CHANGE MANAGEMENT STRATEGY IN DPKAD OF BANTEN

Transcription

1 THE INDONESIAN JOURNAL OF BUSINESS ADMINISTRATION Vol. 2, No. 10, 2013: CHANGE MANAGEMENT STRATEGY IN DPKAD OF BANTEN Tania Nur Rizkiah and Yuni Ros Bangun School of Business and Management Institut Teknologi Bandung, Indonesia Abstract In July 2012, Regional Regulation of Banten Province Number 3 Year 2012 about The Establishment of The Provincial Department of Banten was enacted. The regulation mandated changes in Organizational Structure and Work Procedures (SOTK) in Department of Finance and Regional Asset Management (DPKAD) of Banten Province, the function of asset management was diverted and DPKAD was turned into Department of Revenue and Finance (DPPKD) of Banten Province. Changes in SOTK were aimed to make a better department s performance. In transition period to desired condition, there will be a decline in productivity. To minimize the size and the period of declined productivity, the right change management strategy is needed. This study aims to formulate a change management strategy in DPKAD of Banten Province. Data was collected through the distribution of questionnaires to 112 respondents and conducted interviews with 5 of Chief in DPKAD. From the collected data, it was discovered that 4 major restraining forces in DPKAD are fear of losing incentives, problems in system s synchronization, skepticism, and change the way employees work. 4 major driving forces are mandated in Regional Regulation, job simplification, desire to obtain WTP and develop job performance. In formulating change management strategy, this research used ADKAR model approach, communication strategy, and designing reward system through KPI as performance assessment which is expected to motivate employee to improve their performance. Keywords : Change management strategy, Awareness, Desire, Knowledge, Ability, Reinforcement (ADKAR), Key Performance Indicators (KPI) 1. Introduction Department of Finance and Regional Asset Management (DPKAD) of Banten Province was established by Regional Regulation of Banten Province Number 3 year 2008 about The Organizations Establishment and Work Procedures of Local Departments in Banten Province. DPKAD s position is as executive constituent of the regional autonomy in the field of finance and asset management, led by the Head of Department who responsible to the Governor through the Regional Secretary, and DPKAD s main function is to execute the affairs of local government based on the principle of local autonomy and the duty of assistance in the field of finance and asset management. One of DPKAD s duties is optimizing the realization of potential local revenue by collecting taxes and an increasing adequate regional development. As stipulated by The Laws of The Republic Of Indonesia (UU RI) Number 28 Year2009, Pasal 171 ayat 1, Agencies which collected tax and retribution can be given incentive based on the achievement of certain performance, and also Government Regulation (PP) Number 69 Year 2010, Pasal 3 and 4, the employees of DPKAD are entitled to receive incentive once per three months (four times a year) if DPKAD managed to achieve or exceed revenue target. In July 2012, Governor of Banten together with The Regional Parliament (DPRD) of Banten Province enacted Regional Regulation of Banten Province Number 3 Year 2012 about The Establishment of The Provincial Department of Banten. The regulation stated that the asset management function in 1215

2 Rizkiah and Bangun / The Indonesian Journal of Business Administration, Vol.2, No.10, 2013: DPKAD will be transferred to Bureau of Equipment and Asset Regional Secretariatt of Bantenn Province. So DPKAD will be renamed into Departmentt of Revenuee and Finance (DPPKD). DPPKD s position is as executive constituent of the regional autonomy in the field of financial management and regional revenue, led by the Head of Department who responsible to the Governorr through the Regional Secretary. DPPKD s main function is to execute the affairs of local government based on the principle of local autonomy and the duty of assistance in the field of financial management and regional revenue. Figure 1. Change in SOTK in DPKAD based on Perda Banten No. 3 Year 2012 Since January 2012, DPKAD was led by the new leader. In dealing with the changing plan, the new leader has taken some actions : a. Improve employees discipline on working hours, especially improving their discipline in attending the morning ceremony everyday. He improves the discipline by giving example, always arrives at the office before 7.30 AM and leads the morning ceremony. He also applies coercivee method by smoothly threatened employees who frequently not attend the morning ceremony to meet him and ask to be placed in another department, or he will move them out from DPKAD because he doesn t need employees who are not discipline and not cooperative. b. Communicate the big picture of the changing plan in the morning ceremony. The leader doesn t communicate the details and plan in managingg the changing plan, what is the role of each employee in each division, but he does communicate which division will be affected, whichh division will be separated and what its employees benefits and disadvantages will get after the separation. He also warned the employees to work at their best, or he will move the bad performers out from DPKAD and of course they will lose the incentive. 1216

3 2. Business Issue Exploration A. Trigger to Change Based on examination report from The Audit Board of The Republic of Indonesia (BPK RI) on financial statement of the Government of Banten Province during fiscal year , inventory control and the administration on assets almost always become the problems and obstacles in achieving unqualified opinion (WTP) from BPK. Table 1. BPK s Opinion on Financial Statement of The Government of Banten Province during Fiscal Year No. Fiscal Opinion Year Explanation WDP Exception : 1 19 findings in financial statements 2 13 findings in expenditures WDP Exception : 1 Inventory control problems in health department 2 Problems in inventory control and the administration of fixed assets and other assets was not done adequately 3 Misstatements on cash account at the parliament secretariat WDP Exception : 1 9 findings in internal control systems 2 Problems in inventory control and the administration of fixed assets and other assets was not done adequately WDP Exception : 1 25 findings in compliance with laws and regulations 2 6 findings in internal control systems 3 Weaknesses in management and control systems of the distribution of grants and social support 4 Problems in inventory control and the administration of fixed assets and other assets was not done adequately. Some assets which already handed over to the district/city government, still WDP Exception : 1 7 findings in compliance with laws and regulations 2 5 findings in internal control systems 3 Grant's accountability report was incomplete 4 Problems in confirmation from the recipient of social support 5 Budget which managed outside the mechanism in Bandiklat The Government of Banten Province realized that the current tasks, function, and workload which carried by the leader of DPKAD are too broad and heavy, which make it difficult for its leader to focus and concentrate in fixing and improving asset management and helps the Governor to achieve WTP from BPK. Eventhough in fiscal year 2011 asset management was no longer a problem, but for the long run, the Government of Banten Province felt the need to separare the function of asset management from DPKAD and establish new bureau to handle that function in order to maintain and to improve the government s performance in managing its assets and also to obtain and maintain WTP from BPK. B. Levels of Opinion Issued by the Audit Board of the Republic of Indonesia (BPK RI) As stated in The Laws of The Republic of Indonesia (UU RI) Number 15 Year 2004, Pasal 1 number 11, Opinion is a professional statement as the inspectors conclusion about the fairness of the information presented in the financial statements. As stated in the explanation of The Laws of The Republic of Indonesia (UU RI) Number 15 Year 2004, Pasal 16 ayat 1, BPK issues opinion on financial statements based on these criterias : 1. Compliance with governmental accounting standards (SAP); 2. Disclosure adequacy; 3. Compliance with laws and regulations; 4. The effectiveness of internal control system. There are four levels of opinions issued by BPK, starts from the best to the worst : 1. Unqualified Opinion (WTP) Given if the inspected financial statement is good and fair, and has no irregularities at all. 1217

4 2. Qualified Opinion (WDP) Given if the inspected financial statement is good and fair, in accordance with the SAP, except for some things that are excluded. 3. Adversed Opinion Given if the inspected financial statement is not in accordance with the SAP. 4. Disclaimer Given if the inspectors could not give their opinion on the financial statement because the inspected documents are not enough to make conclusion. C. Targetted Benefits by Achieving Unqualified Opinion (WTP) There are three benefits will be gained if The Government of Banten Province managed to achieve unqualified opinion (WTP) : 1. The Leaders Pride The current Governor of Banten was also the Governor of Banten for the last period. In her first period, The Government of Banten Province did not manage to achieve WTP and only managed to achieve WDP each year, which makes the Governor is more motivated to achieve WTP in her second period. Because one indicator that the Governor successful in her leadership period is the ability to obtain WTP from BPK. It becomes a matter of pride for the Governor, and if she successfully achieves WTP, it will increase her list of achievements, which will be good for her next political career, considering that in 2017 she will no longer be able to participate in the election for the Governor of Banten Province. The new leader of DPKAD is also has an interest and motivation in achieving WTP for financial statement of fiscal year As the new leader, it is a matter of pride for him, if he is successfully improves DPKAD s performance and helps the Governor to achieve WTP in fiscal year Moreover, as the new leader, he is more eager to achieve WTP to prove to the Governor that he is the right man for the current position, and it will also increase his opportunity to be promoted to higher position. 2. An example for the regency/city government in Banten Province Banten Province consists of 4 regencies and 4 cities, below is BPK s opinion on each regencies and cities financial statements during fiscal year Table 2 BPK s Opinion on Financial Statement of The Regency/City Governments in Banten Province during Fiscal Year No. Regency/City Opinion Serang Regency Disclaimer WDP WDP WDP WTP 2 Tangerang Regency WDP WTP WTP WTP WTP 3 Pandeglang Regency WDP WDP Disclaimer Disclaimer WDP 4 Lebak Regency WDP WDP WDP WDP WDP 5 Serang City - WDP WDP WDP WDP 6 Cilegon City WDP WDP WDP Disclaimer WDP 7 Tangerang City WTP WTP WTP WTP WTP 8 South Tangerang City - - WDP WTP WTP Based on The Laws of The Republic of Indonesia (UU RI) number 32 Year 2004 Pasal 38 ayat 1, one of the Governor s duties is giving guidance and supervision in the Regency/City Governance. To be able to effectively execute that duty, the Government of Banten Province should have better performance compared to the Regency/City Governments performance. One of the indicators is the ability to achieve WTP. The Government of Banten Province should immediately achieve WTP before the rest of Regency/City able to achieve WTP. 1218

5 Based on The Regulation of Minister of Internal Affair (Permendagri) Number 13 Year 2006, as amended several times most recently by Permendagri Number 21 Year 2011 Pasal 111, all the Regents and Mayors in Banten Province submit their RAPD to be evaluated by the Governor. As the evaluator, it is important for the Provincial Government of Banten to achieve WTP in fiscal year If The Government of Banten Province successfully obtains WTP in 2012, the evaluations from The Government of Banten Province will be more respected and considered by The Regency/City Government which already obtained WTP in previous fiscal year. Furthermore, the Government of Banten Province will become an example for other Regency/City Governments in Banten Province which have not managed to obtain WTP in previous fiscal year. 3. Incentive from the central government The Ministry of Finance allocates Regional Incentive Funds (DID) to motivate the government of Province/Regency/City to improve their financial management by achieving WTP opinion from BPK, stipulate APBD and submit financial statements to BPK in a timely manner. For fiscal year 2012, the Ministry of Finance stipulated PMK No. 242/PMK.07/2011 about General Guidelines and Allocation of Regional Incentive Funds of Fiscal Year This regulation sets the amount of incentives earned by each local government that meet certain criterias. DID was allocated to assist the local government performs its educational function, especially for classroom s rehabilitation of Elementary School (SD) and Junior High School (SMP). If all the rehabilitation is already done, DID can also be used in other educational function s activities, with these types of expenditure : a) Capital expenditure b) Goods expenditure c) Employees expenditure d) Financial aid expenditure e) Grants expenditure As regulated in The Laws of the Republic of Indonesia (UU RI) Number 20 Year 2003 Pasal 49 ayat 1, the local governments must allocate at least 20% of its APBD for educational function. With the help of DID, the government of Banten Province can increase its allocation for educational function and also increase the quality of education in Banten Province. D. The Importance of Change Management During the process to the desired change and improvement, there will be some negative effects on organization s performance and productivity, which called productivity dip. Figure 2. Productivity Dip The size and duration of this productivity dip has to be minimized through the implementation of the right change management strategy, so all programs and activities in DPPKD of Banten Province can still be working as good as possible, and increase government effectiveness in DPPKD of Banten Province. 1219

6 Rizkiah and Bangun / The Indonesian Journal of Business Administration, Vol.2, No.10, 2013: Business Solution In this research, both quantitative and qualitative researches have been used. The quantitative research was done throughh a questionnaire, while the qualitative research was done throughh interviews. Theree are 112 respondents who were divided throughh disproportional stratified sampling method. The questionnaire was divided into four parts. The first part was about respondent s informations, second part was about the current condition of the organization based on respondent s point of view. The third part was about the preferred communication method, and the last part was asking respondent s opinion and suggestions about the change plan. All parts were multiple choice questionss and using likert scale questions, except the fourth part where respondents were required to answer the questions with their own words and opinion. E. Survey Result Almost all of the employees were afraid to show explicitly about their resistance to change. Becausee The Head of DPKAD is using coercive strategy to compel cooperation and commitment from the employees, they were afraid that if they show their resistance, the superior will transfer them to another department and losing incentives from DPKAD. Figure 3. Force Field Analysis of the Current State Employees who showed their resistance more explicitly were from division Kekayaan Daerah, wheree the staffs in that division did not want to be separated from DPKAD and lose the incentives they have been receiving while they were working in DPKAD. In the change plan, they will be moved to Bureauu of Equipment and Asset, which does not have the authority to collect regional tax and retribution, thus they will not receive incentives. It was natural that they had the tendency to refusee the change plan, because those changes would eliminate one of their income sources in the future. Meanwhile, in other divisions, some of the respondents showed skepticism toward the change plan. They were pessimistic that the change could be done on time. They also thought that the current system was already good and worried the changes would only harm the system. The change in structure and system will also change the way they work, which will force them to learn and adapt to the new system and job description. On the other hand, the number of employees who support the change plan was quite a lot. Mainly they support it because it was mandatory, they will have to do the change plan anyway. Employees who felt that their job desc is too wide and too many, support this plan because they hope for job s simplification, so they can be more focused and show better work performance. Most of the employees also wish Banten Province can achieve WTP opinion in the near future, and they see this change plan as the right vehicle to reach their goal. 1220

7 F. Formulating Communication Strategy To make the communication effective, this communication should be done intensively and repeatedly, in order to make sure that all of the employees know the details of the change plan, so they feel they are involved and important in the changing process. From the questionnaire s result, most of the respondents chose these three communications methods, which they thought the most effective respectively : 1. Meetings All of the meeting members have the opportunity to raise questions, wish, needs, and might be their resistances, and get the answers or responds faster. 2. Memos/Letters Can be used to spread information about when the meetings will be held, and what topic will be discussed. This memos or letters could also act as reminder for all the employees about the change s plan, vision, objectives, strategy, and deadline. This method could also be use to give feedback and assessment of all division s progress in facing the changes. 3. s It will be more effective to also send what is written in memos/letters to their s, in order to make sure all of the employees receive all of the information. G. Formulating Reward System During transition time, there will be a productivity dip. To help organization minimizes this productivity dip, rather than implementing coercive strategy, reward system will be more effective to motivate employee to do their job and achieve organization s target within the dateline. Current condition in DPKAD, incentive is given quarterly if DPKAD successfully achieve each of its quarterly target revenue. The amount of incentive is the same in each level of employee, the higher the position the higher the incentive. But no matter how good or how bad each division performed, they will get the same incentive. To make incentive more equitable, a fair Key Performance Indicator (KPI) is needed to assess each section s performance. KPI will only be introduced first in Section of Budgeting Planning as Pilot Project. Table 3. Proposed KPI in Budget Planning Section TW 1 TW 2 TW 3 TW 4 PERSPECTIVE - STRATEGIC OBJECTIVE NO SASARAN KINERJA SATUAN Bobot Target Bobot Target Bobot Target Bobot Target FINANCIAL 15% 15% 15% 15% 1 Revenue Rp 15% 15% 15% 15% CUSTOMER 20% 20% 20% 20% 2 Customer Statisfaction Index Skala Likert 20% 20% 20% 20% INTERNAL PROCESS 60% 60% 60% 60% 3 % Penyerapan Anggaran Belanja % Ketepatan Waktu dalam Menyelesaikan Pedoman Penyusunan Rencana Kerja dan Anggaran (RKA) Tahun Anggaran 2014 Ketepatan Waktu dalam Mensosialisasikan Pedoman Penyusunan RKA Tahun Anggaran 2014 Ketepatan Waktu dalam Menyelesaikan Pedoman Pelaksanaan Anggaran Pendapatan dan Belanja Daerah (APBD) Tahun Anggaran 2014 Pelaporan Ketepatan Waktu dalam Mensosialisasikan Pedoman Pelaksanaan APBD Tahun Anggaran 2013 Ketepatan Waktu dalam Menyelesaikan Pedoman Standar Biaya Umum (SBU) Tahun Anggaran 2014 Ketepatan Waktu dalam Mensosialisasikan Pedoman SBU Tahun Anggaran 2014 Ketepatan Waktu dalam Menyelesaikan Analisis Standar Belanja Tahun Anggaran Ketepatan Waktu dalam Menyelesaikan Anggaran Kas PAPBD Tahun Anggaran Ketepatan Waktu dalam Menyelesaikan Pedoman Penggunaan Pendapatan PAPBD Tahun Anggaran 2013 Ketepatan Waktu dalam Menyelesaikan Anggaran Kas APBD Tahun Anggaran Ketepatan Waktu dalam Menyelesaikan Pedoman Penggunaan Pendapatan APBD Tahun Anggaran 2014 LEARNING & GROWTH 5% 5% 0.00% 5% 0.00% 5% 15 Kehadiran Hari 1% 1% 1% 1% 16 Training & Development a. Sertifikasi Jumlah 1% 1% 1% 1% b. Shifting Kompetensi Jumlah 2% 2% 2% 2% 17 Internalisasi Budaya Perusahaan Index 1% 1% 1% 1% TOTAL 100% 100% 100% 100% 1221

8 Table 4. Before and After Implementation of Change Management Strategy BEFORE IMPLEMENTATION AFTER IMPLEMENTATION Team s Direction Team s Direction Lack of Awareness Weak Commitment Bad and Good Performers get the same incentives Delay in Tasks and Project Accomplishment Lack of Communication, Communication is Not Effective Lack of Involvement from The Staffs Awareness Increased Strong Commitment Incentives More Equitable, Based on Employees Performance Accomplishment within the Dateline Effective Communicationm, Two Way Communication Increased Invovement from The Staffs 4. Conclusion and Implementation Plan Conclusion Based on the questionnaire and interview resuls, almost all employees in each level are ready to face the change because it was mandatory, eventhough their commitment to this change were weak because they just knew a little about the plan, and they did not feel involved in it. Therefore, the driving forces are : Mandated in Regional Regulation; Job simplification; Desire to Obtain WTP; Desire to Develop Job Performance. And the restraining forces are : Fear of Losing Incentives; System s Synchronization; Skepticism; Change the Way They Work. The head of DPKAD s current strategy to get commitment and cooperation from all of the employees is coercive strategy, by threatening employees who did not perform well or did not want to cooperate will be moved out from DPKAD. This strategy will only cause fear and apparent cooperation from the employees, because by implementing this strategy, the employees did not have a good understanding about the importance of the change, its goals, and its benefits for the organization and for themselves. To overcome these problems, the head of DPKAD should use communication strategy through communication media preferred by the employees, which are meetings, letters/memos, and s. The communication should be done intensively, repeatedly, and effectively in order to improve employees awareness about the change plan. During the change or during transition time from the current state to the desired state, there will be a productivity dip which has to be minimized. In order to do that, rather than using coercive strategy to push employees performance, it will be better and effective to use a reward system like Key Performance Indicators (KPI). By implementing this KPI, the incentive which is given quarterly will be more equitable, because the amount of the incentive is based on employees work performance. The better they performed, the bigeer incentive they will get. 1222

9 Recommendation Due to the change plan in DPKAD, there are some recommendations for the change management strategy. First, to determine the best change management strategy, DPKAD should look for an expert consultant team to help them change and improve their work performance. Organization should not go with the flow and do not do anything to ensure organization s performance during transition time; Second, communication and coordination among all sections and divisions in DPKAD should be improved. Because the current condition showed lack of communication among sections and divisions which caused misinformation and unawareness about each section s programs and progress; Third, the reward system should be developed and implemented immediately not only in DPKAD, but also in all departments in the government of Banten Province, to improve its employees work performance, due to people s demand for a government that is effective, efficient, and accountable. Implementation Plan The preparation and implementation of the change management strategy schedule as follows. Table 5. Implementation Plan No. Activities 1 Find an External Project Facilitator 2 Identifying Stakeholders 3 Readiness Asessment 4 Identifying Restraining Forces 5 Identifying Driving Forces 6 SMT Commitment and Education 7 KPI Team Selection 8 FGD to Find CSF, KRI, RI, and KPI 9 Pilot Project 10 Monitoring and Evaluation 11 Full Implementation 12 Monitoring and Evaluation Time M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M13 M14 References ACCEL TEAM DEVELOPMENT, 2012, Theory X and Theory Y [online] Available from : team.com/human_relations/hrels_03_mcgregor.html [accessed 08 November 2012] BPK RI, 2008, Tingkatan Opini yang Dikeluarkan BPK [online] Available from : [accessed 5 November 2012] BUSINESSBALLS.COM, 2012, Maslow s Hierarchy of Needs [online] Available from : [acccessed 08 November 2012] CHANGE MANAGEMENT COACH, ADKAR : Simple, Powerful, Action Oriented Model for Change [online]. Available from : management coach.com/adkar.html [Accessed 07 November 2012]. CHANGE MANAGEMENT COACH, Force Field Analysis Kurt Lewin [online]. Available from : management coach.com/force field analysis.html [accessed 07 November 2012] DAVID PARMENTER.COM, 2011, How to Implement Winning KPIs in 16 Weeks [online] Available from : [accessed 08 November 2012] ENOTES, 2012, Theory Z [online] Available from : z reference/theoryz [accessed 08 November 2012] KOTTER INTERNATIONAL, 2012, The 8 Step Process for Leading Change [online]. Available from : [accessed 07 November 2012] 1223