Compensation effects on job satisfaction and performance

Abstract

This study examines the effects of air traffic control (ATC) officers’ compensation on their job satisfaction and performance, in PT Angkasa Pura 1 (Persero). Using an explanatory-research method and stratified random sampling, data were collected from 208 ATC officers, at 13 branch offices. Their education ranging from high-school diplomas to postgraduate degrees, said ATC officers perform within four different work units: executive, functional, operational monitoring and structural. Using structural equation modeling (SEM) analysis, the empirical research results show that increasing ATC officers’ compensation enhances their job satisfaction and performance, but increasing their job satisfaction can actually decrease their performance. Synoptically, ATC officers’ compensation can have significantly positive effects on their job satisfaction and performance, yet relying on job satisfaction alone can have significantly negative effects on their performance.

Keywords

OB satisfaction air traffic control (ATC) officers compensation performance structural equation modeling (SEM)

Dr. Supriyanto Supriyanto is an active lecturer in Civil Aviation Safety and Engineering Academy of Surabaya. He was born on 31 December 1955 in Blitar. He studies about several topics related to the Juanda Airport Surabaya including the evaluation of the airport interior management, development of wireless system as back-up back-bond, also Effect of cooperation, communication and career development on job satisfactions at international Airport. In addition, he also studies about the opportunities creatively industry of Indonesia to deal with AEC 2015.

1 Introduction

The globalization perspective in the aviation industry is characterized by the operation of several airlines across countries [1]. This complicates the aviation industry because regulations and policies between these countries are decisive for the development of the aviation industry [2]. These conditions require tighter regulations and must be pursued with Zero defects (no room for an error), especially for officers of the Air Traffic Control (ATC). On the one hand, there is pressure for a tightening of the regulations, but on the other it is not easy to deal with the huge increase in air transport that today has resulted in additional workload, working conditions, and a pattern of compensation applied by the management of PT Angkasa Pura (Persero). The success of a company is determined by the performance of its employees. Basically, performance is what an employee does or does not do. Employee performance influences how much they contribute to the organization, which includes output quantity, output quality, output time period, attendance and cooperative attitude [3]. Employees’ performances are frequently lowered due to discomfort, dissatisfaction, lack of motivation and minimum salary or wage. Therefore, several efforts should be made to deal with such matters. Besides, one of the things that must be done by the organization in order to achieve its objectives is to provide appropriate compensation. This has to be adjusted to the development of the organization [4].

In 1997, the goverments of Indonesia has reformed the protective policy about air company as the benefit of economical crisis. This policy has been changed into unprotective policy that encourage the new air companies development (booming airlines). As the results, Indonesia air territory becomes busier with domestic and international flights with various type of aircrafts.

The increase of flight activity has affected the ATC employees’ load work qualitatively, which multitasking can lead to the emotional exhaustion [5]. Furthermore this potentially causing human error such as low accuracy, unorganized procedure, and the more time required to finish the tasks [6]. However, they are required to work accurately since the regulation should be fulfilled with all the energy with zero defect (no room for an error). This regulation applies to each employee working in the air (aviator) and in the land especially ATC employee. In some cases, there is a time when the employees are no longer productive but destructive. This happens due to their limit for problem solving and constructive reasoning have been overused [7].

On the other hand, the main point of passenger security and safety during flight auntil arrived depend on aviator such as pilot, ATC crew. The errors that have been made in aircraft management will lead to fatal consequences on air safety [8]. There are 3 kinds of service given by ATC crew in the airport, namely Aerodrome Control (ADC), Approach Control (APP), and Area Control Center (ACC). All the crews will coordinate each other intensely and effectively to give the best service both in the land an in the air. Moreover, the job descs of ATC according to International Civil Aviation Organization are controlling the air space to travel, controlling the airlift service, controlling air space in the airport to take off, aviation rescue service, airflight information service, coordination with the other flight instation according to ICAO Annex 2 /Rules of the air, ICAO Annex 11 /Air traffic services, ICAO Doc.4444 /RAC 501 PANS-RAC. All those tasks should be done by ATC to reach the optimal work performance.

The partiality of PT Angkasa Pura I management towards ATC crews is related to the increase of employees’ load work. The compensation has been done by management will affect positively in employees’ works satisfaction and commitment. Besides, it encourage the employees to become more qualified and loyal to the company [9]. In accordance, the effort of each employee decreases as they do not get the proper compensation [10].

The work satisfaction is an indicator if the employees’ expectations towards the organization have been reached as the reward of their performance. The more employees have been satisfied the more contribution they will make to the company. In the same way, employees will be more loyal to obey the policy if they feel satisfied. The committed employees will show positive attitudes.

Compensation is a form of remuneration received by employees as a reward for their work. Compensation, in the form of appropriate rewards, can affect an employee’s job satisfaction [11]. Employees with job satisfaction will be motivated to provide maximum performance for the company. This will help the company to achieve its objectives, so the company has to establish an appropriate compensation program to improve employee job satisfaction.

Based on the description above, the purpose of this study is to examine the effect of compensation on performance and job satisfaction as well as the effect of job satisfaction on the performance of air traffic control (ATC) officers in PT AngkasaPura 1 (Persero).

2 Conceptual framework and research hypotheses

This study was conducted to examine the effect of compensation on employees’ job satisfaction and performance in PT (Persero) AngkasaPura. The factor that influenced the performance and job satisfaction was compensation. Variables of this study are associated as follows:

The independent variable of this study was compensation, which comprised:

Financial compensation – given in the form of money as a reward for the employee’s contribution to the work. The indicator consisted of an honorarium/salary (X1.1), bonus/commission (X1.2), tunjangankeluarga (family benefits) (X1.3).

Nonfinancial compensation – anything other than money that is given to employees for their contribution to the organization. The indicator consisted of the facility (X1.4), health insurance (x1.5), opportunities for further training (X1.6) and promotion (X1.7).

The intervening variable of this study was employee satisfaction (Y1). The indicator consisted of work that is mentally challenging (Y1.1), worthy rewards (Y1.2), supporting working conditions (Y1.3), supporting co-workers (Y1.4), and personality–job suitability (Y1.5).

Furthermore, the dependent variable was employee’s performance (Y2). The indicator consisted of breakdown of separation (Y2.1), breakdown of coordination (Y2.2), inconvenience (Y2.3), accident (Y2.4).

One of the factors that influence employee job satisfaction is the provision of salaries and wages [12]. The compensation is divided into two kinds, namely financial compensation (consisting of salaries, payment of achievement, incentive fees, overtime payment, insurance programs) and nonfinancial compensation (consisting of the work and the working environment). Regarding job satisfaction variables, factors that are more important to encourage job satisfaction, such as work that is mentally challenging, worthy rewards, supporting working conditions, and supporting co-workers [13].

The hypotheses of this study are:

H1 = the compensation of ATC officers has significant influence on job satisfaction

H2 = the compensation of ATC officers has significant influence on performance

H3 = job satisfaction of ATC officers has significant influence on performance

3 Research methods

3.1 Research methods

Explanatory or confirmatory research was used in this study. Meanwhile, data were collected by using questionnaires [14].

3.2 Research participants

Participants of this study were the ATC officers in 13 branches of PT (Persero) AngkasaPura 1. This is in accordance with the regulation from the Minister of Transportation number 44 in 2002 dated August 7, 2002 regarding the Tatanan Kebandar Udaraan Nasional (national airport regulation) 2002–2007. The 13 branches were NgurahRai Airport-Bali, Juanda Airport-Surabaya, Hasanuddin Airport-Makassar, Sam Ratulangi Airport-Manado, Sepinggan Airport-Balikpapan, Syamsuddin Noor Airport-Banjarmasin, Selaparang Airport-Mataram, FransKaisiepo Airport-Biak, Pattimura Airport-Ambon, El Tari Airport-Kupang, Ahmad Yani Airport-Semarang, AdiSucipto Airport-Yogyakarta, and AdiSumarmo Airport-Surakarta.

3.3 Population and sample

3.3.1 Population

The population was all air ATC officers in 13 branch offices of PT. AngkasaPura 1(Persero). The population consisted of the following positions: (1) structural work unit; (2) functional work unit; (3) operational duties monitoring work unit; and (4) executive work unit.

3.3.2 Sample and sample size

The population of ATC officers totaled 619 people, with a 5% tolerated sampling error. The minimum number of samples was calculated using the Slovin formula and resulted in 243 people. In structural equation modeling (SEM) analysis the minimum number of samples to be used is 200 [15]. Meanwhile, the number of samples from the population, which was 208 ATC officers, had already met the minimum requirement of SEM analysis.

3.4 Data analysis

SEM, which is also called LISREL (Linear Structural Relations), was used to analyze the data of this study. This is an integrated approach among factor analysis, structural model and path analysis [16].

4 Results and discussion

4.1 The effect of compensation on performance and job satisfaction

Results showed that compensation has a significant effect on the performance of ATC officers. This was proved by the value of the loading factor (0.265), with t >t table (2.070>1.96) significant level at 5% and <0.05 probability value (0.038). The direct effect of compensation on performance was 0.265, the indirect effect was 0.091, and the total effect was 0.175, so the total effect of compensation on performance was lower than the direct effect. These results suggested that the second hypothesis (H2), which stated that compensation has significant influence on performance, was accepted. This means that an increase in the compensation of ATC officers will result in a significant improvement in performance. Results of this study are in line with studies by [17], which stated that there is a significant correlation between compensation and employee performance.

Results also showed that compensation has a significant effect on ATC officers’ job satisfaction. This was proved by the value of the loading factor (0.632), t >t table (4.131>1.96), significant level at 5% and <0.005 probability value (0.000). These results suggested that the H1 hypothesis, which stated that compensation has a significant influence on job satisfaction, was accepted. These results showed that an increase in compensation will result in an improvement in ATC officers’ job satisfaction. These results are also consistent another study which stated that there is a significant correlation between compensation and job satisfaction [18].

Furthermore, the results of this study suggested the implementations of management as follows:

ATC officers’ positive perception regarding the salary/honorarium was only 26.40%, so the company has to improve the structure of the salary/honorarium as the employees’ main reward for their jobs.

ATC officers’ positive perception regarding the management programs was only 60.58%, so the company has to promote the implementation of management programs to reward ATC officers with good performance and those who work according to the work procedures.

ATC officers’ positive perception regarding the facility program was only 61.10%, so the company has to promote the implementation of facility programs such as company’s credit facilities, transport facilities and other facilities to support the work.

4.2 The effect of job satisfaction on performance

Results showed that job satisfaction has no significant effect on the performance of ATC officers. This is proved by the value of the loading factor (–0.021), with t >t table (–1.887> –1.96), the significant level at 5% and 0.059 probability value. These coefficients showed that an increase in job satisfaction will decrease the performance of ATC officers.

Previous research suggested that job satisfaction will result in an increase of performance, but the result of this study (with ATC officers as the research subject) was not in accordance with the previous studies. Several possible causes of this significant negative effect between job satisfaction and performance are as follows:

Demographic characteristics of ATC officers.

Danish [19] stated that job satisfaction tends to be present continuously within professionals as they age. In addition, the majority of respondents’ working period (tenure) was under 15 years (88.95%). Stefanos and Dimitrios [20] stated that the period of employment and job satisfaction are positively correlated, which means that the shorter the tenure, the lower the job satisfaction.

Job characteristics of ATC officers.

According to Steven [21] the variety of work affects an individual’s perception on work addiction (workaholic) and this influences the level of satisfaction with their jobs.

Supporting facilities characteristics of ATC officers.

The ATC officers’ job requires skills/higher skills, which means that they are very vulnerable to frustration if personal demands cannot be met and this will eventually increase job dissatisfaction. Work duration of ATC officers is also very different from other professions and it is assumed that this influences the level of job satisfaction.

Advanced technology equipment approach.

An upgrade in equipment also requires an upgrade in employees’ skills/expertise, which possibly leads to a sense of discontent.

4.3 Research limitations

The results of this study have not been able to fully answer all the problems related to human resources management, especially in relation to the variables in this study. This is due to several limitations of this study, such as:

Data were not collected at the same time from the 13 branches of PT (Persero) Angkasa Pura 1. The large area and varying geographic location did not allow the researcher to collect data at the same time and this might have caused the diverse variation of responses to the questionnaire, which it was not possible to detect during the research. However, the research was valid and can be projected forward with the assumption that the conditions and the situation remain the same (ceteris paribus).

The inability to observe other factors that were likely to have a dominant influence on the studied variables, as changes to these factors may affect the significance level of the research.

5 Conclusion

Based on the results, it can be concluded that the compensation has a significant positive effect on the performance of ATC officers, which means that an increase in compensation will significantly improve the performance of ATC officers. Moreover, it also has a significant positive impact on job satisfaction, which means that an increase in compensation will significantly increase the job satisfaction of ATC officers. From this analysis, it can be seen that family benefits was the dominant indicator of compensation, while supportive co-workers was the dominant indicator of job satisfaction. At last, job satisfaction has a significant negative effect on the performance of ATC officers, which means that a decrease/increase of job satisfaction will significantly decrease/increase the performance of ATC officers. The investigation of the effect of employees’ commitment towards the company, including trust, obeying the company values, involvement, and loyality can be done in the future study. Furthermore the compensation (wage, bonus, commission, educational opportunities, family allowance) effect on employees; commintment also can be investigated.

Footnotes

Acknowledgments

The author hereby thanks to “PT Angkasa Pura 1 and Civil Aviation Safety and Engineering Academy of Surabaya” for facilitating this research study.

References

John

. Air Transportation: A Management Perspective. Seventh edition. USA: Ashgate Publishing Company; 2011.

Doganis

. The Airline Business. Second edition. Canada: Routlege; 2006.

Saarce

. Employee satisfaction and performance as intervening variables of learning organization on financial performance. Procedia – Social and Behavioral Sciences. 2015;211(2015):619–28.

Tapomoy

. Compensation Management: Text & Cases. New Delhi: Excel Books; 2009.

Cedar

. The Mindfulness Solution for Intense Emotions: Take Control of Borderline Personality Disorder with DBT. Oakland: New Harbinger Publications, Inc.; 2016.

Helen

, Steve

. Occupational Health and Safety in Construction Project Management. New York: Spon Press; 2005.

Margaret

. The Blackwell Handbook of Mediation: Bridging Theory, Research, and Practice. USA: Blacwell Publishing Ltd.; 2006.

Barry

, Mark

, Dirk

. Human Factors Impacts in Air Traffic Management. USA: Ashgate Publishing Company; 2005.

Nadine

, Axel

, Anne

. Options for Variable Compensation. Berlin: GRIN Verlag; 2007.

10.

Robert

, Christopher

. Leadership: Theory, Application, & Skill Development. Sixth edition. USA: Cengage Learning; 2016.

11.

Ayesha

, Amna

, Tahleel

, Hina

. Impact of compensation and reward system on the performance of an organization: An empirical study on banking sector of pakistan. European Journal of Business and Social Sciences. 2015;4(8):319–25.

12.

Aksu

, Aktas

. Job satisfaction of managers in tourism case in the antalya region of Turkey. Managerial Auditing Journal. 2005;20(5):479–88.

13.

Simamora

. Manajemen Sumber Daya Manusia [Management of Human Resources]. Yogyakarta: STIE YPKN; 2006.

14.

Johnson

, Larry

. Educational Research: Quantitative, Qualitative, and Mixed Approaches. Sixth edition. USA: SAGE Publications, Inc.; 2017.

15.

Erika

, Kelly

, Shaunna

, Mark

. Sample size requirements for structural equation models: An evaluation of power, bias, and solution propriety. Educational and Psychological Measurement. 2013;76(6):913–34.

16.

Tanya

, Claudio

. Structural equation modeling in medical research: A primer. BMC Research Notes. 2010;3:267.

17.

Ashley

, Arthur

. Experience-based mitigation of age-related performance declines: Evidence from air traffic control. Journal of Experimental Psychology: Applied. 2009;15(1):12–24.

18.

Udiyati . Pengaruh Kompensasi dan Gaya Kepemimpinan terhadap Kinerja Karyawan [Influences of Compensation and Leadership Manner toward Employee’s Job]. Malang, Indonesia: Brawijaya University Press; 2005.

19.

Danish

. Impact of reward and recognition on job satisfaction and motivation: Ampirical study from Pakistan. International Journal of Business and Management. 2010;5(2):112–24.

20.

Stefanos

, Dimitrios

. Modelling job satisfaction in low-level jobs: Differences between full-time and part-time employees in the greek retail sector. European Management Journal. 2011;29(2):129–43.

21.

Steven

. Workaholism: A review. Journal of Addiction Research and Therapy. Suppl. 2012;6(1):4120.