MODEL DEVELOPMENT OF THE INFLUENCE OF PERFORMANCE MANAGEMENT PRACTICES, ORGANIZATIONAL CULTURE, AND ICT UTILIZATION ON THE PERFORMANCE OF MSME COMPANIES

• Main Author: Nugraheni, Nina
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/71706
• Institution: Institut Teknologi Bandung

Micro, small and medium enterprises (MSMEs) make a major contribution to a country, especially in economic growth and job creation. Behind their contributions, there are obstacles faced by MSMEs such as a low level of business resilience, unprofessional management, and a lack of competitiveness in human resources within MSMEs. Preliminary studies also indicate the importance of research related to the performance of MSME companies to solve existing problems. Based on a literature review from previous research, information was obtained that there are several aspects that can affect the performance of a company, namely performance management practices, organizational culture, and information and communication technology (ICT) utilization. This study aims to develop a model of the influence of performance management practices, organizational culture, and ICT utilization on the performance of MSME companies, as well as evaluate the relationships that arise between performance management practices, organizational culture, and ICT utilization in MSME companies. The indicators in this research model are adapted to the MSME context based on the indicators used in previous studies with MSME objects, and based on the real application obtained from the results of field studies. This research was conducted to provide an overview of the things that need to be considered by MSMEs in order to improve the performance of their companies. Data collection in this study was carried out using the convenience sampling method using an instrument in the form of a questionnaire which was distributed to MSME actors in the Bandung area and its surroundings. The questionnaire contains assessments from respondents using a Likert scale of one to five, regarding performance management practices, organizational culture, ICT utilization, and company performance. Scale one means strongly disagree and scale five means strongly agree with the evaluation items in the questionnaire. From distributing the questionnaires, data were obtained from a total of 96 respondents. The model developed is a hierarchical component model (HCM) which involves a higher- order construct (HOC) with four constructs in the form of performance management practices, organizational culture, ICT utilization, and company performance, and involves a lower-order construct (LOC) for the construct of organizational culture, which consists of the subconstructs of involvement, consistency, adaptability, and mission. Data processing in this study was carried out using the Partial Least Square Structural Equation Modeling (PLS-SEM) method to test measurement models, structural models, and apply multigroup analysis. The results of the analysis show that the level of performance management practices and organizational culture can affect the level of company performance in all MSME groups in this study. The higher the level of performance management practices and organizational culture in an MSME, the higher the performance of the MSME company. Meanwhile, the level of ICT utilization has not been proven to have a direct effect on the level of company performance, and it has not been proven to moderate the effect of the level of organizational culture on the level of company performance in all MSME groups. Based on the results of a multi-group analysis for MSMEs with 3-10 employees, the level of ICT utilization is proven to have a direct effect on the level of company performance. The level of ICT utilization has also been shown to moderate the influence of the level of organizational culture on the level of company performance for MSMEs in the culinary sector and MSMEs with 3-10 employees. In addition, in all MSME groups, there is sufficient evidence that the level of organizational culture influences the level of performance management practices and ICT utilization, and the level of performance management practices also influences the level of ICT utilization. Based on the results of this analysis, this study provides recommendations for MSME actors to design good performance management for their companies and are committed to implementing these performance management practices to the fullest in their companies. Performance management practices consist of setting performance targets, providing feedback, and evaluating performance for all parties within the company. In addition, this research also provides recommendations for MSME actors in implementing organizational culture to encourage employee involvement, maintain company consistency, increase adaptability, and have a mission that is able to provide direction for the future of MSME companies. In addition, the use of ICT in MSMEs should refer to the needs defined in performance management practices and organizational culture in these MSMEs. It is hoped that the results of this study can enrich studies on the topic of MSME company performance and the factors that influence it, and can contribute to improving the performance of MSME companies in Indonesia.