Development and Measurement of Six Capitals in Automotive Parts Manufacturing Companies in Indonesia and Malaysia

The initial step in this research was to find a phenomenon related to the importance of measuring six capital items in companies in the value creation process. The questions were in the form of structured questions that began by asking about the approval of the proposed use of financial capital measurements to the eight informants with the following results:

3.1 Financial capital

1. All informants agree that free cash flow as a financial capital measurement.
2. Three informants did not agree that audit opinion was used as a measurement of financial capital, namely IM1, IM4, and IM8, all of whom were of the opinion that audit opinion with a going-concern emphasis could not be used as a measurement of financial capital because it was not a measurement.
3. All informants agree that net asset as a financial capital measurement.
4. There were 3 informants who did not agree that RCSE was a measurement of financial capital because if they only used common stock as a measurement, it was felt that it did not fully take into account the capital owned by the company (IM5). According to IM6, he disagrees because other factors influence RCSE measurements. Meanwhile, IM7 disagrees because the performance of returns on capital or debt does not guarantee that the company is concerned about ESG activities when viewed from the perspective of the company's overall operations.
5. One informant did not agree with RNOA as a measurement of financial capital, namely IM7, assuming that the performance of returns on capital or debt does not guarantee that the company is concerned about ESG activities from the perspective of the company's overall operations.
6. Two informants did not agree with the DER as a measure of financial capital: IM6 and IM7. According to IM6, DER is not the main choice for financial capital, whereas IM7 uses the same assumption that the performance of returns on capital or debt does not guarantee that the company is concerned about ESG activities when viewed from the perspective of the company's overall operations.
7. The proposed financial capital measurements are included in the main choices of each informant, and there are proposed financial capital measurements that are input from the informants, namely net income, EBITDA and Dividend per share.
8. IM6 and IM7 emphasize that many financial capital measurements can still be adapted to a company's operating business.
9. All informants agreed that the value created from financial capital is sustainable in operations and business (going concern).
10. The summary of financial capital measurement is shown in Table 2.

Table 2. Financial capital measurement results

Some important comments from the informant interviews related to financial capital measurement are as follows:

“Why do I not agree with RCSE, RNOA and DER as measurements of financial capital? If you look holistically at a company, it is not necessarily a company with a good level of return on capital and debt. In this case, if related to debt, it is a good level of collectability in terms of debt repayment that has good ESG-related initiatives. When conducting internal research, how do companies pay back their debt, but how? The company's mindset towards environmental stewardship is bad, while companies with poor collectability at Levels 4 and 5 have good ESG initiatives. The argument is that the collectibility is poor because the funds are allocated first to ESG initiatives which have long returns." --IM7 (OJK)

3.2 Manufactured capital

From the questions asked, there are discussion points of important concern in the proposed measurement of manufactured capital submitted by informants:

1. All the informants agreed with the proposed measurement of manufactured capital.
2. Manufactured capital measurement is included in the main choices of each informant, and manufactured capital measurements are input from the informants, namely, Production Volume, Sales Volume and Production Safety.
3. IM6 emphasized that there are still many manufactured capital measurements that can be adapted to the company's business operations.
4. All informants agreed that if there was a company that did not measure its company capital, it could mean that management did not care about the value of the company which was built from the company's capital.
5. All informants agreed that the value created from manufactured capital reflects the level of effectiveness and efficiency of the company's production.
6. The summary of manufactured capital measurement is shown in Table 3.

A significant explanation can be taken into consideration from expert comments related to the measurement of manufactured capital.

“OEE is the main thing, a high OEE describes how the production process runs. High availability describes the level of reliability/reliability of the production machine, and high Production Efficiency describes a process with a high value-added job, which is greater than that of a non-value-added process. A high product quality indicates process capability (Cp/CpK). With high OEE, production costs will be low, which will ultimately increase profitability and factory utility. High factory utilization indicates how effectively the money invested provides a level of return. Automation technology is a must so that companies can maintain competitiveness as measured by QCD." – Manufacturing expert

Table 3. Manufactured capital measurement

Manufacturing experts also provided other measurement suggestions, in addition to the six financial capital measurements proposed in the interview questions:

The six Manufactured Capital measurements above are all related to machines but do not directly include the MAN and MATERIAL factors. Therefore, it is important to add manpower productivity and material efficiency, which describe the efficiency of the production process, to avoid WASTE.

ME = (Raw Material - Waste Material) / Raw Material × 100%

ME 100%, indicating that no material was wasted during the WASTE. All materials become Finish Goods

"By adding 2 Manufactured Capital Measurements, the manufactured capital measurement includes aspects of MACHINE, MATERIAL, MAN" - Manufacturing expert.

3.3 Human capital

Based on the inquiries made, there are essential topics of human capital measurement outlined in the proposals put forth by the interviewees.

1. Only IM6 disagrees with measuring the level of employee satisfaction and involvement as well as total employee costs as a proposed measurement of human capital because the level of satisfaction and involvement does not necessarily affect the level of employee productivity, nor does a large amount of employee costs necessarily be a positive indicator of human capital productivity. at the company.
2. Not all proposed human capital measurements were included in the main choices of each informant. Employee costs were not the main choice for the eight interviewees.
3. There is a proposal for measuring human capital, which is input from informants, namely Talent Turnover and Metal Health.
4. IM6 emphasizes that there are still many human capital measurements that can be adapted to a company's business operations.
5. All informants agreed that if there was a company that did not measure its company capital, it could mean that management did not care about the value of the company which was built from the company's capital.
6. All informants agreed that the value of human capital reflects their levels of security, comfort, and work productivity.
7. The summary of human capital measurement is shown in Table 4.

A significant explanation can be taken into consideration from expert comments related to measuring human capital as follows:

"Human capital refers to how companies invest in employees who have the best potential, competence, and performance; therefore, training and development efforts are very important. The Employee Engagement Index measures the level of commitment and involvement of talent in the profession and company, resulting in high performance/productivity (not just satisfaction). HC ROI measurement provides an illustration of the extent to which the returns from organizational intervention in human capital provide financial results and the extent to which talent contributes to the company's value creation." – Human Capital Experts.

Table 4. Human capital measurement results

3.4 Intellectual capital

Based on the questions posed, it is evident that there are significant points of discussion regarding the proposed human capital measurements put forth by informants, which warrant careful consideration.

1. IM6 disagree with the total research and development costs because it is not the size of the company that has good innovation and the number of patents it has registered because not all companies have registered patents.
2. All informants agree that new technology as an intellectual capital measurement.
3. IM7 is 50% agrees with patents because not all companies have registered patents.
4. All informants agree that management knowledge and market insight as an intellectual capital measurement.
5. IM 4 disagree with organizational culture as intellectual capital because there any many factors that influence the organizational culture.
6. All proposed intellectual capital measurements were included in the main choices of each informant.
7. There is a proposal for measuring intellectual capital, which is input from the informants, namely, the number of new products, the number of new innovations, and the transfer of technology or knowledge proposed by IM3, IM4, and IM7. In the automotive industry, car manufacturing companies are currently conducting technology and innovation transfer activities for their suppliers. PT Hyundai Motor Manufacturing Indonesia (PT HMMI) is a car manufacturer that actively carries out innovation, technology transfer, and coaching activities. HMMI conducts a coaching project for all its suppliers so that they can design their own products. This project started in 2021; therefore, the proposed number of product innovations can be implemented in this industry.
8. All informants agreed that if there was a company that did not measure its company capital, it could mean that management did not care about the value of the company which was built from the company's capital.
9. All informants agreed that the value achieved from the use of intellectual capital could reflect the level of effectiveness of the company's innovation.
10. The summary of intellectual capital measurement is shown in Table 5.

There are 25% of informants who choose organizational culture as the main choice for measuring intellectual capital, and According to the Toyota Way, organizational culture is of paramount importance. The Toyota Way is a collection of principles that establish the cultural foundation of Toyota Motor Corporation. In 2001, the company formally adopted these principles after years of academic research on the Toyota Production System and its potential applications in lean manufacturing for other organizations. The two key tenets of the Toyota Way are respect for people and constant improvement.

The conclusion from the results of interviews with informants is that all the proposed measurements can be the main measurements of intellectual capital, but there are still many other measurements that can be used according to the type of company business and the information to be conveyed.

Table 5. Intellectual capital measurement result

3.5 Social and relationship capital

Based on the inquiries, there are several topics of significant importance within the suggested methodology for assessing social and relationship capital presented by the informants:

1. All informants agree with the five proposal measurement except the R&D relation, there are four informants did not agree with the relationship between R&D as a measure of social and relationship capital because they concluded that there was no relevance to the relationship between R&D as part of social and relationship capital.
2. All the proposed social and relationship capital measurements were included in the main choices of each informant.
3. There is a proposal for measuring social and relationship capital, which is input from informants, namely social investment and CSR activities, proposed by IM4 and IM5, respectively.
4. All informants agreed that if there was a company that did not measure its company capital, it could mean that management did not care about the value of the company which was built from the company's capital.
5. All informants agreed that the value to be achieved from the use of social and relational capital can reflect the level of stakeholder trust in the company.
6. The summary of social & relationship capital measurement is shown in Table 6.

Fifty percent of the informants chose relations with the government and regulators as their main focus. IM7, who comes from the Financial Services Authority, reminded us that it is important to have a relationship with the government, but IM7 reminded us that there should be no corruption or bribery in that relationship. The following are the comments from IM7.

"The important thing is to have good relations with each party, but don't bribe. Usually, in good relationships, there are bribes, but it must be beyond that for the best. Relationship without bribery.” –IM7 (OJK)

Relations between the government and regulators are very important for the industry, as is the case in the automotive industry in 2021. The government amended PMK No. 31/PMK.010/2021 through PMK Number 77 of 2021, which pertains to PPnBM on the delivery of BKP classified as luxury in the form of motorized vehicles covered by the government for the 2021 Fiscal Year. The amendment was made by the Minister of Finance. The policy issued by the government at the time of Covid-19 is a manifestation of good relations between the government and the automotive industry, which directly and indirectly contributed positively to the Indonesian economy at that time. The conclusion from the results of the interviews with informants is that all the proposed measurements can be the main measurements of social and relationship capital.

Table 6. Social and relationship capital measurement result

3.6 Natural capital

From the questions asked, there are discussion points of important concern in the proposed measurement of natural capital submitted by the informants:

From the questions asked, there are discussion points that are of important concern in the proposed measurement of natural capital submitted by the informants:

1. Only IM4 disagrees with the carbon footprint as a measurement of natural capital, because it should not produce carbon.
2. All proposed natural capital measurements were included in the main choices of each informant.
3. There were no additional proposals for measuring natural capital because the informants felt that all the proposed measurements were sufficient to represent all elements.
4. All informants agreed that if there was a company that did not measure its company capital, it could mean that management did not care about the value of the company which was built from the company's capital.
5. All informants agreed that the value achieved from the use of natural capital could reflect the company's seriousness in running a sustainable business.
6. The summary of natural capital measurement is shown in Table 7.

Table 7. Natural capital measurement results