese cultural influences appear to have a
non-significant relationship and contribute negatively to company performance. A study
on the influence of Indonesian cultural influence on management and HRM practices
showed that Indonesian culture appeared to hinder the implementation of modern
management and Western HRM practices (Nankervis & Putra, 2006). These findings
suggest that limited textile companies should change their culture to accommodate the
implementation of formal Western HRM practices.
The findings of this study could help owners and managers of medium-sized textile
companies in Java scrutinise and possibly improve their HRM practice to increase
company performance. The following suggestions illustrate possible HRM activities for
these managers.
Improving formal HRM practices that they conduct is one approach. This could decrease
informality that still occur in limited textile companies and could improve their
performance significantly. Formalising HRM practices means that they will be better
organised, documented and evaluated. Further, formalising management activities
including HRM practices will provide benefits such as improving the scores that
companies achieve in feasibility studies and that in turn will increase the possibility of
getting a bank loan. Nguyen and Bryant (2004) claim that most banks require SMEs to
formalise their practices if they are to obtain loans.
Formal recruitment and selection will result in better candidates for employment.
Companies might reduce the use of references from family and friends unless the
candidates pass all selection processes. Training evaluation makes it possible for the
company to measure the success of training and also to evaluate their impact on
employees’ performances. Remuneration and rewards might be difficult to improve since
companies have problems making a profit. Most medium-sized companies might use flat
rates with limited rewards and benefits. However, companies could focus on intrinsic
rewards that might change employees' behaviour and performance at work to be more
productive. Performance records could be made available to employees so that they can
see the results of their performance assessments. Proprietary limited companies that use
achievement targets in their employees' appraisals could provide employees with feedback
about both poor and good performance. Furthermore, as Indonesian medium-sized
companies are characterised by collectivism, the appraisals are often assigned to a group
rather than individuals. Starting to give responsibility and to conduct performance
appraisals of individuals could have more positive impact on employees' performances and
this will lead to a better company performance. Finally, proprietary limited companies
might support collective bargaining processes as part of the development of Indonesian
unions. In the future, unions will provide benefits for both parties as conflict resolution
becomes faster and this may reduce the frequency of strikes due to dissatisfaction of the
employees.
Zifirdaus and Nankervis (2003) argue that Indonesian cultural characteristics that are
supportive to management should be managed properly to avoid negative impacts. For
example they argue that gotong-royong should be accompanied by a clear responsibility to
every individual. Thus, proprietary limited companies might start to manage behaviour that
is influenced by cultural values that reduce the motivation of employees. This includes
traditions or practices that hinder the organisation's implementation of formal Western
HRM practices. The ability to replace negative and counter-productive cultural values with
a culture that is supportive of the development of HRM practices will have a significant
impact on company performance. This will also enable proprietary limited companies to
cope with the economic hardship that often becomes the major challenge of SMEs.
The changes to the HRM practices of medium-sized proprietary limited companies could
be made possible by increasing the roles of university and government in medium-sized
companies. Both universities and the government could start to focus their attention on the
implementation of HRM practices in medium-sized companies. Although the development
of human resources has been the centre of the government attention, there has been little
action by the government related to employees’ welfare and development. Regarding
unions and labour relations, the implication of this research for policy is that unions can
examine the government's industrial relations policy and makes suggestions to the
government for the revision of industrial relations law.
According to National Education System Law (UU Sisdiknas No. 20 2003), Indonesian
university lecturers have duties including providing lectures, conducting research and
providing direct services to the community (Sekneg, 2003). Their direct services to the
community could support SMEs by providing training or counselling to improve SMEs'
performance in many areas (i.e. HRM, marketing, accounting or finance). Final year
students of business and management, who do internship programs in HRM could be
directed to spend their internship programs at medium-sized companies. These internship
students might help proprietary limited companies develop recruitment policies and
practices. This would contribute directly to the improvement of HRM practices in SMEs
particularly proprietary limited companies, and could lead to the implementation of formal
HRM practices.
As has been ruled in President Instruction (INPRES) No. 4 1995 about the national
movement to socialise entrepreneurship (Sekneg, 1995), several universities that already
have business incubator program to support entrepreneurs and SMEs in developing their
businesses could start to help medium-sized companies to develop their HRM practices.
Despite current programs such as creating new markets and supporting financial and
technology access, incubator business could support proprietary limited companies to
improve their HR practices for example by designing formal procedures for recruitment
and selection, training plan, performance appraisal forms, remuneration and reward
systems and also employees’ record keeping based on companies’ needs. Incubator
business activities have been funded by universities and the government, thus medium-
sized companies would not pay at any cost.
The employers/managers of medium-sized companies might start to understand the

importance of formalising HRM practices in their companies. They could start to study
HRM at local universities or to take short courses or training in HRM that are provided by
training and development institutions or universities. Increasing their knowledge and skills
in HRM would improve HRM practices in their companies.
The action taken for family businesses might be different as they have different ownership
and structures. For family businesses, this may be a good time to start changing their
management style by conducting more formal HRM practices. Family businesses could
start keeping records related to all business transactions and activities including employee
records. Formalising HRM practices would make it easier for family businesses to cope
with the economic changes. Family businesses in the batik industry are very strongly
characterised by the Javanese culture, and the owners rarely share their power with other
family members. They could start delegating decision making to others. This would
improve business operation and management in terms of jobs efficiency.
It may still be too early for the idea of having unions in family businesses. However, in the
future, as businesses grow, there are possibilities they will change their organisational
structures and this could lead to the introduction of unions and formal labour relations.
More professional management styles will solve companies’ problems systematically and
their chances of success will be higher.
Finally, this study may benefit other parties that are fully or partly involved in SMEs
development. Academic institutions might need to conduct further studies into the HRM
practices of medium-sized enterprises and to help design the best practices to support
medium-sized companies. Training organisations might start to provide training on HRM
practices for SMEs. Training organisations need to design training programs that suit
employees of medium-sized enterprises. The government departments which are
concerned with the development of medium-sized enterprises may evaluate policies and
regulations that support medium-sized enterprises for better results. Although current
government policies on SMEs are still focused on financial assistance, technical assistance
and regulation (Hill, 2001), the government could start to look at the importance of
formalising HRM practices to support SMEs performance, and take actions to facilitate
such changes.
6.6 Contribution of the Thesis
This study has contributed to the understanding of the HRM practices of medium-sized
enterprises by adopting a mixed-method approach that has offered an in-depth and broad
investigation of the topic. A number of researchers have focused on the use of in-depth
case studies as a way of providing information about what is happening in SMEs as they
argue that the use of quantitative data is of relatively little value (Cassell et al., 2002).
Therefore, by combining qualitative and quantitative techniques, this study of HRM
practices is more comprehensive.
This study also has made a contribution to the knowledge of HRM practices, indicating
that HRM practices in Indonesian medium-sized companies in the textile industry are more
developed in proprietary limited companies than in family businesses. The study has also
added to the understanding of the relationship between dominant Indonesian and Javanese
societal cultural values and HRM practices in medium-sized companies. This can lead to a
better understanding of the dynamic features of the culture as well as of the role of culture
in shaping HRM practices.
The qualitative analysis in this study describes the current state of HRM practices in
Indonesian medium-sized textile companies. There are big differences in the adoption of
formal HRM practices between proprietary limited companies and family businesses.
Proprietary limited companies appear to have adopted more formal HRM practices than
family businesses. The quantitative analysis clearly supports the case study findings in
terms of the adoption of formal HRM practices in proprietary limited companies. The
correlations between the independent variables of HRM practices and the dependent
variable of company performance all showed significant positive values. The culture
variable appeared to have non-significant positive value of correlation indicating non-
significant contribution to company performance.
The regression model discussed in Section 6.4.2 showed the contribution of each predictor
variables of HRM practices and culture to perceived company performance. There were
three variables including recruitment and selection, training and development and unions
and labour relations that contributed positively and significantly to company performance.
The other two variables - remuneration and rewards, performance appraisals and culture
appeared to make non-significant contributions or to contribute negatively to company
performance. The culture variable appeared to make significantly negative contribution to
company performance. In summary, the model shows proprietary limited companies,
which practices need to be improved or managed properly to support company
performance. They are recruitment and selection, training and development, and unions
and labour relations.
The degree of formality of organisational structure, the clarity of job description, and the
education levels of the HRM staff appear to contribute to the degree of implementation of
formal HRM practices. Regarding cultural influences, it was found that some HRM
practices remain sensitive to traditional values. For example, the high value placed on
hierarchy, seniority and status are still deeply rooted in the minds of Indonesian managers
and employees. The empirical findings reveal that proprietary limited companies and
family businesses have similar cultural orientation towards HRM practices. Javanese
cultural characteristics appear to influence the implementation of HRM practice and are
recognised to hinder the introduction of formal Western HRM practices.
The findings regarding the HRM practices of Indonesian medium-sized textile companies,
especially proprietary limited companies, have shown that some Western-based practices
have been introduced but little effort has been made to introduce more sophisticated
practices. Informal practices are used to make it less complicated and to reduce costs. This
might be because the focus of medium-sized companies is more on surviving than on
building good HR practices. Many of medium-sized companies pay little attention to
innovations in HRM. Furthermore, a lack of experience in HRM and a limited capacity for
the acquisition of knowledge in HRM might also be reasons for the limited adoption of
formal HRM practices (De Kok, 2003).
Both case study findings and survey findings reveal the limitations of formal HRM
practices in the family businesses. This indicates that ownership structures determine the
degree of formality of HRM practices in Indonesian medium-sized companies. It appears
that most family businesses are reluctant to change the way they manage their business
including HRM practices. Some of the Western cultural characteristic reflected in formal
HRM practices, such as individualism and power sharing are still considered unacceptable
(Nankervis & Chatterjee, 2003). Further, it seems that several Western HRM practices that
tend to reduce the owners' power and authority are being rejected. Therefore, family
businesses might be left behind proprietary limited companies in adopting formal Western
HRM practices.
The findings from qualitative and quantitative analysis appeared to give an indication that
HRM practices in Indonesian medium-sized companies support the divergence approach to
HRM. Poon and Rowley (2010) argue that divergent theorists appreciate the importance of
the uniqueness of each culture; therefore, they recognise the need to adapt management
practices to local employment markets. Javanese culture and traditions, local custom and
regulation appeared to differentiate Indonesian HRM practices from common Western
HRM practices. Although Indonesian people are considered receptive to other cultures
including Western culture (Zifirdaus and Nankervis, 2003), adopting full Western HRM
practices might still be impossible as Indonesian culture is deeply embedded in most
Indonesian people. Poon and Rowley (2010) argue that culture is not isolated and
unchangeable, but constantly changing, being modified and transforming. Therefore, there
is a possibility that Indonesian proprietary limited companies can change their culture in
ways that enable the implementation of formal Western HRM practice.
6.7 Limitations of the Study
All research strategies have their strengths and weaknesses. There are several limitations
of using case study and survey methods. Validity and reliability can be difficult to achieve
in case study research. However, these limitations were minimised in survey research. In
quantitative data analysis, the results for the proprietary limited companies samplereflected
strong internal reliability and validity with Cronbach’s alpha of .0.952 (see section 5.5.3 of
Chapter 5 ).
The use of a small number of cases means that the case study method is unable to
statistically represent the population. In this study, a four-case design was implemented, in
which each case was considered to be typical in terms of its capacity to be an essential
source of information. Four cases might be considered not to be representative of the
actual condition in the medium-sized companies. However, by employing a large-scale
questionnaire survey through which the critical elements that emerged in the case study
were tested, the weaknesses of conducting a small-scale inquiry were offset.
The survey method only aimed to confirm the implementation of formal HRM practices in
proprietary limited companies that had been found in the case study analysis. Informality
is not fully tested in the survey. The survey did not cover informal HR practices and
although the case study analysis did. This might mean that the findings about informal
HRM practices in proprietary limited companies cannot be applied more widely. As
informality is associated with SMEs' HRM practices, it may be worthwhile to quantify the
findings by using a larger sample in a survey.
At its inception, this study did not attempt to separate proprietary limited companies and
family businesses. The case study of the family business showed limited HRM practices.
However, in the survey analysis of the initial combined sample, it was found that the
inclusion of family businesses caused inconclusive results with non-significant correlations
between HRM practices and company performance. The analysis of the family businesses
on their own provided similar results that caused it to be terminated and as yet no further
analysis has been conducted. This might be seen as incomplete research that needs
completion. However, since the research aim was to explore the implementation of HRM
practices in medium-sized companies, the finding that proprietary limited companies had
formal HRM practices led to their becoming the focus of analysis.
In this study, the respondents were the employers/owners/HR managers of medium-sized

companies. The absence of employees in the survey might limit the significance of the
results. Although the case study included the employees’ opinions, the findings from the
employees' side have not been confirmed with a larger sample. The purpose of this study
was to explore the HRM practices in the medium-sized companies; therefore, the focus
was on employers/owners/HR managers who conduct HR practices. The employees’
opinions were therefore not the focus of the study.
This study only covers the textile industry. A similar study for another industry may
provide different results as different industries have different business characteristics,
workforce skills and organisational cultures. Moreover, since the study was conducted in
Java, the Javanese culture was assumed to represent Indonesian cultural characteristics. In
Indonesia, there are more than 200 ethnic groups, which possess varying values with five
religions (Islam, Christianity, Buddhism, Confucianism and Hinduism) all of which play
roles in shaping the Indonesian culture. This diversity of Indonesian society involves
challenges to HR management.
The researcher is a native-born Indonesian, although she pursued postgraduate study in

Australia. A bias due to cultural origin may well exist when interpreting findings. To
balance this potential limitation, the researcher’s supervising professor is Australian with
extensive experiences of other countries’ HRM practices.
6.8 Suggestions for Further Research

A number of researchers have identified that HRM practices in SMEs have not received
significant attention in management research; they further stress the need for future studies
on these issues. The scarcity of HRM research into SMEs is evidenced by the numerous
calls in favour of increased research in this area (Hornsby & Kuratko, 2003). The findings
of this study raise a number of issues that could guide future research.
This study only focuses on five HRM practices (recruitment and selection, training and
development, remuneration rewards, performance appraisals and union and labour
relations) and culture. Further study of Indonesian medium-sized companies may extend
to related areas such as HRM planning and strategy. These other areas are still open for
research and the results of such research would enable the HRM practices of Indonesian
medium-sized companies to be described in more detail.
Recruitment and selection, training and development and also industrial relations appeared
to have positive and significant correlations to company performance. In the regression
model these variables also contributed significantly to company performance. These
findings might be tested to other companies in other industries to investigate how they do
these practices. Other companies might have different practices.
The survey method as the second stage in the mixed method employed in this study aimed
to confirm the implementation of formal HRM practices of medium-sized companies.
Informal practices that were discussed in the case study analysis were not fully tested in
the survey. Therefore, there is an opportunity to conduct a further survey to examine
informal HRM practices in medium-sized companies. This would provide more exact
findings and may confirm the findings of the quantitative analysis of this study.
The case study findings on family businesses showed limited adoption of HRM practices
and the HRM practices of family businesses were not further analysed in the survey due to
the non-significant results. Further research that focuses on medium-sized family
businesses could be conducted. The case study findings regarding HRM practices in family
businesses still need further analysis because in the case study, there was only one family
business. If more family businesses were used in a case study, the results would be more
comprehensive.
The survey method as the second stage of the mixed method approach employed in this
study, investigated the relationships between HRM practices and perceived company
performance. Further research could examine HR practices in the light of proprietary
limited companies annual reports or portfolios. Company performance might also be
assessed in terms of productivity. Quantitative measurement of company performance
might provide more accurate results.
A ‘positive’ approach could be used to test the findings of this study in other industries.
The findings of this study highlight commonalities arising when HRM practices are taken
as a whole for medium-sized enterprises in the textile industry in Java and those
commonalities may be enriched by applying them to Indonesian medium-sized companies
in other industries. This research would be replicable in the medium-sized companies of
other industries that have similar characteristics. Similar research might also be conducted
into big companies. Theoretically, big companies adopt more formal HRM practices than
medium-sized companies. Findings about the HRM practices of larger companies might be
used as benchmarking for medium-sized companies in developing the formal practices.
Research into the HR practices of larger companies could enrich the knowledge of HRM
practices in Indonesia by revealing the differences in the adoption of the formal Western
HRM practices between medium-sized and large companies.
6.9 Conclusion
It is evident from the above discussion that the distribution of human resource
management practices towards improving organisational performance is becoming more
important in developing countries especially Indonesia. As the world becomes more
competitive, industrial enterprises need to create sustainable competitive advantage based
on human resource management practices (Khandekar & Sharma, 2005). In today's world,
the central challenge that a country faces is the continuous improvement of the
performance of its organisations, in both the public and private sectors (Werther & Davis,
1996).
Managing employees continues to be a major challenge for Indonesia medium-sized

companies in the textile industry. While there has been very little research into the effects
of HRM adoption on the performance of SMEs, a common thread in the arguments
presented in prior studies on HRM in SMEs is that as SMEs grow, unsophisticated people
management approaches become increasingly inadequate (Kotey & Slade, 2005; Zheng et
al., 2006). When this occurs, SME owners and managers may come to realise the
importance of formally adopting HRM systems (these may be called steps towards the
development of HRM sophistication) and the associated benefits of nurturing people’s
creativity, and even the creation of competitive advantage, growth and success through
people (Kotey & Slade, 2005; Zheng et al., 2006). De Grip and Sieben (2009) argue that
good HR practices will reduce quitting rates, which, in turn, decreases recruitment and
selection costs, and increases the benefits of investments in firm-specific skills.
Variations in ownership structure and organisational complexity appear to differentiate the

HRM practices of SMEs and this determine the nature of HRM outcomes (Mazzarol,
2003). Daily and Dollinger (1993) cited by Kotey (2003) note that family and non-family
firms differ in their goals, management practices, and performance. This is also the case in
Indonesian medium-sized companies where proprietary limited companies and the family
businesses in the textile industry had quite different HRM practices. Proprietary limited
companies appear to have adopted Western HRM practices although they are not
sophisticated ones. Family businesses had not adopted Western HRM practices and still
implement very limited HRM practices with a high degree of informality. Kotey (2003)
argues that formal management practices are more common among medium non-family
firms than similar family firms. The different stages of HRM implementation in these two
types of Indonesian medium-sized companies have different impacts on company
performance and employees welfare.
This study has revealed that Western HRM practices have a more significant impact on
limited company performance than on family business performance. This might be caused
by the degree of informality that appears to be higher in family businesses than in
proprietary limited companies.Propri etary limited companies had more formal
organisational structure and clearer job descriptions than family businesses and therefore
conducted more organised and formal HRM practices. Furthermore, the case study
findings confirmed that proprietary limited companies had more strategic plans, schedules
and clearer HRM objectives. This might also relate to the educational background of the
employers/HRM managers of these types of businesses. Most of the employers/HRM
managers of proprietary limited companies had received a tertiary education whereas
family business owners or managers generally obtained only a secondary education.
The conceptual model of the relationship between HRM practices and culture, and
company performance that was described in Chapter 1 has been transferred to a regression
model. It appears that remuneration and rewards and also performance appraisals did not
make a significant contribution to company performance. The non-significant and negative
coefficient for the remuneration and rewards in the regression model might relate to the
difficulty of increasing wages because of financial problems faced by in many SMEs. This
is also the case for performance appraisals which had non-significant positive coefficient.
Therefore remuneration and rewards and performance appraisals appeared did not appear
to contribute to company performance.
In the other hand, culture provided negative and significant impact to company
performance. Based on the regression model, proprietary limited companies could improve
their performance by formalising and improving the implementation of recruitment and
selection, training and development, and also unions and labour relations.
The analysis of family businesses showed they had very limited HRM practices. Family
businesses in this study only had very simple organisational structures with only family
members in the structure, and traditional management styles under strong Javanese cultural
influences which meant that Western HRM practices had not been adopted yet.
Furthermore, the high degree of informality and limited documentation and limited
administrative work and records keeping in HRM practice did not support company
performance.
The implications for practice which arise from this study might be more easily accepted by
proprietary limited companies than family businesses. Proprietary limited companies
already have a foundation of Western HRM practices and may only need to improve.
However, this will require effort and resources. For family businesses, there need to be
fundamental changes in management style for them to be able to adopt Western HRM
practices.
Finally, this research extends the body of knowledge on the HRM practices of medium-
sized companies. It also explores Indonesian HRM practices and the influence of Javanese
culture on the implementation of HRM practices in Indonesian medium-sized enterprises.
This research commenced with a review of the extant literature covering HRM practices
and cultural influences on HRM practices. A theoretical framework guiding the field
research was formulated based on a comparison of Western HRM practices in other
countries and Indonesia. In addition, this study consolidates the realist pragmatist approach
for research in Indonesia, and brings a cross-disciplinary perspective to intellectual
property management.
Recommendations for improving the HRM practices of Indonesian medium-sized

companies are also provided by this research. However, the model and concepts
introduced in this research are at an early stage of development, and future confirmatory
research may improve the impacts of this study in theoretical, methodological, policy,
industry and professional practice areas.
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Appendices
APPENDICES
Appendix A1 Information sheet................................................................................. 261

Appendix A2 Informed consent to participate in the research project....................... 263
Appendix A3 Human Resource Ethics Committee (HREC) Notification................. 266
Appendix A4 Interview guide for the owner/managers............................................. 268
Appendix A5 Interview guide for the employees....................................................... 270
Appendix B1 Observation photos of Case A ............................................................ 272
Appendix B2 Observation photos of Case B............................................................. 273
Appendix B3 Observation photos of Case C............................................................. 274
Appendix B4 Observation photos of Case D............................................................. 275
Appendix C1 The questionnaire for pilot Survey...................................................... 276
Appendix C2 Covering letter to Indonesian reviewers............................................. 283
Appendix C3 Covering letter to survey respondents................................................. 286
Appendix C4 The questionnaire for Survey............................................................... 288
Appendix C5 The questionnaire for survey (Indonesian language)........................... 294
Appendix D1 Demographic of the initial combined sample – 228 respondents........ 301
Appendix D2 Descriptive of HRM practices of the initial combined sample – 228
respondents.......................................................................................... 302
Appendix D3 Reliability and matrix correlations of the initial combined sample –
228 respondents................................................................................... 303
Appendix E1 Demographic of the family businesses – 147 respondents.................. 307
Appendix E2 Descriptive of HRM practices of the family businesses – 147
respondents........................................................................................... 308
Appendix E3 Reliability and matrix correlations of the family businesses – 147
respondents........................................................................................... 309
Appendix E4 Preliminary analyses of the family business– 147 respondents........... 313
Appendix F1 Demographic of proprietary limited companies – 81 respondents...... 315
Appendix F2 Descriptive of HRM practices of proprietary limited companies – 81
respondents.......................................................................................... 316
Appendix F3 Reliability and matrix correlations of proprietary limited companies
– 81 respondents.................................................................................. 317
Appendix F4 Preliminary analyses of the proprietary limited companies – 81
respondents…..................................................................................... 321
Appendix G1 Demographic of proprietary limited companies combined sample –
209 respondents................................................................................... 323
Appendix G2 Descriptive of HRM practices of proprietary limited companies
combined sample – 209 respondents................................................... 324
Appendix G3 Reliability and matrix correlations of proprietary limited companies
combined sample – 209 respondents.................................................. 325
Appendices
Appendix A1
SOUTHERN CROSS UNIVERSITY

INFORMATION SHEET
A Study of HRM practices of medium enterprises in Indonesia
My name is Asminah Rachmi and I am a Doctor of Business Administration candidate at Southern

Cross University, Australia. As part of my doctoral studies, I am conducting research on the HRM
practices of medium-sized enterprises in Indonesia. The supervisor of this research is Associate
Professor Michelle Wallace, PhD CAHRI, of the Graduate College of Management at Southern
Cross University (see below for contact details).
I am researching the HRM practices of medium-sized enterprises in textiles industry because

textiles industry has supported the Indonesian economy for decades. The purpose of this research
is to examine HRM practices of medium-sized enterprises in Indonesia, and also the influence of
Indonesian culture in their HRM practices. HRM practices are activities that are conducted by
personnel department managers or business owners are related to hiring and managing employees
to achieve the organisation's objectives. The HRM practices that will be investigated include
recruitment and selection, training and development, reward and compensation, and also
performance appraisal. The methodology used for this research is case study; therefore it will use
interviews and observation of the selected participants of the case study enterprises. The research
will involve the owner or manager and the employees for the interview activities
You are invited to take part in this research by agreeing to participate in an interview, the details of
which are provided below.
Interview procedures
The interview will mainly consist of open questions and will focus on three key topics:
• The HRM practices in your organisation.
• Who conduct the HRM practices in your organisation?
• Does Indonesian culture influence the HRM practices in your organisation?
Each interview will take approximately 60 minutes of your time should you agree to participate,
and will take place in your office. Participation is purely voluntary and no financial remuneration
or incentive will be offered for taking part in this research. There are no travel expenses, nor are
there any costs associated with participation in this research apart from your valuable time.
Responsibilities of the Researcher
Appendices
To ensure the confidentiality of the information provided by you during the interview, your name
and other identifying information will not be attached to data collected. Your name will only be
used to enable an appointment to be made to conduct the interview. Your participation in this
study is on a voluntary basis.
As an interviewee, you will be asked to sign an informed consent form, in which you give your
permission that the information collected in the interview to be used in this study, without
identifying your or your organisation’s name. All signed consent forms will be held in safe
storage at the University for a period of five years before being destroyed. You are free to
withdraw your consent and to discontinue participation at any time
The research findings may be submitted for publication. Unless agreed on otherwise, all data
collected is anonymous and confidential. Other than your role or position within the organisation,
no personal data will be used in this research. All information collected will be presented as
overall data. In the final research report, the participating organisations will only be referred to as
cases with numbers. The results of the research will be made available to interested parties in
final thesis format through Southern Cross University’s library.
Responsibilities of the Participant and Possible Risks
The only requirement of you as part of this research, should you agree to participate, is a
commitment of time and willingness to share your opinions and experience about the research
topic.There are no foreseeable risks or discomforts involved for you in this research.
Inquiries
This form is yours to keep for future reference. If you have any questions, please feel free to
contact us any time:
Researcher Supervisor
Asminah Rachmi Associate Professor Michelle Wallace, PhD
Doctoral candidate Graduate College of Management
Southern Cross University / International Office Southern Cross University
PO Box 42 Tweed Heads NSW 2485 Australia PO Box 42 Tweed Heads NSW 2485 Australia
Phone: Telephone: (61-7) 5506 9321
E-Mail: a.rachmi.10@scu.edu.au E-Mail: michelle.wallace@scu.edu.au
The ethical aspects of this study have been approved by the Southern Cross University Human
Research Ethics Committee. The Approval Number is ECN-09-106. If you have any complaints
or reservations about any ethical aspect of your participation in this research, you may contact the
Committee through the Ethics Complaints Officer:
Ms Sue Kelly
Ethics Complaints Officer and Secretary
HREC
PO Box 157
Lismore, NSW, 2480
Telephone (02) 6626-9139 or fax (02) 6626-9145
Email: sue.kelly@scu.edu.au
All complaints, in the first instance, should be in writing to the above address. All complaints are
investigated fully and according to due process under the National Statement and this University.
Any complaint you make will be treated in confidence and you will be informed of the outcome.
Appendices
Appendix A2
Informed consent to participate in the following research project:

HRM practices in Indonesian medium-sized enterprises
My name is Asminah Rachmi and I am a Doctor of Business Administration candidate at Southern Cross
University, Australia. I am conducting research on the Human Resource Management (HRM) practices of
medium-sized enterprises in Indonesia with a focus on the Textiles Industry. The following gives an outline
of this project.
The purpose of this research is to examine HRM practices of medium-sized enterprises in Indonesia, and also
the influence of Indonesian culture on their HRM practices. HRM practices are activities that conducted by
personnel department managers or the company owners related to hiring and managing employees to achieve
the organisation objectives. The HRM practices that will be investigated include recruitment and selection,
training and development, reward and compensation, and also performance appraisal.
This research will be performed from September 2009 to November 2009 through interviews with the
owners, managers and staff of textiles companies in Java. Participation is entirely voluntary. If the people
decide to participate in the interviews, they may answers the questions according to their own experiences
and feelings. Prior to the interview session, the interviewee will be told that the recorded interviews will be
kept confidentially and will be used only for this research. Furthermore, all interviewees will be kept
anonymous. The interview will take approximately 90 minutes. The interview is only used in the DBA
thesis, without any other purpose. It does not involved sensitive topic. The results of this interview will be
stored by the researcher and her supervisor.
If you have any questions about this study, you can directly contact with supervisor or the
researcher via email or phone:
Supervisor Details
Associate Professor Michelle Wallace, PhD
Graduate College of Management
PO Box 42
Tweed Heads NSW 2485
Phone number/email address: 0061-7-5506 9366 / michelle.wallace@scu.edu.au
Researcher Details
Asminah Rachmi
Phone number/email address: 0413842872 / a.rachmi.10@scu.edu.au
Please tick (√) in front of the statement:
□ I have been provided with information at my level of comprehension about the purpose, methods,
demands, risks, inconveniences, and possible outcomes of this research (including any likelihood and form
of publication of results).
Appendices
□ I agree to participate in the above research project. I have read and understand the details contained in the
Information Sheet. I have had the opportunity to ask questions about the study and I am satisfied with the
answers received.
□ I agree to an interview and to my interview being recorded on audiotape.
OR
□ I do not agree to my interview being audio-taped and prefer the researcher to take hand written notes.
□ I understand that if I withdraw from participation in this research, that any tapes or handwritten notes
about my contribution will be destroyed.
OR
□ I understand that neither my name nor any identifying information will be disclosed or published, except
with my permission.
OR
□ I understand that all information gathered in this research is confidential. It is kept securely and
confidentially for 5 years, at the University.
□ I understand that I am free to discontinue participation at any time. I have been informed that prior to data
analysis, any data that has been gathered before withdrawal of this consent will be destroyed.
□ I am aware that I can contact the Supervisor or other researchers at any time with further inquiries, if
necessary.
The ethical aspects of this study have been approved by the Southern Cross University Human Research
Ethics Committee (HREC). The Approval Number is
If you have any complaints or reservations about any ethical aspect of your participation in this research,
you may contact the Committee through the Ethics Complaints Officer:
Ms Sue Kelly
Ethics Complaints Officer and Secretary
HREC
PO Box 157
Lismore, NSW, 2480
Telephone (02) 6626-9139 or fax (02) 6626-9145
All complaints, in the first instance, should be in writing to the above address. All complaints are
investigated fully and according to due process under the National Statement on Ethical Conduct in
Research Involving Humans and this University. Any complaint you make will be treated in confidence and
you will be informed of the outcome.
I understand that I will be given a copy of this consent form for my records. The researcher will also keep a
copy in safe storage at the University.
I have read the information above and agree to participate in this study. I am over the age of 18 years.
Name of Participant: ………………………………………………………………………………………
Signature of Participant: ………………………………………………………………………………….
Date: ………………………………………………………………………………………………………
I certify that the terms of the Consent Form have been verbally explained to the participant and that the
participant appears to understand the terms prior to signing the form. Proper arrangements have been made
for an interpreter where English is not the participant’s first language.
Name & Contact Detail of Witness: ………………………………………………………………………
…………………………………………………………………………………………………………….
Appendices
Signature of Witness: ……………………………………………………………………………………..
Date: ……………………………………………………………………………………………………...
NOTE:
The witness should be independent of the research, where possible. If this is not possible at the place of
consent, please inform the researcher and state a reason below.
Reason: ……………………………………………………………………………………………………
…………………………………………………………………………………………………………….
…………………………………………………………………………………………………………….
Name and signature of the researcher: ……………………………………………………………………
…………………………………………………………………………………………………………….
Date: ………………………………………………………………………………………………………
Appendices
Appendix A3
HUMAN RESEARCH ETHICS COMMITTEE (HREC)

NOTIFICATION
To: A/Prof Michelle Wallace/Asminah Rachmi (DBA)

Graduate College of Management
michelle.wallace@scu.edu.au,a.rachmi.10@scu.edu.au
From: Secretary, Human Research Ethics Committee

Division of Research, R. Block
Date: 17 August 2009
Project: HRM practices in Indonesian medium enterprises.

Approval Number ECN-09-106
The Southern Cross University Human Research Ethics Committee has established, in accordance
with the National Statement on Ethical Conduct in Human Research – Section 5/Processes of
Research Governance and Ethical Review, a procedure for expedited review by a delegated
authority.
This application was considered by the HRESC, Tweed Heads campus.
This research is approved and you may commence your research.
The approval is subject to the mandatory standard conditions of approval. Please note these and
inform the HREC when the project is completed or if there are any changes of protocol.
This approval will be ratified by the full Human Research Ethics Committee (HREC) at its
September meeting. If the full HREC has any further queries, the researchers are expected to
respond to those queries.
Standard Conditions in accordance with the National Statement on Ethical Conduct in Human
Research (National Statement) (NS).
1. Monitoring
NS 5.5.1 – 5.5.10
Responsibility for ensuring that research is reliably monitored lies with the institution under
which the research is conducted. Mechanisms for monitoring can include:
(a) reports from researchers;
(b) reports from independent agencies (such as a data and safety monitoring board);
(c) review of adverse event reports;
(d) random inspections of research sites, data, or consent documentation; and
(e) interviews with research participants or other forms of feedback from them.
The following should be noted:
(a) All ethics approvals are valid for 12 months unless specified otherwise. If research is
continuing after 12 months, then the ethics approval MUST be renewed. Complete the
Annual Report/Renewal form and send to the Secretary of the HREC.
NS 5.5.5
Appendices
(b) Generally, the researcher/s provide a report every 12 months on the progress to
date or outcome in the case of completed research specifically including:
• The maintenance and security of the records.
• Compliance with the approved proposal
• Compliance with any conditions of approval.
• Any changes of protocol to the research.
Note: Compliance to the reporting is mandatory to the approval of this research.
(c) Specifically, that the researchers report immediately and notify the HREC, in writing,
for approval of any change in protocol. NS 5.5.3
(d) That a report is sent to HREC when the project has been completed.
(e) That the researchers report immediately any circumstance that might affect ethical
acceptance of the research protocol. NS 5.5.3
(f) That the researchers report immediately any serious adverse events/effects on
participants. NS 5.5.3
2. Research conducted overseas

NS 4.8.1 – 4.8.21
That, if research is conducted in a country other than Australia, all research protocols for that
country are followed ethically and with appropriate cultural sensitivity.
3. Complaints
NS 5.6.1 – 5.6.7
Institutions may receive complaints about researchers or the conduct of research, or about
the conduct of a Human Research Ethics Committee (HREC) or other review body.
Complaints may be made by participants, researchers, staff of institutions, or others. All

complaints should be handled promptly and sensitively.
Complaints about the ethical conduct of this research should be addressed in writing to the
following:
Ethics Complaints Officer

HREC
PO Box 157
Lismore, NSW, 2480
All complaints are investigated fully and according to due process under the National
Statement on Ethical Conduct in Human Research and this University. Any complaint you
make will be treated in confidence and you will be informed of the outcome.
All participants in research conducted by Southern Cross University should be advised of the
above procedure and be given a copy of the contact details for the Complaints Officer. They
should also be aware of the ethics approval number issued by the Human Research Ethics
Committee.
Sue Kelly
Secretary HREC
Ph: +61 +2 6626 9139
sue.kelly@scu.edu.au
Professor Bill Boyd

Chair, HREC
Ph: (02) 6620 3569
william.boyd@scu.edu.au
Appendices
Appendix A4
INTERVIEW GUIDE
FOR THE OWNER/MANAGERS
Section A
Section A aims to explore the history and the profile of enterprises including the
company’s goals, vision and mission.
Question 1: Would you explain the history of this business and how you developed it to
become what it is now?
Question 2: What are the company goals and how does it to achieve these goals?
Question 3: What are the vision and mission of this company?
Section B
Section B aims to explore the HRM practices in the company?
Question 4: What do you think about the employees as human resource capital of the
organisation?
Question 5:
a. Would you explain the recruitment processes in this company?
b. Do you make a plan before recruitment takes place?
c. Do you do recruitment formally? Why?
d. If you recruited formally, did you advertise the vacancy?
e. If you recruited informally, what source of recruitment did you use?
f. What recruitment sources does this company select for managerial
and non-managerial positions? (relatives, friends, word of mouth,
advertisement)
g. Do the recruitment sources differ between managerial and non-
managerial position?
h. What are the selection criteria for the recruitment of managerial and
non-managerial positions?
i. Is there any test or interview for the selection processes?
j. Do you have any strategy to get the right employees?
k. Is there any relatives, family or friends who work here? If yes, how
they recruited?
Question 6
a. Do you perform training and development in your company? If yes
why?
b. Does this company have a training plan?
c. What kind of trainings does your company usually conduct?
d. How many times does the training take place in a year?
e. Where does the training usually take place?
f. How do you select employees for training?
g. Is training seen as a reward for good performance or a punishment for
a poor performance?
h. Do you make evaluation on the employees after training?
i. Do you have any strategy on training that will match with its cost?
Appendices
j. Do you have any strategy to make training successful?
Question 7:
a. How do you compensate the employees?
b. Do you have a plan on compensation for each employee?
c. Do you follow government policy on wage standard?
d. How do you determine employees’ wages?
e. Are there any criteria for compensation rate/pay level?
f. Do you have a fixed plan for pay increase? at every how many yrs?
g. Are there any complaints about the pay rates?
h. is your compensation system competitive with other similar
companies?
i. Do you provide other rewards to the employees?
j. Do you have any strategy on compensation?
Question 8:
a. How do you conduct performance appraisal to your employees?
b. Do you conduct performance appraisal to your employees on a regular
basis?
c. What are the criteria for employees’ performance appraisal?
d. What are your objectives in conducting performance appraisal?
e. How do you give feedback on good performance?
f. How do you give feedback on poor performance?
g. Do you have a plan for employee’s promotion?
h. Are there any criteria for promotion?
Question 9: Is there any union organisation in your organisation? If yes is it formal or

informal? How do you feel about this union?
Section C
Section C aims to explore the influence of Indonesian culture and organisation culture to
HRM practices in your company.
Question 10: Is there any company philosophy to be shared among employees?

Question 11: Are there any traditions or habits in your organisation that are always done
by all employees?
Question 12: What kind of leadership do you apply for your employees?
Question 13: Do you have any values to be shared with your employees? If yes, please
explain your values
Question 14: Do you value Hierarchy, seniority and status in your company? Why?
Question 15: How do you build your relationship with your employees?
Question 16: How do you supervise your employees?
Question 17: Do you prefer your employees to work individually or as team works?
Why?
Question 18: How do you build loyalty and commitment to your employees?
Question 19: How do you apply the decision making process?
Question 20: Do you always follow formal rules and strict policy to manage your
employees?
Thank you for your cooperation. Your name will be kept anonymously and the
interview will be treated confidentially.
Appendices
Appendix A5
INTERVIEW GUIDE
FOR THE EMPLOYEES
Section A
Section A aims to explore the employee’s background
Question 1: Why did you apply for this job in this company?
Question 2: Did you have any relationship (such as family, relatives or friends) with the
owner or manager or one of the employees before you applied this job?
Question 3: If yes, do you think that relationship helped you in any way to get this job?
Section B
Section B aims to explore your experience in dealing with the HRM practices in this
company?
Question 4: What do you think about your current job?

Question 5:
a. Would you explain how you were recruited in this company?
b. Were you recruited formally or through one of the employee?
c. Did you follow the selection process (test and interview)?
d. Did the job you applied for fit with your qualification?
e. Did you have work experience before coming to this company? If yes, did
your previous experience contributed in your being hired for this job?
Question 6:
a. Has this company provided training for you? If ‘yes’ :
b. What kind of training?
c. When was the training provided?
d. What was the duration of the training?
e. Where did the training take place?
f. Were you trained individually or in group?
g. Were your knowledge and skill improved by that training?
h. Do you know how you were selected for training?
i. Do you know why you were selected for training?
Question 7:
a. What do you think about your current wage?
b. Is your wage under, same or above regional minimum wage (UMR)?
c. Are you satisfied with your current wage? If not have you ever
complaint?
d. Do you think your wage match with your skills and experience?
e. Have you ever received pay increment?
f. Do you receive other compensation instead of wage?
g. What is your opinion about company policy on the salary level?
Question 8:
a. Does your company maintain your career development? Do you think they
will know what career development is?
b. Have you ever had a promotion? If ‘yes’ when and why?
Appendices
c. Do you think the company has fair promotion policy?

d. Does your company provide performance appraisal for its employees?
e. If yes is there any feedback on your performance appraisal result?
f. How is your supervisor giving feedback to your performance?
g. How is your supervisor performing his/her job?
Question 9: Have you joined any unions? If ‘yes’ is it formal or informal? Why have you
joined it?
Section C
Section C aims to explore the influence of Indonesian culture and organisation culture to
HRM practices in your company.
Question 10: Is there any company philosophy to be shared by the manager or the owner?
Question 11: How do you describe the leadership style of your manager or the owner?
Question 12: Are Hierarchy, seniority and status in your company valued highly? What do
you feel about it?
Question 13: Are there any traditions or habits in this company that are always practiced
by all employees?
Question 14: Do you have commitment or loyalty to this company? Why?
Question 15: Do you work in close or loose supervision? How do you feel about it?
Question 16: Do you work as individual or as a team work? How do you feel about it?
Question 17: How is your working relationship with your manager or the owner?
Question 18: Have you ever been involved in the decision making process by your
supervisor?
Question 19: How do you describe the working environment of this company?
Question 20: What is your opinion about company rules or policies applied in this
company?
Thank you for your cooperation, your name will be kept anonymously and the
interview will be treated confidential.
Appendices
Appendix B1
OBSERVATION PHOTOS OF CASE A
A company slogan’s banner attached to the

No smoking sign attached at the front gate
security building
The production area The production area
A sign to use safety glasses and gloves in

Finished goods storage area
chemical liquid storage
Appendices
Appendix B2
OBSERVATION PHOTOS OF CASE B
A fire hose attached on the wall of production

The factory Environment
area
The production area The production area
The packaging area 5Rs motto
Appendices
Appendix B3
OBSERVATION PHOTOS OF CASE C
The company’s motto: smile, acknowledge,

Museum collection
greet, success, thankful
A by contract employee designing batik in the Daily basis employees drawing batik in the
production area production area
Show room for batik clothes and material Two employees working in another
designed by contract employees showroom (printed batik clothes and
material)
Appendices
Appendix B4
OBSERVATION PHOTOS OF CASE D
No smoking sign and a fire hose in front of

Employees' locker room
sewing building
Employees' finger print machine The sewing section
The ironing section The finishing section
Appendices
Appendix C1
THE QUESTIONNAIRE FOR PILOT SURVEY
. Research on HRM practices of Indonesian medium-sized

enterprises of textile Industry
(Should be filed in by the owner or HRM/Personnel Manager or manager who is in charge
with human resource management activities)
Thank you for accepting to participate in this research, the study is being
undertaken to seek the opinion of the owner or manager who is involved
with human resource management practices in the company.
Your answers are only about your experiences at work and your
completed questionnaire should be returned in the sealed envelope
provided and sent back to researcher by mail.
Please note that your responses to this survey are strictly
CONFIDENTIAL. The statistical results will not identify any individual
company
CITY : …………………………………………………………….
PROVINCE : …………………………………………………………….
Appendices
Section A: Human resource management practices of in your company

Please indicate the extent of your agreement with the following statements on a 7-points
scale. (Please circle your answer)
Neither Disagree
Moderately
Moderately
Disagree
Nor Agree
Strongly
Strongly
disagree
disagree
Slightly
Slightly
Agree
Agree
Agree
No Questions
1 2 3 4 5 6 7
Recruitment and Selection

The company conducts formal
1 1 2 3 4 5 6 7
recruitment process
The company uses external sources
2 1 2 3 4 5 6 7
for recruitment
The company allows employees to
3 submit friends or relatives’ 1 2 3 4 5 6 7
applications
The company uses advertisements
4 (e.g media or online) as a 1 2 3 4 5 6 7
recruitment source
The company applies criteria for
5 1 2 3 4 5 6 7
recruitment and selection
The company conducts individual
6 1 2 3 4 5 6 7
interviews with all candidates
The company conducts tests to
7 ascertain candidates’ skills and 1 2 3 4 5 6 7
capability
The relationship between the new
candidate and existing employees
8 1 2 3 4 5 6 7
determines the candidates’
acceptance
Appendices
Neither Disagree
Moderately
Moderately
Disagree
Nor Agree
Strongly
Strongly
disagree
disagree
Slightly
Slightly
Agree
Agree
Agree
No Questions
1 2 3 4 5 6 7
Training and Development

The company conducts training on
9 1 2 3 4 5 6 7
regular basis
The company conducts on-the-job
10 1 2 3 4 5 6 7
training for the new employees
The duration of on-the-job training
11 1 2 3 4 5 6 7
is at least 2 months
The company conducts other
12 training (e.g management training) 1 2 3 4 5 6 7
based on needs
The company conducts training for
13 1 2 3 4 5 6 7
skills improvement purpose
The manager makes an evaluation
14 1 2 3 4 5 6 7
before and after training
Reward and compensation
The company has a fair
15 1 2 3 4 5 6 7
compensation system
The company follows government
16 1 2 3 4 5 6 7
policy on wage standard (UMR)
The company uses criteria in
17 determining the pay rate for each 1 2 3 4 5 6 7
employees
The company increases the wage
18 1 2 3 4 5 6 7
every year.
The company pays higher wage
19 compared with other similar 1 2 3 4 5 6 7
companies
The company provides other
20 1 2 3 4 5 6 7
rewards and benefit
Appendices
Neither Disagree
Moderately
Moderately
Disagree
Nor Agree
Strongly
Strongly
disagree
disagree
Slightly
Slightly
Agree
Agree
Agree
No Questions
1 2 3 4 5 6 7
The employees never complain

21 1 2 3 4 5 6 7
about their wages
Performance Appraisal
The company conducts performance
22 1 2 3 4 5 6 7
appraisal of all employees
23 1 2 3 4 5 6 7
appraisal on a regular basis
The company uses criteria for the
24 1 2 3 4 5 6 7
performance appraisal
The company uses performance
25 appraisal for career development 1 2 3 4 5 6 7
purpose.
26 appraisal for wage increment 1 2 3 4 5 6 7
purpose.
The company informs the
27 employees about the result of the 1 2 3 4 5 6 7
appraisal
Employee relation
The company allows the employees
28 1 2 3 4 5 6 7
to join the union
29 to participate actively in the union 1 2 3 4 5 6 7
activities
30 The union has functioned properly 1 2 3 4 5 6 7
Both the company and the
31 employees get benefit from the 1 2 3 4 5 6 7
union’s existence
Appendices
Section B: The influence of culture in human resource management practices of in

your company
Please indicate the extent of your agreement with the following statements on a 7-point
Slightly Disagree
Neither Disagree
Strongly Agree
Slightly Agree
Moderately
Moderately
Nor Agree
Disagree
Disagree
Strongly
Agree
No Questions
1 2 3 4 5 6 7
32 I value harmony in the organisation 1 2 3 4 5 6 7

I value hierarchy and status in the
33 1 2 3 4 5 6 7
organisation structure
I build cooperative relationships
34 1 2 3 4 5 6 7
among employees
35 I apply participative decision making 1 2 3 4 5 6 7
36 I supervise my employees loosely 1 2 3 4 5 6 7

I build trustworthiness among
37 1 2 3 4 5 6 7
employees
I believe employees will perform
38 1 2 3 4 5 6 7
well in a group
I consider my employees as parts of
39 1 2 3 4 5 6 7
a big family
40 I use paternal leadership 1 2 3 4 5 6 7
Appendices
Section C: Perception on firm performance
State your agreement on the company’s performance past over a year compared with
competitor average!
Slightly higher
Slightly lower
Neither lower
Moderately
Moderately
Very much
Very much
nor higher
higher
higher
lower
lower
No Questions
1 2 3 4 5 6 7
41 Return on Sales 1 2 3 4 5 6 7
42 Return on capital 1 2 3 4 5 6 7
43 Cash flow 1 2 3 4 5 6 7
44 The product quality 1 2 3 4 5 6 7
Section D: Demographic information
No Question
45 Gender Male □ Female □
Less than 20 □ 21 – 30 □ 31- 40 □

Age
41- 50 □ 51 – 60 □ over 60 □
46
47 Position in the company …………………………………………..
Working experience in the

48 current position ………… years
49 Working experience in HRM ………… years
Primary school □ Secondary school □
Highest education achieved High school □ Diploma (D3) □

Bachelor degree □ Master degree □
50
(or equivalent)
Other □ specify …………………………..
51 Competency skill held …………………………………………….
Appendices
Section E: general information about your company
No Question
What is your company’s business category?

52 Textile - Weaving □ Textile-spinning □ Batik□
Garment □ Other □ .......................................
What is type of your company?
Family business □ Proprietary Limited shared □ □ ……………

53
Other
What department in your company that conducts human resource management

activities?
HRM Dept. □ Personnel Dept. □

54
Other □ (please specify) ………………………………………………………
Please indicate the total number of employees in your company!
55 Managerial Employees : ……………. people
Non-managerial Employees : ……………. People

(operational level employees)
What percentage of non-managerial employees (operational level employees) are

56 contract workers?
………………….%
Was firm profitable in previous financial year?

57
Yes□ No □
**End of Questionnaire**
THANK YOU FOR COMPLETING THE QUESTIONNAIRE!
Appendices
Appendix C2 : A letter to Indonesian reviewers

Surakarta, 13 September 2010
Kepada Yth,
Tim Reviewer
Di tempat
Dengan hormat,
Dalam rangka penyusunan disertasi, perkenankanlah saya memohon kepada Ibu/Bapak

untuk berkenan me-review Instrumen terlampir.Instrumen yang dimaksud berbentuk
Kuesioner yang menyangkut berbagai aspek Praktek Manajemen Sumber Daya Manusia
(MSDM) di perusahaan.
Sebelumnya perlu saya informasikan bahwa saya adalah mahasiswa program Doctor of
Business Administration di Southern Cross University Australia. Disertasi saya berjudul
Praktek Manajemen Sumber Daya Manusia Pada Perusahaan Skala Menengah Industri
Tekstil di Indonesia.Saat ini saya sedang melakukan penelitian untuk disertasi saya dengan
metode survey.
Tujuan dari penelitian ini adalah untuk melihat praktek manajemen SDM di perusahaan
skala menengah di Indonesia, dan juga pengaruh dari budaya Indonesia dalam praktek
manajemen SDM.Praktek manajemen SDM berkaitan dengan kegiatan yang dilaksanakan
oleh manajer departemen personalia atau pemilik perusahaan seperti perekrutan dan
pengelolaan karyawan untuk mencapai tujuan organisasi. Praktek manajemen SDM yang
akan dikaji meliputi rekrutmen dan seleksi, training dan pengembangan, kompensasi,
penilaian kinerja karyawan dan hubungan ketenagakerjaan.
Atas perkenan dan adanya kerjasama yang baik dari Ibu/Bapak untuk berpartisipasi secara
aktif, saya mengucapkan terima kasih
Hormat saya,
Asminah Rachmi, SE, MBA

Nomer Telpon / alamat email: 081945788507 / a.rachmi.10@scu.edu.au
Appendices
PETUNJUK PENGISIAN KUESIONER
BAGIAN A – C:
Semua pertanyaan pada bagian A sampai dengan C disajikan dengan menggunakan skala 7
poin mulai dari sangat tidak setuju (nilai 1) sampai dengan sangat setuju (nilai 7).
Ibu/Bapak mengisi kuesioner dengan cara melingkari angka yang disediakan. Contoh:
Perusahaan melaksanakan proses

1 1 2 3 4 5 6 7
rekrutmen formal
RUMUS PADA BAGIAN C:
Sebelum mengisi bagian C, Ibu/Bapak dimohon menghitung rumus dari pertanyaan nomer
41, 42, dan 43 sebagai berikut:
41 Tingkat pengembalian penjualan Laba : Total penjualan
42 Tingkat pengembalian modal Laba : Total harta
43 Aliran kas Laba + Penyusutan
Data laba, penjualan, total harta/aktiva dan penyusutan dapat dilihat pada laporan
keuangan atau dihitung dari data keuangan perusahaan jika perusahaan Ibu/Bapak tidak
mempunyai laporan keuangan. Penyusutan adalah nilai yang disusutkan pada aktiva tetap
(misal mesin, gedung dan kendaraan) berdasarkan umur ekonomisnya (nilai aktiva
tetap/umur ekonomis)
Jika hasil perhitungan sudah diperoleh, mohon dibandingkan dengan rata2 pesaing atau
perusahaan pesaing yang Ibu/Bapak ketahui kemudian diisikan pada skala 7 poin yang
disediakan.
BAGIAN D dan E
Bagian D dan E diisi sesuai data Ibu/Bapak dan data perusahaan.Untuk jawaban pilihan,
dimohon memberi tanda cawang (√) pada kotak yang disediakan.
Appendices
PENILAIAN UNTUK KUESIONER
Ibu/Bapak dimohon kesediaannya untuk menilai kuesioner dari survey ini.
A. Apakah ada pertanyaan yang sulit dipahami/dijawab?
Ya□ Tidak □
Jika Ya, pertanyaan nomer
……………………………………………………………………
Alasan: (gunakan lembar kosong yang disediakan jika diperlukan
………………………………………………………………………………………….
…………………………………………………………………………………………
…………………………………………………………………………………………
B. Komentar dan saran untuk perbaikan kuesioner
………………………………………………………………………………………...
………………………………………………………………………………………...
………………………………………………………………………………………...
………………………………………………………………………………………...
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
Terima kasih untuk waktu yang telah Ibu/Bapak berikan!
Reviewer: ……………………………………………….
Tanggal dan Tandatangan:
Appendices
Appendix C3 : Covering letter to survey respondents
Surakarta, 11 Oktober 2010
Kepada Yth,
Direktur/Manager bidang SDM
Di tempat
Dengan hormat,
Saya adalah mahasiswa program Doctor of Business Administration di Southern Cross

University Australia. Disertasi saya berjudul Praktek Manajemen Sumber Daya Manusia
Pada Perusahaan Skala Menengah Industri Tekstil di Jawa.Saat ini saya sedang melakukan
penelitian disertasi saya dengan metode survey.
Tujuan dari penelitian ini adalah untuk melihat praktek manajemen SDM di perusahaan
skala menengah di Indonesia khususnya yang masuk dalam kelompok industri tekstil, dan
juga pengaruh dari budaya Indonesia dalam praktek manajemen SDM.Praktek manajemen
SDM berkaitan dengan kegiatan yang dilaksanakan oleh manajer departemen personalia
atau pemilik perusahaan seperti penarikan dan pengelolaan karyawan untuk mencapai
tujuan organisasi. Praktek manajemen SDM yang akan dilihat meliputi rekruitmen dan
seleksi, training dan pengembangan, kompensasi, penilaian kinerja karyawan dan
hubungan industri.
Kami mohon kerjasama Ibu/Bapak untuk melengkapi kuesioner yang terlampir.Kuesioner

tersebut menanyakan pendapat Ibu/bapak mengenai berbagai aspek Praktek Manajemen
Sumber Daya Manusia (MSDM) di perusahaan Ibu/Bapak.Tidak ada jawaban benar atau
salah, kami hanya menginginkan pendapat jujur Ibu/Bapak. Pengisian survei ini akan
memakan waktu 20-30 menit.
Semua respon Ibu/Bapak akan kami rahasiakan. Tidak akan ada nama atau identitas
perusahaan yang muncul dalam disertasi dan tidak ada pihak ketiga yang akan mengakses
informasi dari Ibu/Bapak.
Atas kesediaan Ibu/Bapak untuk berpartisipasi saya mengucapkan terima kasih
Hormat saya,
Asminah Rachmi, SE, MBA

Nomer Telpon / alamat email: 08123316167 / a.rachmi.10@scu.edu.au
Appendices
PETUNJUK PENGISIAN KUESIONER
BAGIAN A – C:
Semua pertanyaan pada bagian A sampai dengan C disajikan dengan menggunakan skala 7
poin mulai dari sangat tidak setuju (nilai 1) sampai dengan sangat setuju (nilai 7).
Ibu/Bapak mengisi kuesioner dengan cara melingkari angka yang disediakan. Contoh:

1 1 2 3 4 5 6 7
rekrutmen formal
RUMUS PADA BAGIAN C:
Sebelum mengisi bagian C, Ibu/Bapak dimohon menghitung rumus dari pertanyaan nomer
41, 42, dan 43 sebagai berikut:
Tingkat pengembalian penjualan = Laba

41
Total penjualan
Tingkat pengembalian modal = Laba

42
Total harta
Aliran kas = Laba + Penyusutan

43
Data laba, penjualan, total harta/aktiva dan penyusutan dapat dilihat pada laporan
keuangan atau dihitung dari data keuangan perusahaan jika perusahaan Ibu/Bapak tidak
mempunyai laporan keuangan. Penyusutan adalah nilai yang disusutkan pada semua
aktiva tetap (misal mesin, gedung dan kendaraan) berdasarkan umur ekonomisnya (nilai
aktiva tetap/umur ekonomis)
Jika hasil perhitungan sudah diperoleh, mohon dibandingkan dengan rata2 pesaing atau
perusahaan pesaing yang Ibu/Bapak ketahui kemudian diisikan pada skala 7 poin yang
disediakan.
BAGIAN D – E
Bagian D dan E diisi sesuai data Ibu/Bapak dan data perusahaan.Untuk jawaban pilihan,
dimohon memberi tanda cawang (√) pada kotak yang disediakan.
Appendices
Appendix C4
THE QUESTIONNAIRE FOR SURVEY

.
Research on HRM practices of Indonesian medium-
sized enterprises of textile Industry
(Should be filed in by the owner or HRM/Personnel Manager or manager who is in charge
with human resource management activities)
Thank you for accepting to participate in this research, the study is being
undertaken to seek the opinion of the owner or manager who is involved
with human resource management practices in the company.
Your answers are only about your experiences at work and your
completed questionnaire should be returned in the sealed envelope
provided and sent back to researcher by mail.
Please note that your responses to this survey are strictly
CONFIDENTIAL. The statistical results will not identify any individual
company
CITY : …………………………………………………………….
PROVINCE : …………………………………………………………….
Appendices
Section A: Human resource management practices in your company

Please indicate the extent of your agreement with the following statements on a 7-points
Neither Disagree
Moderately
Moderately
Disagree
Nor Agree
Strongly
Strongly
disagree
disagree
Slightly
Slightly
Agree
Agree
Agree
No Questions
1 2 3 4 5 6 7
Recruitment and Selection

The company conducts formal
1 1 2 3 4 5 6 7
recruitment process
The company uses external sources
2 1 2 3 4 5 6 7
for recruitment
The company uses advertisements
3 (e.g on media or online) for its 1 2 3 4 5 6 7
recruitment
The company applies criteria for
4 1 2 3 4 5 6 7
recruitment and selection
The company conducts individual
5 1 2 3 4 5 6 7
interviews with all candidates
The company conducts tests to
6 ascertain candidates’ skills and 1 2 3 4 5 6 7
capability
Training and Development
7 The company conducts training on
1 2 3 4 5 6 7
regular basis
8 The duration of on-the-job training
1 2 3 4 5 6 7
ranges from 1- 3 months
9 The company conducts other
training (e.g management training) 1 2 3 4 5 6 7
based on needs
10 The company conducts training for
1 2 3 4 5 6 7
skills improvement purpose
11 The manager makes an evaluation
1 2 3 4 5 6 7
before and after training
Appendices
Neither Disagree
Moderately
Moderately
Disagree
Nor Agree
Strongly
Strongly
disagree
disagree
Slightly
Slightly
Agree
Agree
Agree
No Questions
1 2 3 4 5 6 7
Reward and compensation

The company has a fair
12 1 2 3 4 5 6 7
compensation system
The company follows government
13 1 2 3 4 5 6 7
policy on wage standard (UMR)
The company uses criteria in
14 determining the pay rate for each 1 2 3 4 5 6 7
employees
The company increases the wage
15 1 2 3 4 5 6 7
every year.
The company pays higher wage
16 compared with other similar 1 2 3 4 5 6 7
companies
The company provides other
17 1 2 3 4 5 6 7
rewards and benefit
The employees never complain
18 1 2 3 4 5 6 7
about their wages
Performance Appraisal
19 1 2 3 4 5 6 7
appraisal of all employees
20 1 2 3 4 5 6 7
appraisal on a regular basis
The company uses criteria for the
21 1 2 3 4 5 6 7
performance appraisal
22 appraisal for career development 1 2 3 4 5 6 7
purpose.
23 appraisal for wage increment 1 2 3 4 5 6 7
purpose.
The company informs the
24 employees about the result of the 1 2 3 4 5 6 7
appraisal
Appendices
Neither Disagree
Moderately
Moderately
Disagree
Nor Agree
Strongly
Strongly
disagree
disagree
Slightly
Slightly
Agree
Agree
Agree
No Questions
1 2 3 4 5 6 7
Employee relation
25 1 2 3 4 5 6 7
to join the union
26 to participate actively in the union 1 2 3 4 5 6 7
activities
27 The union has functioned properly 1 2 3 4 5 6 7
Both the company and the
28 employees get benefit from the 1 2 3 4 5 6 7
union’s existence
Section B: The influence of culture in human resource management practices in your

company
Please indicate the extent of your agreement with the following statements on a 7-point
Slightly Disagree
Neither Disagree
Strongly Agree
Slightly Agree
Moderately
Moderately
Nor Agree
Disagree
Disagree
Strongly
Agree
No Questions
1 2 3 4 5 6 7
I build cooperative relationships
29 1 2 3 4 5 6 7
among employees
I build trustworthiness among
30 1 2 3 4 5 6 7
employees
I believe employees will perform
31 1 2 3 4 5 6 7
well in a group
I consider my employees as parts of
32 1 2 3 4 5 6 7
a big family
33 I use paternal leadership 1 2 3 4 5 6 7
Appendices
Section C: Perception on firm performance
State your agreement on the company’s performance past over a year compared with
competitor average!
Very much lower
Slightly higher
Slightly lower
Neither lower
Moderately
Moderately
Very much
nor higher
higher
higher
lower
No Questions
1 2 3 4 5 6 7
34 Return on Sales 1 2 3 4 5 6 7
35 Return on capital 1 2 3 4 5 6 7
36 Cash flow 1 2 3 4 5 6 7
37 The product quality 1 2 3 4 5 6 7
Section D: Demographic information
No Question
38 Gender Male □ Female □
Less than 20 □ 21 – 30 □ 31- 40 □

Age
41- 50 □ 51 – 60 □ over 60 □
39
40 Position in the company …………………………………………..
Working experience in the

41 ………… years
current position
42 Working experience in HRM ………… years
Primary school □ Secondary school □

High school □ Diploma (D3) □
Highest education achieved
Bachelor degree □ Master degree □
43
(or equivalent)
Other □ specify …………………………..
Appendices
44 Competency skill held …………………………………………….
Section E: general information about your company
No Question
What is your company’s business category?
45 Textile - Weaving □ Textile-spinning □
Batik □ Garment □ Other □
What is type of your company?
46
Family business □ Proprietary Limited shared □ Other □ ……………
What department in your company that conducts human resource management
activities?
HRM Dept. □ Personnel Dept. □

47
Other □ (please specify) ………………………………………………………
Please indicate the total number of employees in your company!
48 Managerial Employees : ……………. people
Non-managerial Employees : ……………. People

(operational level employees)
What percentage of non-managerial employees (operational level employees) are

49 contract workers?
………………….%
Was firm profitable in previous financial year?

50
Yes□ No □
**End of Questionnaire**
THANK YOU FOR COMPLETING THE QUESTIONNAIRE!
Appendices
Appendix C5
KUESIONER UNTUK SURVEY

.
Riset tentang praktek sumber daya manusiadi
perusahaan skala menengah pada Industri Tekstil di
Indonesia
(Hanya diisi oleh pemilik perusahaan atau Manager personalia/SDM atau manager yang
melaksanakan kegiatan manajemen sumber daya manusia)
Terima kasih atas kesediaannya untuk berpartisipasi didalam riset ini. Studi
ini dilaksanakan untuk mencari opini dari pemilik perusahaan atau
manager yang terlibat dalam kegiatan/praktek manajemen sumber daya
manusia di perusahaan.
Jawaban saudara hanya berkaitan dengan pengalaman saudara di tempat
kerja dan kuesioner yang sudah selesai diisi harus dikembalikan dalam
amplop tertutup dan dikirim ke peneliti lewat pos.
Harap diperhatikan bahwa respon saudara pada survey ini dijaga ketat
kerahasiaannya. Hasil statistik tidak akan menunjuk pada satu perusahaan.
KOTA : …………………………………………………………….
PROPINSI : …………………………………………………………….
Appendices
BAGIAN A : Praktek manajemen sumber daya manusia di perusahaan saudara

Nyatakan tingkat persetujuan saudara pada pernyataan berikut menggunakan skala 7-poin.
(Harap lingkari jawaban saudara)
sedikit tidak setuju

sangat tidak setuju
agak tidak setuju
Sangat setuju
sedikit setuju
agak setuju
netral
No Pertanyaan
1 2 3 4 5 6 7
Rekrutmen dan Seleksi

1 1 2 3 4 5 6 7
rekrutmen formal
Perusahaan merekrut calon
2 1 2 3 4 5 6 7
karyawan dari luar perusahaan
Perusahaan menggunakan iklan
3 (media massa atau internet) sebagai 1 2 3 4 5 6 7
media rekrutmen
Perusahaan menerapkan kriteria
4 1 2 3 4 5 6 7
untuk rekrutmen dan seleksi
Perusahaan melaksanakan
5 wawancara individu pada semua 1 2 3 4 5 6 7
calon karyawan
Perusahaan menjalankan tes untuk
6 memastikan keahlian dan 1 2 3 4 5 6 7
kemampuan karyawan
Training dan Pengembangan
Perusahaan melaksanakan training
7 1 2 3 4 5 6 7
secara reguler
Perusahaan melaksanakan on-the-
8 job training dengan durasi antara 1 - 1 2 3 4 5 6 7
3 bulan
9 lainnya (misalnya management 1 2 3 4 5 6 7
training) berdasarkan kebutuhan.
Appendices

sangat tidak setuju
agak tidak setuju
Sangat setuju
sedikit setuju
agak setuju
netral
No Pertanyaan
1 2 3 4 5 6 7
10 dengan maksud meningkatkan 1 2 3 4 5 6 7
keahlian karyawan
Manajer melakukan evaluasi
11 1 2 3 4 5 6 7
ssbelum dan setelah training
Kompensasi dan Imbalan
Perusahaan melaksanakan system
12 1 2 3 4 5 6 7
kompensasi yang adil
Perusahaan mengikuti kebijakan
13 pemerintah untuk standard upah 1 2 3 4 5 6 7
minimum (UMR)
Perusahaan menggunakan kriteria
14 untuk menentukan tingkat upah 1 2 3 4 5 6 7
setiap karyawan
Perusahaan menaikkan upah setiap
15 1 2 3 4 5 6 7
tahun
Perusahaan membayar gaji lebih
16 tinggi dibandingkan dengan 1 2 3 4 5 6 7
perusahaan lain yang sejenis
Perusahaan memberikan imbalan
17 1 2 3 4 5 6 7
dan manfaat lainnya
Karyawan tidak pernah mengeluh
18 1 2 3 4 5 6 7
tentang upah mereka
Penilaian kinerja
Perusahaan melaksanakan penilaian
19 1 2 3 4 5 6 7
kinerja terhadap semua karyawan
Perusahaan melaksanakan penilaian
20 1 2 3 4 5 6 7
kinerja secara reguler
sangat tidak setuju
agak tidak setuju
Sangat setuju
sedikit setuju
agak setuju
netral
No Pertanyaan
Appendices
1 2 3 4 5 6 7
Perusahaan menggunakan kriteria
21 1 2 3 4 5 6 7
dalam penilaian kinerja
Perusahaan menggunakan penilaian
22 kinerja untuk tujuan pengembangan 1 2 3 4 5 6 7
karir
Perusahaan menggunakan penilaian
23 kinerja untuk tujuan peningkatan 1 2 3 4 5 6 7
upah
Perusahaan menginformasikan
24 kepada karyawan tentang hasil 1 2 3 4 5 6 7
penilaian
Hubungan ketenagakerjaan
Perusahaan mengijinkan karyawan
25 untuk bergabung dengan serikat 1 2 3 4 5 6 7
pekerja.
Perusahaan mengijinkan karyawan
26 untuk berpartisipasi aktif didalam 1 2 3 4 5 6 7
serikat pekerja
Serikat pekerja sudah berfungsi
27 sebagai perantara (penengah) antara 1 2 3 4 5 6 7
perusahaan dengan karawan
Perusahaan dan karyawan keduanya
28 mendapat manfaat dari keberadaan 1 2 3 4 5 6 7
serikat pekerja
Appendices
Bagian B: Pengaruh budaya dalam praktek sumber daya manusia di perusahaan
Nyatakan tingkat persetujuan Ibu/Bapak pada pernyataan berikut dengan cara melingkari
angka pada skala 7 poin.

sangat tidak setuju
agak tidak setuju
Sangat setuju
sedikit setuju
agak setuju
netral
Pertanyaan
No
1 2 3 4 5 6 7
Saya membangun hubungan
29 1 2 3 4 5 6 7
kerjasama antar karyawan
Saya membangun kepercayaan antar
30 1 2 3 4 5 6 7
karyawan
Saya percaya karyawan akan bekerja
31 1 2 3 4 5 6 7
dengan baik dalam kelompok
Saya menganggap karyawan saya
32 1 2 3 4 5 6 7
seperti bagian dari keluarga besar.
Saya menerapkan kepemimpinan
33 1 2 3 4 5 6 7
yang kebapakan
Bagian C: Persepsi tentang kinerja perusahaan
Nyatakan tingkat persetujuan Ibu/Bapak terhadap kinerja perusahaan selama satu tahun
terakhir dibandingkan dengan rata-rata pesaing!
Sedikit lebih rendah
Sangat lebih rendah
Sedikit lebih tinggi
Sangat lebih tinggi

Agak lebih tinggi
agak lebih endah
sama
No Pertanyaan
1 2 3 4 5 6 7
34 Tingkat pengembalian penjualan 1 2 3 4 5 6 7
35 Tingkat pengembalian modal 1 2 3 4 5 6 7
36 Aliran kas 1 2 3 4 5 6 7
37 Kualitas produk 1 2 3 4 5 6 7
Appendices
Bagian D: Informasi demografi (informasi tentang diri ibu/bapak!)
No Pertanyaan
38 Jenis kelamin Laki-laki □ Perempuan □

Kurang dari 20 □ 21 – 30 □ 31- 40 □
Umur
41- 50 □ 51 – 60 □ diatas 60 □
39
40 Posisi dalam perusahaan …………………………………………..
Pengalaman kerja pada posisi

41 sekarang ………… tahun
Pengalaman kerja di manajemen

42 Sumber Daya Manusia ………… tahun
SD □ SMP □
Pendidikan tertinggi yang dicapai SMU □ Diploma (D3) □

S1 □ Master □
43
(atau yang sederajat)
Lainnya □ sebutkan ……………………..
44 Kompetensi yang dimiliki …………………………………………….
Bagian E: Informasi umum tentang perusahaan
No Pertanyaan
Apakah kategori bisnis perusahaan ini?
Textile - kain □ Textile-benang □ □

45
Batik
Garmen □ Lainnya □sebutkan.....................................
Apa bentuk perusahaan ini?
Perusahaan keluarga □ Perseroan terbatas □ □

46
Lainnya
47
Departemen apa diperusahaan saudara yang menyelenggarakan kegiatan
Appendices
manajemen sumber daya manusia?
HRM Dep. □ Dep. personalia□
Lainnya □ (harap sebutkan) ………………………………………………………
Harap sebutkan jumlah total karyawan di perusahaan saudara!
48 Karyawan manajerial : ……………. orang
Karyawan non manajerial : ……………. orang

(karyawan level operasional)
Berapakah prosentase karyawan non manajerial (karyawan level operasional)

49 yang merupakan karyawan kontrak?
………………….%
Apakah perusahaan memperoleh keuntungan pada tahun keuangan yang lalu?

50
Ya□ Tidak □
**Akhir kuesioner**
TERIMA KASIH SUDAH MENGISI KUESIONER!
Appendices
Appendix D1
Demographic of the initial combined sample – 228 respondents
Variable Category Frequency Per cent

Male 150 66
Gender
Female 78 34
total 228 100
Less than 20 years 0 0
21-30 years 44 19
31-40 years 79 35
Age
41-50 years 68 30
52-60 years 32 14
Over 60 years 5 2
total 228 100
Elementary School 19 8
Junior High School 34 15
Senior High School 79 35
Education Diploma 19 8
Bachelor Degree 69 30
Master Degree 6 3
Other 2 1
total 228 100
0 Year 21 9
1-5 Years 85 37
Work experience 6-10 Years 57 25
in HRM 11-15 Years 28 12
16-20 Years 20 9
>20 Years 17 7
total 228 100
Textile – weaving 32 14
Textile – spinning 27 12
Business
Garment 65 28
Category
Batik 102 45
other 2 1
total 228 100
Source: Analysis of survey data
Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
recruitment_selection 228 1.00 7.00 4.7624 1.63927
training_development 228 1.00 7.00 4.7816 1.83520
remuneration_rewards 228 2.14 7.00 5.2782 1.01306
Performance_Appraisal 228 1.00 7.00 5.2770 1.50448
Industrial_relation 228 1.00 7.00 4.6327 1.48939
Culture 228 1.40 7.00 6.1675 .95401
Performance 228 1.67 7.00 5.0746 1.18846
Appendices
Appendix D2
Descriptive of HRM practices of the initial combined sample – 228 respondents

N Min Max Mean SD
RECRUITMENT & SELECTION
Formal recruitment process 228 1 7 4.54 2.021
External sources for recruitment 228 1 7 4.62 2.002
Advertisements 228 1 7 4.40 2.192
Selection criteria 228 1 7 4.94 1.880
Interviews 228 1 7 5.07 1.881
Tests to ascertain candidates’ skills and capability 228 1 7 5.00 1.862
TRAINING & DEVELOPMENT
Training on regular basis 228 1 7 4.89 2.071
On-the-job training duration ranges from 1- 3 months 228 1 7 4.71 2.042
Other training based on needs 228 1 7 4.68 2.067
Training for skills improvement purpose 228 1 7 4.75 1.990
Evaluation before and after training 228 1 7 4.87 1.941
REMUNERATION & REWARDS
Fair remuneration system 228 1 7 5.87 1.321
Adopting regional wage standard (UMR) 228 1 7 4.96 1.905
Using criteria in determining the pay rate 228 1 7 5.50 1.416
Increasing the wage every year. 228 1 7 5.39 1.596
The wage is higher than other similar companies 228 1 7 4.67 1.526
Other rewards and benefits 228 1 7 5.32 1.424
No complaining from employees 228 1 7 5.23 1.705
PERFORMANCE APPRAISAL
To all employees 228 1 7 5.60 1.613
On a regular basis 228 1 7 5.25 1.685
Criteria for the performance appraisal 228 1 7 5.43 1.639
For career development purpose. 228 1 7 5.24 1.686
For wage increment purpose. 228 1 7 5.26 1.736
Informing the result to the employees 228 1 7 4.90 1.938
INDUSTRIAL RELATION
Allowing the employees to join the union 228 1 7 4.81 1.691
Allowing the employees to participate actively in the union 228 1 7 4.62 1.652
The union has functioned as expected by the employers and
the employees 228 1 7 4.58 1.671
Both the company and the employees get benefit from the 228 1 7 4.52 1.717
union’s existence
CULTURE
Building cooperative relationships among employees 228 1 7 6.13 1.272
Building trustworthiness among employees 228 1 7 6.18 1.150
The employees will perform well in a group 228 1 7 6.22 1.144
Considering the employees as parts of a big family 228 1 7 6.12 1.166
Paternal leadership 228 1 7 6.18 1.184
PERCEPTION OF THE COMPANY’S PERFORMANCE
Return on Sales 228 1 7 4.14 2.017
Return on capital 228 1 7 5.00 1.425
Cash flow 228 1 7 4.97 1.387
Product quality 228 1 7 5.25 1.440
Source: Survey Analysis
Appendices
Appendix D3:
Reliability
Scale: ALL VARIABLES
Case Processing Summary

N %
Valid 228 100.0
Cases Excludeda 0 .0
Total 228 100.0
a. Listwise deletion based on all variables in the
procedure.
Reliability Statistics
Cronbach's Alpha N of Items
.933 37
Inter-item correlation and item-to-total correlation

the initial combined sample – 228 respondents
Correlations
recruitment_
rs1 rs2 rs3 rs4 rs5 rs6 selection
rs1 Pearson Correlation 1 .709** .708** .683** .696** .560** .877**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
rs2 Pearson Correlation .709** 1 .627** .556** .536** .388** .771**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
rs3 Pearson Correlation .708** .627** 1 .599** .635** .536** .833**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
rs4 Pearson Correlation .683** .556** .599** 1 .766** .731** .863**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
rs5 Pearson Correlation .696** .536** .635** .766** 1 .701** .864**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
rs6 Pearson Correlation .560** .388** .536** .731** .701** 1 .777**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
recruitment_selection Pearson Correlation .877** .771** .833** .863** .864** .777** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
Appendices
Correlations
training_develop
td7 td8 td9 td10 td11 ment
td7 Pearson Correlation 1 .775** .786** .773** .759** .903**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
td8 Pearson Correlation .775** 1 .843** .754** .750** .909**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
td9 Pearson Correlation .786** .843** 1 .749** .782** .918**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
td10 Pearson Correlation .773** .754** .749** 1 .824** .902**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
td11 Pearson Correlation .759** .750** .782** .824** 1 .905**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
training_development Pearson Correlation .903** .909** .918** .902** .905** 1
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
Correlations
remuneration
cr12 cr13 cr14 cr15 cr16 cr17 cr18 _rewards
cr12 Pearson Correlation 1 .305** .398** .267** .311** .398** .174** .596**
Sig. (2-tailed) .000 .000 .000 .000 .000 .009 .000
N 228 228 228 228 228 228 228 228
cr13 Pearson Correlation .305** 1 .292** .331** .272** .342** .312** .660**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228 228
cr14 Pearson Correlation .398** .292** 1 .447** .380** .369** .210** .659**
Sig. (2-tailed) .000 .000 .000 .000 .000 .001 .000
N 228 228 228 228 228 228 228 228
cr15 Pearson Correlation .267** .331** .447** 1 .366** .347** .200** .649**
Sig. (2-tailed) .000 .000 .000 .000 .000 .002 .000
N 228 228 228 228 228 228 228 228
cr16 Pearson Correlation .311** .272** .380** .366** 1 .392** .405** .680**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228 228
cr17 Pearson Correlation .398** .342** .369** .347** .392** 1 .401** .700**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228 228
cr18 Pearson Correlation .174** .312** .210** .200** .405** .401** 1 .611**
Sig. (2-tailed) .009 .000 .001 .002 .000 .000 .000
N 228 228 228 228 228 228 228 228
remuneration_rewards Pearson Correlation .596** .660** .659** .649** .680** .700** .611** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228 228
Appendices
Correlations
remuneration
cr12 cr13 cr14 cr15 cr16 cr17 cr18 _rewards
cr12 Pearson Correlation 1 .305** .398** .267** .311** .398** .174** .596**
Sig. (2-tailed) .000 .000 .000 .000 .000 .009 .000
N 228 228 228 228 228 228 228 228
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228 228
Sig. (2-tailed) .000 .000 .000 .000 .000 .001 .000
N 228 228 228 228 228 228 228 228
Sig. (2-tailed) .000 .000 .000 .000 .000 .002 .000
N 228 228 228 228 228 228 228 228
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228 228
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228 228
Sig. (2-tailed) .009 .000 .001 .002 .000 .000 .000
N 228 228 228 228 228 228 228 228
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228 228
Correlations
Performance_
pa19 pa20 pa21 pa22 pa23 pa24 Appraisal
pa19 Pearson Correlation 1 .716** .758** .672** .708** .556** .831**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
pa20 Pearson Correlation .716** 1 .836** .856** .798** .636** .916**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
pa21 Pearson Correlation .758** .836** 1 .818** .790** .593** .905**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
pa22 Pearson Correlation .672** .856** .818** 1 .793** .681** .914**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
pa23 Pearson Correlation .708** .798** .790** .793** 1 .680** .905**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
pa24 Pearson Correlation .556** .636** .593** .681** .680** 1 .799**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
Performance_Appraisal Pearson Correlation .831** .916** .905** .914** .905** .799** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 228 228 228 228 228 228 228
Appendices
Correlations
ir25 ir26 ir27 ir28 Industrial_relation
ir25 Pearson Correlation 1 .704** .681** .658** .860**
Sig. (2-tailed) .000 .000 .000 .000
N 228 228 228 228 228
ir26 Pearson Correlation .704** 1 .765** .748** .907**
Sig. (2-tailed) .000 .000 .000 .000
N 228 228 228 228 228
ir27 Pearson Correlation .681** .765** 1 .714** .892**
Sig. (2-tailed) .000 .000 .000 .000
N 228 228 228 228 228
ir28 Pearson Correlation .658** .748** .714** 1 .883**
Sig. (2-tailed) .000 .000 .000 .000
N 228 228 228 228 228
Industrial_relation Pearson Correlation .860** .907** .892** .883** 1
Sig. (2-tailed) .000 .000 .000 .000
N 228 228 228 228 228
Correlations
cu29 cu30 cu31 cu32 cu33 Culture
cu29 Pearson Correlation 1 .583** .492** .616** .593** .823**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
cu30 Pearson Correlation .583** 1 .579** .643** .499** .817**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
cu31 Pearson Correlation .492** .579** 1 .525** .526** .769**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
cu32 Pearson Correlation .616** .643** .525** 1 .564** .830**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
cu33 Pearson Correlation .593** .499** .526** .564** 1 .791**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
Culture Pearson Correlation .823** .817** .769** .830** .791** 1
Sig. (2-tailed) .000 .000 .000 .000 .000
N 228 228 228 228 228 228
Correlations
pp34 pp35 pp36 pp37 Performance
pp34 Pearson Correlation 1 .012 .190** -.191** .494**
Sig. (2-tailed) .856 .004 .004 .000
N 228 228 228 228 228
pp35 Pearson Correlation .012 1 .626** .577** .768**
Sig. (2-tailed) .856 .000 .000 .000
N 228 228 228 228 228
pp36 Pearson Correlation .190** .626** 1 .460** .812**
Sig. (2-tailed) .004 .000 .000 .000
N 228 228 228 228 228
pp37 Pearson Correlation -.191** .577** .460** 1 .614**
Sig. (2-tailed) .004 .000 .000 .000
N 228 228 228 228 228
Performance Pearson Correlation .494** .768** .812** .614** 1
Sig. (2-tailed) .000 .000 .000 .000
N 228 228 228 228 228
Appendices
Appendix E1
Demographic of the family businesses – 147 respondents

Male 102 61
Gender
Female 45 39
total 147 100
21-30 years 28 19
31-40 years 51 35
Age 41-50 years 47 32
52-60 years 19 13
Over 60 years 2 1
total 147 100
Elementary School 17 11.6
Junior High School 24 16.3
Senior High School 57 38.8
Education Diploma 10 6.8
Bachelor Degree 34 23.1
Master Degree 4 2.7
Other 1 0.7
total 147 100
0 Year 16 10.9
1-5 Years 51 34.7
Work experience 6-10 Years 41 27.9
in HRM 11-15 Years 17 11.6
16-20 Years 14 9.5
>20 Years 8 5.4
total 147 100
Textile – weaving 15 10.2
Textile – spinning 13 8.8
Business
Garment 35 23.8
Category
Batik 83 56.5
other 1 0.7
total 147 100
Appendices
Appendix E2
Descriptive of HRM practices of the family business – 147 respondents

N Min Max Mean SD
Interviews 147 1 7 4.93 1.908
INDUSTRIAL RELATION
the employees 147 1 7 4.33 1.593
union’s existence
CULTURE
Return on Sales 147 1 7 3.44 1.810
Cash flow 147 1 7 5.05 0.909
The product quality 147 1 7 5.87 1.100
Appendices
Appendix E3
Reliability

N %
Valid 147 100.0
Total 147 100.0
procedure.
.939 37
Inter-item correlation and item-to-total correlation

The family business – 147 respondents
Correlations
recruitment_se
rs1 rs2 rs3 rs4 rs5 rs6 lection
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .008 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .008 .000 .000 .000 .000
N 147 147 147 147 147 147 147
recruitment_selection Pearson Correlation .885** .634** .803** .865** .843** .785** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Appendices
Correlations
training_develop
td7 td8 td9 td10 td11 ment
Sig. (2-tailed) .000 .000 .000 .000 .000
N 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000
N 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000
N 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000
N 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000
N 147 147 147 147 147 147
training_development Pearson Correlation .893** .917** .914** .909** .891** 1
Sig. (2-tailed) .000 .000 .000 .000 .000
N 147 147 147 147 147 147
Correlations
remuneration_
cr12 cr13 cr14 cr15 cr16 cr17 cr18 rewards
cr12 Pearson Correlation 1 .160 .327** .189* .138 .416** .195* .516**
Sig. (2-tailed) .053 .000 .022 .096 .000 .018 .000
N 147 147 147 147 147 147 147 147
cr13 Pearson Correlation .160 1 .264** .303** .191* .347** .388** .685**
Sig. (2-tailed) .053 .001 .000 .021 .000 .000 .000
N 147 147 147 147 147 147 147 147
cr14 Pearson Correlation .327** .264** 1 .287** .194* .387** .223** .590**
Sig. (2-tailed) .000 .001 .000 .019 .000 .007 .000
N 147 147 147 147 147 147 147 147
cr15 Pearson Correlation .189* .303** .287** 1 .116 .258** .124 .528**
Sig. (2-tailed) .022 .000 .000 .162 .002 .134 .000
N 147 147 147 147 147 147 147 147
cr16 Pearson Correlation .138 .191* .194* .116 1 .307** .422** .550**
Sig. (2-tailed) .096 .021 .019 .162 .000 .000 .000
N 147 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .002 .000 .000 .000
N 147 147 147 147 147 147 147 147
cr18 Pearson Correlation .195* .388** .223** .124 .422** .432** 1 .675**
Sig. (2-tailed) .018 .000 .007 .134 .000 .000 .000
N 147 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147 147
Appendices
Correlations
Performance_
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 147 147 147 147 147 147 147
Correlations
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Correlations
cu29 Pearson Correlation 1 .326** .134 .386** .474** .701**
Sig. (2-tailed) .000 .106 .000 .000 .000
N 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .004 .000
N 147 147 147 147 147 147
cu31 Pearson Correlation .134 .450** 1 .258** .267** .620**
Sig. (2-tailed) .106 .000 .002 .001 .000
N 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .002 .000 .000
N 147 147 147 147 147 147
Sig. (2-tailed) .000 .004 .001 .000 .000
N 147 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000 .000
N 147 147 147 147 147 147
Appendices
Correlations
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Correlations
pp34 Pearson Correlation 1 -.203* -.113 -.329** .409**
Sig. (2-tailed) .014 .174 .000 .000
N 147 147 147 147 147
pp35 Pearson Correlation -.203* 1 .557** .448** .675**
Sig. (2-tailed) .014 .000 .000 .000
N 147 147 147 147 147
pp36 Pearson Correlation -.113 .557** 1 .369** .657**
Sig. (2-tailed) .174 .000 .000 .000
N 147 147 147 147 147
pp37 Pearson Correlation -.329** .448** .369** 1 .508**
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Sig. (2-tailed) .000 .000 .000 .000
N 147 147 147 147 147
Appendices
Appendix E4
Preliminary analyses of the family business – 147 respondents

Reliability
The family business sample data had a Cronbach’s alpha of 0.939 (>0.7) meaning all items
used in the questionnaires were reliable.
Correlation matrix
To be retained the value of the item-to-total correlation should be greater than 0.5 and the
value of inter-item correlation should be greater than 0.3. The results of the correlation
matrix analysis of the seven variables (see Appendix E3) is summarised below
Table E4.1 Correlation matrix of variables

Remuneration and rewards cr12, cr13, cr14, cr15, cr16, cr17, cr18 all items >0.5 some items <.3
Performance appraisal pa19, pa20, pa21, pa22, pa23, pa24 all items >0.5 all items >0.3
Industrial relation ir25, ir26, ir27, ir28 all items >0.5 all items >0.3
Performance pp34, pp35, pp36, pp37 item pp34 < .5 item pp34<0.3
The results of item-to-total correlations indicate that the coefficients of six variables were
all within an acceptable range except perception of company performance which had one
correlation that was <0.5 (item pp34). Furthermore, the inter-item correlation of item pp34
also showed values that were lower than 0.3. Therefore, item pp34 was deleted from the
composite variable of perception of company performance and a new composite variable
of perception of company performance was re-transformed using only three items.
Transforming final composite variables

Using the results on correlation matrix analysis, the procedure of transforming composite
variables was conducted for the family business data sample.
Table E4.2 Composite variables

Composite Variable items Matrix correlation analysis
Recruitment_selection rs1, rs2, rs3, rs4, rs5, rs6 Inter-item .>0.5, item-to-total >0.3
Training_development td7, td8, td9, td10, td11 Inter-item .>0.5, item-to-total >0.3
Remuneration_rewards cr12, cr13, cr14, cr15, cr16, cr17, cr18 some inter-item .>0.5, item-to-total >0.3
Performance_appraisal pa19, pa20, pa21, pa22, pa23, pa24 Inter-item .>0.5, item-to-total >0.3
Industrial_relation ir25, ir26, ir27, ir28 Inter-item .>0.5, item-to-total >0.3
Culture cu29, cu30, cu31, cu32, cu33 Inter-item .>0.5, item-to-total >0.3
Performance pp35, pp36, pp37 Inter-item .>0.5, item-to-total >0.3
After transforming seven composite variables, the next step was checking inter-item
correlations and item-to-total correlations.
Appendices
Normality and outliers

The absolute value of Z-score (±2.58, p<0.01) was used because the number of samples
was less than 300. Table E4.3 below shows the statistic and std. error of skewness.
Table E4.3 The statistic and standard error of skewness before normality
Std.
N Minimum Maximum Mean Deviation Skewness Z-score
Recruitment_selection 147 1.00 7.00 4.6769 1.54514 -.236 .200 -1.18
Training_development 147 1.00 7.00 4.4966 1.77754 -.243 .200 -1.22
Remuneration_rewards 147 3.57 7.00 5.4159 .88993 -.040 .200 -0.2
Performance_appraisal 147 1.00 7.00 4.5884 1.45562 -.364 .200 -1.82
Culture 147 4.00 7.00 6.5156 .55538 -1.790 .200 -8.95
Performance 147 3.33 7.00 5.4036 .85406 .389 .200 1.95
The calculation of Z-score of skewness resulted on culture variable that exceeded absolute
value and needed transformation. Square root transformation was used because they were
negatively skewed. Table E4.4 shows the new statistical and standard error values after
transformation. Recalculation of Z-score for skewness after transformation of all variables
resulted in values that were less than 2.58. This indicated that all composite variables were
distributed normally.
Table E4.4 The statistical and standard error of skewness after normality
Std.
Remuneration_rewards 147 3.57 7.00 5.4159 .88993 -.040 .200 -0.2
PerformanceAppr_transform 147 1.00 7.00 4.5884 1.45562 -.364 .200 -1.82
Performance 147 3.33 7.00 5.4036 .85406 -.389 .200 1.95
The next step after checking for normality was checking for univariate outliers and
multivariate outliers. The univariate outliers exist when there were Z standard-score
exceed the absolute value of 2.58 and multivariate outliers exist if the Mahalanobis score
exceeds the value of 22.458. (df = 6). There were no univariate or multivariate outliers
found. Therefore the 147 members of the sample were ready for further statistical analysis.
Appendices
Appendix F1
Demographic of proprietary limited companies – 81 respondents

Male 48 59
Gender
Female 33 41
total 81 100
21-30 years 16 20
31-40 years 28 34
Age 41-50 years 21 26
52-60 years 13 16
Over 60 years 3 4
total 81 100
Elementary School 2 3
Junior High School 10 12
Senior High School 22 27
Education Diploma 9 11
Bachelor Degree 35 43
Master Degree 2 3
Other 1 1
total 81 100
0 Year 5 6.2
1-5 Years 34 42.0
in HRM 11-15 Years 11 13.6
16-20 Years 6 7.4
>20 Years 9 11
total 81 100
Textile – weaving 29 36
Textile – spinning 16 20
Business
Garment 17 21
Category
Batik 18 22
other 1 1
total 81 100
Appendices
Appendix F2
Descriptive of HRM practices of proprietary limited companies – 81

respondents
N Min Max Mean SD
Interviews 81 1 7 5.32 1.815
INDUSTRIAL RELATION
the employees 81 1 7 5.02 1.725
union’s existence
CULTURE
Return on Sales 81 1 7 5.42 1.731
Cash flow 81 1 7 4.83 1.980
Source: Survey analysis
Appendices
Appendix F3
Reliability

N %
Valid 81 100.0
Total 81 100.0
procedure.
.959 37
Matrix correlations of proprietary limited companies – 81 respondents

Correlations
Recruitment_
rs1 rs2 rs3 rs4 rs5 rs6 Selection
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Recruitment_Selection Pearson Correlation .884** .942** .894** .899** .908** .819** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Appendices
Correlations
Training_De
td7 td8 td9 td10 td11 velopment
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Training_Development Pearson Correlation .916** .892** .914** .906** .922** 1
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Correlations
Remuneration
cr12 cr13 cr14 cr15 cr16 cr17 cr18 _Rewards
cr12 Pearson Correlation 1 .538** .466** .349** .503** .374** .139 .736**
Sig. (2-tailed) .000 .000 .001 .000 .001 .216 .000
N 81 81 81 81 81 81 81 81
cr13 Pearson Correlation .538** 1 .344** .390** .409** .337** .178 .707**
Sig. (2-tailed) .000 .002 .000 .000 .002 .112 .000
N 81 81 81 81 81 81 81 81
cr14 Pearson Correlation .466** .344** 1 .581** .565** .337** .157 .774**
Sig. (2-tailed) .000 .002 .000 .000 .002 .161 .000
N 81 81 81 81 81 81 81 81
cr15 Pearson Correlation .349** .390** .581** 1 .638** .436** .225* .782**
Sig. (2-tailed) .001 .000 .000 .000 .000 .043 .000
N 81 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .001 .000
N 81 81 81 81 81 81 81 81
Sig. (2-tailed) .001 .002 .002 .000 .000 .002 .000
N 81 81 81 81 81 81 81 81
cr18 Pearson Correlation .139 .178 .157 .225* .360** .344** 1 .279*
Sig. (2-tailed) .216 .112 .161 .043 .001 .002 .012
N 81 81 81 81 81 81 81 81
Remuneration_Rewards Pearson Correlation .736** .707** .774** .782** .817** .517** .279* 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .012
N 81 81 81 81 81 81 81 81
Appendices
Correlations
Performance_
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 81 81 81 81 81 81 81
Correlations
Sig. (2-tailed) .001 .000 .000 .000
N 81 81 81 81 81
Sig. (2-tailed) .001 .000 .000 .000
N 81 81 81 81 81
Sig. (2-tailed) .000 .000 .001 .000
N 81 81 81 81 81
Sig. (2-tailed) .000 .000 .001 .000
N 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000
N 81 81 81 81 81
Correlations
cu29 Pearson Correlation 1 .594** .613** .614** .554** .838**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000 .000
N 81 81 81 81 81 81
Appendices
Correlations
pp34 Pearson Correlation 1 .677** .623** .839** .888**
Sig. (2-tailed) .000 .000 .000 .000
N 81 81 81 81 81
pp35 Pearson Correlation .677** 1 .699** .634** .864**
Sig. (2-tailed) .000 .000 .000 .000
N 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000
N 81 81 81 81 81
pp37 Pearson Correlation .839** .634** .655** 1 .875**
Sig. (2-tailed) .000 .000 .000 .000
N 81 81 81 81 81
Sig. (2-tailed) .000 .000 .000 .000
N 81 81 81 81 81
Appendices
Appendix F4
Preliminary analysis of proprietary limited companies – 81 respondents
Reliability
The reliability analysis resulted in a Cronbach’s alpha of 0.959 meaning that all items used
from the questionnaires were reliable.
Correlation matrix
The results of correlation matrix analysis of the seven variables (see Appendix F3 for the
matrix correlation) are summarised in Table F4.1
Table F4.1 Correlation matrix of variables

Remuneration and rewards cr12, cr13, cr14, cr15, cr16, cr17, cr18 all items >0.5 all items >0.3
Performance appraisal pa19, pa20, pa21, pa22, pa23, pa24 all items >0.5 all items >0.3
Industrial relation ir25, ir26, ir27, ir28 all items >0.5 all items >0.3
Performance pp34, pp35, pp36, pp37 all items >0.5 all items >0.3
The results of item-to-total correlation indicate that the coefficients of the seven composite
variables were within the acceptable range. The inter-item correlations were also within
the acceptable limits. Therefore, no item was removed.
Creating final composite variables
Using the result of matrix correlation analysis, seven final composite variables (six
independent variables and one dependent variable) were generated from 37 items. The next
step was checking their normality and outliers.
Normality and outliers

Since the number of respondents for proprietary limited companies was only 81, the
absolute value of Z-scores used as a standard was 2.58 (p<0.01). The skewness values
were obtained through a descriptive analysis process. Table F4.2 showed statistic values
and standard error values of skewness.
Appendices
Table F4.2 The statistical and standard error of skewness before normality
Std.
Recruitment_selection 81 1.33 7.00 4.9177 1.79721 -.703 .267 -2.63
Training_development 81 1.00 7.00 5.2988 1.83579 -.927 .267 -3.47
Performance_appraisal 81 1.00 7.00 5.6420 1.37894 -1.530 .267 -5.73
Culture 81 1.40 7.00 5.5358 1.18018 -1.188 .267 -4.45
Performance 81 1.75 7.00 4.7130 1.45726 -.423 .267 -1.58
By calculating Z- score of skewness, it was found that four variables exceeded the
maximum value (>2.58) and needed to be transformed. They were recruitment and
selection, training and development, performance appraisal and culture. Recruitment and
selection, training and development and performance appraisal were transformed using
square root technique while culture was transformed using an inverse technique because it
was severely skewed. Table F4.3 shows the new statistic and standard error values after
transformation.
Table F4.3 The statistical and standard error of skewness after normality
Std.
RecruitmentSel_transform 81 .42 2.00 1.3154 .49762 -.456 .267 -1.71
TrainingDev_transform 81 .35 2.00 1.4432 .53020 -.624 .267 -2.34
PerformanceAppr_transform 81 .35 2.00 1.5198 .41119 -.332 .267 -1.24
Performance 81 1.75 7.00 4.7130 1.45726 -.423 .267 -1.58
After transformation, the Z-scores of skewness for the composite variables were all less
than 2.58. This indicated that all variables were normally distributed.
The Z-score used to check univariate outliers was 2.58 and Mahalanobis’ value used to
check multivariate outliers was 22.458. (df = 6). There were three univariate outliers (data
numbers 13, 54, and 79) and no multivariate outliers were found. The data for the three
outliers were removed from the samples data and data from 78 respondents were ready for
further analysis.
Appendices
Appendix G1
Demographic of proprietary limited companies combined sample – 209 respondents
Male 139 67
Gender
Female 70 33
total 209 100
21-30 years 39 19
31-40 years 76 36
Age 41-50 years 57 27
52-60 years 31 15
Over 60 years 6 3
total 209 100
Elementary School 3 1.4
Junior High School 15 7.2
Senior High School 55 26.3
Education Diploma 27 13.0
Bachelor Degree 101 48.3
Master Degree 5 2.4
Other 3 1.4
total 209 100
0 Year 5 2.4
1-5 Years 102 48.8
in HRM 11-15 Years 24 11.5
16-20 Years 14 6.7
>20 Years 13 6.2
total 209 100
Textile – weaving 58 27.7
Textile – spinning 44 21.1
Business
Garment 37 17.7
Category
Batik 66 31.6
other 4 1.9
total 209 100
Appendices
Appendix G2
Descriptive of HRM practices of proprietary limited companies – 209 respondents

N Min Max Mean SD
Interviews 209 1 7 5.09 1.723
INDUSTRIAL RELATION
the employees 209 1 7 4.88 1.730
union’s existence
CULTURE
Return on Sales 209 1 7 4.85 1.887
Cash flow 209 1 7 4.18 2.074
Appendices
Appendix G3
Reliability

N %
Valid 209 100.0
Total 209 100.0
procedure.
.952 37
Matrix correlations of proprietary limited companies – combined sample (209

respondents)
Correlations
Recruitment
_Selection rs1 rs2 rs3 rs4 rs5 rs6
Recruitment Pearson Correlation 1 .857** .896** .869** .857** .830** .793**
_Selection Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
rs6 Pearson Correlation .793** .592** .660** .626** .603** .610** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Appendices
Correlations
Training_Deve
lopment td7 td8 td9 td10 td11
Training_Development Pearson Correlation 1 .880** .834** .888** .869** .880**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
td11 Pearson Correlation .880** .748** .609** .717** .773** 1
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Correlations
Remuneration
_Rewards cr12 cr13 cr14 cr15 cr16 cr17 cr18
Remuneration_ Pearson Correlation 1 .613** .657** .743** .752** .750** .704** .573**
Rewards Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .004
N 209 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .006
N 209 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209 209
cr18 Pearson Correlation .573** .199** .190** .252** .260** .417** .392** 1
Sig. (2-tailed) .000 .004 .006 .000 .000 .000 .000
N 209 209 209 209 209 209 209 209
Appendices
Correlations
Performance_
Appraisal pa19 pa20 pa21 pa22 pa23 pa24
Performance_Appr Pearson Correlation 1 .789** .820** .865** .866** .874** .742**
aisal Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
pa24 Pearson Correlation .742** .382** .468** .513** .607** .656** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 209 209 209 209 209 209 209
Correlations
Industrial_relation ir25 ir26 ir27 ir28
Industrial_relation Pearson Correlation 1 .789** .854** .823** .814**
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
ir28 Pearson Correlation .814** .529** .619** .512** 1
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
Appendices
Correlations
Culture cu29 cu30 cu31 cu32 cu33
Culture Pearson Correlation 1 .835** .837** .822** .839** .826**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
cu33 Pearson Correlation .826** .588** .592** .640** .615** 1
Sig. (2-tailed) .000 .000 .000 .000 .000
N 209 209 209 209 209 209
Correlations
Performance pp34 pp35 pp36 pp37
Performance Pearson Correlation 1 .925** .902** .864** .905**
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
pp37 Pearson Correlation .905** .866** .751** .682** 1
Sig. (2-tailed) .000 .000 .000 .000
N 209 209 209 209 209
Appendices
Correlations
Remuneration
_Rewards cr16 cr15 cr14 cr17 cr13 cr18 cr12
Remuneration_Rewards Pearson Correlation 1 .749** .747** .723** .706** .657** .578** .624**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .001 .000
N 212 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .004 .000
N 212 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .001 .000 .004 .001
N 212 212 212 212 212 212 212 212
cr12 Pearson Correlation .624** .288** .304** .450** .414** .357** .234** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .001
N 212 212 212 212 212 212 212 212
Correlations
Performance_
Appraisal pa20 pa19 pa21 pa22 pa23 pa24
Performance_Appraisal Pearson Correlation 1 .816** .788** .863** .862** .872** .731**
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212
pa24 Pearson Correlation .731** .449** .367** .493** .604** .635** 1
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 212 212 212 212 212 212 212
Appendices
Correlations
Industrial_relation ir26 ir28 ir25 ir27
Industrial_relation Pearson Correlation 1 .857** .818** .794** .827**
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
ir27 Pearson Correlation .827** .664** .522** .545** 1
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
Correlations
Culture cu33 cu31 cu29 cu32 cu30
Culture Pearson Correlation 1 .828** .822** .835** .839** .838**
Sig. (2-tailed) .000 .000 .000 .000 .000
N 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000
N 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000
N 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000
N 212 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000 .000
N 212 212 212 212 212 212
cu30 Pearson Correlation .838** .596** .609** .625** .651** 1
Sig. (2-tailed) .000 .000 .000 .000 .000
N 212 212 212 212 212 212
Correlations
Performance pp34 pp37 pp35 pp36
Performance Pearson Correlation 1 .926** .907** .902** .866**
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212
pp36 Pearson Correlation .866** .687** .689** .699** 1
Sig. (2-tailed) .000 .000 .000 .000
N 212 212 212 212 212

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Southern Cross University

The HRM practices of Indonesian medium-sized

BSc of Management, Brawijaya University, Indonesia

Date : 28 January, 2013

In the name of Allah, the Most Gracious, the Most Merciful

I wish to express my heartfelt gratitude to my supervisor Associate Professor Michelle

This exploratory research investigates human resource management (HRM) practices in

Small and medium-sized enterprises (SMEs) play an important role in Indonesian

Statement of original authorship ........................................................................................... i

CHAPTER ONE: OUTLINE OF THE STUDY ............................................... 1

CHAPTER TWO: LITERATUREREVIEW ........................................... 15

CHAPTER THREE: RESEARCH METHODOLOGY ......................... 68

CHAPTER FOUR: QUALITATIVE DATA ANALYSIS ...................... 112

CHAPTER FIVE: QUANTITATIVE DATA ANALYSIS ................... 163

CHAPTER SIX: DISCUSSION AND CONCLUSION ......................... 202

REFERENCES ............................................................................................ 241

APPENDICES ............................................................................................. 260

Chapter 2 Review of the Literature

Chapter 3 Research Methodology

Chapter 5 Quantitative Data Analysis

Figure 1.1 Structure and map of Chapter 1.................................................................... 2

Appendix A1 Information sheet................................................................................ 261

ACFTA ASEAN-China Free Trade Agreement

Figure 1.1 Structure and map of Chapter 1

1.2 Research Background

1.3 Research Objectives

1.4 Research Focus, Research

1.5 Justification for the Study

1.6 Research Methodology

1.7 Contribution of the study

1.8 Thesis Outline

1.2 Research Background

1.3 Research Objectives

1.4 Research Focus, Research Question and Hypotheses

1.4.1 Research focus

To explore the nature and extent of human resource management practices in

1.4.2 Research questions

Research Question 1 was formulated to examine the implementation of HRM

3. What are the relationships between HRM practices in medium-sized textile

H1: There is a positive relationship between the implementation of recruitment and

H2: There is a positive relationship between the implementation of training and

Recruitment Training and Remuneration Performance Industrial Culture

Source: Developed for this study

1.5 Justification for the Study

This research is justified for the following reasons:

By understanding HRM practices in Indonesian medium-sized enterprises, the study can

The focus of the research to medium-sized enterprises is because small-sized enterprises

1.6. Research Methodology

1.7 Contribution of the Study

1.8 Thesis Outline

In Chapter 2, the theoretical literature on Human Resource Management (HRM) is

Figure 2.1. Structure and map of Chapter 2

2.2.1 HRM practices in Western context

2.3.1 National culture

2.4.1 Indonesian culture

2.5.1 Definition of Indonesian medium-

2.6.1 The development of the textile

2.8 Research Focus, Research

2.2 HRM Practices in Business Organisation

2.2.1 HRM practices in the Western context

employees as human capital and HRM function started to be recognised as strategic

HRM functions and practices: Roehling et al (2005) argue that HR function is

Storey (1992) as cited in Desler et al (2007) mentions 27 points of difference between