Developing company viability based on virtue and human potentials (Study on SME in West Java)

B. Gomulia

Faculty of Economy, Parahyangan Catholic University, Bandung, Indonesia

ABSTRACT: The company viability, particularly in relation to virtue and human potentials, has scarcely been discussed in today’s field of business and management.

1 INTRODUCTION

1.1 Company viability and workers' roles in West

Java

Economy crisis taken place in the 1997-1998, brought a big impact in West Java. Many companies were bankrupt; however, a few survived the crisis. The data of company mortality in West Java during 1996-2000 showed that 2.680 units or about 43.4% of all the com­panies in 1996 of companies were able to survive (as a first data position), and only 19% of companies could show the ability to progress better, provided the pro­gress is viewed from the rising of total number of workers.

Table 1. Company viability value in West Java in 1996-2006 (in unit).

17

Many factors and aspects determine the com­pany’s ability to survive and develop. The worker factor is deemed as one of the factors which deter­mine the success of business development. Statistic data in West Java in 2012-2014 show the increasing of workers and their productivity.

Table 2. The development of processing industry product­ivity in West Java.

* The data are processed from BPS Indonesia and West Java BPS, UM=medium business, UB=large business.

The role and position of workers for the company are not equal to the machine, material, and asset on the production process. Different from the machine and any other resources, workers have reasoning and conscience to assess the appropriateness of the demands. Mele & Canton (2014) said the difference

between other creations and human is that human has free will.

“Free will - We are owners of our acts of choice, the desires accepted by our will, and thus we are responsible for them ”.

The attitude and behavior of the workers are determined by the harmony and the conformity between the norm and value applied in the society. The workers can choose to be the ethical person on working and business. This assumption becomes the reason why this study submitted the concept of com­pany viability that is based on virtue and workers’ potentials (Moore & Spence 2006, Solomon 2004, Pirson & Lawrence 2010).

The purpose of the study is to find out the virtue and human potentials that contribute to the develop­ment of company viability. In specific, the questions are formulated as follows:

- How is the company viability constructed to face the environmental challenges?

- How the community member’s willingness to give the best for the company can contribute to the enhancement of the company viability?

- How the spirit of community member to change for the future challenges can contribute to the enhancement of the company viability?

2 PROPOSITION MODEL

2.1 Dynamic environment and company viability

Beer (1985) stated for the first time about a concept of organization viability that “system’s ability to maintain its independent existence within a speci­fied environment”.

The company viability is considered as a form of successful business, which is multidimensional and also contingent and contextual. A company cannot survive to face the dynamic environment situation by relying on the system and management structure which tends to be mechanistic, instead of flexibility and high adaptability that are needed (Thompson 2017). The member of the company who has an opportunity and responsibility on facing the chal­lenges can only provide this flexibility.

A well-survived company is a company which can operate, maintain, and update the working system in a short term or long term with the direction of the aspirations to be achieved in the future. A company which can maintain its viability is marked by the ability to maintain consistency and continuity of operation (Thompson 2003). The external or internal community support in order to maintain the stock and process directly and indirectly gives com­pany the flexibility and adaptability to deal with the changes occurring (De Geus 1997, Freeman et al. 2007). This viability is developed on the basis of trust and good will on developing together between stakeholders and companies (Cameron et al. 2004a, Cameron et al. 2004b, Chun et al. 2011, Freeman 2004).

2.2 Intrinsic dimensions of the company performance

In this study, the company viability does not use a hard-dimensional measurement such as the long company life, company growth, maturity stage, and other measurement because these kind of dimensions only show how far the company is able to survive.

To express the company viability adequately, some dimensions which characterize the intrinsic capability will be identified. First, sensitivity to the market - it reflects the company’s ability to fulfill the consumer needs for the products and services which fluctuate quickly. So far, the con­sumer is consistently loyal to the company. Second, a balance and fairness transaction - a fair treatment for the stakeholders, which brings a win-win situation on working and business run by the company. This business relationship is the best guarantee to maintain business viability in a long term. Third, vision to build people’s capabil­ities - reflection from the company aspiration and desire to develop the future, which supports the positive and innovative member’s innovation. These three dimensions are expected to reveal the flexibility, adaptability, innovation, and company standards to run business and create a fair and responsible working environment.

2.3 Company viability based on the virtue and human potentials

On the company viability concept, human is placed in the central role and position in the com­pany management; people benefit from various things cannot be seen as a ready resource, but it can be considered and treated as a human resource which has virtue and potential for the actualization (Hartanto 2009, Peterson & Seligman 2004). Hartanto (2009) also viewed human potentials as a strong character, which grow from the confi­dence, belief, and emotion about positive things in a working life and social life. If this human potential is loaded with a beauty, moral superior­ity, concern for other people, then those poten­tials are often called as a virtue.

From the assumptions that company viability can only be manifested through working and manage­ment effort, and by company members who will and are able to work synergistically (Hartanto 2009), the proposition is submitted that the company viability is influenced by Management Commitment and Intrapreneurial Spirit to the company. The meaning of the virtue and two potentials explicitly are described as follows:

- Management Commitment - Management com­mitment is one of the forms of work ethic which reflects management determination to build sup­port from all of the community members to pro­duce performances expected by the company continuously, and the capability to contribute con­sistently even though the working and business environment is less conducive (Chun et al. 2013, Cullen et al. 2000, Porter et al. 1974, Rhodes & Eisenberger 2002)

- Intrapreneurial Spirit - The entrepreneurship shows the company member’s readiness to study, change, adapt, and innovate consistently in accordance with the working demands develop­ment in the daily operation, in present and future (Kao 1995, Kuratko et al. 2011)

The intrapreneurial spirit itself seems to be influenced by the company members’ spirit and behavior. The spirit and behavior are defined as follows:

- Working Spirit - This spirit is needed to maintain the sustainable working in a full of challenging situation.

- Innovative Learning Spirit - This spirit is needed to bring out renewal and innovation in a con­stantly changing situation.

- Accountability - This spirit is needed to ensure that working is in a law and ethic corridor, in addition to maintaining decision-making done responsibly.

Human is a social being; therefore, the attitude and other people in the surroundings affect behav­ior. Likewise, the virtue and worker’s potentials can develop corresponding to the society situation and the situation of the company community at the same time (Solomon 2004). There are some work­ing environment aspects which are estimated to influence the behavior and working life.

Figure 1. Proposition model.

3 RESEARCH METHOD

Research sample is from 47 medium- and small-scale manufactures that have been running for at least fif­teen years in West Java. The total of the sample is suf­ficiently estimated, because this type of study usually requires at least 30 companies (rule of thumb). Bigger sample is required to ensure the validity of the result.

The variable is measured perceptually through the workers’ or management member perception for community or company behavior. The instruments used are general opinion questions on “psycho­social”. In this study, workers and management member as the observation units filling the survey is as many as 905 individuals.

The statistical analysis consists of factor analysis and path analysis which used SPSS version 21 (Stat­istical Package for the Social Sciences).

3.1 Factor analysis

In this study, the test was conducted in two stages; first stage is conducting a validity and reliability variable constructing test with the exploratory factor analysis as well as confirmatory factor analysis. Second stage is conducting a test towards recon­structed research model. The confirmation is is used as the research model and hypothesis from the rela­tionships between research variables; finally, the Research Model is obtained and analyzed further.

4 RESULTS AND DISCUSSION

After conducting a factor analysis to the research variables, which are submitted on the proposition model, a redefinition variable is obtained. This vari­able is a representation from the psychosocial condi­tion which is perceived in the company environment. The exploratory and confirmatory factor analysis suc­cess in identifying dimension and variable that con­tribute to the improvement model quality of company viability is shown in Figure 2.

4.1 Company performance - viability

The company viability turns out to be a concept, which has to be holistically seen from three dimensions including (1) Attention to Oper­ational, (2) Market Adaptation, (3) Responsibil­ity. All the dimensions consist of company capability to maintain the operational dynamics in order to answer the development of challenges and market chances.

The long-term company viability is not only driven by external stimuli, but also appear impli­citly as a consciousness from company members to self-development in order to meet the chal­lenges in the future. This can be seen from the manifestation contents of each company viability dimension, which consist of people development aspects.

Table 3. Management commitment (KMP) and intrapre­neurial spirit (SKI) towards company viability.

R² = 0.929

The mutual trust, which is felt in these company environments, is as expected. This mutual trust has been proven to increase the positive influence of the management commitment towards the company via­bility. Thus, the companies have actually been proven to have assets yet unable to use them for pro­ductive work.

Figure 2. Research model.

Table 4. Work Spirit (GK), Social Climate (IS), Innova­tive Learning (SBI), Compliance (PP), and Ethical Climate (IE) toward Intrapreneurial Spirit.

R² =.94

4.2 Management commitment and intrapreneurial spirit in rising company viability

Table 3 shows the result of path analysis, from which research model submitted can be confirmed as significant, even though not all hypotheses submitted are accepted. With the explanation level of R² 0.93, most of the company viability can be explained by Management Commitment and Intrapreneurial Spirit. The company viability has been proven posi­tively and significantly by Management Commit­ment and Intrapreneurial Spirit. From the results, it can be concluded that company viability can be increased if there is an effort and real concern from the management (and owner) to the workers, as well as the spirit of innovation in the internal company environment. The rising of intrapreneurial spirit, which is found in the company environment, will affect company viability positively and significantly. Thus, it can be seen that the spirit felt in the com­pany environment contributes to the company cap­abilities to deal with the internal and external challenges.

Table 4 shows that the intrapreneurial spirit which is discussed in this study is adequate, because the value of R² 0.94; it means that intrapreneurial exist­ence can be explained by Work Spirit, Innovative Learning, and Compliance. Nevertheless, as per psy­chosocial research, this research model still needs to be refined and enriched, so that the complete and comprehensive description can be obtained.

The increase of innovative learning spirit avail­able among company members makes a decrease in intrapreneurial spirit. It is suspected due to one or more reasons as follows:

- Innovative learning spirit, which is marked a lot by dialog, discussion, and asking each other, is considered as disrupting daily production activ­ities and the achievements of production target. This phenomenon isin line with the practice, in which the researched company orders workers to focus their attention on the achievement of pro­duction target and it needs no renewal because it is considered as management responsibility.

- Innovative company members who learned a lot yet get their opinions ignored or rejected by the management will increase their diasspointment. Consequently, this situation will decrease the company’s performance.

The increase of working spirit has negative effect towards intrapreneurial spirit. It is estimated among 47 researched companies that are still transactional and raised by external stimuli such as performance achievement, which is related to the reward. This situation is strengthened by working condition which tends to be mechanistic with clear and certain work­ing conditions. All of the renewal and innovations which want to be implemented in the working envir­onment tend to be considered inhibit working oppor­tunities to achieve production target and big reward. The working spirit is usually associated with the effort to pursue more rewards which will automatic­ally reduce the willingness to implement new ideas, and this is reflected in the working environments. When the renewal is still considered as a disruption for the production activities, then renewal spirit of the companies will tend to decrease.

The obedience to the rules and work plan turn out to increase the intrapreneurial spirit significantly. Even the impact is getting stronger and significant when the company members experience ethical atmosphere. If the members obey the rules and work ethically, man­ager can concentrate more to the renewal and innov­ation, because in the company environments, the supervision can be reduced. This matter can increase the company dynamic and viability.

5 CONCLUSION AND SUGGESTION

To conclude from all of the results and analysis stated before, the observed companies show a dynamic and good viability indeed; however, the viability still relies on the manager capability which is also the owner who is not in the virtue. The com­pany members tend to be treated as a resource and production factor, not as a human being who has virtue and potential that can be invited to think about the company future and directly involved in contrib­uting more to the increasing of company viability. It is estimated that if the member is given an opportun­ity to engage and contribute in production activities as well as the roles and responsibility, the company viability will be long guaranteed.

In line with the suggestions to the management, commitment should be enriched to be collective, which is supported by the results that company members’ mutual trust can be increased from man­agement’s commitment towards company viability. Thus, it is suggested that mutual trust between mem­bers should be increased constantly through real efforts in the form of member involvement in the production activities and innovation. These efforts need to be implemented consistently by tolerant management, which is reflected through the follow­ing attitude and behavior:

• Have a willingness to learn from the honest mistake.

• Have a readiness to listen and consider new ideas of utilization coming from members.

• Respect to the useful members’ criticism.

The key to success of this management is deter­mined by the management’ s willingness to keep the implementation consistently, because the goodwill of the management is usually tested by the members before the management’s attitude and behavior accepted as the new habits of the members.

The findings reveal that the work spirit developed in the company environment is still transactional, so that the intrapreneurial spirit need to be paid atten­tion by the management, because in long term, this transactional-based work spirit will impede the com­pany capabilities to develop and adapt with the external environment. Transactional atmosphere will make the company mechanistic increasingly. Man­agement need to develop reward system which reduces members’ transactional, like the application of bonus system that gives appreciation to the innov­ation and renewal ideas, the involvement in social responsibility implementation, and the improvement of teamwork quality.

The management’s willingness for the utilization of the renewal ideas sincerely comes from this effort which will determine the usefulness of this sugges­tion. If it is actualized, the work spirit may develop into more transformational with positive impact on the intrapreneurial spirit. Obedience should be asso­ciated all this time as an actualized condition so that workers do not interfere the renewal and innovation spearheaded by the management. The meaning and understanding in the workers cycle become a readi­ness for the innovative working needs to be devel­oped constantly in the regulation and applicable ethics. Here, it needs to be developed the definition of rules of obedience that does not go against the innovation and renewal.

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