Integrated Competency-Based Human Resource Management System:

Implemented Model in Indonesian Crown Corporations

Joko Siswanto 1*
1
Industrial Management Research Group
Bandung Institute of Technology (ITB)
Jl. Ganeca 10, Bandung, West Java, 40132, Indonesia
E-mail: j.siswanto@ti.itb.ac.id

Abstract: Competency-Based Human Resource Management (CBHRM) has been introduced in Indonesia since 1995.
Later many crown corporations from different sectors, such as energy, manufactures and services started to implement it.
However, only several corporations are successful and get benefits substantially from the implementation of CBHRM.
This paper presents the critical success factors in implementing CBHRM based on field observations in facilitating the
implementation of CBHRM in the corporations in Indonesia. The presentation covers the models, processes and benefits
of successful CBHRM implementation in several crown corporations in Indonesia. The finding suggests that the models
must be fitted to vision, missions, values and culture of the organization. The stakeholders of the organization need to be
involved in the implementation process from the beginning. The most valuable benefits gained by the organizations
depend on how close the needs of management and employee may be met. The most important of needs of many crown
corporations is how to link closely organization and employee performance management. Meanwhile, the most critical
need for employees is clear criteria and transparent process for their career.

Keywords: Competency-Based HRM, Crown Corporation, Implementation, Indonesia

1. INTRODUCTION

Indonesia has about 139 crown or state own corporations called ‘Badan Usaha Milik Negara’ or briefly ‘BUMN’. About
ten percent of them have already listed in stock markets. The corporations operate in many different industry sectors such
as manufacture, energy, agriculture, infrastructure and services.
In order to improve their business performance, the management of crown corporations continuously seeks and
invests better methods in managing their human resources. In early 1995, Competency-Based Human Resource
Management (CBHRM) has been introduced to the management of an oil and gas crown company in Indonesia by a
consortium of international consultants. It was promoted that implementation of CBHRM might radically increase in
performance, service quality and at the same time might significantly reduce human resource costs.
CBHRM can be defined as a process to make decision optimally about employment relationship from the process of
recruitment, placement, up to termination by using provided information on competency profiles and employee
competencies in order to maintain and/or to improve organization performance (to achieve organization missions and
objectives). The decision about employment relationship influences not only employee (and their families) but also
organization effectiveness. Competency is ‘an underlying characteristics of an individual that is causally related to
criterion-referenced effective or superior performance in a job’ or situation, Boyatzis (1982). Differentiating
competencies distinguish superior from average performers. Threshold or essential competencies are required for
minimally adequate or average performance. The threshold and differentiating competencies for a given job provide a
template for HRM decisions. Meanwhile,
This paper is intended more to focus on the process and its critical success factors in implementing CBHRM in
crown corporation companies, rather than to measure success levels of CBHRM implementation. This paper discusses
three cases in which researcher observed and involved in different roles in facilitating the implementation process of
CBHRM in the crown corporations studied. The sample companies are considered success in implementing CBHRM
system when management apply the system, and the benefits and objectives of CBHRM implementation are gain by
companies and their stakeholders.

2. CBHRM MODEL

CBHRM system widely applied in Indonesia has four main components, namely competency dictionary,
competency profiles, employee competencies and HRM applications. Figure 1 presents the integrated model of CBHRM
system implemented in crown corporation companies in Indonesia.
 Figure 1. Integrated CBHRM System

Company can develop the system, if companies have already had clear organization vision, missions, values, culture and
business strategy, as well as have established solid job descriptions or business process.
The first main component of CBHRM system is competency dictionary. It consists of series tables of soft and hard
competencies that will be used as main measurement references for both job competency profiles and employee
competencies. Each table contains all required information about competency, including name, definition, dimensions,
levels and behavioral description of each level. Spencer and Spencer (1993) provide valuable source and format of soft
competency tables. Meanwhile, hard competency tables need to be developed specific to organization business, strategies
and technology by using similar format to soft competency table. It is important to note that the competency dictionary is
developed based on visions, missions, business strategies and technology, values and cultures of the company; therefore,
totally competency dictionary is unique for each crown corporation.
Competency profile or competency model for a job contains a list of differentiating competencies including the
levels that are needed for by superior performers, and/or threshold competencies required for minimally adequate
performers. The development of competency profile of each job bases on its job description and the competency
dictionary of the company.
There are two common approaches to develop competency profiles. The first is start from scratch by using expert
panel method, and the second is by adopting validated models. The first method is mostly applicable when the job is
designed specific for the crown corporation organizations only. In this case, the job description is critical reference to
determine required competencies including the levels from the competency dictionary. The second is more suitable when
the job is adopting internationally standardized jobs or functions. In the later situation, the competency profile is mostly
provided by international consultants, or adopted from the results of bench marking. It is very important to compare and
look detail the job description or the business process adopted before applying the competency profile. Simply to see the
same job titles often provides misleading results.
The next important part of CBHRM system is employee competency data. It may be assessed in many different
ways, ranging from bio data study, interview, questionnaire up to assessment centre method applying multi measurement
tools by multi assessors and involving multi employee as assesses. For soft competency, the assessment consists of 1)
rationale – the employee should exhibit objectives and clear methods for doing job activities, 2) documentation – the
employee should be able to submit evidence that indicate competent performance, and 3) observation – an assessor should
witness competent performance of the employee. It would also be value added for the employee assessed if she or he has
third party testimony – comments from colleagues and customers. For hard competency, the assessment process mostly
covers 1) eligibility (having right knowledge and qualification), 2) suitability (having required skills, as well as suitable
physical and mental requirement for doing the jobs), and 3) ability (be able to perform as required by standards). Finally,
the individual competencies identify levels of competencies shown by value or morally based behaviors, intellectually
based behaviors, and/or skill based behaviors.
Having a set of data of competency profiles and employee competencies, companies can establish integrated
competency based HRM applications. The CBRHM system can integrate most HRM decision process involving
competency dimensions including recruitment and selection, talent and potential assessment, career path and succession
planning as well as performance management. Other HR functions that may also be integrated into the system are training
and development need analysis, HR planning, job design and evaluation, as well as compensation. Table 1 presents Basic
model of information processing within the integrated CBHRM system.

Table 1 Basic Model of Information Processing within CBHRM Applications

No CBHRM Applications
1 Recruitment & selection
2 Potential & Talent Assessment
3 Career Path & Succession Plan
4 Performance Management
5 Training & Development
6 HR Planning
7 Job Design & Evaluation
8 Compensation
Main Processes Sample Output(s)
Comparing job competencies profiles and List of qualified candidates
candidates competencies
Employee competency measurement List of potential and talented employee
Job-people matching process
Cluster analysis Career path
Person-jobs matching process Succession plan
List of right person at the right place
Maintaining performance data (planning, Performance plan, track and scores
monitoring and evaluating)
Job-competency measurement
Gap competencies (person - job) & Training & development needs
e-learning materials E-learning
Work load and competency analysis HR planning (quantity and competence)
Matrix of business process and Job Description
organization Job value
Job evaluation
Salary & income tax calculation and Payroll
administration Income tax reports

3. IMPLEMENTATION

Formerly, most crown corporations managed their employee based on an old fashion personnel administration that was
very bureaucratic, administrative approach, and seniority bases. The system leaded educated and talented younger
generation was hard to achieve important positions in the companies and to get better compensations. As a result, the
company performance grew slower than the economy.
Many HRM decisions, such as training and development programs and career systems, solely based on the HR
leaders or the line manager. If the leader is replaced, it may result HRM practice changes, such as changing policy on
training and development programs and career systems. On the other hand, their competitors more specifically multi
national companies, have run more modern system such as Enterprise Resource Planning, i.e. HR modules.

Missions and Objectives

Missions of implementation CBHRM system may vary from one company to other companies. Some companies were
interested in implementing it along with their business strategies, while other companies simply to solve their specific
HRM issues after conducting HR audit, for an example. Many other companies tried to modernize their approaches in
managing people. In other words, in implementing CBHRM system the companies have various reasons from a
consequence of adopting higher level of corporation strategy up to ‘faddish’ to implement ‘latest HR management
methods’.
It was also found that their objectives were also vary from implementing the whole eight HR applications to only
choose one or several HR applications only such as career system. Mostly, they had had different motives and reasons.
For the first category, the companies wanted to implement all applications, they were usually very interested in the
benefits of implementing CBHRM that were considered can solve their problems, and they could allocate sufficient
budgets for one or two years a head. For the second category, the companies want to implement gradually CBHRM. They
usually could not allocate budget and/or resources as required including people who would become members of
implementation team.

Approaches

There were three different common approaches for organization in implementing CBHRM system. The first was by hiring
external consultant services to design the system. In the mid of 1990s, several big crown corporations hired famous
international consultants. The implementation required substantial amount of investment in which board of directors of
the company was involved in budgetary decisions. The typical management consultation process in Indonesia involves
desk study, interview, series reports, and presentation activities. The company had obligation to pays the consultation
costs and to provide required information. Sometimes, management also appointed a counterpart team consist of dozen
employees to work together with the experts from the consultant company. The consultant obligated to design the system
and, sometimes, to train the counterpart team who would implement the system. In this approach, it was often found that
people in the companies had in sufficient knowledge and skills to modify, improve, and develop further the system as
required by organizations.
Other companies apply different methods in developing and implementing the system. They seek and attend
training or workshop programs providing required knowledge and skills to develop and to implement the system.
Universities or individual experts often provide this kind of services. This approach provides higher employee
involvement and more cost efficient. For several companies, this approach makes employees found a lack of commitment
from top executives and management in implementing the system. Top executives tend to mistrust to the internal team
who tried to develop the system.
The last approach is participatory process. It combines workshops and consultation programs. The company needed
to run a series of workshops to socialize CBHRM to top executives of the company, as well as to transfer knowledge and
skills to implementation team members. Before each workshop, the consultant needs to prepare conceptual design of
CBHRM system. During the workshop, the conceptual design, then, were explained and discussed together to achieve the
suitable designs. Commitment of top executives was found very important for this approach.
In general, companies planned to implement CBHRM system requires to develop the basic components of CBHRM
system i.e. competency dictionary and competency profiles. Having these two main components, companies then be able
to develop further related competency based applications such as recruitment and selection, career path and succession
planning. For those companies plan to implement the completely integrated system, they need develop the system into
two stages. The first stage is to develop three basic components (competency dictionary, competency profiles and
employee competency). The second stage is to design the applications along with management and employee priorities. It
is usual in Indonesia, assessment of employee competencies are contracted out to the third parties in order to reduce
subjectivity. In current practices, however, more and more companies assess their own employee internally, i.e. by HR
department. Even, several companies develop and apply their own assessment centers for assessing their employee
competencies.

4. CASE STUDIES

Energy Company

The first case considered success in implementing CBHRM system is an oil and gas company. It changed its vision from
an excellent oil and gas company into a world-class energy company. Formerly, the company got revenues based on fees
of production costs from the government. Later in line with free market development, the government as the main
shareholder requested the management to seek profit from margin of sales (based on market price) and production cost. In
other words, employees need to change their behaviors from ‘big spenders’ to work efficiently in order to gain higher
profit for the company without reducing employee’s wealthy.
The company hired a consortium of international and local consultants to develop blue print of CBHRM system in
1995. The consortium had produced a blue print of CBHRM system and run a pilot project in one of the company branch
in Kalimantan. Unfortunately, in 1997 the country was hit by the lengthen economic crises. The management decided to
cut budged since could not afford any more experts from abroad due to soar inflation. Otherwise, management hired local
consultants and academicians with much lower rates to continue the projects. The roles of local consultants and
academicians handed in hands with former members of the counterpart team to implement the system broadly in the
corporation and to develop further the concepts of CBHRM system
The company has widely applied CBHRM applications such as selection and recruitment, career and succession
planning, training and development, as well as performance management. During the last ten years, the company might
reduce around twelve thousands employees (thirty percents of total employees). Employee satisfaction surveys reported
higher scores in those areas. Employees left in the company at certain degree more satisfied with better management
system more specifically on training and career planning. On the other sides, management likes performance management
system that allows management work together with employee to achieve organization targets.

Manufacturing Company

The next case is a manufacturing company located in Bandung, West Java. The company was deeply hit by the economic
crises due to it imported substantial amount of their raw materials that their prices were soar. The company needed to
revitalize the business. CBHRM system was decided to be the part of the integrated solution, since management though
those human resources were also one of major source problem. Formerly, the company had employed workers from many
different sources, such as government institutions, army and the company it self. Meanwhile, the company applied
bureaucratic, traditional and unmotivated personnel administration system, the same with government personnel
administration.
A group of people from HR department was formed as an implementation team. The team worked together to
develop each component of the system. If team members needed required knowledge and skills, local experts were hired
to explain and to coach the team on call bases. At the first stage, the team developed a soft competency dictionary and the
competency profiles in line with its company vision, mission and cultures. For hard competencies, the team worked
together with the association of metal industries in Indonesia to do bench mark and to adopt the competency dictionary
and profiles from developed countries. They also assessed employee competencies by themselves so that they identified
the training needs of employees. During the development of the system, involvement of top executives in the process was
very high. For example, top executives followed important meetings including training and coaching sessions for the
team.
Now, this company becomes on of most often benchmarked by other companies, which are interested in
implementing CBHRM system. The company has applied a performance management with 360 degrees evaluation and
better career path and transparent succession planning for employees.

Service Company

The last case is a service company that provides services for doing survey, inspection and quality consultation. The
company faced very serious problem when one of the services was stopped due to a new regulation issued by the
government of Indonesia. Consequently, revenue of the company fall forty-five percents. Board of directors prepared a
transformation program. The company needed to increase revenues at least the same forty-five percents within three years.
The company also needed to reduce employee about thirty percents in order to cut operation costs.
Portfolio services were analyzed and new repositioning strategies were developed. Talented people were assessed
their competencies by a consultant third party in order to avoid they leave the company followed a golden shake hand
program. Later, management decided to implement widely CBHRM system.
A team from HR and planning departments worked together to developed CBHRM components. They were assisted
by local experts who transferred knowledge and skills required to implement CBHRM system. A new competency based
placement or staffing model was developed. Each candidate considered competent was required to write a working
proposal. The board of directors themselves evaluate and judge the proposal before one candidate was appointed for an
important position.
Performance management system was also adopted. Management required periodically to develop performance plan
and to do coaching with colleagues and staffs before appraising period. As a result, the third year of the transformation
program, the company reached its revenue target increased by forty-five percents.

5. CONCLUSION

Integrated CBHRM system became one part of integrated solutions for many crown corporations in Indonesia in
facing turbulent business environment. It replaced old bureaucratic personnel administration formerly adopted from
governmental personnel administration. It not only provides benefits for the companies, but also satisfies competent
employees.
The implemented CBHRM system is similar to models applied in developed countries. The models refer to
company’s competency dictionary to develop job competency profiles and to measure employee competencies. Based on
these data, human resource people develop applications in order to manage employees.
In implementing it, the finding suggests that the models must be fitted to vision, missions, values and culture of the
organization. The stakeholders, including top executives of the organization need to be involved in the implementation
process from the beginning. The most valuable benefits gained by the organizations depend on how close the needs of
management and employee might be met. The most important of needs of many crown corporations is how to link closely
organization and employee performances. Meanwhile, the most critical need for employees is clear criteria and
transparent process for training and development as well as their careers.
Using a consultant service in implementing CBHRM system may only lead to success if there is a transfer
knowledge and skill to the employee of the company during the consultation process. Meanwhile, participatory
consultation process found provided better chance to have successful implementation. The process combines workshops
and consultations involving top executives. Strategically, implementation of CBHRM system was found successful if it is
part of bigger longer-term business strategy.

REFERENCE

1. Boyatzis, R.E. (1982). The Competent Manager. John Wiley & Sons, Inc., New York., USA

2. Dubois, David D. (1993) Competency Based Performance Improvement: A Strategy for Organizational Change.
HRD Press, MA, USA.

3. Green, Paul C. (1999). Building Robust Competencies: Linking Human Resource Systems to Organizational
Strategies. Jossey Bass Inc., California, USA

4. Lucia, A.D. and Lepsinger, R. (1999) The Art and Science of Competency Models. Jossey-Bas/Peiffer Inc., San
Fransisco, California, USA

5. Mitrani, A. and Fitt, D. (Editors) (1992). Competency Based Human Resource Management: Value-Driven
Strategies for Recruitment, Development and Reward. Kogan Page Limited,. London, United Kingdom

6. Spencer, L.M. and Spencer, S.M. (1993). Competence at Work: Models for Superior Performance. John Wiley &
Sons, Inc., New York., USA

7. Spencer, L.M. (1995). Reengineering Human Resources. John Wiley & Sons, Inc., New York., USA