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The Effect of Compensation and Organization Culture on Employee Performance with Work Motivation as an Intervening Variable in Employees of PT Xyz (East Java
Surabaya)
Retno Nur Widiyani, Elok Damayanti, Miftahur Rochman Departement of Management, Narotama University Surabaya
Jl. Arief Rachman Hakim No. 51, Surabaya, Indonesia retnonw1398@gmail.com, elok.damayanti@narotama.ac.id,
miftahur.rohcman@narotama.ac.id
Abstract
The study discuss about what the influence of compensation and organization culture on employee performance with work motivation as a variable intervening. The study aims to determine the effect of variable compensation and organization culture on employee performance with work motivation as a variabel intervening in employee PT XYZ (East Java Surabaya). The type of this study using a quantitative approach. Data collection is done by using observation, interview, and questionnaries that is a method of data collection by spreading the list statement. The sampling technique in this study were employees of PT XYZ (East Java Surabaya) as many as 73 respondents. The analytical method used is PLS (Partal Least Square). Based on the results of this study, Compensation an Organization Culture on Employe Performance through the Work Motivation variable have a significant effect or the Work Motivation variable mediated the effect of Compensation and Organization Culture on the Employee Performance of employees in this company.
Keyword :
Compensation, Employee Performance, Motivation, Organization Culture.
1. Introduction
The business world is currently required to create a high employee performance for a development. An organization or company must be able to build and improve performance in its environment. To be able to achieve this goal, every organization or company needs resources. Resources are a source of energy, power, force necessary to create power, movement, activity, activity, and action. These resources include natural resources, financial resources, human resources, scientific resources, and technological resources.
To get a goal desired by each company, high employee performance is needed by the organization or company. The more companies have employees with a high work ethic, the overall productivity of the company will increase, so that the company can survive the competition. Efforts to improve employee performance, of course, the company can take several ways including, namely, providing compensation, creating a good organizational culture, and providing motivation. These three variables affect the performance of an employee and lead to the achievement of the targets of a company.
PT XYZ is one of the large retail companies that is quite well known among the public. There are several branches spread across several cities in Indonesia. One of them is in the city of Surabaya. Based on the historical record of PT XYZ which is located in the city of Surabaya, it has been established since 2001 and has been able to survive until now. In addition, PT XYZ also experienced an increase in sales every year. However, since the current pandemic, sales have begun to decline and the company's revenue continues to decrease. After the researcher conducted a field survey and conducted an interview session with an HR manager at the company, there were several phenomena that occurred in the company that caused the decline in performance, namely the loss of employee enthusiasm at work because they found a decrease in compensation, so that some violations are often committed by employees which can be used as a benchmark for declining performance. the following data I presented was obtained from the results of the interview.
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2019 2020 2021
9 8
7 6 5 4
3 2
1 Employee
absence
Late Leave Early Violation Of The Rules
Resign
2019 0 2 0 3 0
2020 2 4 4 6 1
2021 6 7 6 8 3
0
Figure 1. Violation Of Employees Source : PT XYZ (Surabaya East Java)
The problem that is happening to this company is a decrease in employee performance caused by discrepancies regarding what they receive with what they do. In the last three years, there has been an increase in some violations committed by some employees which can be used as evidence of a decrease in performance.
From the background description above, the researcher is interested in conducting a study with the title
"The Effect of Compensation and Organizational Culture on Employee Performance with Work Motivation as an Intervening Variable".
Based on the research background, the formulation of the problem can be formulated as follows:
1. Does compensation affect the Work Motivation of PT XYZ Employees (Surabaya East Java) ?
2. Does Organizational Culture affect the Work Motivation of PT XYZ Employees (Surabaya East Java) ? 3. Does Kompensai affect the Employee Performance of PT XYZ (Surabaya East Java) ?
4. Does Organizational Culture affect the Performance of PT XYZ Employees (Surabaya East Java) ? 5. Does Work Motivation affect the Performance of PT XYZ Employees (Surabaya East Java) ?
6. Does compensation affect the performance of employees of PT XYZ (Surabaya East Java) through motivation?
7. Does Organizational Culture affect the Performance of PT XYZ Employees (Surabaya East Java) through motivation. ?
2. Literature Review 2.1. Compensation
According to Marwansyah (2016) argues that compensation is an award or reward directly or indirectly in the form of financial or non-financial given that is given fairly and appropriately to employees in return for their contribution / service to the achievement of organizational goals. According to Milkovich & Newman (2004) the purpose of providing compensation is to achieve enterprise efficiency, fairness (openness), and comply with the rules of applicable legislation. What is meant by efficiency is:
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1. Good compensation can improve employee performance, improve the quality of employee work, to provide employee satisfaction and stockholders (shareholders),
2. For labor control. According to Singodimedjo, compensation is all recompense that an employee receives from his company as a result of the services or personnel he has provided to the company.
2.2. Organization Culture
According to Gibson et al. (1996) states that "organization culture is what he employees perceive and how his perception creates a pateren of beliefs, values, and expectations" this understanding explains that organizational culture is what employees appreciate and how perceptions create patterns of beliefs, values, and expectations. Kreitner & Kinicki (2008) give the notion that "organization culture is he set of shared, taken for granted implicit assumptions hat a group hods and that determines how it perceives, thinks about, and react to its various environments". This understanding explains that organizational culture is a force that is not realized, but it is easy to disseminate, its presence is not realized by individuals but is obeyed by individuals in the organizational environment, giving organizational boundaries as shared values and beliefs that underlie identity to members, promote collective commitment, improve the stability of the social system, as well as rely on the behavior of the members.
2.3. Employee Performance
According to Hasibuan (2007), it states that performance comes from the word work achievement or achievement that is actually achieved by a person in his field of work. Definition of performance as a result of work in terms of quality and quantity achieved by an employee in carrying out duties in accordance with job responsibilities given by the organization or company where a person works.
2.4. Motivation
In the opinion of Edwin B Fippo "Direction or motivation is essence, it is a skill in aligning employee and organization interest so hat bahvior result achievement of employee want simulaneously with attainment or organizational objectives". According to Mangkunegara (2010) work motivation is defined as a condition that has an effect on generating, directing and maintaining behaviors related to the environment.
3. Research Paradigm
Figure 2. Research Paradigm The Effect Of Compensation And Organization Culture On Employee Performance With Work Motivation As An Intervening Variable In Employees of PT XYZ (East Java
Surabaya)
4. Research Methodology
The type of research used in this study is quantitative research with a descriptive approach. Quantitative methods are research methods related to numbers analyzed by statistical techniques to analyze the results.
According to Sujarweni (2014) quantitative research is a type of research that produces discoveries that can be achieved (obtained) using statistical procedures or other means of quantification (measurement).
The scale used in this study is likert scale. Likert scale or likert scale is a research scale used to measure attitudes and opinions. The object of research in this study was an employee of PT XYZ (Surabaya East Java).
The population in this study was employees of PT XYZ which amounted to 73 employees. The method used by the researcher for sampling in this study was to use the technique of drawing census samples or saturated samples, where all members of the population were used as samples.
COMPENSATION (X1)
MOTIVATION
(Z) H
5
EMPLOYEE PERFORMANCE
(Y) ORGANIZATION
CULTURE (X2)
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The sampling technique in this study is Simple Random Sampling where sampling of population members is carried out randomly without paying attention to the strata present in that population. In this study, the data source was obtained directly from the original source, which was in the form of a questionnaire.
The data collection technique in this study was to use questionnaire techniques, observations, and interviews. The data analysis technique in this study was to use PLS (Partial Least Square) 3.3.
5. Result And Discussion
The data in this study were obtain from the results of distributing quetionnaires to 73 XYZ Company.
Based on the result of respondent's answer to the questionnaires distributed, respondent data can be described based on gender, age, and last education as follows:
Tabel 1. Characteristics based on the gender of the respondent Gender Frequency Percentage
Male 16 21.92
Woman 57 78.08
Total 73 100
Source: Primary Data Processed, 2022
From the table shows that most of the respondents from this study are male with a percentage of 21.92%
with a total of 16 respondents. Meanwhile, the female gender has a percentage of 78.08% with 57 respondents.
Tabel 2. Characteristics based on respondent’s age Age Frequency Percentage
< 21 Years 2 2.74
21 - 30 Years 63 86.30
31 - 40 Years 7 9.59
> 40 Years 1 1.37
Total 73 100
Source : Primary Data Processed, 2022
From the table, it can be seen that most of the respondents in this study were in the age range of less than 21 years as many as 2 people (2.74%), the age range of 21- 30 years as many as 63 people (86.3%), the age range of 31-40 years as many as 7 people (9.59%), and the age range over 40 years as many as 1 person (1.37%).
Tabel 3. Characteristics based on respondent’s education Education Frequency Percentage
Postgraduate 1 1.37
Bachelor 14 19.18
High School/Equivalent
58 79.45
Total 73 100
Source : Primary Data Processed, 2022
From table 4.3, it can be seen that most of the respondents in this study have high school education / equivalent with a percentage of 79.45% with a total of 58 respondents, undergraduate education with a percentage of 19.18% with a total of 14 respondents, and only 1 person (1.37%) has a Postgraduate Education.
39 5.1. Measurement Outer Model
Figure 3.
Source: Data Processing With PLS, 2022 1. Validity Test
Convergent validity aims to find out the validity of each relationship between the question item used and its latent variables. The convergent validity of the measurement model with reflexive indicators is assessed based on the correlation between the item or component score and the latent variable score or construct score calculated with PLS. The test results if the loading factor value is above 0.7 are said to be ideal and valid.
However, the value of the loading factor above 0.5 is also still acceptable, but if the value of the loading factor is below 0.5 then the item used must be removed from the model. In this study, a critical value of 0.7 was used.
The following are presented results from outer loading for each indicator – indicator owned by each – each exogenous and endogenous latent variable obtained from processing data using SmartPLS
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Table 4. Validity Convergent Outer Loading Compensation
(X)1
Organization Culture (X2)
Employee Performance
(Y)
Motivation (Z)
X1.1 0.855
X1.2 0.770
X1.3 0.917
X1.4 0.775
X2.1 0.879
X2.2 0.855
X2.3 0.834
X2.4 0.870
Y1 0.868
Y2 0.873
Y3 0.804
Y4 0.804
Y5 0.724
Y6 0.889
Y7 0.857
Y8 0.881
Y9 0.786
Z1 0.877
Z2 0.902
Z3 0.725
Z4 0.857
Z5 0.791
Source : Data Processing with SmartPLS (2022)
Table 4 illustrates the convergent validity values of each indicator. The value of the loading factor > 0.7 can be said to be valid. From this table, it is known that all loading factor values of the Indicators of Compensation, Organizational Culture, Motivation (Z) and Employee Performance (Y) are greater than 0.7.
This shows that these indicators are valid.
2. Reliability Test
Evaluation of the measurement model with square root of average variance extracted is to compare the value of the AVE root with the correlation between constructs. If the value of the AVE root is higher than the correlation value among the constructs, then a good discriminant validity is achieved. In addition, an AVE value greater than 0.5 is highly recommended.
The construct is declared reliable if the composite reliability value or the cronbach alpha value is above 0.70. The following are the results of the PLS Model Evaluation
Table 5. Nilai Avarage Variance Extracted Reliability
Cronbach's Alpha Composite Reliability Average Variance Extracted (AVE)
X1 0.85 0.899 0.692
X2 0.882 0.919 0.739
Z 0.888 0.918 0.694
Y 0.944 0.953 0.694
Source: Data Processing With PLS, 2022
The AVE values for the four constructs are greater than 0.5 so it can be concluded that the evaluation of model measurements has a good discriminant validity.
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Figure 4.
Source: Data Processing With PLS, 2022
5.2. Structural Model Testing (Inner Model)
Testing of the inner model or structural model is carried out to see the relationship between the significance value construct and the R-square of the research model.
Structural models are evaluated using R-square for the dependent construct of the t-test as well as the significance of the coefficients of the structural path parameters. Testing of the structural model is carried out by looking at the R-square value which is the goodness-fit test of the model.
Table 6. R-Square
Variable R Square
Z 0.559
Y 0.672
Source: Data Processing with PLS, 2021 3. Hypothesis Testing Results
Research Results The results of testing with bootstrapping from PLS analysis are as follows : Table 7. Hypothesis Testing Results
Original Sample (O) T Statistics (|O/STDEV|) P Values Description
X1 -> Z 0.288 4.004 0.000 Significant
X2 -> Z 0.547 6.688 0.000 Significant
X1 -> Y 0.169 2.064 0.040 Significant
X2 -> Y 0.248 2.041 0.042 Significant
Z -> Y 0.506 3.464 0.001 Significant
Source: Data Processing With PLS, 2022
6. Discussion
6.1. Effect of Compensation Variables on Motivation
Based on the results of statistical analysis using the path analysis method, it can be seen that the Compensation variable has a positive influence on Motivation, indicating that the value of the path coefficient is 0.288. The positive direction of the relationship shows that if the better the Compensation, the motivation will also increase. the results of a path analysis showing a probability or significant value of t of 0.000 with an alpha of 0.05 (0.000 < 0.05) prove that H0 is rejected. The conclusion that can be drawn is that the Compensation variable has a significant effect on the Motivation variable.
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6.2. Effect of Organizational Culture Variables on Motivation
Based on the results of statistical analysis using the path analysis method, it can be seen that the Organizational Culture variable has a positive influence on Motivation, indicating that the value of the path coefficient is 0.547. The positive relationship direction shows that if the better the Organizational Culture, the motivation will also increase. This is evidenced by the results of a path analysis that shows a probability or significant value of t of 0.000 with an alpha of 0.05 (0.000 < 0.05) proving that H0 is rejected and H1 is accepted. The conclusion that can be drawn is that the variables of Organizational Culture have a significant effect on the Variables of Motivation where the better the Organizational Culture, the higher the Motivation.
6.3. Effect of Compensation Variables on Employee Performance
Based on the results of statistical analysis using the path analysis method, it can be seen that the Compensation variable has a positive influence on Employee Performance, indicating that the value of the path coefficient is 0.169. A positive relationship direction shows that if the better the compensation, the employee performance will also increase. the results of a path analysis showing a probability or significant value of t of 0.040 with an alpha of 0.05 (0.040 < 0.05) prove that H0 is rejected. The conclusion that can be drawn is that the Compensation variable has a significant effect on the Employee Performance variable.
6.4. Effect of Organizational Culture Variables on Employee Performance
Based on the results of statistical analysis using the path analysis method, it can be seen that the Organizational Culture variable has a positive influence on Employee Performance, indicating that the value of the path coefficient is 0.245. The positive relationship direction shows that if the better the Organizational Culture, the employee performance will also increase. This is evidenced by the results of a path analysis that shows a probability or significant value of t of 0.042 with an alpha of 0.05 (0.042 < 0.05) proving that H0 is rejected and H1 is accepted. The conclusion that can be drawn is that the Organizational Culture variable has a significant effect on the Employee Performance variable where the better the Organizational Culture, the higher the Employee Performance.
6.5. The Effect of Motivation Variables on Employee Performance
Based on the results of statistical analysis using the path analysis method, it can be seen that the Motivation variable has a positive influence on Employee Performance, indicating that the value of the path coefficient is 0.506. A positive relationship direction shows that if the better the motivation, the employee performance will also increase. This is evidenced by the results of a path analysis that shows a probability or significant value of t of 0.001 with an alpha of 0.05 (0.001 < 0.05) proving that H0 is rejected and H1 is accepted. The conclusion that can be drawn is that the Motivation variable has a significant effect on the Employee Performance variable where the better the Motivation, the higher the Employee Performance.
6.6. The Effect of Compensation Variables on Employee Performance Through Work Motivation as an Intervening Variable
Based on the results of statistical analysis using the path analysis method, it can be seen that the Compensation variable has a positive influence on Employee Performance with Motivation as an intervening variable indicating that the value of the path coefficient is 0.146. A positive relationship direction shows that if the better the compensation, the employee performance will also increase. the results of a path analysis showing a probability or significant value of t of 0.012 with an alpha of 0.05 (0.012 < 0.05) prove that H0 is rejected. The conclusion that can be drawn is that the Compensation variable has a significant effect on the Employee Performance variable with Motivation as an intervening variable.
6.7. The Effect of Organizational Culture on Employee Performance Through Work Motivation as an Intervening Variable
Based on the results of statistical analysis using the path analysis method, it can be seen that the Organizational Culture variable has a positive influence on Employee Performance with Motivation as an intervening variable showing that the value of the path coefficient is 0.277. The positive relationship direction shows that if the better the motivation in mediating, the relationship between Organizational Culture and Employee Performance will also increase. This is evidenced by the results of a path analysis that shows a probability or significant value of t of 0.004 with an alpha of 0.05 (0.004 < 0.05) proving that H0 is rejected and H1 is accepted. The conclusion that can be drawn is that the variable Organizational Culture has a significant effect on the variable Employee Performance with Motivation as an intervening variable.
43 7. Conclusion and Suggestion
7.1. Conclusion
Based on the problems that has been formulated, the results of hypothesis analysis and testing that have been carried out in the previous chapter, then from the research carried out, the following conclusions can be drawn:
1. The results of the study show that the Compensation variable has a direct influence on Motivation (Z).
because it has a probality value (0.000) < 0.05 which means there is a significant influence.
2. The results showed that the variable Organizational Culture, has a direct influence on Motivation (Z).
because it has a probality value (0.000) < 0.05 which means there is a significant influence
3. The results of the study showed that the Compensation variable has a significant direct influence on Employee Performance (Y). because it has a probality value (0.040) < 0.05 which means there is a significant influence.
4. The results of the study show that the variable Organizational Culture, has a direct influence that is still significant on Employee Performance (Y). because it has a probality value (0.042) < 0.05 which means there is a significant influence
5. The results showed that the Motivation variable (Z) had a positive effect on Employee Performance (Y) because it had a probality value (0.001) < 0.05 which means there is a significant influence.
6. The results showed that the Compensation variable has a significant indirect influence on Employee Performance (Y) through Motivation. because it has a probality value (0.012) < 0.05 which means there is a significant influence.
7. The results showed that the variables of Organizational Culture, have a significant indirect influence on Employee Performance (Y) through Motivation. because it has a probality value (0.004) < 0.05 which means there is a significant influence
7.2. Suggestion
Based on the conclusions above, several suggestions can be put forward that are expected to be useful for the company as well as for other parties. The suggestions given include:
1. It is hoped that the company can maintain and improve services to Motivation, because the Motivation variable has a significant influence in bridging Employee Performance, including so that Employee Performance will increase.
2. Considering that the free variables in this study are very important in influencing Employee Performance, it is hoped that the results of this study can be used as a reference for subsequent researchers to develop this study by considering other variables that are other variables outside the variables that have been included in this study.
References
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Marwansyah, M. (2016). Manajemen Sumber Daya Manusia Edisi Kedua. Alfabeta.
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Milkovich, G., & Newman, J. (2004). Compensation Eight Edition (8th edition). McGraw-Hill.
https://www.amazon.com/Compensation-8th-George-Milkovich/dp/0070635196
Sujarweni, V. W. (2014). Metodologi Penelitian : Lengkap, Praktis, dan Mudah Dipahami (Cetakan Pertama).
Pustaka Baru Press. http://balaiyanpus.jogjaprov.go.id/opac/detail-opac?id=303228
Biography
Retno Nur Widiyani is a student of Narotama University, Faculty of Law, Economics and Education Management Study Program.
Elok Damayanti graduated at Surabaya University (UBAYA) in major of Foreign Business Language and then continued her study at Sekolah Tinggi Ilmu Ekonomi YAPAN, Surabaya. She completed her Master’s Degree of Management, focuses in Human Resource Management at Narotama University. Active as a lecturer in Departement of Management at Narotama University since 2016 with courses of Human Resources Management, HRM International, HRM Practicums, Business Introduction, Business Ethics, Public Speaking and Business English. Active in national and international organizations of ADRI, IORA, ICOGOIA, and World
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Conference. Also active in writing scientific articles and writing books in National and International journals. In addition, she is a Director of Professional Certification Institute at Narotama University and also as a Head of National Partnership, responsible for the domestic cooperation at the university
