CC BY
38
DOI 10.18551/rjoas.2019-08.25
STRATEGY FOR PERFORMANCE IMPROVEMENT AT BUILDING DIVISION OF PT. HUTAMA KARYA (PERSERO) IN CONDITIONS OF CONSTRUCTION BUILDING
BUSINESS COMPETITION
Utomo Prajapati*, Baga Lukman M., Djohar Setiadi
School of Business, IPB University, Indonesia *E-mail: [email protected]
ABSTRACT
PT. Hutama Karya (Persero) Building Division is a one of companies engaged in the construction of high rise buildings. The purpose of this research is to evaluate company performance and develop strategies to improve company performance. Interview and literature study use to evaluate company performance. Internal Faktor Evaluation (IFE) Matrix and External Faktor Evaluation (EFE) Matrix use to analyze internal and external environment. SWOT Matrix used to get alternative strategies and Quantitative Strategic Planning Matrix (QSPM) used for priority strategies. The IE Matrix show that the company is in Quadran IV. The strategy in that position is market penetration, market development. The results of QSPM analysis of the right strategy are strategies to utilize the big name of BUMN to be aggresive in marketing (initiating or creating projects). The strategy resulted in 5 of the strategy's activities.
KEY WORDS
Performance improvement, QSPM, SWOT matrix, strategy, business.
In this era of advancement, the society prefers to more practical and handy materials, especially regarding houses. There have currently been many buildings that not just function as offices, but also as apartments with facilities such as shopping malls.
According to a research by BCI Asia Indonesia, the construction market in Indonesia was estimated to reach Rp 451,33 trillions in 2018, a 2,71% increase than the one in 2017, around Rp 439,44 trillions, with the civil projects were up to 64% and building construction projects up to 36%. The value of building constructions was only estimated to increase 1,05%, or from Rp 157,11 trillions to Rp 155,86 trillions, in 2017. Such value was mostly allocated for presidential projects around Jakarta in 2018.
4.000.000 3.500.000 3.000.000 2.500.000 2.000.000 1.500.000 1.000.000 500.000
■ SALES 2016
■ SALES 2017
Figure 1 - Sales of construction companies
PT. Hutama Karya (Persero) Building Division is a Division of PT. Hutama Karya, a state-owned enterprise specializing in the constructions of High Rise Buildings, in which one of the products is contractors for skyscrapers. It was formed in 2010, where there were new companies focusing on the constructions of High Rise Buildings. PT. Hutama Karya
(Persero) Building Division has done many projects for constructing many office buildings, apartments, and hospitals, both in and outside of Jakarta.
Amidst the growing construction business, a 2017 phenomenon showed that while there were sale increases in other grade-7 construction companies, PT. Hutama Karya (Persero) Building Division experienced an income decrease or lower than 2016. Such decrease could be shown in Figure 1. Aside from incomes, the company's profit also strongly decreased, as shown in Figure 2.
450.000 100.000 350.000 300.000 250.000 200.000 150.000 100.000 50.000
(50.000) HK APG WIKA GEDIJNG Total bangun
■ PROFIT 2016 (1.193) 1.199 195.642 210.412
■ PROFIT 2017 (14.866) 1.537 407.398 231.269
Figure 2 - Profits of construction companies
In comparison, other contractor companies with the same grade as PT. Hutama Karya (Persero) Building Division had significant increases. Therefore, the company is required to improve its perormance in order to compete properly in the building construction business.
Based on the introduction, the sales and profits of PT. Hutama Karya (Persero) Building Division in 2017 decreased compared to 2016 and 2015, while sale and profit increases happened in other companies. In addition, the company failed to reached the standard targets set by the Division Budget and Work Plan (RKAD) of 2015-2017.
In this study, the writer analyzed this phenomenon and determined every possibe strategy that PT. Hutama Karya (Persero) Building Division could apply to improve the company's performances. Upon analyzing, the writer implemented the research questions as follow:
• What was the current condition of PT. Hutama Karya (Persero) Building Division?
• What are the main factors of improving the company's performances?
• Which alternative business strategies that could be implemented to improve the company's performances?
• Which improvement strategies that the company should implement in order to compete with other construction companies?
Based on the research problems, the purposes of this research were as follow:
• Analyzing the current condition of PT. Hutama Karya (Persero) Building Division;
• Identifying internal and external factors that could influence the improvement of the company's performances;
• Formulating alternative business strategies and prioritizing on which strategies that would be implemented to improve the company's performances;
• Suggesting the management on which strategies that should be implement in order to improve the company's performances and compete with other construction companies.
The results of this research were expected to provide benefits to the writer, the company (PT. Hutama Karya (Persero) Building Division), and the readers:
• For the writer, it would provide a practical experience on planning a strategy to improve the company's performances in the building construction industry;
• For PT. Hutama Karya (Persero) Building Division, it would provide a suggestion on a strategy planning to could be implemented to improve the company's performances;
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• For the readers, it would become a source of information and a literature review for the following researches on performance improvement strategies.
METHODS OF RESEARCH
The research conducted in the office of PT. Hutama Karya (Persero) Building Division, Jalan Iskandarsyah I no. 6 Kebayoran Baru, South Jakarta, as it was intended from the start. The research was conducted during a one-month period, or during October until November of 2018.
The research used the descriptive quantitative analysis, which described the research problem thoroughly in a form of a numeric data. The required datas were a primary data through interviews with experts and a secondary data obtained through journals, books, web pages, company documents.
The research used a thorough interview method wit experts to learn about the current condition of the company.
The sampling technique was conducted through the purposive sampling and judgment sampling techniques, which were intended to obtain respondents whose capacities and compentence were aligned with the purpose of the research. The respondent sample could shown in Table 1.
Table 1 - Research Respondent Sample
Respondent Name Position
Internal Purnomo Head of Division
Rohmat Danang NR Senior Manager of Production (SMP)
Suherni Senior Manager of Administration & Finance (SMAK)
Buzmart Zuriantomy Senior Manager of Construction Business / Marketing Development (SMPBK)
External Agus Ediyanto Director of Yaika Gema Utama
Muhammad Anwar Director of Graha Kartika Anugerah
Performance Evalulion Building Division
Internal Analysis ^ Marketing Operational - HR ^ • Finance_j
Evaluation Internal Factor n.___J
Grand Strategy {Matriks IE)
Alternative Strategy (SWOT Analysis)
QSPM
—1 —
Managerial Implication
Note:---Scope of Research
Figure 3 - Mind Map of the Research
RESULTS AND DISCUSSION
The performance evaluation was analyzed through three aspects of the company: marketing, production / operational and finance.
On marketing, the winning auctions had only reached 28,22% in 2015 and increased up to 96,74% in 2016 from the appointed RKAD target. Yet in 2017, marketing experienced a decrease, with only 26,32% from the RKAD target. The target achievement for marketing compared with the realization could be seen in Table 3 below.
Table 3 - Performance Evaluation of Marketing*
YEAR AUCTION FOLLOWED AUCTION WON
RKAD (PLAN) REAL ACHIEVEMENT RKAD (PLAN) REAL ACHIEVEMENT
2015 10.000 8.186 81,86% 1.892 534 28,22%
2016 7.880 9.675 122,78% 2.360 2.283 96,74%
2017 9.241 9.058 98,02% 3.545 933 26,32%
*the amounts were in billions of Rupiah.
In general, the marketing performance failed to reach the intended RKAD target. On the production / operational target, the sales in 2015 only reached 66,26% from the RKAD target and the inefficiency of HPP reached 1,78% of the RKAD target. The net profit still experienced a loss at Rp 42,7 billions. In 2016, there was an increase from the previous year, both in sales and profits, around 72,25% from the RKAD and HPP targets, while the inefficiency rate of 2016 was 0,49%. The net profit loss in 2016 was Rp. 92,46 billions. In 2017, the production / operational performance had a decrease in both the sales target and rate compared with the previous two years, with only 42,43% from the RKAD target, the inefficiency of HPP about 1,14% and a loss in net profit around Rp 71,93 billions. The target achievement for production / operational compared with the realization could be seen in Table 4 below:
Table 4 - Performance Evaluation of Production / Operational
PRODUCTION
ACHIEVEMENT
ACHIEVEMENT RKAD (PLAN)
ACHIEVEMENT
NON JO (JOINT OPERATION)
JO (JOINT OPERATION)
NON JO (JOINT OPERATION)
Old Contract
JO PROFIT
PROFIT_
OTHER SALES OTHER COST
PROFIT BEFORE INTEREST & TAX
COST OF INTEREST
PROFIT AFTER TAX
Source: Financial Report of PT. Hutama Karya (Persero) Building Division, Processed.
On finance, the company did not reach the intended target cash. In 2015, it only achieved 54,04% of the RKAD target, only 70,30% in 2016, then decreased in 2017 up to 52,64%. The target achievement for finance compared with the realization could be seen in Table 5 below:
Table 5 - Performance Evaluation of Finance
VARIABLE 2015 2016 2017
RKAD (PLAN) REAL ACHIEVEMENT RKAD (PLAN) REAL ACHIEVEMENT RKAD (PLAN) REAL ACHIEVEMENT
Cash In 1.338.019 723.053 54,04% 1.262.111 887.244 70,30% 1.725.174 908.148 52,64%
Cash Out 1.214.268 824.400 1.224.738 842.757 1.593.559 811.240
Surpulus/(Defisit) 123.751 (101.347) 37.373 44.487 131.615 96.908
Source: Financial Report of PT. Hutama Karya (Persero) Building Division, Processed.
2015
2U17
Old Contract New Contract
Old Contract New Contract
Old Contract
New Contract_
JO (JOINT OPERATION)
- New Contract_
PROFIT BEFORE JO
PROFIT AFTER JO COST OF BUSINESS
The records for the company's equity rates and short-term rates could be seen in Table 6 below:
Table 6 - Company's Financial Variables, 2015-2017
No Variabel Year
2015 2016 2017
1 Current Liability 886.426.505.934 992.656.762.368 745.769.969.765
2 Equity (16.724.237.809) (140.266.961.501) (71.931.079.856)
Source: Financial Report of PT. Hutama Karya (Persero) Building Division, Processed.
The equity rates were still negative as the company experienced losses in 2015 and 2016. The analysis of the external environment resulted in five opportunities and five threats that the company currently faced. Both factors were evaluated using the EFE matrix to monitor the company's response towards them. The EFE Matrix of PT. Hutama Karya (Persero) Building Division could be seen in Table 7.
Table 7 - The EFE Matrix of PT. Hutama Karya (Persero) Building Division
NO OPPORTUNITIES WEIGHT RATE SCORE
1 Good relations with customers 0,15 3,00 0,45
2 Presidential Regulation planning on the holdings of state-owned construction companies 0,11 4,00 0,45
3 The biggest Portfolio owners by state-owned enterprises and Government 0,09 3,00 0,28
4 Design and Build package for tender 0,08 2,00 0,16
5 Government regulation on the constructions of 0% down payment houses and penthouses 0,06 2,00 0,13
NO THREATS WEIGHT RATE SCORE
1 Increase of dollar exchange rate against rupiah 0,11 3,00 0,34
2 Bad debts due to the owner's inability to pay debts 0,11 3,00 0,33
3 Requirements of using the BIM (Building Information Modeling) application on tender 0,08 3,00 0,23
4 The competition between Grade-7 contractor companies 0,12 3,00 0,35
5 Fines on delayed projects 0,08 3,00 0,25
TOTAL 1 - 2,97
The analysis of the company's external environment showed that good relations with customers and plans on the holdings of the infrastructure of state-owned companies were the opportunities that the company could prioritize. Whereas for threats, the company should remain alerted with the competition between Grade-7 contractor companies and bad debts due to the owner's inability to pay. The total evaluation rate of the EFE matrix was 2,97. It showed that the company could respond to both opportunities and threats very well.
The analysis of the internal environment resulted in five strengths and five weaknesses that the company currently had. Both factors were evaluated using the IFE matrix to measure the internal condition of the company, both in strengths and weaknesses. The IFE Matrix of PT. Hutama Karya (Persero) Building Division could be seen in Table 8.
Table 8 - The IFE Matrix of PT. Hutama Karya (Persero) Building Division
NO STRENGTHS WEIGHT RATE SCORE
1 The Board of Management's commitment on the company's growth 0,13 4 0,54
2 The formation of a task force 0,09 3 0,26
3 The big name of state-owned companies and the company's reputation 0,14 4 0,55
4 The use of the Project Control Information System 0,11 4 0,44
5 The use of the monitoring system for vendor bills 0,10 4 0,38
NO WEAKNESSES WEIGHT RATE SCORE
1 Marketing personnels failed to initiate projects 0,17 2 0,34
2 The length of time for the disbursement of bills to vendors 0,07 2 0,14
3 Unrecorded past project budgets and bad debts 0,08 2 0,17
4 The dropping of funds from the main office 0,06 2 0,11
5 Limited personnels for Cost Control 0,06 2 0,11
TOTAL 1,00 - 3,04
The analysis of the internal environment showed that the most important strengths that the company obtained were the big name of state-owned companies and the company's
reputation and the Board of Management's commitment on the company's growth. On the other hand, marketing personnels who failed to initiate projects, as well as unrecorded past project budgets and bad debts, became their greatest weaknesses. The total evaluation rate of the IFE matrix of 3,04 showed a strong condition on the company's internal environment.
With the EFE and IFE rates were in 2,97 and 3,04 respectively, the company was at row IV, which, according to David (2011),put the company in a growing and building position. It implicated which strategies that the company could implement, which were market penetration, market expansion, and product expansion.
IFE Total Score Strong Mild Weak 3,0-4,0 2,0-2,99 1,0-1,99
4,0_3,0_20_10
r
3,0 I II III
EFE Total Score 2,0 * IV V VI
r
1,0 VII VIII IX
Figure 4 - The IE Matrix
The analysis of SWOT was to identify several factors that determined alternative strategies systematically, with the help of the SWOT matrix. The result could be seen in Figure 5.
Faktor Internal Faktor Eksternal Strenght (S) 1. The Board of Management's commitment on the company's growth 2. The formation of a task force 3. The big name of state-owned companies and the company's reputation 4. The use of the Project Control Information System 5. The use of the monitoring system for vendor bills Weak (W) 1. Marketing personnels failed to initiate projects 2. The length of times for disbursement of bills to vendors 3. Unrecorded past project costs and bad debts 4. The dropping of funds from head office 5. Limited personnels for cost control
Opportunity (O) 1. Relations with customers 2. Presidential regulation planning on the holdings of state-owned construction companies 3. The biggest portofolio owners by state enterprise and government 4. Design and Build packages in the tender offer 5. Government policies related to the construction of DP 0% houses and flat apartments Strategy (SO) 1. Using the state-owned enterprises for aggressive marketings (project initiation/creation) (S1,S3,O1,O3,O4) 2. Offering tender prices with 89% HPP (S1,S3,O3,O4,O5) Strategy (WO) 1. Providing lobbying and negotiation trainings to project teams (W1,W2,O1,O3) 2. Conducting a joint operation with project planner/other contractors (W3,W4,03,04,05)
Threat(T) 1. Increase of dollar exchange rate against rupiah 2. Bad debt due to the owner's inability to pay debts 3. Requirements of using the BIM (Building Information Modeling) application on tender 4. The competition between grade-7 contractor companies 5. Fines on delayed projects Strategy (ST) 1. Implementing a framework contract with suppliers and specialized subcontractors (S4,S5,T1) 2. Fastening the vendor billing process with the maximum of one month disbursement (S1,S2,S5,T4,T5) Strategy (WT) 1. Avoiding any unrecorded project budgets (W3,T1)
Figure 5 - The SWOT Matrix of PT. Hutama Karya (Persero) Building Division
The last step of the strategy analysis was determining which strategies that the company should prioritize and implement, through the analysis of QSPM. The prioritized strategies should be considered based on the company's limited resources, such as the human resource and the cost. Strategies on the SWOT matrix were weighted and rated once again to produce higher scores and determine the strategies to be implemented. The analysis result of QSPM could be seen in Table 9.
The analysis result of QSPM showed that the highest TAS (Total Attractive Strategy) rate was using the state-owned enterprises for agressive marketings (project initiation /
creation). This strategy was important for the company to improve its market growth, which could increase the sales rate and gain positive profits.
Table 9 - The Analysis of QSPM Matrix of PT. Hutama Karya (Persero) Building Division
ALTERNATIVE STRATEGY TAS (TOTAL ATTRACTIVE) STRATEGI RATING
Using the state-owned enterprises for aggressive marketings (project initiation/creation) 6,30 I
Offering tender prices with 89% HPP 4,35 V
Menerapkan kontrak payung dengan suplier dan subkontraktor spesialis 4,42 VII
Implementing a framework contract with suppliers and specialized subcontractors 4,38 IV
Providing lobbying and negotiation trainings to project teams 4,86 II
Conducting a joint operation with project planner/other contractors 5,76 III
Avoiding any unrecorded project budgets (W3,T1) 4,22 VI
From the resulted strategy, a suggestion of implementation was required.
Table 10 - Five-year strategic activities
No Activity plan Person in charge Year 2019 2020 2021 2022 2023
1 Using the state-owned enterprises for agressive marketings (project initiation / creation) Assigning project leaders as marketing agents; Forming a marketing team that was comprised of: Marketing team for government projects Marketing team for state projects Marketing team for private projects Each team would be assigned to search informationthat were tenered by the owner. Head of Division, Senior Manager of Construction Business / Marketing Development, Head of Production Head of Division, Senior Manager of Construction Business / Marketing Development, Head of Production
2 Providing lobbying and negotiation trainings to project teams Representing services to new or private ownersby suggesting a project plan to be included in the owner's Work and Production Budget Plan (RKAP). Conducting a routine visit to the existing owners. Head of Division, Senior Manager of Construction Business / Marketing Development, Head of Production Head of Division, Senior Manager of Construction Business / Marketing Development, Head of Production
3 Conducting a joint operation with project planner / other contractors Cooperating with consultants to initiate tendered design and build projects in order to obtain a higher supply margin. Head of Division, Senior Manager of Construction Business / Marketing Development, Head of Production
CONCLUSION AND SUGGESTIONS
The current condition of PT. Hutama Karya (Persero) Building Division was still in the recovery state after unrecorded past debts because of undisciplined administration.
The company's internal and external factors were in quadrant IV (growing and building) with both IFE and EFE rates at 3,05 and 2,97, respectively. Internally, the big name of state-owned companies and the company's reputation are its strength, while marketing personnels who failed to initiate projects became their greatest weakness. On the external factors, the
highest opportunity was good relations with customers, in contrast with the competition between Grade-7 contractor companies on tender prices as its biggest threat.
Out of seven alternative strategies resulted from the SWOT matrix; the prioritized startegi that company should implement was using the state-owned enterprises for agressive marketings (project initiation / creation).
There were five strategy activities from the company's prioritized strategy that could be implemented by the management.
After the implementation from the company's prioritized strategy, the company conducts a follow-up research on the effect of such implementation to its performance improvements.
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