From legal to organizational formalization: A pyramid of organizational development approach to SME maturity a multiple case study of an Indonesian machining and MRO workshop

Abstract

Small and medium-sized enterprises (SMEs) in Indonesia are increasingly converting into limited liability companies, but such conversion changes a firm’s legal status without necessarily transforming how it operates. This study examines that gap in a family-owned machining and maintenance, repair, and operations (MRO) workshop in Jakarta that became a Perseroan Terbatas in 2023. The study applies the Pyramid of Organizational Development, extended by incorporating sustainability as a cross-cutting dimension, and uses a qualitative multiple-case design with polar reference cases. Data were collected through five semi-structured interviews, one focus group discussion, direct observation, and internal documents and were analyzed using framework analysis. Each dimension was scored on a five-level maturity scale derived from Flamholtz and Randle and the Capability Maturity Model Integration (CMMI). The focal firm scored 1.8 overall, positioning it between an unincorporated family business, which scored 1.1, and a formally managed peer, which scored 3.3. The relative ordering of the three cases remained consistent across all dimensions. Operational systems represented the weakest dimension, with the focal firm scoring Level 1, the same as the unincorporated case, compared with Level 4 for the formally managed peer. Two main findings emerged. First, the primary deficit concerned documentation rather than operational capability, as repeatable informal routines already existed but had not been formally documented. Second, organizational maturity did not increase automatically with firm age: the unincorporated case had operated since 2005 yet remained the least mature, whereas the formally managed peer was established in 2023.