Training Incentives for Malaysian SMEs: an Impact Evaluation


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International Journal of HRD Practice, Policy and Research 2018, Vol 3 No 1: 73-88 doi: 10.22324/ijhrdppr.3.103
Training Incentives for Malaysian SMEs: an Impact Evaluation
Corporate Strategy and Insights Department, Pembangunan Sumber Manusia Berhad1, Malaysia
The article reports on the effectiveness of a Malaysian Government initiative to enhance training within the country’s Small and Medium Enterprises (SMEs). The Training Incentives for SMEs Scheme was designed to improve the level of productivity among SMEs by upgrading the skills and capabilities of the existing SME workforce. The Scheme has benefited a total of 16,248 employees from 5,502 employers and they were trained by 276 training providers. The article reports on a study to assess the outcome of the Scheme by measuring the effectiveness based on the perspective of trainees, employers and training providers. In conclusion, the Scheme was effective. Strategic recommendations are developed to improve future schemes by targeting types and content of training programmes, delivery of training programmes and execution of future training programmes and incentive schemes mechanism.
Key Words: training, training incentives, SMEs, impact, Malaysia
1. Introduction
Small and Medium Enterprises (SMEs) form the backbone of Malaysia’s economy and are key to driving the momentum of the nation’s growth. Over the last decade, SMEs’ Gross Domestic Product (GDP) growth has continuously outpaced Malaysia’s overall economic growth. However, SMEs’ growth is constantly being constrained by lack of skilled labour resulting in lower productivity rates when compared to larger firms. The Training Incentive for SMEs Scheme was introduced by the Pembangunan Sumber Manusia Berhad (PSMB) (better known as Human Resources Development Fund, HRDF) to support the aspirations of SMEs in developing and improving the level of productivity by upgrading the skills and capabilities of the existing SME workforce.
This article reports on the study undertaken to assess whether the training programmes attended by trainees under the Scheme was effective in improving the trainees’ job performance. The study’s three main objectives were to:
• Assess the outcome of the Training Incentive against its objectives by measuring the effectiveness of it from the perspective of the trainees, employers, and training providers.
• Identify the problems and challenges associated with the Training Incentive and obtain feedback on areas of improvement from the three target groups (i.e. trainees, employers, and training providers).
• Provide recommendations and develop short and long-term action plans to improve the training programmes offered under such Incentive schemes.
This paper starts by providing a brief contextual profile regarding training within SMEs in Malaysia. It then outlines the methodology associated with this study before reporting on findings.

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A concluding section provides a discussion of the issues associated with the implementation of this scheme and a consideration of the implications for future government backed programmes in order to enhance the training effectiveness within SMEs.
Training and Malaysian SMEs
The Malaysian Government has long been concerned with the development of SMEs in Malaysia and various strategic plans and initiatives have been formulated to assist SMEs in facing new challenges faced by the changing business environment. This is because SMEs are recognized as a growth driver and an accelerator of economic expansion in Malaysia (Hashim, 2012). Hashim (2012) also argues that apart from their significant share of business establishment (more than 90% of business establishments in Malaysia are SMEs) and their contribution to the country’s income generation (approximately 37% of Malaysia’s GDP), SMEs are also known to provide new job opportunities, introduce innovations, stimulate competition, and form an important link in the supply chain to large multinational companies.
Efficient SMEs have a more educated workforce and are more likely to provide formal structured training to their workers (Batra & Tan, 2003). However, there are five key challenges faced by SMEs: (1) lack of access to finance, (2) human resource constraints, (3) limited or inability to adopt technology, (4) lack of information on potential markets and customers, and (5) global competition. More importantly, there is a high risk that SMEs will be wiped out if they do not improve their competitiveness in a globalized market that changes at a rapid pace (Ting, 2004). Although there are various factors that are hindering SMEs’ competitiveness, the lack of human capital is the most significant challenge for Malaysian SMEs. It is often too expensive for SMEs in Malaysia to employ professional and competent employees (Saleh and Ndubisi, 2006).
The Incentive Scheme
Realizing the importance of SMEs to the nation, there is acknowledgement from the Government to support the human capital development of SMEs in Malaysia, especially in skills-upgrading for their employees. As such, the agenda of Developing and Retaining a First Class World Talent Base is included as one of the priorities under the Tenth Malaysia Plan (10th MP, Chapter 5). PSMB was given the mandate to upgrade the skills and capabilities of the existing workforce and was entrusted with an allocation of RM47.5 million (for the period 2011 to 2015) to provide training and skills-upgrading to employees of SMEs across Malaysia. This marked the beginning of the SME Training Incentive Scheme.
Specifically the Training Incentive Scheme is to assist SME employers that are registered with PSMB and who pay the levy2, but who have insufficient levy balance, to engage some of their employees in training. Training must be in an area of direct benefit to the business operation. Any eligible employer is able to nominate up to three employees to attend a programme run by an external training provider and from a list of approved programmes. In implementing the SME Training Incentive Scheme, PSMB has adopted the latest definition of SME as determined by the SME Corporation Malaysia (SME Corp). The definition is in line with an economic development of the country taking into consideration of price inflation, change in business trends and structural changes. The definition of SME is as stated below:

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Category

Small
Sales turnover from RM300,000 to less than RM15 million

Medium
Sales turnover from RM15 million to not exceeding RM50 million

Manufacturing

OR

OR

full-time employees from 5 to less than 75*
Sales turnover from RM300,000 to less than RM3 million

full-time employees from 75 to not exceeding 200*
Sales turnover from RM3 million to not exceeding RM20 million

Services & Other Sectors OR

OR

full-time employees from 5 to less than 30*

full time employees from 30 to not exceeding 75*

Note: *PSMB Act, 2001 refers to the number of employees and paid-up capital during the implementation of the scheme, 10th Malaysia Plan, in determining the eligibility of employers to register.

Table 1: Definition of SME Source: SME Corporation Malaysia

Employers with one or more following cases — arrears of levy and Interest, involved in PSMB legal cases, in the process of deregistration — are not eligible to participate in the scheme.

The Evaluation
Measuring and evaluating the effectiveness of training programmes for SMEs and the relevant government support is a relatively complicated matter as it is relatively difficult to measure the direct effects or impact of training (Devins & Johnson, 2002). In addition, it is more challenging to measure a large number of different training programmes and which evolve over time (LopezAcevedo & Tinajero, 2010). Therefore, this study is taking the best possible approach to measure training effectiveness. Whilst there are limitations it is better to measure imperfectly rather than the absence of evaluation (Giangreco et al, 2010).
The study assesses the relationship between the quality of the training programmes and the outcomes from the perspective of the trainees, employers, and training providers. The quality of a training programme is determined based on the independent variables which are the quality of the training module, quality of the trainer, quality of the training venue and equipment, the length of the training, the ease of applying for the training, and the frequency of trainees attending training. The effectiveness of a training programme is reflected in the dependent variables which are measured from the perspective of the trainees, employers, and training providers. The moderating variables are variables that moderate the strength of the correlation between the quality of training and the effectiveness. In this study, the moderating variables are the trainee’s ability or readiness prior to attending training, the employer’s training budget, the barriers to the trainees applying what they learnt at the workplace, and the availability of trainers. The research framework and variables related to this study are shown in Figure 1.

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Dependent Variables

Objectives Respondents

Independent Variables
Quality of Training Programmes
• Quality of training module
• Quality of trainer • Quality of training
venue and equipment • Length of Training • Ease of Applying
for Training • Frequency of
attending training
To measure the perception of the training programmes
Trainees and employers

Moderating Variable
• Employer’s training budget
• Readiness of trainees
• Availability of trainers
• Barriers to applying training at workplace
To identify the challenges that have an effect on the effectiveness of training
Trainees, employers, and training providers

Effectiveness of Training Programmes Trainees • Personal development • Career development
Employers • Value creation • Employee retention
Training Providers • Growth of business • Industry recognition
To measure the outcomes and effectiveness of the training programmes
Trainees, employers, and training providers

Figure 1: Research Framework for the Study

The study was completed using four main methods which were:

• Consultation with key stakeholders to understand specific needs and issues, share preliminary hypotheses, and obtain the database relevant to the Scheme.
• Secondary research to identify information from previous studies that are related to the current study as well as best practices in other countries in upskilling SME employees.
• Online and telephone quantitative surveys with trainees, employers, and training providers who were participants of the Scheme.
• Workshops and in-depth interviews with the related participants.

Data collection
A five-point Likert scale quantitative survey ranging from ‘1 = Strongly Agree’ to ‘5 = Strongly Disagree’ was designed according to the scope of study. Online and telephone quantitative surveys with all trainees, employers, and training providers who were part of the training incentive scheme, were contacted and requested to complete the survey. The database provided by PSMB listed an initial population of 16,248 trainees, 5,502 employers, and 276 training providers. Based on a confidence interval of 95% and a margin of error of 5%, a sampling framework was established which consisted of 390 trainees, 368 employers, and 131 training providers.

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A pilot study was undertaken. Subsequently, the full survey was conducted with all three target groups. For the employers and training providers, online survey links were emailed to the respective company’s person-in charge which enabled them to complete the survey at their convenience. Follow-up calls were made and reminder emails were sent to remind them about the survey and to encourage them to participate.
Data analysis
First, descriptive statistics are used to provide a general view on what is the average score on each assessment. Next, Chi-square Goodness-of-Fit test is used to determine whether the results from the respondents are equally distributed in their choices in the Likert-Scale.
H0: The data are consistent with a specified distribution
H1: The data are not consistent with a specified distribution
Finally, challenges and recommendation from the workshop with respondents are compiled into workshop reports for further discussion.
Findings
Participant background
422 trainees participated in the survey and most of them were from the central region (46.0%). This is followed by East Malaysia (18.2%), southern region (16.4%), northern region (15.6%) and East Coast of Peninsular Malaysia (3.8%). In terms of gender, 54.5% of the respondents were female while 45.5% were male. The most common highest education attainment for the trainees was Bachelor’s degree level where it made up 41.7% of the total respondents, followed by Diploma (27.0%), Masters (13.3%), SPM (9.2%) and others. Most of the trainees were from the Manufacturing sector (32.4%), followed by Other Service Activities (13.3%), Information and Communication (12.8%), and Education (8.7%). The majority of the respondents were managers (39.1%) while the rest were made up by professionals (36.7%), clerical support workers (11.8%) and technicians and associate professionals (6.9%). The most common working experience in the trainees’ current company fell under the category of 4 to 7 years (30.1%) and the most common total working experience was the category of 16 to 30 years (34.1%).
406 employers participated in the survey and most of them were from the central region (52.2%), followed by northern region (17.0%), southern region (14.5%), East Malaysia (11.3%) and East Coast (4.9%). Slightly more than half of the respondents employ more than 50 employees. About 40% of all the employers were small companies and the rest were medium companies. In terms of industry breakdown, manufacturing made up 41.9% of the respondents while the rest were made up of services and others. Most of the respondents were from management positions (42.9%), followed by respondents who were HR personnel (29.8%), Executives (25.9%) and Training Personnel (1.5%).
Most of the 131 Training Provider respondents were based in the central region (70.2%) while 10.7% of them are located in the northern region. Most of the training providers (69.5%) specialize in more than one type of training courses (multi specialization). Half of the training

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providers are accredited by local bodies and only 38.9% of them collaborate with public training institutions. About 52% of all the training providers collaborate with industry partners when drafting their training modules. Examples of industry partners that training providers work together with include Shell, Hewlett-Packard, Asian Regional Training and Development Organisation, ACCA, and CIMA.

Impact: Participating Trainees

Trainee satisfaction with training programmes
There were 13 indicators to gauge trainees’ satisfaction. The chi-square goodness-of-fit test was performed on the results of all the indicators to determine whether the distribution of scores is equal among the Likert Scale.

Trainees’ satisfaction with training

Observed frequency 12345

Training module was applicable and met job requirements (TM1)

1 10 56 226 129

Training was in-depth (TM2)

4 11 90 207 110

Training delivered was in-line with training objectives 3 (TM3)

7 73 196 143

Trainer had expertise on the subject matter (TQ1)

2 6 61 175 178

Trainer had good overall attitude (TQ2)

2 4 64 181 171

Trainer was effective in content delivery (TQ3)

1 11 74 197 139

Training venue was accessible (TV1)

3 13 82 187 137

Training venue had good learning environment (TV2) 2 6 87 189 138

Training equipment was of good quality (TA1)

1 14 96 196 115

Computer/AV equipment was of good quality (TA2)

4 12 112 186 108

Training manual was of good quality (TA3)

3 8 90 197 124

Training duration was effective (TL)

0 14 103 204 101

Overall, the training was of good quality (Overall)

2 4 51 235 130

(1=Strong disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly agree)

* p<0.05 ** p<0.01

X2
418.7**
326.6**
339.3**
360.8** 361.4** 333.1** 296.5** 317.0** 301.4** 276.6** 316.8** 320.0** 463.6**

Table 2: Frequency Distribution of Scores on Trainees Satisfaction with Training Programmes

Results indicate that the frequency distribution is unequal and therefore the null hypothesis is rejected. It is also shown that most of the scores rate between 4-5, suggesting that the trainees are satisfied with the training programme.

Figure 2 shows that all 13 indicators are above 3 (Neutral), indicating overall positive satisfaction in terms of the training conducted in the Scheme.

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Figure 2: Mean Score of Trainees Satisfaction with Training Programmes

Personal Development After Training
Training has added to my knowledge on the subject matter and is useful for my job
Training has improved my technical skills and is useful for my job
Training has enabled me to improve the quality of the products/services produced by me
Training has enabled me to contribute new ideas to the company
Training has enabled me to improve my efficiency and reduce wastage
Training has improved customer satisfaction as I am now better at handling/engaging with my customers
Training has motivated me and improved my attitude towards my work
Training has expanded my professional network
Training has enabled me to better understand my company’s organizational goals and align my goals to them
Training has enabled me to contribute to increased company revenue
Training has enabled me to contribute to reduced costs for the company
Training has enabled me to contribute to increased profitability for the company
Training has enabled me to be more efficient which has contributed to the company’s productivity

Observed Frequency X2 12345 0 11 81 191 138 317.8** 3 18 98 188 114 271.1** 1 17 90 197 116 299.4** 3 10 108 187 113 285.8** 4 9 110 185 113 282.0** 4 11 115 160 131 245.5** 1 9 72 186 153 330.4** 6 12 85 182 136 280.0** 9 9 102 194 107 287.4** 16 18 155 156 76 228.8** 18 26 137 157 83 188.3** 11 17 150 164 79 244.6** 2 8 90 209 112 343.8**

(1=Strong disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly agree) * p<0.05 ** p<0.01

Table 3: Frequency Distribution of Scores on Personal Development

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Personal development
13 indicators were used to measure trainees’ personal development after attending training programmes under the Scheme. The chi-square goodness-of-fit test was performed on the results of all the indicators to determine whether the distribution of scores is equal among the Likert Scale.
Similar to previous section, results mean rejection of the null hypothesis. Most of the scores are rated between 4 to 5, indicating that the trainees experienced personal development after attending the training programmes under the Scheme.

Figure 3: Mean Score of Personal Development after Training Programmes
Figure 3 shows that all 13 indicators are above 3 (Neutral), indicating overall improved personal development after the training conducted in the Scheme.
Career development
121 (28.7%) respondents indicated that they did receive a promotion after attending training. Of this number, 51.2% agreed that the promotion was due to the training programme attended. According to Table 4, out of the 422 trainees who responded to the question, 303 (71.8%) agreed or strongly agreed that they were sent for training because their employer wanted to encourage them to remain with the company. Consequently, there were 344 (81.5%) trainees who responded that they had not quit their jobs after the training and are still with the same company.
In Table 5, based on the replies of the 74 trainees who did quit their jobs after attending the training programmes, 60% left because of better job offers, 14% because they were dissatisfied with their job. About 46% of the 74 trainees that did quit their job after the training programme stated that their change of employment had nothing to do with the training programme they attended. Only about 11% revealed that they quit their jobs completely due to the training attended.

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Expectation that Training was to Encourage Retention 1
2
3
4
5
Grand Total

Actual Length of Stay After Training

<30

<3

<6 <1 year >1 year Did not n/a

days months months

quit job

1

1

1

7

1

1

1

1

15

3

6

5

4

4

67

1

2

6

3

5

12

156

1

2

3

5

8

99

1

8

16

8

16

26

344

4

Table 4: Matrix of Trainees’ Expectations That Training was to Encourage Retention vs. Length of Stay after Training

Grand Total
11 18 90 185 118 422

Current Job Classification

Trainees quit their jobs after attending training

No

Yes

Managers

134

31

Professionals

125

26

Clerical Support Workers

46

4

Technicians and Associate Professionals

22

7

Service and Sales Workers

16

3

Craft and Related Trades Workers

0

2

Elementary Occupations

1

1

Total

344

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Table 5: Trainees Turnover Rate by Job Classification

Turnover rate
18.8% 17.2% 8.0% 24.1% 15.8% 100.0% 50.0% 17.5%

In terms of receiving a professional certificate after attending the training programmes, about 49% of the trainees stated that they did receive a professional certificate. Out of those that did receive a certificate, about 83% of them believe that their certificate is an industry recognized certification.

Impact: Participating Employers
Value creation In Table 6 and Figure 4, the results suggest that the employers responded that they are neutral with most of the indicators. Only for the indicator on improving company productivity did employers mostly agreed with the indicator.
The results in Table 7 and Figure 5 present the findings on the non-financial impact of the training incentive programme. It suggests that the employers responded that they are either neutral or agreed with most of the indicators.

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Financial impact of training

Observed frequency 12345

Company revenue has increased after employees attended training

10 76 226 86 5

Operational cost of company has reduced as employee is more efficient

12 54 207 123 7

Company profitability has increased after employee attended 10 67 220 96 10 training

Company productivity has improved as employee is more 9 32 160 185 17 efficient
(1=Strong disagree, 2=Disagree, 3=Neutral, 4=Agree, 5=Strongly agree) * p<0.05 ** p<0.01

X2 395.7** 354.9** 370.0** 356.5**

Table 6: Financial Impact of Training on Employers

Figure 4: Mean Score of Financial Impact of Training on Employers

Figure 5: Mean Score of Non-Financial Impact of Training on Employers

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Training Incentives for Malaysian SMEs: an Impact Evaluation