Meanwhile, the study by Osman et al. in the service sectors, which have full-time employees not exceeding fifty, as defined by SME Corp. Malaysia, also disclosed that more than half of the 43 (51%) SMEs surveyed had an HR department in their organization, while the remaining declared otherwise. They also revealed that SMEs with their own inhouse HR department implement the HRM practices (such as training and development, performance appraisal, employee relations and communication) more often compared to SMEs without an in-house HR department. Besides that, employees show higher job satisfaction in the organizations that have their own HR department. In another recent study, Subramaniam et al. found that 84 SMEs (22 of them are small-sized) in the central region of Peninsular Malaysia demonstrated positive relationships between compensation, information sharing, and training and development to organizational performance. Moreover, there is one SME study done by Kwang et al., which examined the mediating role of HRM practices in the relationship between EO and organizational learning (OL) capability in Sarawak. They found that HRM practices directly and indirectly affect an SME’s OL capability.
Therefore, within the context of this paper, and following Tan and Nasurdin and Agarwala, HRM is conceptualized as combinations of several practices that are systematically designed to be geared towards improving SME effectiveness and yield better performance outcomes, in which comprises the practices of training and development, reward system, performance appraisal, staffing, as well as communication and information sharing. Among HR practices, training and development is of critical importance (Tanova & Nadiri, 2005). Carlson, Upton and Seaman observed that training and development is one of the most vital activities needed in an organization to succeed and survive. Stavrou-Costea suggested that every level of an organization should emphasize training and development practices, as the continuous training and development activities are possible to increase efficiency and flexibility of the employees in their work tasks. Previous research had found a positive relationship between training and development and firm performance. In addition, Westhead and Storey discussed the importance of training practices in SME firms in enhancing performance. Even though they have critically argued the training requirements of needed and unneeded training activities for SME firms, the matters can be unconsidered as several recent studies have suggested that training and development might be differentiated between them, but the practices are still crucial to the organization’s success and survival. Although, it was recognized that training and development are important HRM issues in small firms, in terms of providing formal training, it is still being overlooked by them. This is because most employers often underestimate the benefit and cost of training to small firms as not being worthwhile. In Malaysia, several platforms of training are provided by the government to assist SME development in terms of managerial and technical training. Thus, given the importance of training and development in small firms, SMEs have to grab any opportunities and take the initiative to improve as well as update their employees’ knowledge and skills in order to produce superior output. electronic-loan.com