Management Science Letters 11 (2021) 2053–2060

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Management Science Letters

homepage: www.GrowingScience.com/msl

The effect of organizational culture on employee performance mediated by job satisfaction and
work motivation: Evident from SMEs in Indonesia

Tri Wahjoedia*

aLecturer, STIE Mahardhika, Surabaya, Indonesia

CHRONICLE ABSTRACT
Article history: This study aims to examine the influence of organizational culture on employee performance me-
Received: December 14, 2020 diated by job satisfaction and work motivation. This research is a quantitative research with a case
Received in revised format: study at the SME PT PMS Company in Surabaya, Indonesia by distributing questionnaires to 50
January 29 2021
employees. The data were processed using Structural Equation Modeling with the Smart PLS 3
Accepted: March 2, 2021
Available online: programs. The results showed that in fact the respondents thought that organizational culture and
March 2, 2021 work motivation had no direct significant effect on employee performance, and work motivation
Keywords: could not mediate organizational culture on employee performance. Organizational culture has a
Organizational Culture significant direct effect on job satisfaction and work motivation and job satisfaction has a signifi-
Employee Performance cant direct effect on employee performance. Likewise, job satisfaction can mediate organizational
Job Satisfaction culture on employee performance where all relationships lead in a positive direction. There has
Work Motivation been no research that examines the relationship model of those 4 variables which is intended to
determine the wider relationship between these variables and this study provides an overview of
employee behavior in SME companies and is useful as input in determining strategies, especially
for companies to improve their performance.
© 2021 by the authors; licensee Growing Science, Canada

1. Introduction

Business competition from time to time is getting tougher. Many businesses have declined or disappeared, but many new
businesses have sprung up with new energies and strategies. Every company strives to achieve better performance so as not
to be eliminated from the competitive area. The human resources who run the company are continuously improved to keep
up with the latest developments. The organizational culture that is created becomes a good habit to support the company's
achievements.
Organizational culture is one of the opportunities to build Human Resources through the aspect of changing attitudes and behaviors
that are expected to adapt to challenges. A strong organizational culture supports company goals. (Gibson, 2011) in (Sutanto, 2002)
distinguish strong and weak cultures, strong cultures are shown by organizational values that are reflected in employee behavior. In
a company with a strong organizational culture, shared values are deeply understood, embraced and fought for by most of the mem-
bers of the organization. A strong and positive culture is very influential on company behavior and performance. In addition to
organizational culture, good performance can be achieved if people / employees in the company have a strong motivation to succeed
both individually who will later contribute to the company. Changes in corporate culture result from the behavior of employees and
managers, ultimately realizing the goals of the learning organization. In fact, it was they who planted the seeds for reform and
improve company competitiveness (Wahjoedi et al., 2020). It is undeniable that good company performance can be achieved if
employees are satisfied with the work they are currently doing. Job satisfaction can determine the level of high or low employee

* Corresponding author.

E-mail address: tri.wahjoedi@stiemahardhika.ac.id (T. Wahjoedi)

© 2021 by the authors; licensee Growing Science, Canada

doi: 10.5267/j.msl.2021.3.004
2054

performance. The level of job satisfaction is expected to improve employee performance so that it can achieve the goals expected
by the company in obtaining good work results.

This study aims to examine the Effect of Organizational Culture on Employee Performance mediated by Job Satisfaction and Work
Motivation: Evidence from SME PT PMS Company in Surabaya, Indonesia. Modeling with 2 mediating variables to see broadly the
relationship of the 4 variables above can provide a new discourse in organizational behavior research. These papers are arranged in
the following order: Section 2 discusses the literature review of this research. Section 3 discusses the methodology. Section 4 de-
scribes data collection, data processing and analysis of findings and discussion. Section 5 concludes the research results.

2. Literature Review

Attention to performance is a very important thing for a company. With good performance, the company will be able to survive in
the competition. Performance is a work result that can be achieved by a person or group of people in an organization, in accordance
with their respective authorities and responsibilities, in an efforts to legally achieve the goals of the relevant organization without
violating the law and is in accordance with morals or ethics (Prawirosentono, 2008). The performance of each person is influenced
by many factors which can be classified into three groups, namely the individual competence of the person concerned, organizational
support, and management support (Simanjuntak Payaman, 2005, p. 210). Several factors that influence performance include organ-
izational culture, work motivation, and job satisfaction.

Organizational culture is a culture that is deeply rooted in the organization which can increase the effectiveness of achieving the
organization's vision, mission and goals. Followed by members of the organization as an organizational value system, then influenc-
ing how to work and behave so that the value system and meaning system differentiate between organizations (Busro, 2018, p. 64).
Organizational culture between companies can be different, this is because organizational culture reflects the personality or charac-
teristics that distinguish one organization from another. These traits can be things that look like organizational rules or things that
don't look like organizational mindset. These traits directly describe the organizational culture. Therefore, organizational culture is
a system, a shared meaning shared by its members that differentiates an organization from others (Robbins & Cotler, 2005). Organ-
izational culture is an important factor for increasing motivation among employees. As a result, an increase in employee motivation
will result in an increase in employee performance (Paais & Pattiruhu, 2020), (Shah, 2015), (Yumte et al., 2017). Several studies
have shown that the organizational culture created by leaders will affect employee strategy and performance (Irwan et al., 2020).
Employees need to be given the opportunity to be involved in the organization. If employees participate in organizational functions,
employees will feel themselves as part of the organization.

(Steers, 1985) states that one of the factors that influence performance is work motivation. Steer also explained that motivation has
the strength of a person's or individual tendency to carry out activities that lead to goals in work as satisfaction. According to
(Sutrisno, 2017, p. 146). Motivation is a factor that encourages a person to do an activity, therefore motivation is often interpreted
as a factor driving one's behavior. Every activity carried out by someone must have a factor that drives these activities. Meanwhile
(Wexley & Yukl, 2003) say that motivation is the gift or creation of a motive. So, work motivation is something that creates enthu-
siasm or encouragement. Motivation is a process in which the need encourages a person to carry out a series of activities that lead
to the achievement of certain goals. Goals that, if successfully achieved, will fulfill or fulfill these needs (Munandar, 2001). Work
motivation as a driving force for a person makes a very large contribution to the trust of a responsible organization, with the under-
standing that the achievement of organizational goals also means personal goals for the members of the organization involved
(Siagian, 2011). Work motivation is the willingness to make high efforts towards organizational goals, which is conditioned by the
ability of these efforts to meet individual needs. Several studies state that work motivation has a significant effect on performance
(Paais & Pattiruhu, 2020), (Yumte et al., 2017).

Job satisfaction needs special attention so that workers can improve their performance. Job Satisfaction is an emotional attitude that
is fun and loves his job. This can be seen from the positive attitude of employees towards work and everything faced in the work
environment. Job satisfaction is enjoyed at work, outside work, and a combination of inside and outside work (Hasibuan, 2001, p.
202). Job satisfaction reflects a person's feelings about his job (Handoko, 2001, p. 193). Due to differences in each individual. The
more aspects of work that are in accordance with individual desires, the higher the level of satisfaction he feels (Anoraga, 1998). Job
satisfaction is a psychological aspect that influences employee behavior in carrying out their activities. Job satisfaction is very im-
portant for employees because it will have an impact on work and the quality of their work. Employees who feel happy and satisfied
with their work will certainly carry out their duties as well as possible to get the same or more satisfaction so that it will have a
positive impact on their work performance (Irwan et al., 2020), (Shah, 2015). Conversely, if an employee feels unhappy or dissat-
isfied, he will be disturbed in his work which will have a negative impact on his work results (Annisa, 2013).

3. Methods

The research method is basically a scientific way to get data with specific purposes and uses, where data is valid with the aim of
being able to find, prove, and develop knowledge so that in the end it can be used to understand, solve and anticipate problems
(Sugiyono, 2015, p. 2). This is quantitative research. Quantitative research is research that is used to examine a specific population
or sample, Sampling techniques are usually carried out randomly, using research tools for data collection, quantitative/statistical
analysis, and the purpose is to test predetermined hypotheses (Sugiyono, 2010, p. 56). Using a descriptive research approach and
verification analysis, because of the relationship between the variables to be examined and the purpose of presenting a structured,
factual picture of the facts of the relationship between the variables to be studied. Descriptive research aims to describe or carry out
 T. Wahjoedi / Management Science Letters 11 (2021) 2055

the current state of the object or research subject based on visible facts or as they are. Meanwhile, verification shows that research
looks for the influence of the independent variables on the dependent variable. The research layout this time is a description of the
information used for solving problems from Human Resources. Using a survey is research that is used to explain causal relationships
and hypothesis testing. According to (Sugiyono, 2015, p. 4) the meaning of survey research is as follows: "Survey research is a
research technique used in large and small populations to obtain information by compiling a list of statements submitted to respond-
ents, but the data studied is data from the sample. Which is taken from the population, so that the relative incidents, distribution, and
relationships between sociological and psychological variables are found”. Population is a generalization area consisting of objects
/ subjects that have certain qualities and characteristics that are determined by the researcher to be investigated and then draw con-
clusions (Sugiyono, 2010, p. 15). The population in this study were 50 employees of PT PMS in Surabaya. Another term saturated
sample is census, where all members of the population are sampled (Sugiyono, 2011, p. 68). From the description above states that
in this study the sample is PT.PMS employees totaling 50 people.

The operational understanding of a variable is an element of research that tells how to measure a variable or it can be said to be a
kind of implementation guide on how to measure a variable. This study consists of 4 variables to be studied, namely the independent
variables consisting of: Organizational Culture (X), the mediation variables consisting of: Job Satisfaction (Z1) and Work Motivation
(Z2) and the dependent variable: Employee Performance (Y).

Organizational Culture (X)

Organizational culture is the values, beliefs and principles that serve as the basis for an organization's management system, as well
as management practices and behaviors that help and reinforce these basic principles. This type of indicator in organizational culture
refers to the type of clan culture according to (Schein, 2010) in (Limbunan, 2016), the indicators are as follows:

 Dominant Characteristics: The Company is a very familiar place like a big family, the employees share in many ways.
 Dominant Leadership Style: Leadership in companies is generally considered an example of mentoring, facilitating and
guiding employee development.
 Employee Management: Company management is characterized by teamwork, employee participation and deliberation.
 Organizational Adhesives: Organizational adhesives in the company commitment, loyalty and mutual trust in the company
is very high.
 Strategic Emphasis: The Company emphasizes on developing human resources, high trust, openness, and continuous par-
ticipation.
 Success Criteria: a) The Company defines success based on HR development, teamwork, employee commitment, and
concern for employees, b) The Company defines success based on efficiency, such as reliable delivery, good scheduling,
and low-cost production.

List of 7 questions for respondents as follows:

 The company is a very familiar place like a big family, employees share in many ways.
 Leadership in a company is generally considered an example of mentoring, facilitating and guiding employee development.
 The company's management is characterized by teamwork, employee participation and deliberation.
 Organizational glue in the company commitment, loyalty and mutual trust in the company is very high.
 The company emphasizes on human resource development, high trust, openness, and continuous participation.
 The company defines success based on human resource development, teamwork, employee commitment, and concern for
employees.
 Companies define success based on efficiency, such as reliable delivery, well-executed scheduling, and low-cost produc-
tion.

Job Satisfaction (Z1)

Job satisfaction is based on the facts faced and accepted as compensation for business and labor given according to (Sutrisno, 2017,
p. 80). The indicators are as follows:
 Psychological factors: a) I feel at ease when working, b) I am disciplined at work.
 Social factors: I have good relationships with leaders and colleagues
 Physical factors: a) The type of my job is in accordance with my expertise, b) The working time arrangement is in accord-
ance with the type of my job.
 Financial factors: The system and amount of salary that I receive every month is in accordance with the results of my work.

List of 6 questions for respondents as follows:

 I feel at ease when I work.
 I am disciplined when I work.
 I have good communication ties with colleagues and leaders
 My type of work matches my expertise.
 Working time arrangements according to my type of work.
 The system and amount of salary that I receive every month are in accordance with the results of my work.
2056

Work Motivation (Z2)

Work motivation is a skill in directing or controlling and moving someone to take action on the desired behavior based on the goals
that have been set to achieve certain goals. This type of indicator in work motivation refers to the type of motivation Herzberg (1950)
in (Lusri, 2017), the indicators are as follows:
 Achievement: The Company provides rewards for performance in the form of bonuses or incentives to employees.
 Recognition: Recognition of work performance is able to motivate employees to excel.
 The Job itself: Every job task that is done must be based on a sense of pleasure, loyalty, and high organizational responsi-
bility.
 Responsibilities: I always double-check the work that has been completed as a form of my sense of responsibility towards
the job
 Progress: The position I am currently holding is in accordance with my work achievements so far.
 Individual Potential Development: The availability of job training aims to improve the employability of employees.

List of 6 questions for respondents as follows:

 The company provides rewards for performance in the form of bonuses or incentives to employees.
 Recognition of work performance is able to motivate employees to excel
 Every work task that is done must be based on a sense of pleasure, loyalty, and high organizational responsibility.
 I always double-check the work that has been completed as a form of my sense of responsibility towards work.
 The position that I am currently holding is in accordance with my work achievements so far.
 Bosses provide trainings to employees to improve their abilities and skills.

Employee Performance (Y)

It is a result of the achievement of employees in carrying out certain duties and responsibilities that make these results the profit and
progress of the company according to (Lusri, 2017). The indicators are as follows:
 Accuracy of work results: I complete my work carefully and meet company targets.
 Level of initiative: a) I anticipate problems that may occur, b) I am able to create alternative solutions to solve problems
 Mental dexterity: a) I am able to understand the direction given by the leader, b) I can adjust quickly to all changes in the
work environment
 Time discipline and attendance: I attend regularly and always come on time
List of 6 questions for respondents as follows:

 I complete my work carefully and meet company targets.

 I anticipate problems that may occur.
 I was able to come up with an alternative solution to solve the problem.
 I am able to understand the direction given by the leader.
 I can adjust quickly to any changes in the work environment.
 I attend regularly and always come on time.

Researchers used a Likert scale to measure respondents' answers. The Likert scale is a measurement scale with five response cate-
gories ranging from "strongly agree" to "strongly disagree" which requires respondents to determine the degree of their agreement
or disagreement with each of a series of statements regarding the object of the stimulus (Malhotra, 2007, p. 298). Each statement is
given a numerical score ranging from 1 to 5. Where, Strongly Disagree - score 1, Disagree - score 2, Doubt - score 3, Agree - score
4, strongly agree - score 5. Descriptive analysis aims to provide an overview of the research subject based on data from the variables
obtained from the group of subjects studied (Azwar, 2013, p. 126). In this study, the collected data were analyzed using structural
equation modeling (SEM) Partial Least Square (PLS) using the Smart PLS 3 program. Structural model of this research can be
described as Fig. 1.

Fig. 1. Structural Model

 T. Wahjoedi / Management Science Letters 11 (2021) 2057

Hypothesis

The hypothesis of the structural model image above is as follows:

 H1: Organizational Culture (X) has a significant direct effect on Employee Performance (Y).
 H2: Organizational Culture (X) has a significant direct effect on Job Satisfaction (Z1).
 H3: Organizational Culture (X) has a significant direct effect on Work Motivation (Z2).
 H4: Job Satisfaction (Z1) has a significant direct effect on Employee Performance (Y).
 H5: Work Motivation (Z2) has a significant direct effect on Employee Performance (Y).
 H6: Organizational Culture (X) has significant effect on Employee Performance (Y) through Job Satisfaction (Z1).
 H7: Organizational Culture (X) has significant effect on Employee Performance (Y) through Work Motivation (Z2).

4. Results

4.1 Evaluation of Measurement (Outer Model)

4.1.1 Validity Test

An indicator can be declared valid if it has a loading factor above 0.5 on the target variable. The Smart PLS 3 output provides the
following analysis results:

Table 1
Result for Outer Loading
Indicators X Y Z1 Z2
EP1 0.840
EP2 0.828
EP3 0.793
EP4 0.839
EP5 0.867
EP6 0.826
JS1 0.802
JS2 0.840
JS3 0.815
JS4 0.835
JS5 0.711
JS6 0.852
OC1 0.835
OC2 0.883
OC3 0.897
OC4 0.752
OC5 0.865
OC6 0.844
OC7 0.823
WM1 0.906
WM2 0.879
WM3 0.717
WM4 0.821
WM5 0.892
WM6 0.904

Fig. 2. Value of Loading Factor

2058

Test the validity of the reflective indicators using the correlation between the item scores and the variable scores. The table
above shows that the loading factor provides a value above the recommended value of 0.7 (Hair et al., 2006). The smallest
value is 0.711 for the JS5 indicator. This means that the indicators used in this study can be declared valid or have met con-
vergent validity. The loading factor diagram for each indicator is as shown in Fig. 2. Following, reflective indicators also
need to be tested for their discriminatory validity by cross loading:
Table 2
Result for Cross Loading
Indicators X Y Z1 Z2
EP1 0.262 0.840 0.523 0.371
EP2 0.301 0.828 0.455 0.264
EP3 0.352 0.793 0.658 0.565
EP4 0.169 0.839 0.624 0.438
EP5 0.368 0.867 0.643 0.613
EP6 0.008 0.826 0.478 0.297
JS1 0.267 0.433 0.802 0.423
JS2 0.136 0.519 0.840 0.431
JS3 0.320 0.605 0.815 0.667
JS4 0.344 0.666 0.835 0.540
JS5 0.198 0.559 0.711 0.501
JS6 0.343 0.535 0.852 0.383
OC1 0.835 0.078 0.096 0.183
OC2 0.883 0.191 0.271 0.295
OC3 0.897 0.089 0.153 0.303
OC4 0.752 0.310 0.339 0.406
OC5 0.865 0.106 0.165 0.260
OC6 0.844 0.481 0.470 0.417
OC7 0.823 0.076 0.039 0.221
WM1 0.381 0.327 0.456 0.906
WM2 0.332 0.512 0.540 0.879
WM3 0.089 0.193 0.383 0.717
WM4 0.253 0.481 0.565 0.821
WM5 0.455 0.561 0.649 0.892
WM6 0.382 0.503 0.489 0.904

An indicator is declared valid if it has a loading factor value > 0.7 (Hair et al., 2010). Organizational Culture (X) has indicators
OC1, OC2, OC3, OC4, OC5, OC6, OC7, all of which are loading factor values (0.835, 0.883, 0.897, 0.752, 0.865, 0.844 and
0.823) > 0.7. Employee Performance (Y) has indicators EP1, EP2, EP3, EP4, EP5, EP6, all of which are loading factor values
(0.840, 0.828, 0.793, 0.839, 0.867 and 0.826) > 0.7. Job Satisfaction (Z1) has indicators JS1, JS2, JS3, JS4, JS5, JS6, all of
which are loading factor values (0.802, 0.840, 0.815, 0.835, 0.711 and 0.852) > 0.7. Work Motivation (Z2) has indicators
WM1, WM2, WM3, WM4, WM5, WM6 where all loading factor values (0.906, 0.879, 0.717, 0,821, 0.892 and 0.904)> 0.7.
Another method to see discriminant validity is to look at the square root of the average variance extracted (AVE) value. The
recommended value is above 0.5 (Hair et al., 2010). The following is the AVE value in this study:

Table 3
Average Variance Extracted (AVE)
Variables Average Variance Extracted (AVE)
X 0.712
Y 0.693
Z1 0.657
Z2 0.732

The table above provides an AVE value above 0.5 for all variables contained in the research model. The lowest AVE value is 0.657
in the Z1 (Job Satisfaction) variable.

4.1.2 Reliability Test

Reliability test is seen from the reliability value of the composite indicator block that measures the variable. The composite relia-
bility results are satisfactory if the value is above 0.7. The following are the composite reliability values for the output:

Table 4
Composite Reliability
Variable X Y Z1 Z2
Composite Reliability 0.945 0.931 0.920 0.942

The table above shows that the combined reliability values for all variables are above 0.7 which means that all variables in
the estimated model meet the criteria for discriminant validity. The lowest composite reliability value is 0.920 in the Z1
 T. Wahjoedi / Management Science Letters 11 (2021) 2059

variable (Job Satisfaction). Reliability testing can also be strengthened with Cronbach's Alpha where the SmartPLS Version
3 output shows the following results:

Table 5
Cronbach's Alpha
Variable X Y Z1 Z2
Cronbach’s Alpha 0.9369 0.9122 0.8953 0.9281

The recommended value is above 0.6 while the table above shows that the Cronbach's Alpha value for all variables is above 0.6. The low-
est value is 0.895 in variable Z1 (Job Satisfaction).
4.2 Testing the Structural Model (Inner Model)
After the estimated model meets the criteria for the Outer Model, the next is testing the structural model (Inner model). The following is
the R-Square value of the variable:
Table 6
The results of R-Square
Variable X Y Z1
R-Square 0.502 0.116 0.160

The table above gives a value of 0.502 for the Y variable, which means that X, Z1 and Z2 are able to explain the Y variance of 50.2%.
The value of R is also found in Z1 which is influenced by X namely 11.6% and also found in Z2 which is influenced by X namely16%.
Hypothesis testing is as follows:
Table 7
Final Result of Hypothesis Testing
Standard Deviation T Statistics
Original Sample (O) Sample Mean (M) P Values
(STDEV) (|O/STDEV|)
X→Y 0.045 0.052 0.103 0.439 0.661
X → Z1 0.340 0.383 0.091 3.747 0.000
X → Z2 0.400 0.429 0.099 4.040 0.000
Z1 → Y 0.578 0.575 0.163 3.556 0.000
Z2 → Y 0.163 0.186 0.181 0.900 0.368
X → Z1 → Y 0.197 0.220 0.080 2.461 0.014
X → Z2 → Y 0.065 0.074 0.079 0.827 0.409

The Final Result of Hypothesis Testing is as follow:

There are 4 Hypotheses which are accepted:

 X (Organizational Culture)  Z1 (Job Satisfaction) 

Z1 (Job Satisfaction)  Y (Employee Performance)
 X (Organizational Culture)  Z2 (Work Motivation) 
X (Organizational Culture)  Z1 (Job Satisfaction)
 Y (Employee Performance)
Because P Values < 0.05 and all of them in positive direction (original sample value). There are 3 Hypotheses which are rejected:

 X (Organizational Culture)  Y (Employee Performance)

 Z2 (Work Motivation)  Y (Employee Performance)
 X (Organizational Culture)  Z2 (Work Motivation)  Y (Employee Performance)
Because P Values > 0.05 and all of them in positive direction (original sample value).

5. Discussion

To build a strong organizational, culture requires a process because of the different perceptions, desires, attitudes, and behaviors of
employees in the company. Match between organizational characteristics and employee desires must be achieved to lead to a high
level of togetherness. In preparing for change, employees are expected to feel safe and happy in doing their job. So that employees
will be willing to accept changes sincerely without fear or compulsion. In line with this, it can be understood that organizational
culture has a very important role in increasing job satisfaction and performance. In this study, organizational culture can directly and
significantly influence job satisfaction, it's just that work culture does not have a significant direct effect on performance, this does
require synchronization regarding expected performance with organizational culture that is created so that the effects of organiza-
tional culture can be directly felt on performance. The greater the values that can be accepted by employees, the stronger the organ-
izational culture, so that the effect will be more visible on employee behavior. With a strong organizational culture, it is expected to
encourage high motivation from employees so that it can improve performance as well. In this study, organizational culture can
directly and significantly influence work motivation, it's just that work motivation does not have a direct significant effect on per-
formance. It takes not just motivation to directly influence performance, but something that is really felt that creates deep satisfaction
at work. Job satisfaction can more mediate organizational culture to improve performance compared to work motivation.
2060

6. Summary and conclusion

The results of this study are:

 Organizational Culture (X) has an insignificant direct effect on Employee Performance (Y).
 Organizational Culture (X) has a significant direct effect on Job Satisfaction (Z1).
 Organizational Culture (X) has a significant direct effect on Work Motivation (Z2).
 Job Satisfaction (Z1) has a significant direct effect on Employee Performance (Y).
 Work Motivation (Z2) has an insignificant direct effect on Employee Performance (Y).
 Organizational Culture (X) has significant effect on Employee Performance (Y) through Job Satisfaction (Z1).
 Organizational Culture (X) has an insignificant effect on Employee Performance (Y) through Work Motivation (Z2).

From the results of this study where the job satisfaction factor is the most significant variable in maintaining and even improving
employee performance, while in the job satisfaction it includes indicators of income, job suitability, and relationships, it is necessary
to create a positive environment for growth. Work isn't just for making money. There are also many employees who want to improve
their skills and learn new things at work. Companies can support employees' growth expectations by providing the right training and
career paths. Give equal opportunities to every employee to improve.

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