EXAMINING PERFORMANCE MANAGEMENT SYSTEM IN INDUSTRIAL REVOLUTION 4.0: A STUDY AT RESEARCH AND DEVELOPMENT DIVISION OF AN INDONESIAN STATE-OWNED ENTERPRISE

Abstract

The changing customer demands together with rapid technological changes in industrial revolution 4.0 have lead organizations, especially those dealing with research and development activities, to inculcate flexible culture. However, the performance management system (PMS), a formal and routine-based system, has been argued to be a hindrance to flexibility and innovation. Thus, PMS needs to be designed and used to enable proper control system while still facilitating flexibility and innovation in organization. As such, the aim of this paper is to explain how PMS is designed and adapted to be aligned with the flexible culture of the organization. A qualitative case study at a R&D division of an Indonesian state-owned enterprise was undertaken with the data gathered from interview with key organizational members and also from internal and external documents. The finding shows that the flexible culture at R&D division was created as a response to the environmental forces which leads to the adaptation in the design and use of the PMS. Consequently, there are two PMS at the R&D division: the formal PMS of the parent’s company used for reporting purposes, and the informal adapted PMS aligned to the virtual organization structure of the R&D division. This informal PMS consists of project-based indicator with revolving targets used for senior manager’s decision making and reward evaluation purposes.
Keywords: Flexible culture, performance management system, research and development