ANALYSES ON THE KEY DRIVERS OF ENGAGEMENT, ENABLEMENT, AND EMPOWERMENT FOR DEVELOPING EMPLOYEE EXCELLENCE IN SELECT MANUFACTURING COMPANIES IN INDONESIA DISSERTATION Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy from Institut Teknologi Bandung IMAN PERMANA ID: 39010004 (Doctoral Program in Management Science) INSTITUT TEKNOLOGI BANDUNG 2015 i ABSTRACT ANALYSES ON THE KEY DRIVERS OF ENGAGEMENT, ENABLEMENT, AND EMPOWERM ENT FOR DEVELOPING EMPLOYEE EXCELLENCE IN SELECT MANUFACTURING COMPANIES IN INDONESIA By: Iman Permana ID: 39010004 Organizational excellence is crucial for survival in today’s business dynamics. Literature reviews revealed that how engaged, how enabled, or how empowered employees were in day-to-day work activities affected organizational excellence. This research hypothesizes that employees’ actions, on the other hand, are affected by how engaged, how enabled and how empowered they are in day-to- day work activities. These actions, along with the results of the actions, are basically what employee excellence is all about. It is therefore paramount to ensure that the motivated employees, who are highly engaged, are properly enabled with the right resources and work environment and are empowered with right level of authority of decision making. This study analyzed the key drivers of employee engagement, enablement, and empowerment in select manufacturing companies in Indonesia. Manufacturing companies were chosen for this study due to their massive work force and their largest share of foreign direct investment inflows into Indonesia, and thus, the study would add values to the Indonesian business sector by focusing on manufacturing organizations. Eight manufacturing companies were selected for this study. Four companies were foreign direct investment multinational companies, while the other four were local or national companies. This research firstly developed a framework for developing sustainable employee excellence through the constructs of engagement, enablement, and empowerment. The study commenced with literature review to identify potential drivers of each of these constructs, which were then used in conceptual theory building to come up with the proposed framework. To further explore and confirm these drivers, the study then proceeded with evidence-based interviews with 257 foremen, 257 direct subordinates of the foremen, 83 direct superiors of the foremen, and 34 managers of the eight sampled companies. As a result of the literature review and the evidence-based interviews, eleven potential drivers of engagement, seven potential drivers of enablement, and four potential drivers of empowerment were identified. The study then assessed the relative-importance of these potential drivers by conducting pairwise comparisons and analytic hierarchy processes. Further confirmation was then done with a quadrant analysis of importance-vs- ii observance. The same 257 foremen from the eight companies interviewed previously were taken as the respondents for this part of the study. The results of the assessment mentioned above revealed that being confident of own future in the organization, supportive working environment, and superior’s willingness to delegate are respectively the most important drivers for engaging, enabling and empowering employees. Using the model built based on the framework from the qualitative study, the research then quantitatively analyzed the model using Structural Equation Modelling (SEM) with latent variables. The measurement model for the predictor variables used formative measures, and therefore, Partial Least Square (PLS)- SEM was used in this study. Employees at the foremen level were the unit of analysis in this quantitative study. Using survey questionnaire, the 257 foremen from the eight companies were the respondents for this quantitative study. As a result of the quantitative analysis, the study revealed that there was a key driver for each of the predictor construct when quantitatively related with Employee Excellence. Psychological Capital was found to be the key driver of Employee Engagement; Infrastructure for Data Sharing was the key driver of Employee Enablement; Transformational Leadership was the key driver of Employee Empowerment. The study also revealed that Employee Engagement, Enablement, and Empowerment were not correlated with each other when jointly affecting Employee Excellence. These three constructs jointly affected Employee Excellence positively and significantly. In the perspective of theory-building, this research contributed to the existing stream by recommending a model of employee excellence based on 3E (Engagement, Enablement, and Empowerment), and empirically examined the model by assessing employee engagement, employee enablement, and employee empowerment as latent independent predictors of employee excellence. While literature reviews revealed that previous researches studied how engagement, enablement, or empowerment affected organizational excellence individually, this research provided a new dimension to the existing stream by assessing how the 3E affected employee excellence jointly. In the perspective of practical/managerial implications, the research findings provided an empirical basis for management to prioritize strategic actions on the most important factors for affecting engagement, enablement, and empowerment, in an effort to develop employee excellence, which was reflected in terms of safety, productivity, quality, customer service, and leadership performances. The study recommended managerial actions to develop these reflective manifests of employee excellence through the most important drivers of employee engagement, enablement, and empowerment. Key words: Engagement, Enablement, Empowerment, Employee Excellence. i ABSTRAKSI ANALISIS PENGGERAK-PENGGERAK UTAMA KETERLIBATAN , KEBERDAYAAN , DAN KEBERWENANGAN UNTUK MENGEMBANGKAN KEUNGGULAN PEGAWAI DI BEBERAPA PERUSAHAAN MANUFAKTUR DI INDONESIA Oleh: Iman Permana NIM: 39010004 Keunggulan organisasi sangatlah penting bagi kelangsungan hidup dalam dinamika bisnis sekarang ini. Kajian pustaka mengungkapkan bahwa seberapa terlibat, seberapa berdaya, atau seberapa berwenang para pegawai dalam kegiatan kerja sehari-hari ternyata memengaruhi keunggulan organisasi. Di lain sisi, riset ini menghipotesiskan bahwa tindakan pegawai dipengaruhi oleh seberapa terlibat, seberapa berdaya, dan seberapa berwenang mereka dalam kegiatan kerja sehari- hari. Tindakan tersebut, beserta hasilnya, itulah pada dasarnya yang dimaksud dengan keunggulan pegawai. Oleh karena itu, adalah sangat penting untuk me- mastikan bahwa pegawai yang bermotivasi, yang sangat terlibat, diberdayakan secara layak dengan sumber daya dan lingkungan kerja yang tepat dan diberwe- nangkan dengan tingkat wewenang yang tepat bagi pengambilan keputusan. Studi ini menganalisis penggerak-penggerak utama keterlibatan, keberdayaan, dan keberwenangan pegawai di beberapa perusahaan manufaktur di Indonesia. Perusahaan manufaktur dipilih untuk studi ini karena besarnya jumlah tenaga kerjanya dan karena memberikan sumbangsih terbesar dalam aliran investasi lang- sung asing yang masuk ke Indonesia, dan oleh sebab itu, studi ini akan memberi- kan nilai tambah bagi sektor bisnis Indonesia dengan berfokus pada organisasi manufaktur. Delapan perusahaan manufaktur dipilih untuk studi ini. Empat perusahaan merupakan perusahaan multinasional investasi langsung asing, sedangkan yang empat lainnya adalah perusahaan lokal atau nasional. Riset ini mengembangkan suatu kerangka untuk membangun keunggulan pegawai yang berkesinambungan melalui variabel Keterlibatan, Keberdayaan, dan Keber- wenangan. Studi ini diawali dengan kajian pustaka untuk mengidentifikasi peng- gerak-penggerak yang mungkin pada masing-masing variabel tersebut, yang ke- mudian digunakan dalam membangun teori konseptual untuk membuat usulan kerangka tersebut. Untuk lebih jauh lagi mengeksplorasi dan mengkonfirmasi penggerak-penggerak tersebut, studi ini dilanjutkan dengan wawancara berbasis- bukti kepada 257 orang foreman, 257 orang anak buahnya, 83 orang atasan langsungnya, dan 34 orang manajer, di delapan perusahaan yang telah dipilih tadi. Kajian pustaka dan wawancara berbasis-bukti mengidentifikasi sebelas penggerak yang mungkin pada Keterlibatan, tujuh penggerak yang mungkin pada Keberdayaan, dan empat penggerak yang mungkin pada Keberwenangan. Studi ini kemudian menelaah tingkat relatif dari pentingnya penggerak-peng- gerak yang mungkin tersebut dengan melakukan perbandingan pasangan dan proses hirarki analitis. Konfirmasi lebih lanjut dilakukan dengan analisis kuadran * ii terhadap tingkat pentingnya vs apa yang diamati. Ke-257 orang foreman yang sama dari delapan perusahaan yang diwawancara sebelumnya dipergunakan lagi sebagai responden untuk tahapan studi ini. Hasil telaah tersebut di atas mengungkapkan bahwa keyakinan terhadap masa depan sendiri di organisasi, lingkungan kerja yang mendukung, dan kesediaan atasan untuk mendelegasikan adalah penggerak utama untuk—sesuai urutan di atas—melibatkan, memberdayakan, dan memberwewenangkan pegawai. Dengan menggunakan model yang dibangun dari kerangka yang dihasilkan studi kualitatif, riset ini kemudian secara kuantitatif menganalisis model tersebut dengan menggunakan Structural Equation Modelling (SEM) dengan variabel- variabel laten. Model pengukuran untuk variabel predictor menggunakan ukuran formatif, dan oleh karenanya, Partial Least Square (PLS)-SEM digunakan dalam studi ini. Unit analisis dalam studi kuantitatif adalah pegawai di tingkat foreman.