ENHANCING ORGANIZATIONAL PERFORMANCE OF MALAYSIAN SMEs THROUGH HUMAN RESOURCE MANAGEMENT (HRM) PRACTICES AND ORGANIZATIONAL INNOVATIVE CAPABILITY: HR practices

ENHANCING ORGANIZATIONAL PERFORMANCE OF MALAYSIAN SMEs THROUGH HUMAN RESOURCE MANAGEMENT (HRM) PRACTICES AND ORGANIZATIONAL INNOVATIVE CAPABILITY: HR practicesHowever, in this paper, the selection of HRM practices is based on the innovative HRM practices proposed by Agarwala. Following Tan and Nasurdin, this paper only adopted five Agarwala’s innovative HRM practices, which are training and development, reward system, performance appraisal, staffing, as well as communication and information sharing. The practice of career management that was adapted by Tan and Nasurdin has been dropped since Tan and Nasurdin have discovered that career management did not have an effect on product, process and administration innovation. This is because the responding companies that mostly comprised of locally-owned companies were generally less aggressive in developing their employees’ career paths compared to foreign-owned companies. In fact, career management is not the most effective strategy for SMEs due to most employees who engaged in smaller companies are merely to obtain work experiences, so that they will be more prepared in coping with job opportunities at larger companies. They placed the SMEs as a stepping stone to further expand their career at larger organizations. Thus, there is no sense of attachment for the employees towards their organization, and at the same time, employers are incapable of providing career management to employees due to financial constraints.
In addition, the selection of five HRM practices is based on Boselie, Dietz, and Boon, who have compiled a list of research articles related to ‘HRM and Performance’. In their review drawn on a comprehensive sample of 104 articles; the total of 83 articles is on the training and development, 71 articles on the contingent pay and reward scheme, 51 articles on the performance management (including appraisal), 50 articles on the recruitment and selection, 32 articles on communication and information sharing. These five basic practices listed have justified having the most support across various literatures. Lepak and Snell, Snell and Dean and Youndt et al. similarly agree that the four key HRM practices are staffing, training and development, performance appraisal and compensation. While according to Pfeffer, communicating and sharing of information is one of the seven practices of successful organizations and it is a key component in a high-performance work system. Therefore, it is expected that these five HRM practices could influence organizational performance in the Malaysian SMEs. electronic-loan.com
After all, in the Malaysian context; SMEs do implement HRM practices, but only the basic practices of HRM. This is another reason to justify why only five basic HRM practices have been selected. This is proven with the emergence of recent studies on HRM practices in Malaysian SMEs. For example, Daud and Mohamad have investigated the extent to which HR practices are highlighted by the Malaysian SMEs. They discovered that there was a substantial difference between the 108 SMEs surveyed with respect to the adoption of HR practices, where a majority of these organizations used an informal approach to manage their HR practices.