Academic journal article International Journal of Management

Organizational Commitment as a Moderator of the Effect of Training on Service Performance: An Empirical Study of Small- to Medium-Sized Enterprises in Malaysia

Academic journal article International Journal of Management

Organizational Commitment as a Moderator of the Effect of Training on Service Performance: An Empirical Study of Small- to Medium-Sized Enterprises in Malaysia

Article excerpt

This paper seeks to examine the relationship between training approaches and organizational performance among 150 front-line employees from 10 service-based Small Medium Enterprises (SEMs) in Klang Valley Malaysia. Regression results show that there are positive and significant relationships between both formal and informal training approaches and service performance. Based on adjusted R-square values, only informal training contributes to the success of the service firms when there is a presence of moderating effect of organization commitment to employees. Senior management of SMEs can benefit from this study through recognition of the role of organizational commitment to employees as a key driver to strengthen the relationship between informal training and service performances further.

Introduction

It is widely known that Small Medium Enterprises (SMEs) are the main engine of growth in most developing economies (Hoq et. al. 2009). In Malaysia, SMEs can be broadly defined either in terms of the annual sales turnover or the number of full-time employees employed in the company. SMEs can also be categorized in terms of the industry sector they are operating. As far as the service-based SMEs (services, primary agriculture, and information and communication technology) is concerned, the sales turnover is between RM 250, 000 and RM 1 million, and the number of full time employees is not more than 50 (SMIDEC 2009).

There are many contributions of SMEs to developing countries. As pointed out by Berry and Mazumdar (1991), these contributions include the development and establishment of large number of SMEs firms, the employability of the number of workers, the increase of the value-added outputs, the utilization of local factors of production, and the redistribution of households' income in the country. SMEs in the service sector contributed steadily to Malaysian GDP growth from 50.7 in 1996 to 53.9% in 2000, and increased further to 58.1% in 2005. Additionally, the service sector accounted of more than half of the total workforce in Malaysia (Department of Statistics 2006). Despite these contributions, there are challenges faced by SMEs in the service sector. These challenges include the shortage of skilled workers, low productivity of workers, limited capacity of SMEs to operate in the globalization era, and intense competition from the firms in China and India (Ting 2004). Therefore, it is certainly crucial for SMEs to improve their organization performances through giving training to their human capitals (Valle et. al. 2009).

Literature Review

Generally, training can be divided into two types, namely formal and informal training. Formal training refers to initiatives which have a structured mode of delivery, and can be identified by both recipients and deliverers with the purpose of creating new awareness or knowledge of a workplace process or activity (Patton and Marlow 2002). Informal training, on the other hand, is explained as ad-hoc based, fragmented and flexible which often lack a formal structure and objectives stated (Jayawarna et. al 2007). In other words, informal training can be either in the form of assistance given by senior workers (Sicherman 1 990) or of not formally planned by an organization (Wu and Rocheleau 2001).

Small firms of SMEs prefer informal training rather than formal training which can lead to formal qualifications (Matlay 2004, Holden et. al. 2006). There are a variety of reasons to support the fact that formal training approach is not highly demanded by small business firms. These are due to high training cost, high opportunity cost of attending formal training courses, and lack of relevance of the job training (Johnson 2002). Mathis and Jackson (2008) argued that informal training enables employees to learn informally by asking questions, and getting advice from other colleagues and their supervisors which may help establish better working relationships. …

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