This is the author’s version of a work that was submitted/accepted for publication in the following source: Dharmayanti, Gusti, Coffey, Vaughan, & Trigunarsyah, Bambang (2011) The importance of organisational culture to improve a project selection process : case of public infrastructure project in Indonesia. In Taplin, John (Ed.) Towards Liveable Cities & Better Communities, Smart Vision International, Perth, Australia, pp. 1-11. This file was downloaded from: http://eprints.qut.edu.au/46307/
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The Importance of Organisational Culture to improve a Project Selection Process:Case of Public Infrastructure Project in Indonesia Gusti Dharmayanti1, Vaughan Coffey2and Bambang Trigunarsyah3 1
PhD candidate, School of Urban Development, Queensland University of Technology, Brisbane, Australia Senior lecturer, School of Urban Development, Queensland University of Technology, Brisbane, Australia 3 Associate Professor, School of Urban Development, Queensland University of Technology, Brisbane, Australia Email address of corresponding author:
[email protected] 2
ABSTRACT:Project selection is a decision-making process that is not merely influenced by technical aspects but also by the people who involved in the process. Organisational culture is described as a set of values and norms that are shared by people within the organisation that affects the way they interact with each other and with stakeholders from outside the organisation. The aim of this paper is to emphasize the importance of organisational culture on improving the quality of decisions in the project selection process, in addition to the influence of technical aspects of a project. The discussion is based on an extensive literature review and, as such, represents the first part of a research agenda investigating the impact of organisational culture on the project selection process applicable specifically to road infrastructure contracts. Four existing models of organisational culture (Denison 1990; Cameron and Quinn 2006; Hofstede 2001; Glaser et al 1987) are discussed and reviewed in view of their use in the larger research project to investigate the impact of culture on identified critical elements of decision-making. An understating of the way organisational culture impacts on project selection will increase the likelihood in future of relevant government departments selecting projects that achieve their stated organisational goals. Keywords: Organisational Culture, Project Selection, Decision Quality, Public infrastructure.
1. INTRODUCTION The importance of investment in road infrastructure for national economic development is widely recognized (Kwon 2006; Anonymous 2010). This is particularly true for developing countries such as Indonesia. There is a justification, therefore, for the Indonesian government to be responsive to the need to provide good road infrastructure to encourage economic growth. The provision of road infrastructure in Indonesia is currently still inadequate and the distribution of infrastructure funding across the provinces and regions in Indonesia is imbalanced (ADB 2009; Listiyanto 2009; Donohoe 2006; Ja'far 2007). In terms of quality, Mustajab (2009) indicates that despite the relatively good condition of most national and provincial roads, many regional roads are in noticeably poor condition. Thus, in order to accelerate economic growth throughout the country, regional roads should not be less prioritized, as they are more directly related to the economic activities of communities. Selecting the right project for the right location could make a major contribution to providing a more equitable distribution of infrastructure throughout the country. The current project selection process in Indonesia involves a degree of public participation by way of a formal regional planning and budgeting process. This process is particularly aimed at identifying community problems and needs accurately. However, the effectiveness of this process has been criticized and selected projects are generally unable to fulfill the expectations of the communities that they have been designed to 1|Page
serve. Also, there is a perceived lack of government commitment, (LGSP-USAID 2007; Widiyanto 2008; Soerjodibroto 2008; Sarosa ,Nurman and Hasan 2008; ANTARA News 2010) together with other organisational issues, such as deficiency of capable human resources, managerial skills, coordination and communication, that have caused a regional economic imbalance in the Eastern part of Indonesia (Thamrin 2005). It is well known that deciding the right project to finance is a complex task. It involves multiple objectives, constraints and stakeholders (Puthamont and Charoenngam 2007). In order to improve the current project selection process, there is a need to identify the existing barriers before developing strategies to overcome the problems. In relation to this, Mack et al (2004) recommended the understanding of the organisation, particularly organisational culture, as the first step for improving decision-making process. In parallel with a focus on developing strategies, issues related to quality matters, such as provision of quality of services and products, improvement of organisational performance, and upgrading quality of decision-making processes, have also been widely related to strengths and types of organisational culture traits. Strong evidence of the link between culture and performance has been discovered over the last decade (Kotter and Heskett 1992; Denison and Mishra 1995; Hofstede 2001; Cameron and Quinn 2006; Coffey 2010). As part of the studies in organisational performance, the influence of organisational culture on decision-making has also been recognized (Brown 1998; Denison 1990; Ogarca 2008; Vroom and Jago 2007). Briggs and Little (2008) emphasize that organisations are clearly social entities and that the nature of a group‟s culture and the relationships between its individuals heavily affects the processes and the outcomes of decisions. For instance, Vroom and Jago (1988) implied that decisionmaking is influenced by stakeholder involvement (participation), Al-Yahya (2009) demonstrated that participation (also defined as “share power-influence”) in decisionmaking is influenced by organisational culture elements (which are measured by involvement, teamwork, management/supervision and morale). Further to these views, Mack et al. (2004) indicated that there is a significant positive correlation between decision-making style and organisational culture. As project selection involves the use of a decision-making process, this means that organisational culture is likely to have strong influence on the project selection process and can contribute to the implementation of it. At present, there is little research that investigates the relationship between organisational culture and decision-making, particularly in the project selection area. Thus, this paper aims to investigate how organisational culture impacts on the process of project selection. The combination of the four models of organisational culture assessment (Denison (1990); Cameron and Quinn (2006); Glaser et al (1987), Hofstede(2001)), containing factors which have all been associated with the critical aspects of effective decision-making, are integrated into a survey questionnaire used to examine the influence of organisational culture on the process of project selection in the Indonesian road infrastructure context. The development and use of this hybrid instrument contributes to the initial part of a larger research project which has an objective to develop a framework for improving the project selection process. The results of that project will benefit decision makers in maximizing the achievement of project objectives. 2|Page
2. LITERATURE REVIEW 2.1 Project Selection as a decision-making process The term „project selection‟ used in this research refers to the use of a decision-making process to select a project which if carried out correctly, should satisfy the needs of the community that it is designed to serve (Leinbach and Cromley 1983; Puthamont and Charoenngam 2007; de Rus and Socorro 2010). Project selection constitutes the beginning phase of the project life-cycle, often known as the „concept and initiation‟ stage. During this stage, the needs of stakeholders as well as the opportunities provided by the realization of the projects, products, facilities or services are established and project proposals are then further investigated and evaluated during the next life-cycle phase known as the „feasibility stage‟(Burke 2007). According to Mack et al. (2004, p.4) there are a number of effective decision-making models, such as the “rational model”, the “political model”, and even the “garbage can model”. However, the author (ibid 2004) suggests that these models are solely theoretical in nature and are infrequently seen in action in the real world. Therefore, instead of using one of the existing decision-making models, an initial set of seven steps forming a decision-making process are proposed, as they offer a rational, logical and sequential approach to managerial decision-making and can be used by small groups. The steps are: 1. Understanding the organisation; 2.Defining the objectives of the decision; 3. Identifying and prioritizing the factors that influence the decisions; 4.Collecting information needed to make the decision, and generating decision options; 5. Evaluating options, and make the best choice; 6. Developing an action plan, and implement the decision; 7. Monitoring the consequences. Referring to the approach proposed by Mack et al. (2004, p.4), the elements are similar to the classic approach of decision-making. The only different element is to „understand the organisation‟ which is placed as the first step and aims to identify the existing barriers to good decision-making in the organisation. By identifying the existing barriers, thus appropriate strategies to overcome them can be developed. The main approach used currently by certain Indonesian government organisations to undertake the current process of project selection focuses on the elements found in the classic approach. This is due to the fact that the main evaluation merely follows the core elements of the approach. In addition to this, the classic approach is applicable for any types of decision-making (Adair 2010). The main steps in this approach are (Robbins 2005; Adair 2010): 1. Defining the problem and set the objective; 2. Collecting relevant information; 3. Generating feasible options (modelling the situation and quantitative analysis: i.e., identifying the decision criteria and allocate weight to the criteria); 4. Evaluating and deciding (selecting the best alternative); 5. Monitoring consequences (implementation and evaluation)
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In addition to this, the effectiveness of project selection can not only be measured by the stages above but also based on certain criteria or results orientation. One of the set criteria for effective decision-making is defined by Vroom (2000) 1. Decision Quality: “was the decision consistent with potentially available information about the likelihood of achieving the goals which were at stake in this problem? 2. Implementation:“did the decision process create the necessary commitment to, and understanding of, the decision by group members for them to effectively carry it out?” 3. Cost (Time): “Was the decision made in a timely fashion; did it consume more time on the part of group members and on the leader than was necessary to achieve a high quality decision that was effectively implemented?” 4. Development: “Did the decision process enhance group members‟ knowledge and expertise, their ability and desire to work together as a team, and their feeling of being an important and valued part of the organisation?” Accordingly, the effectiveness of the project selection process in this context is defined according to how successful the process was: (1). to produce quality decisions, i.e., the projects that fit the intended goals/needs and prioritize the projects based on urgency (quality, budget and time); (2). to create necessary equal commitment between stakeholders (both government and communities) to implement the process effectively; (3) to ensure decisions are made at the right time; (4) to promote team-work relationships between stakeholders, thus enhance information flow and achieve stakeholders‟ satisfaction as they feel a valued part of the organisation. In this study, therefore, the analysis of the impact of organisational culture on the current project selection process is associated with the above criteria for an effective decisionmaking process and good decision quality. 2.2 Organisational culture and decision–making The concept of organisational culture is derived from studies of psychology, anthropology and behaviour. Hill and Jones (2001, p.240) described organisational culture as “…the specific collection of values and norms shared by people and groups in an organisation and controls the way they interact with each other and with stakeholders outside the organisation.” Similarly, Alvesson(2002, p.1) described it as “…the way people in a company think, feel, value and act in guidance of ideas, meanings and beliefs of a cultural (socially shared) nature.” Culture as the basic personality of the organisation shapes the behaviors of the people in the organisation, which can affect decision-making styles (Mack ,Crawford and Reed 2004). Based on these views, it can be concluded that organisational culture is something that is intangible but can critically impact on an organisation‟s activities. The influences can be seen in the way people work as a team, act and cooperate in their teamwork to achieve the set goals, and also in how people think, prioritize and decide.
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2.3 Dimension of organisational culture related to decision-making There are several instruments for measuring organisational culture in relation to its impact on an organisation‟s performance and these include the models of: Denison (1990); Cameron and Quinn (2006); Hofstede (2001); and Glaser et al (Glaser ,Zamanou and Hacker 1987). Because none of these models have been used to specifically measure the impact of organisational culture on decision-making, thus by combining these four models, a more comprehensive measurement of culture in relation to decision-making can be undertaken. Accordingly, there is a need to understand the relevant elements/dimensions of each of the models and this is explained as follows: The Denison Model (1990) provides correlation between four cultural traits (Involvement, Consistency, Adaptability, and Mission) and organisational effectiveness. This model is appropriate for use in business situations, as it focuses on management and organisational practices related to culture and leadership. This model according to the developer can be applied in all industries, including government, education and nonprofits (Denison Consulting 2010). It consists of a 60-statement survey instrument that is developed based on four cultural traits and 12 indices. Each cultural trait consists of three indices. The cultural traits that are likely influence the decision-making process are: 1. Involvement (consisting of empowerment, team-orientation and capability development). The authors that developed it argue that the high levels of involvement and participation create a sense of ownership and responsibility, lead to increased commitment to an organisation and lesser need for excessive control (Denison and Mishra 1995,p.7). Recent research by Al-Yahya (2009) indicated that organisational culture (measured by involvement, team-work, meetings-supervisions and morale) is a key driver of participation in decisionmaking. Thus, it can be justified that high involvement in decision-making will enhance the commitment of the group members to more effectively implement the decisions being made. This cultural trait is relevant with the criteria for effective decision-making, especially „implementation‟ proposed by Vroom (2000). Accordingly, this cultural trait is selected in this study to examine whether high levels of involvement and participation in the decision-making process affect the success of the current project selection. 2. Mission (strategic direction and Intent; goals and objectives; vision). A strong sense of mission provides clarity and direction (Denison and Mishra 1995, p. 13). Providing a clear mission is the first important step to provide direction in the decision–making process. Decisions made must facilitate an organisation to both meet its mission and maintain its financial viability (Mack ,Crawford and Reed 2004). This cultural trait can be used as the dimension for measuring how clear and realistic the missions of the government related to the provision of road infrastructure are at the regional level. Its use in this study is to investigate whether there is a significant link between mission and an effective project selection process. 3. Consistency (agreement, coordination and integration). A “strong culture” in this dimension of the model implies that there must be consistency between principles, behavior and conformity to valued organisational practice, in order to obtain a high degree of integration and coordination. This cultural trait is related 5|Page
to the criteria for achieving the quality of decisions, in accordance with the set of objectives/missions (Vroom 2000). Thus, its use is justified in the context of this research to examine the proposition that a high level of consistency contributes to the effectiveness of the project selection process. 4. Adaptability is the cultural trait that is more appropriate for a profit driven organisation (private sector) to sustain their market position. Thus, only one index of this trait, which is Customer Focus is adopted for this research. The reason for this is that an effective decision should be able to satisfy stakeholders‟ requirements (internal and external). In order to simplify the classification of organisational culture traits, this index is refined to the cultural trait “Involvement”, as it can measure the influence of public participant involvement in determining the objectives (i.e., selecting the projects). Hofstede (2001) establishes four national culture dimensions aimed at determining the main criteria which distinguish one national culture from others. This model consist the dimension of Individualism-collectivism, Power-distance, Uncertainty-avoidance and masculinity-femininity. Because the nature of current project selection involves many structural levels of decision-making in the governmental organisations, then „powerdistance seems to be the most compatible cultural trait to use in the hybrid model. Power-distance describes how close or how distant subordinates feel from their superiors. A high power distance culture is illustrated by decisions being made by superiors without consulting with subordinates. In this condition employees feel reluctant to contribute their ideas, whereas, a low power distance has a more participative and equal relationship between superiors and subordinates. In other words, „low power distance‟ contributes to the effectiveness of the decision-making process in project selection. Accordingly, this cultural trait is selected to identify and measure the powerdistance found in the existing process. This study examines whether low power-distance plays an important contributing role to the success of the project selection process. Glasser, Zamanou and Hacker(1987) provide six elements of culture, grounded in both management and communication research, as follows: 1. Teamwork-conflict – can be characterized by coordination of effort, intrapersonal cooperation, rapport, or antagonism, resentment, jealousy, mistrust, power struggle within sections or divisions; Indirect and candid talk of people about problems they have. 2. Climate-morale – can be characterized by feelings about work conditions, motivation, general atmosphere, organisational character. 3. Information flow – can be characterized by links, channels, contact, flow of communication to pertinent people or groups in the organisation; reported feelings of isolation or being out of touch. 4. Involvement – can be characterized by input and participation in decisionmaking; respondents feeling of acceptance. 5. Supervision – can be characterized bythe rapport between the employees and their immediate supervisor. 6. Meetings – can be characterized by whether meetings occur and are productive. The latest version of this model was used by Al-Yahya (2009) to examine the impact of organisational culture on participation in decision-making and focused mainly on the 6|Page
communication aspect. However, it is argued that this model is only appropriate for measuring organisational „climate‟ rather than „culture‟“…because it better expresses the feelings of people about their internal organization instead of measuring the way people share their beliefs, values and customs” (Coffey 2010, pp. 32-38). In addition, as there are some similarities in the dimensions of this model to the Denison model (1990), and so only a relatively few elements of this model are adopted. These cover the elements which are not yet defined in the Denison model (1990), i.e. information flow and teamwork-conflict. In this research, these elements will be clustered into the main cultural trait of “involvement”. Cameron and Quinn (2006) developed a model that is known as the Organisational Culture Assessment Instrument (OCAI) based on the Competing Values Framework (CVF). The OCAI is in the form of an 87-questionnaire that requires individuals to respond to just six key dimensions of organisational culture (i.e., Dominant characteristic, Organisational leadership, Management of employees, Organisational glue, Strategic emphases, Criteria of success). Each key dimension has four alternatives that refer to the organisation characteristics/the organisation culture type (i.e., Clan, Adhocracy, Hierarchy and Market). This model is used to diagnose the existing and preferred cultures of an organisation, and also to facilitate a change in organisational culture. The four culture types are described below (Cameron and Quinn 2006): 1. Clan culture has the characteristics of a family, providing a very friendly place to work, nurturing leaders, high commitment and loyalty, long-term benefit of human resource development, high sensitivity to customers and people, strong team-work, participation and consensus. 2. Adhocracy culture has the characteristic to be dynamic, entrepreneurial and creative, exhibited by risk taking, innovator leaders, commitment to experimentation and innovation, focusing on being the leading edge. 3. Market culture is a characteristic of a results-orientated organisation, focusing on job accomplishment, competition and goal attainment, reputation and success, and market leadership. The leaders in this culture are hard drivers, producers and competitors. 4. Hierarchy culture has the characteristics of a very formalized and structured organization, which focuses on procedure, formal rule, smooth-running, long-term stability, efficient performance, secure employment and predictability. The leaders pride themselves on being good coordinators and organisers, who are efficiencyminded. The Cameron & Quinn model (2006) is employed in this research to facilitate a guideline for developing future organisational characteristics in order to improve better processes in decision-making, where both the decision makers and community can obtain benefits from any decisions at the same time.
3. CONCLUSIONS This paper has discussed the link between organisational culture and decision-making. It has also reviewed the reasons for the use of specific cultural dimensional measures, which will be employed to investigate the impact of organisational culture on decision7|Page
making. In summary, it is intended in future research to combine the selected dimensions of „mission‟, „consistency‟, „involvement‟, „power-distance‟ and „organisational characteristics‟ into a framework for use in improving the quality of decision-making in the Indonesian road infrastructure arena. These particular dimensions will be further examined through the use of a questionnaire survey, to be conducted in three provinces in Indonesia, i.e. Bali, West Nusa Tenggara and East Nusa Tenggara. The results of that study are expected to provide strong evidence on the influence of organisational culture on the effectiveness of project selection process in the Indonesian context.
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