Employees Training and Its Impact on Organizational Performance:

A Study of Small and Medium Enterprises in Pakistan

 Abstract
Staffing and training are key human resource management practices used to achieve firms

performance through acquiring and developing human capital resources. However, little research

has examined whether and why staffing and training influence firm-level financial performance

(profit) growth under different environmental (economic) conditions. This study intends to

analyze the different SMEs sector working in Pakistan. On the basis of convenience sampling,

the Punjab province is selected to collect the data. The study will first analyze the impact of

training on productivity of employees which will be calculated by using different factors or

dimensions of the variable. Then subsequently, the impact of employee productivity will be

analyzed on the performance or profitability of SMEs. This study will give an important insight

about whether the government should focus on employees training in SME sector of Pakistan?

Because of its 25% contribution to GDP of Pakistan it postulates testable statement to analyze

the relationship of training and profitability.

 Introduction
The evolution of every organization towards the changes being offered in the international

creates a great impact in the life of the business. Through the various technologies and

application of an innovative system, continuous product development and immense services

offered, there is no doubt that the business tycoons in today valued the importance of their

resources and knowledge. Aside from the form of the new driven technology, the business

leaders also believe in the ability and capacity of the natural resources the people. Over the past

one and half decades, various arguments have been made that firms human resource may be its

sole source of sustainable competitive advantage (Ferris et al, 1999).

We extend this idea by arguing that if innovation is the education and, especially, training is the

ammunition that renders it useful and effective. Research indicate that inadequate and inefficient

management of employee in small firms has resulted in low productivity and high turnover rate

and one of the leading causes of small firm failures (Mc Evoy,1984). The resource based

approach contends that organizations can develop a sustained competitive advantage only if its

activities create value in a unique way, one that competitors cannot easily copy (Barney, 1991;

1995).Employee Training Program increase performance of both organization & individuals.

This study will address one specific aspect of human resource management, training, to see if the

presence and type of training offered by Pakistan SMEs impact operations and profitability.

Purpose of the Study

The primary objective of this study is to investigate how effective is employee training in SMEs

of Pakistan and consequently enhancing the performance of the organization. This study attempts
to analyze the kind of training provided for the employees. In employee training literature,

human resource is the greatest source of the improvement of a business. Here, it exposes the

positive as well as the negative treatment accorded to the employees as a result of an

effective/ineffective implementation of an employee training program.

Likewise, it is necessary to study the current practices in company training and development that

are supposed to contribute to the enhancement of the employees skills. This study examines the

role of employee training to the success.

To address this objective, the researcher conducts a survey on the employees perception of their

training. Moreover, management personnel will be interviewed to evaluate their views on

effective employee training program.

The purpose of the study is to simply prove the equitable answer on the effects or impacts of the

training among the employee and their impact on performance of the organization in small and

medium enterprises (SMEs) of Pakistan.

 Literature Review
Companies today are forced to function in a world full of change and complexity, and it is more

important than ever to have the right employees in order to survive the surrounding competition.

New companies and business are blossoming, new technologies are constantly developed and the

knowledge and perception of how much your employees actually mean to your organization is

greater for every day.

Most companies are looking for the right expertise in different areas, and human resources are

therefore an important competitive factor that needs to be taken into consideration while

managing business (Ljungberg & Larsson, 2005). For this most of the companies arrange

training and developments for their employees.Organisations have to balance both production

effectiveness as well as efficient workforce to be successful. Even though a company has

managed to find the right employees, this is not enough. A crucial factor is to make employees

best and reduce the turnover rate. Talented employees can be a source of advantage for an

organization (Siegler 1999), but how to achieve this may be a major challenge. What do

employees want from their organization in order to feel committed?

The answer is they need security of their future that is only with the training and development.

The primary reason for working is to obtain money (Jackson and Carter, 2007), but could

employers do more in order to retain their employees? Or even more important, what do

employees want from their employer in order to feel committed willing to stay? Since there may

be a difference between how employers try to give employees regarding to how employees

actually would prefer to be stay there and satisfy with the job.

Throughout research we find indications that training and development is a major element for

firm, performance. Job satisfaction is affected by the worker and the work itself (Chen, 2008). In
older literature the focus has been on the relationship between training and development and job

satisfaction as well as remuneration. In the 1940s, 1950s and 1960s several studies were made

(Ohio, Michigan and the Hi-Hi leader).Employees satisfaction builds on elements such as a

higher participation, feedback, fairness, responsibility, development and work-atmosphere

(Hytter, 2007).

Problem Statement
The human resource department or the HRD is the only one department wherein a good decision

is being carried out from the start of their hiring process up to the point of the promotion and

retention. Their planning and organizational model of application is affected through the series of

changes that might affect the entire business. Still, the propellers look to the department as one of

the most essential part of the organization. One purpose of HR is to produce a talent that would

be fit in the needs of the organization and be suitable the human knowledge in their position. The

idea of having a right people in the right position is not impossible through the integration of the

training. But on what ways will the training can affect the level of performance of the employees

and consequently the performance of the SMEs in Pakistan?

Research Question

1. What are the common training programs that can enhance the performances of each

individual in SMEs?

2. Are these programs effective in terms of organizational Performance?

 Theoretical Framework
Conceptual Model:

This study is trying to establish a relationship among different qualitative and quantitative

variables. It descriebes if workers knowledge and skills can be improved by different training

programs, their productivity will automatically increase. And resultantly their firms performance

and profitability will also increase.

Hypotheses Development
On the basis of theoretical framework, the following hypotheses can be tested:

H1: There is a relationship between employee productivity and training

H2: There is a relationship between employee productivity and organizational performance.

Methodology: Research Technique, Data Collection,

Analysis
There are two sources of research that are used in this study; primary and secondary. Primary

research data are obtained through this new research study. Secondary research data that exists

and is available are used by the researcher.

Primary research was conducted using two methods; survey-questionnaires that will be

sent to employees in SMEs, and interviews will be conducted with management personnel within

the company. Secondary data will be collected from SMEDA which is the regulatory authority

for SMEs in Pakistan. By mixing the methodologies in conducting the primary research, the

researcher is enabled to take a broader and complimentary view of the issues being researched.

The questionnaires are used to collect quantitative data and the in-depth interviews are used to

provide qualitative insights into the data collected.

Variables of the Study

This study assumes different variables on the basis of their relationship with the dependent

variable. The dependent variable is profitability of the firm that can be obtained through net

income from income statements of SMEs. Independent variable is training programs conducted

in SMEs. An interview will be conducted from managers of SMEs to ask which type of training

programs are they following and what is their perceived effectiveness? Then employees

productivity which is a key moderating variable that can strengthen the relationship of

dependent-independent variables will be analyzed by using different components. Those are

increased output, efficiency in time, work quality, regularity, cooperating and motivation of

employees. These data on these factors will be collected by using a structured questioner.
Data Collection
Data will be collected form SMEDA of different sectors. According to IFC (2012),

approximately there are 3.2M businesses in Pakistan of which 3M are SMEs thus constituting

more than 90% of business stakes and having economic contribution of more than 30% to GDP,

25% to countrys total earnings and employing more than 70% of labor force. Keeping in view

the importance of SME sector in Pakistan, many significant milestones have been achieved by all

the stakeholders including establishment of Small and Medium Enterprises Development

Authority (SMEDA), SME bank, SBP SME department, Prudential Regulations of SBP

exclusively for SMEs and various government and other stakeholders initiatives from time to

time. This study will try to cover the Punjab side sectors of SMEs. Convenient sampling

technique will be used for this purpose. First of all regional offices of SMEDA will be called by

phone for appointments for giving list of addresses of SMEs of Punjab side.

Significance of the Study

The present study will be significant in number of ways. It will contribute to the body of

knowledge by:

1. Firstly, since the present area is highly under researched in Pakistan. No study has been found

to explore the employees training in Small and Medium Enterprises of Pakistan. Therefore, the

present study assumes that the findings of the present study will help in implementing that study

in SMEs Sector of Pakistan and those in developing countries in general to answer the long

standing question of how to enhance employee and firm performance.

2. Secondly, no research has been found on employee training and firm performance in Small

and Medium Enterprises in Pakistan. Therefore, the present study will prove to be a significant

contribution in this area with the assumption that employee training program is important for the
individual and firm overall performance. Employing mix methods research which has not been

used in this area and hence this will be a significant methodological advancement.

3. Examining the applicability of the discussed Western concepts and theories in an Eastern

developing country (Pakistan) in order to develop of these concepts.

Limitations
On the basis of convenience sampling, this study is covering only the SMEs working in province

of Punjab. Other province side sectors may give different results.

 References
The Journal of Psychology, Vol. 133, No. 2, pp. 205-16.

Blake, Robert R.; Mouton, Jane S; Barnes, Louis B (1964) Breakthrough in Organization

Development. Harvard Business Review; Nov/Dec64, Vol. 42 Issue 6, p133-155, 23p,

Brazier Davina Kay (2005:128-140) Influence of contextuak factors on health-care

leadership. Leadership and Organization Development Journal. Vol 26. No2. pp.128-140

Barney, J. B., & Arikan, A. M. (2001) The resource-based view: Origins and implications. In m.

A. Hitt, R. E. Freeman, & J. S. Harrison (Eds.), The Blackwell handbook of strategic

management: 124-188. Malden, Ma: Blackwell Publishers Inc.

Priem, R. l., & Butler, J. E. (2001a) Is the resource-based view a useful perspective for

strategic management research? Academy of Management Review, 26 (1): 22-40.

Delaney, J. T. and Huselid, M. A. (1996) The impact of human resource management practices

on perceptions of organizational performance, Academy of Management Journal, 39: 949-69.

See lynch, 1992; Winkelman, 1994; for productivity See Black and Lnch, 1996; Dearden

et al 2000).

(Ferris et al, 1999) McEvoy, G.M. (1984), Small business personnel practices, Journal of Small

BusinessManagement, 22(4), 1-8