RESEARCH ARTICLE Adv. Sci. Lett., 46 49, 05 Copyright 05 American Scientific Publishers Advanced Science Letters All rights reserved Vol., 46 49, 05 Printed in the United States of America The Powerful of Training; and Compensation; Rewards in Sustaining SME s. Mohd Fitri Mansor, Noor Hidayah Abu, Hussen Nasir, School of Business Innovation and Technopreneurship, Universiti Malaysia Perlis, 0000 Kangar, Perlis, Malaysia. School of Technology Management and Logistic, College of Business, Universiti Utara Malaysia, 0600 Sintok, Kedah, Malaysia. Human capital is one of valuable assets to the organization in order to sustain organization performance and to achieve both employees and employer objectives. The aim of the study is to examine the powerful of both Human Resource practices (i.e. Training & and Compensation & Rewards) towards sustaining Small Medium Enterprise s (SME s) performance. The objectives of the current study are to examine the relationship between training and development as well as compensation and rewards in sustaining Malaysian Small Medium Enterprise s performance. Finally, is to identify the strongest variable contribute to the sustainability of Small Medium Enterprise s performance. The result from 80 Malaysian Small Medium Enterprise s owners found that both variables training & development and compensation & rewards significantly contributes to the sustainability of Small Medium Enterprise s performance. Meanwhile, the strongest variable contributes to the sustainability of Small Medium Enterprise s performance was training and development. The study contributes to the knowledge and awareness to the Small Medium Enterprise s owners an important or the powerful of human resource practices in sustaining their organization performance. Keywords: Training and, Compensation and Rewards, Sustainability, SME s. INTRODUCTION Human Resource Management (HRM) is a vital function in creating and sustaining the best human resource contribution for the organization 4. It leads to achieving sustained competitive advantage via developing capital pool and encouraging employees to pursue the interest of organization,,, 7,. HRM practices are referring to several functions: recruitment and selection, training and development, compensation and reward systems and appraisal 8. HRM practices may contribute to promote a culture of innovation, creativity and initiative, developing entrepreneurial attitude within the organization that are difficult to imitate. * Email Address: fitrimansor@unimap.edu.my The HRM has been recognized as a competitive advantage particularly in the West organizations. Despite of that, many countries in Southern Asia, awareness of the importance and value of HR as competitive advantage has yet to be appreciated in the analysis of HRM in Malaysia 6. Human Resource Department mostly know as a support or non-core business activities or service department rather that core business activities such as production, engineering, research & development departments. Upon Malaysia gained its independence from British in 957, the wider aspects of human resource practices were not given priority, as the main focus was mainly on work simplification and methods for increasing output. A gap exists between what is expected and the actual scenario HRM in Malaysia. Here lies a gap that needs further investigation in explaining the powerful of training and development as well as compensation and rewards in
Adv. Sci. Lett., 46 49, 05 RESEARCH ARTICLE sustainability of Malaysian Small Medium Enterprises (SMEs) performance. Therefore, the aim of the current study is to study the influence of both Human Resource practices (i.e. Training & and Compensation & Rewards) towards sustaining SME s performance. Furthermore, the objectives of the current study are to examine the relationship between training and development as well as compensation and rewards in sustaining Malaysian SME s performance. Finally, is to identify the strongest variable contribute to the sustainability of SME performance.. LITERATURE REVIEWS A. Malaysia SME s SMEs are an important component of the Malaysia s economic growth and development. SMEs can be divided into four broad economic segments namely services, manufacturing, raw material producers, and agriculture. Although SMEs operate in almost all industries, they differ in their scope and importance. In Malaysia particularly about 9% of companies in manufacturing sectors are SMEs and contributed 7.% of total manufacturing output, 5.8% to value-added production, own 7.6% of fixed assets and employed 8.9 of country s workforce 0. performance is not only focusing to productivity, efficiency, effectiveness and more recently is competitiveness. It has also been a subject of a study for social scientist from wide range of disciplinary perspectives. More recently efforts have been made by HRM theorists to try to establish a causal link between HRM and performance. is a major multidimensional construct aimed to achieve results and has a strong link to strategic goals of an organization 8. They stated that, the performance is the key element to achieve the goals of organization which helpful for the achievement of the organizational goals. The right employee training, development and education at the right time will provides big payoffs for the employer increased productivity, knowledge loyalty and contribution. The contribution and improvement of organizational performance is primarily through development of people as individuals, work group and as members of the wider organization. While, the competitive and attractive compensation and rewards packages will also increase employees loyalty to the organization as well as increase motivation that could lead to increase organization performance. In view of that, human resource is very important as valued assets of every organization. The SME s invest huge amount to the human resource capital such as sending their employees to the training and development programs in order to ensure return on investment that will ultimately increase the performance of the organization. B. Training and (T&D) Training and development is a systematic process that intends to ensure the organizations has effective employees to meet the exigencies of its dynamic environment. This is inclusive of adding to the employee s knowledge, skills and attitudes required by an individual to improve his performance in the organization 6, 0. Similarly, as Schuler stated that training and development can promote entrepreneurial behavior to the extent that they are applicable to a broad range of job situations and encourage high employees participation. They also found an effective training and development improves the culture of quality in business, workforce and ultimately the final product. Training and learning development usually includes aspects such as ethics and morality, attitude and behavior, leadership and determination, as well as skills and knowledge. It is considered as the process of upgrading the knowledge, developing skills, bringing about attitude and behavioral changes and improving the ability of the trainee to perform tasks effectively and efficiently in organizations. Similarly, as Chris 5 combines the two concepts of training and development gives an organization function which has the outcome of ensuring that the contribution of individuals and groups in achieving the organizational objectives through the development of appropriate knowledge, skills and attitude of the employees. Clearly shows that, the employee s performance is important for the performance of the organization and it s beneficial for the employee to improve its performance. Thus, training and development towards sustaining SME s performance can be hypothesized as:- H : Training and development will have a positively sustainability in SME s performance. C. Compensation and Benefits (C&B) Compensation and benefits practices are very important to increase organization competition can significantly increase motivation of an individual to increase their performance. Employee compensation refers to all forms of pay or rewards going to employee and arising from their employment and it has two main components 7. Studied by Carrier 4, Gary 9 pointed that the rewards and compensation management is key human resource practices contribute to the emergence of corporate entrepreneurship in both small and large organization. Direct compensation (financial) is in the form of wages, salaries, incentives, bonuses, commissions and so on. Indirect compensation is the form of non-financial benefits like vacation, annual leave entitlement, medical and hospitalization benefits, retirement benefits and etc. An ideal compensation policy encourages the employees to work harder and with more determination that can help the organizations to set the standards that are job related, realistic and measurable. The policies should have integration with other practices of human resource management and may provide growth opportunities to its
RESEARCH ARTICLE Adv. Sci. Lett., 46 49, 05 employees and to create a vigorous competition among the employees in order to have an urge work more efficiently and proficiently. Compensation management is advantageous to both employees and employers. It is beneficial for the employer in the sense to decrease the absenteeism rate. Low satisfaction from job and increased absenteeism rate are the consequences arising from the insufficient and inadequate benefits 9. The purpose of any compensation, whether direct or indirect, is to recognize the performance value of employees and to establish ways to motivate them to work with full efficiency and could link with the improvement organizational performance. An empirical study shows that five factors of employee satisfaction have been chosen namely empowerment and participation, working conditions, reward and recognition, team work and training and personal development 8,. Hence, the compensation and benefits towards sustaining SME s performance can be hypothesized as:- H : Compensation and rewards will have a positively contributing in sustaining SMEs performance D. Theoretical Framework Based on the previous reviews, the proposed theoretical framework can be proposed as Figure below:- Training & Compensation & Rewards Fig.. Proposed Theoretical Framework. METHOD & MEASUREMENT The study is using quantitative methods by distributing 00 set of questionnaires to the owners of Malaysian SME s in Northern part of Peninsular Malaysia. The respondents were asked several questions on the variables studied and the measurement of each question was used 6 Likert scales. There are 80 set of usable questionnaires collected representing 80% of response rate. Then, the data gathered and analyzed by using SPSS Version 9 in order to answer research objectives. 4. RESULT AND DISCUSSION Sustaining Based on the data analyzed the findings on demographic profile, mean, reliability test and correlation will be discussed as below paragraphs. Based on findings, Table below shown the demographic profiles of the SME s owner participating in the studied mainly are female (6%), age between 4-9 years old (.%), married (6%), executive level (4.%), with qualification degree level (%), from majority of sales and marketing department (5.0%) with length of service of less than years (4.%). Table.. Analysis of Demographic Profile Gender Male Female Age 8- years 4-9 years 0-5 years 6-4 years 4 years and above Marital Status Single Married Widow Position Director Manager Asst.Manager Executive Clerical Operator Others Education Level Primary LCE MCE HSC Diploma Degree Master PHD Department Administration Production Engineering Sale & Marketing Finance Others Length Of Service 0- years 4-6 years 7-9 years 0- years years and above Frequency 9 5 9 5 9 4 6 5 7 5 9 0 4 6 5 8 7 6 Percentage 6. 6.. 6. 7.5.5 6 8.8 6. 4..5. 5.0 5.0 7.5 7.5. 8.8.5. 5.0 4. 8.8. 0.0 Based on Table below shown the mean for each variables training and development; compensation and rewards; organizational performance are 4.05,.9 and 4.0
Adv. Sci. Lett., 46 49, 05 RESEARCH ARTICLE respectively. While, the standard deviation for each variable was 0.5 (training & development), 0.59 (compensation & rewards) and 0.57 (organizational performance) respectively. Table.. Analysis of Minimum, Maximum, Mean & Standard Deviation N Min Max Mean Std. Deviation Training & 80.0 5.00 4.046.547 Compensation 80.0 5.00.9075.59890 & Rewards 80.0 5.00 4.0075.5777 Meanwhile, Table shown that, both human practices i.e. training and development; compensation and rewards are positively sustaining the SME s organizational performance. Based on the studied, it found that the most superficial influence the sustainability of the SME s organization performance was training and development with significant level 0.00 rather than compensation and rewards with significant level was 0.0. It is aligned with the previous studied by Gary 9, Unnikammu et. al.,. Furthermore, the reliability test is used to show the goodness of the measure internal consistency of the scale used in the study. It was found that the Cronbach s coefficient (α) is above 8.0 which as Nunnaly 5, recommends a minimum level of 7.0 as the acceptable threshold. The R-square value of 0.6 indicates that 6% of the variance in variable sustainability of SME s performance can be explained by training and development as well as compensation and rewards. Table.. Analysis of Reliability Test & Correlations, Coefficients a Training & Compensation & Benefits N Cronbach s Correlations Sig. Alpha 80.875.000.000 80.88.000.00 80.866.000.68 **Correlation is significant at the 0.0 level (-tailed) R Squares: 0.64 & Adjusted R Square 0.64 5. CONCLUSION It is concluded that, Human Resource Management (HRM) is may lead to competitive advantage and sustainability of the SME s performance. Human capital most valuable assets any organization with the machines materials and even the money, nothing get done without manpower. The importance of HRM as a competitive advantage had been long recognized by companies in the West. However, in many countries in Southern Asia, awareness of the importance and value of HR as competitive advantage has yet to be appreciated in the analysis. Based on the findings, training and development is one of the elements in HR practices may positively contribute to the sustainable of the SME performance. It is involving the process of adding to the employee s knowledge, skills and attitudes required by an individual to improve his performance in the organization. Meanwhile, compensation and rewards is very important to ensure effective compensation and benefits package can significantly increase the motivation of an individual to increase their performance. The findings also revealed that, the said variable is also positively contributing the sustainability of SME s performance. In addition, the study cannot be generalized due to the number of SME s involve in the study only 80 companies and limited to the Northern area of Peninsula of Malaysia. The future studies can be extended to various HR practices and involving more SME s owners in several states. ACKNOWLEDGMENTS Authors would like to thanks to SMEs owners in the Northern Peninsular of Malaysia, Universiti Malaysia Perlis and Ministry of Malaysia Higher Education in providing the grants. REFERENCES [] Bartel, A.P. Productivity gains from the implements of employee training programs. Industrial Relations, (994) 4-45 [] Barney, J. and Wright, P. On becoming a strategic partner: the role of human resources in gaining competitive advantage. Human Resource Management, () (988) -46 [] Bratnicki, M. al entrepreneurship: theoretical background, some empirical tests, and directions for future research. Human Factors and Ergonomics in Manufacturing, 5( ) (005) 5- [4] Carrier, C. Intrapreneurship in large firms and SMEs: a comparative study. International Small Business Journal, () (994) 54-6 [5] Chris Amisano. Relationship between training and employee. ehow contributer, (00). [6] Delaney, J.T. and Huselid, M.A. The impact of human resource management practices on perceptions of organizational performance. Academy of Management Journal, 9 (996) 949-969. [7] Dessler, G. Human Resource Management. th ed., Prentice- Hall. Englewood Cliffs NJ, (008). [8] Fombrun, C., Tichy, N. and Devanna, M. Strategic Human Resource Management, John Wiley, New York, NY., (984). [9] Gary J. Castrogiovanni, David Urbano & Joaquı n Loras. Linking corporate entrepreneurship and human resource management in SMEs. International Journal of Manpower, () (0) 4-47. [0] Huseild, MA. The impact of human resource management
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