Effect of compensation strategy implementation on knowledge sharing through affective commitment and psychological contracts

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Psychological contract illustration. (Source: https://www.psychologymania.com/)

Human resources (HR) are the main driver for industrial growth and in improving business performance. Facing increasingly sharp competition between companies providing engineering for appropriate technology machines, both in the manufacture of agricultural machines and industrial machines, it is important for companies to have highly competitive human resource assets. Manufacturing companies in Indonesia are able to achieve high profits while being competitive. For example, PT. Agro Teknik Wijaya earned a profit of Rp. 6.5 billion in 2015, besides that there is also PT. Maksindo machines which earned a profit of IDR 10 billion in 2015 (www.tokomesin.com). Considering that increasingly competitive profitability encourages companies to manage every asset they have as best as possible, one of which is the human resources they have.

One of the strategies to improve the quality of human resources is to promote knowledge sharing between employees. In addition to human resources, knowledge is also considered the most strategic resource and competitive advantage for organizations, and knowledge management is considered very important and critical for the success of a group or organization (Yao et al., 2019). Because according to Mustika et al., (2020) managing knowledge is an important thing and must be done by an organization if the organization wants to have a competitive advantage. So, it can be said that organizations that already have unique and interesting knowledge will have the opportunity to enter the competitive industrial market. Knowledge sharing is a form of knowledge management. Knowledge sharing is considered an inseparable part of knowledge management. This is consistent with the view that knowledge management systems depend on successful knowledge sharing (Rohman et al., 2020). Knowledge sharing can also be interpreted as transferring knowledge from a person, group or organization to something else which is an important area in knowledge management (Yao et al., 2019). Knowledge sharing can occur when someone is able and willing to help others, as well as learn from other individuals. So, it implies that the act of knowledge sharing makes knowledge available to others in the organization.

The creation of knowledge sharing among employees related to a number of factors, including affective commitment, psychological contract and compensation strategy implementation set by the company (Anvari et al., 2014). The affective commitment felt by employees, where employees will feel they must be in the organization Meyer & Allen, (1996) will have an effect on being more motivated and have a strong desire to contribute and performance to the organization. Affective commitment refers to an individual and organizational psychological involvement, where individuals will be very committed to the organization and be involved in organizational activities and enjoy activities within the organization (Koentjoro & Eliyana, 2015). This means that someone will commit to remain in an organization because he feels very needed, and they are willing to stay in the organization as a form of commitment influenced by certain factors. Affective commitment can encourage a positive attitude towards knowledge sharing (Anvari et al., 2014). Because employees with a high level of organizational commitment tend not to leave the organization, and are more likely to be willing to give extra effort according to their ability to behave or in general are more willing to share knowledge within the organization (Anvari et al., 2014).

Another factor related to knowledge sharing behavior in the work environment is psychological contracts (Anvari et al., 2014). According to Patrick (2008), the psychological contract initially only described the relationship between leaders and employees. According to (Robinson & Rousseau, 1994) in Anvari et al, (2014) that the psychological contract is an individual trust, regardless of the terms and conditions. Psychological contract is a very important aspect where one can see how the exchange of mutual promises and obligations between employees and the company, which has an impact on motivation and discretionary behavior that is not explicitly recognized by the formal reward system (Rezania & Gurney, 2016). Psychological contract refers to a perception of employees and employers about their work relationship, and refers to employees’ perceptions that the organization delivers what has been promised (Idrees et al., 2019). Psychological contracts have a relationship with knowledge sharing, in which the fulfillment of employees’ psychological contracts towards leaders will encourage employees to help each other and show the image of the organization in (Yuan et al., 2017).

The last factor related to knowledge sharing behavior in the work environment is the compensation strategy (Anvari et al., 2014). Compensation is all income in the form of money, direct or indirect goods received by employees in return for services provided to the company (Febriandika, 2020). According to Das et al., (2016) the fairness level of compensation refers to the perceptions that employees have about equity in company practices which include internal compensation, external compensation, and allowances. Compensation can mean different things between different people. Compensation strategy is an important factor in increasing affective commitment, psychological contract and developing knowledge sharing within the organization. Compensation strategy according to Armstrong et al., (1999) is to use a strategic approach to human resource management (eg compensation) can make strong changes within the company, with how employees compensate. Design of compensating employers to employees to win competition with other companies (Milkovich and Newman, 2008: 37). For some employees, the hope of getting a salary is the only reason to work, but others argue that money is just one of many needs that are met through the work done. According to Gibson, (1996) one of the company’s goals to provide employees with welfare is to provide compensation to keep employees in work.

This research was conducted at PT. Agro Teknik Wijaya, which is a private company engaged in manufacture. PT. Agro Teknik Wijaya set a work target of “Progressive Machinery”, as part of the newest service of PT. Agro Teknik Wijaya. Progressive machinery will be a solution to support the needs of Indonesian society for agriculture, plantations and industry. PT. Agro Teknik Wijaya realizes the need for Indonesian people to service appropriate technology machines, and applies methods that are resource-efficient, easy to maintain and have a minimal pollutant impact compared to mainstream technologies, which generally emit a lot of waste and pollute the environment. PT. Agro Teknik Wijaya is committed to providing the best service for the Indonesian people both in the agricultural and industrial communities because the company is supported by experts in their fields and has 18 years of experience in engineering Appropriate Technology machines. So that PT. Agro Teknik Wijaya also needs to pay attention to human resource management and knowledge management in his company in order to improve the quality of the right and best work. Because through good quality work will make the company PT. Agro Teknik Wijaya can improve its industry and achieve a competitive advantage. It is also supported by a statement through Gope et al., (2018) which states that human resource management (HRM) and knowledge management (KM) are two valuable and interdependent drivers. HRM concerns the practices, policies, and systems that affect the behavior, attitudes and performance of employees, thus enabling the effective use of people in an organization to achieve organizational goals. Whereas KM will aim to create or discover knowledge, manage the flow of knowledge and also ensure that knowledge is used effectively and efficiently for the long-term benefit of the organization.

PT. Agro Teknik Wijaya is targeting 1000 Progressive Machinery customers for the next 3 years. Such a challenging target needs to be supported by the participation of all employees. Regarding the size of the target set, PT. Agro Teknik Wijaya applies a compensation strategy. An important compensation strategy encourages affective commitment, psychological contracts and the development of knowledge sharing within the organization (Anvari et al., 2014). The form of compensation strategy provided by PT. Agro Teknik Wijaya in the form of payroll based on competitive performance in accordance with applicable laws and regulations and periodically carry out benchmark market prices. Based on the performance of compensation performance at PT. Agro Teknik Wijaya consists of Weekly Salary, Monthly Salary, Overtime Wages, Bonuses, Health Insurance, Joint Holidays, Working Facilities, Family Allowances and Holiday Allowances. The compensation strategies provided will form an affective commitment and psychological contract so as to encourage employees to make extra efforts according to their abilities and be more willing to share knowledge.

Meanwhile, Knowledge sharing conducted by PT. Agro Teknik Wijaya is in the form of unified communication, regular meetings, periodic surveys and personal workbooks. Knowledge sharing in this research needs to be studied because it has a positive impact on PT. Agro Teknik Wijaya, but until now there has been no previous research that examines the factors that encourage knowledge sharing at PT. Agro Engineering Wijaya. These facts make this research an urgent value to do. The application of knowledge sharing brings positive changes to the company, one of which is the acceptance of PT. Agro Teknik Wijaya by many people. PT. Agro Teknik Wijaya requires a variety of agricultural machinery manufacturing specifications and methods for the manufacturing process of agricultural machines. Machines produced by PT. Agro Teknik Wijaya has the same production standard but has different specifications. The existence of knowledge sharing makes it easier for workers to finish working on the machine until the final stage. Every month PT. Agro Teknik Wijaya produces various machine specifications, of course, requires knowledge sharing. So, if there is no knowledge sharing, the business process cannot be carried out.

Based on the analysis and discussion that has been carried out in this study, the conclusion that can be drawn is that Compensation Strategy Implementation has a positive and insignificant effect on Knowledge Sharing at PT. Agro Teknik Wijaya Surabaya, Compensation Strategy Implementation has a significant positive effect on Affective Commitment at PT. Agro Teknik Wijaya Surabaya, Affective Commitment has a significant positive effect on Knowledge Sharing at PT. Agro Teknik Wijaya Surabaya, Affective Commitment fully mediates the relationship between Compensation Strategy Implementation and Knowledge Sharing at PT. Agro Teknik Wijaya Surabaya significantly, Compensation Strategy Implementation has a significant positive effect on Psychological Contract at PT. Agro Teknik Wijaya Surabaya, Psychological Contract has a significant positive effect on Knowledge Sharing at PT. Agro Teknik Wijaya Surabaya, and Psychological Contract fully mediate the relationship between Compensation Strategy Implementation and Knowledge Sharing at PT. Agro Teknik Wijaya Surabaya is not significant. It is also supported by a statement through Gope et al., (2018) which states that human resource management (HRM) and knowledge management (KM) are two valuable and interdependent drivers. So that PT. Agro Teknik Wijaya is also able to pay attention to human resource management and knowledge management in the company through the variables of Compensation Strategy Implementation, Affective Commitment, Psychological Contract, and Knowledge Sharing in order to improve the quality of the right and best work. Because through good quality work will make the company PT. Agro Teknik Wijaya can improve its industry and achieve a competitive advantage.

The results of this research can be used as a recommendation by the management of the company regarding the effect of the compensation strategy implementation on knowledge sharing through the affective commitment and psychological contract at PT. Agro Engineering Wijaya Surabaya. This can affect employees in fostering compensation strategy implementation, fostering affective commitment by creating work programs that can foster a sense of love for the organization, fostering psychological contracts, for example by encouraging employees to contribute, fostering knowledge sharing by clearly communicating the intentions of a knowledge sharing culture. in front of employees, and in order to produce the best quality work in order to be the main driver for industrial growth and in improving business performance. In addition, seen through the average results on the variable knowledge sharing, the lowest is 4.06 and it is the employees of PT. Agro Teknik Wijaya stated that when they learn to solve problems related to their work, they will tell their other colleagues. Although it is still in the high category, these results show the smallest average. So that every employee is needed to voluntarily and comfortably, conduct knowledge sharing behavior with other colleagues. This can help the success of the organization through the performance of all employees.

Author : Anis Eliyana

Details of this research available at:

http://www.sysrevpharm.org/index.php?fulltxt=17428&fulltxtj=196&fulltxtp=196-1603213426.pdf

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