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This is an article review on a paper entitled, ‘The effects of human resource management practices on business performance among private companies in Malaysia’ written by Zaini Abdullah, Nilufar Ahsan and Syed Shah Alam taken from the International Journal of Business and Management. Human capital is one of the most vital aspect of private companies, and human resource management has become an integral part of a company’s success. It is even more crucial in a country such as Malaysia that contains multi-ethic and multi-cultural workforce.
It is acknowledged that HRM in Malaysia is still not common (Chew, 2005), but more and more companies are embrasing the concept and integrating it as part of the company’s strategy as they discover the benefits such as organisational stability and harmony (Cheah et al, 2003). The article aims to observe the effect of several HRM practices on the business performance of private companies in Malaysia. There were several HRM practices particularly observed such as – training & development, team work, compensation/incentives, HR planning, performance appraisal and employee security.
These are the 6 main independent variables that were identified in the article. The dependent variable is business performance. Previous researches and studies have shown relationship between HRM and business performance. Researches by MacDuffie (1995) showed that some HR practices in worldwide auto assembly plants relates with the quality of the firm. In addition, Youndt et al (1996) also have found some relationship between HRM practices and operational performance of manufacturing companies. Meanwhile, Dory and Doty (1996) found a connection between HR practices and accounting profits among banks. Methodology & Approach
This is a survey-based research. It used a self-developed and reliable questionaire to obtain data on human resource practices and business performance. Business performance is measured by the same items developed by Lee and Lee (2007). In total, there were 153 completed samples from managers of companies that are based in Selangor. Respondents are mainly Chinese and undergraduates. Findings The results of this research shows that HR activities such as training and development, team work, HR planning, performance appraisal have a positive impact and relationship with business performance of private companies in Malaysia.
On the other hand, it is also observed that compensation/insentives and employee security do not have significant influence on the business performance. Practical Implications As mentioned earlier, HRM practices are still not commonly practised in Malaysia (Chew,2005). Therefore, there is the unique challenge of motivating and training private companies in Malaysia to adopt HRM practices. HRM must be seen as integral with the organizational goals and strategies for growth. Suggestions There are several ways that this research can be improved.
First of all, the business world is a big domain with many different industries and sizes. It must be acknowledged that there is a difference of the rate of HRM practices adoption between companies of various size and industries. Therefore, it would be difficult to generalize the result of HRM improving business performance for all types of business. To improve the research, a larger number of respondents from various industries and different sizes must be obtained to get better results.
By getting a larger sample of data, the research can obtain a much generalized result. In addition, the research data collected on business performance is based on Likert scale and so can be very subjective. It is arguable that business performance can be measured accurately using this empirical approach. It is suggested that for business performance measurement, a quantitative approach is also used. Business performance can be measured more accurately using data from profits, revenue, cash-flow and cost-savings.
As a result, the relationship between HRM and business performance can be analyzed better. It is also suggested that an additional longitudinal study is done to get a much better observation on the relationship between HRM practices and business performance. With a longitudinal study, the companies performance are observed in a much longer time period. The effects of HRM practices over this time period can be observed much better. As a conclusion, this research has empirically proven a positive relationship between HRM practices and business performance.
It is seen that training and development, teamwork, HR planning and performance appraisal can improve business performance of private companies in Malaysia. However, it is noted that HRM practices in Malaysia is still not widely implemented and an effort to promote HRM is required. The research can also be improved by getting a large sample of data from various company sizes and industries. A quantitative approach is also suggested to analyze business performance better. Lastly, a longitudinal study will improve this research better by observing the effects HRM practices on business performance over a longer time period.