The Impact of COVID-19 Pandemic on Sustainability, Employee Retention and Innovative Performance in The Malaysian
Manufacturing Industry
Ishaq Ibrahim1, Kalsom Ali1, Walid Abdullah Al-Suraihi2, Al-Hussain Abdullah Al- Suraihi3
1 Faculty of Leadership and Management, USIM, Malaysia
2 Faculty of Management, Limkokwing University Of Creative Technology, Malaysia
3 Faculty of Economics and Muamalat, USIM, Malaysia
* Corresponding Author: [email protected]
Accepted: 15 June 2021 | Published: 1 July 2021
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Abstract: This study aims to suggest a framework to the Malaysian manufacturing industry helping the companies to overcome the pandemic, importantly passing this crisis with minimum effect on the countries and economies. The most three important indicators of the country’s economy were examined in this study predicted by Pandemic-COVID-19. Thus, quantitative method was employed in this research through collecting online survey from 574 employees in the Malaysian manufacturing industry. The data analyzed via SPSS and AMOS for both descriptive analysis and hypothesis testing. The findings of this are, Pandemic COVID-19 negatively influencing the sustainability, employee retention and innovative performance of the Malaysian manufacturing industry. In addition, the research recommended future researcher to explore each of the model’s variables for detailed models to be implemented in the different countries and industries.
Keywords: Covid-19, Sustainability, Employee retention, Innovation performance, Malaysia, Manufacturing
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1. Introduction
The Malaysian economy popular as a developing economy passing through several stages forward higher performance. The transformation of the economy contributes significantly to the country exportation, gross domestic product (GDP) and employment creation at a different level of skill (Azer et al., 2018). Recently in 2019 a percent of 22.1% dross domestic product accounts for the Malaysian manufacturing industry (Department of Statistics, 2019a, b).
Recently, appears the concern of the environmental issues, the other Malaysian manufacturing industry as one of the developing countries more likely toward sustainable manufacturing practices (Lee et al., 2017). Several researchers stated the manufacturing industry needed sustainability as a critical strategy to be implemented (Fatimah et al., 2013; Govindan et al., 2019; Lage and Filho, 2012). According to a study done by the United States Agency for International Development (USAID), the remanufacturing industries in Malaysia is contribute up to RM4 billion a year to its national economy. It is potentially increased up to RM 8 billion a year if remanufacturing practices in Malaysia are being promoted as matured as the United States of America and developed countries.
This research paper will examine the impact of COVID-19 on the sustainability, retention and innovation performance in the country, sustainable manufacturing industry, and higher employee retention and lower turnover rate is a crucial issue in the past few years. Accordingly, under the impact of COVID-19. This research paper expects more critical situation and needed new modelling and feature of the crises. Recently, the industry created employment opportunities for 500,696 people.
Understanding the demand and supply and the reality of the excited sources is effecting the sustainability of the production, importation and exportation in Malaysia (Humsa & Srivastava 2015). Thus, the unsustainable consumption and production negatively effect the manufacturing industry crucially and changes will occur on the employment rates and total performance in the country (Mohamed, & Rasnan, 2021).
2. Research Problem
According to the department of statistics in the third quarter of 2020 the manufacturing is affording the highest rate of vacancies and third higher employment rate in the country, while before the pandemic the manufacturing industry used to have the highest employment rate and highest vacancies. According to the department of statistics Malaysia in the first quarter of 2020 there was an increase in the manufacturing industry sales of 2.6%, and 2,280,951 employees, bank negara Malaysia expect GDP growth from 4.3 in 2019 and -2 in 2020 looking to return back the performance and production in the Malaysian industries and the manufacturing industry is one of the most important industries in the country. According to the ministry of finance the government planned share of the manufacturing industry in the Malaysian GDP is 22.6 while the expected now is 7.0. refereeing to the department of statistics, Malaysia in 2020 the output of the manufacturing industry in 2019 was 8% while became - 38% in 2020. Stated in Oxford economics/Haver Analytics, 2021 Malaysia is not the best country in term of performance amongst (Malaysia, Philippines, Thailand, Singapore and Indonesia). The department of statistics, Malaysia reported an increase in the unemployment rate and increasing inflation in the country 2021. Specifically, there are more than 150,000 persons in Malaysia lost their jobs in the pandemic as reported by the official Malaysian media 2021.
Currently, most of the manufacturing practices in Malaysia and other developing countries are unsustainable as the end of life products are being discarded or landfilled by its end-user without adoption of sustainable manufacturing practice (Ngu, Lee, & Osman, 2020). In the last twenty years, Malaysia has only published 71 Scopus articles on the topic of remanufacturing, the lack of research on this industry is causing increasing in the issue facing this industry (Ngu, Lee, & Osman, 2020). Hence, there is a gap that existed in this area. The current challenges and future expected opportunities should be the researcher concern with the current COVID- 19 crisis to ensure the continuous employment chances afford by the industry and increase the importation and exportation of the country which it reputes the country (Ngu, Lee, & Osman, 2020).
3. Literature Review
The manufacturing industry show a steady growth and has contributed Gross Output Value from RM1.2 Billion (USD 280 Million) in 1959 to RM 1.14 Trillion (USD 270 Billion) in 2015. And in 2018 the Gross Output value increased to 1.27 Trillion (USD 300 Billion) in 2018
(Department of Statistics (DOS) 2017). In addition this industry has created a total of 60,570 jobs in 1959 and increased to 2.1 million jobs in 2015 (Department of Statistics (DOS) 2017).
As of 2017, 2.2 million jobs were created from the manufacturing industry. The increasing of the contribution from manufacturing industry in Malaysia come from projects that are high value and high growth industries. One of the high values and high growth industries in Malaysia is the electrical and electronic industry. The electrical & electronics (E&E) industry is the leading sector in Malaysia’s manufacturing sector, contributing significantly to the country’s manufacturing output (26.94%), exports (48.7%) and employment (32.5%).
In recent decades, “sustainable manufacturing” had been an increasing interest topic due to the growth of public awareness with the end-of-life products and its unsustainable disposal method (Singhal, Tripathy, & Jena, 2019; Kadhim, et al., 2020). Sustainable manufacturing was derived from the concept of sustainable development. It was first introduced in the 1980s to resolve the economic, environmental, and social concerns simultaneously in the human development process (Ibrahim & Ali, 2019). Today, there is no standard definition of sustainable manufacturing among scholars and literature as different researchers defined sustainable manufacturing in a different perspective of view (Raminder, 2017).
Although various researchers had defined the concept of sustainable manufacturing in a different perspective of view, the three fundamental dimensions of sustainable manufacturing (economic, environmental, and social) and its benefits in human development are well accepted by all researchers (Chang & Cheng, 2019; Al-Suraihi, et al., 2020). The design of human and industrial systems to ensure that humankind’s use of natural resources and cycles do not lead to diminished quality of life due either to losses in future economic opportunities or to adverse impacts on social conditions, human health, and the Environment (Melhem, 2016; Alaarj, Mohamed, & Bustamam, 2016).
Employee retention concept started to appear in business in the 1970s. Employee retention means the ability of an employer to retain employees in the company (Melhem, 2019).
Employee retention is a process to encourage employees to remain in the organization for the maximum period of time (Ibrahim, Ali, & Zumrah, 2019). Employee retention is one of the cost saving measures for the company. Retaining existing employees help to save company cost. Employee retention is the important backbone assets for the company. According to the previous mentioned studies the employment rate is important as well because any decrease in the unemployment rate is due to the increase in employee turnover.
Powerful recognitions are needed to retain talent. This theory emphasizes that performance management is contributed by employee retention, which engagement and retention improve and boost the company performance. Retaining talented, skilled, and expert’s employees would be reflected on the total performance, quality, efficiency, effectiveness and productivity of the firm (Alaarj, Mohamed, & Bustamam, 2017). The organization performance is depending on health and productivity of the employee individually (Hee, & Rhung, 2019).
4. Research Methodology
The figure below presents the variables of the conceptual model of this study.
SUSTAINABILITY
INNOVATIVE PERFORMANCE
EMPLOYEE RETENTION COVID_19
PANDEMIC
H1
H2
H3
H1: There is a significant impact of COVID-19 Pandemic on sustainability of the manufacturing industry in Malaysia.
H2: There is a significant impact of COVID-19 Pandemic on employee retention in the manufacturing industry in Malaysia.
H3: There is a significant impact of COVID-19 Pandemic on innovative performance in the manufacturing industry in Malaysia.
5. Results
The first section of the results will focus on the validity and reliability of the research items representing each of the variables.
Table 1: Reliability and Validity
Sustainability Employee Retention
Innovative Performance
COVID-19 Pandemic Cronbach
Apha
0.841 0.872 0.921 0.731
Mean 2.329 2.540 2.582 2.387
Median 1.523 1.583 1.832 1.930
Skewness -.522 .719 .231 -1.426
Kurtosis .384 .132 .317 -.942
KMO .923 .962 .967 .910
The Cronbach Alpha value indicates the reliability of the items which it’s been six items representing sustainability variable scored 0.841 which is above 0.7 according to (Hair., et al., 2016), seven items representing Employee Retention scored 0.872, four items representing Innovation Performance 0.921 and finally five items representing COVID-19 0.731. these results shows that the items of the study are reliable for further analysis. In term of validity the mean and median of all the variables was accepted, both Skewness and Kurtosis recommended to be not more than 7.0 and not less than -7.0 (Kline & B, 2016). Finally, KMO scores for all the variables above 0.9 (Kaiser, 1974) which it’s below the scores of all the variable.
The hypothesis testing done via Structural Equation Modeling (SEM) because the model constructed with three dependent variables and a huge number of online responses, the table
below presents some of the most important and crucial scores identifying the significance and goodness of the model.
Table 2: Model’s Summary
Model R R Square Adjusted R
Square
Sig
1 0.853 0.809 0.742 0.000
This table summarizing the acceptance and goodness of the model indicated in R value of 0.853 followed by less R square value of 0.809 and less Adjusted R square value of 0.742 then a significant model with 0.000 significancy value. Moving to the next hypothesis testing via SEM (AMOS) the results was as below:
COVID-19 PANDEMIC
SUSTAINABILITY
EMPLOYEE RETENTION
INNOVATIVE PERFORMANCE CVD1
IP2 CVD5
CVD3 CVD2
ST2
ER1
ER4
IP4 IP3 ER5 ST1
ST4 ST3
IP1 .70
.67 .79 .69
.78 .73 .81 .67 .87 .89 .84
.82 .88 .90 .79
.759
.832
.742
e6
e8 e7 .74
.81 .84
The examination resultant with high estimation value of the relationships (COVID-19 >
SUSTAINABILITY, COVID- 19 > EMPLOYEE RETENTION, COVID- 19 >
INNOVATIVE PERFORMANCE) respectively as (0.759, 0.832, 0.742). the table below presents the crucial values to identify the significance of the model. Through the confirmatory factor analysis for each variable there were variables which it must be eliminated for the goodness of the model such as (CVD4, ER2, ER3). The result after the deletion is below in the table:
Fit Measurement Criteria
Score Accepted score
RMSEA .072 ≤ 0.08
CMIN/DF 2.842 ≤ 3
CFI .964 ≥ 0.9
TLI .929 ≥ 0.9
PCLOSE .731 > 0.05
The criteria of measurement as stated above are indicating a goodness of the model for all the values (RMSEA, CMIN/DF, CFI, TLI, PCLOSE), and chi square value of 73.856. all of these values conclude that this is a significant model could be observed and explored in several industries and countries.
6. Discussion
After the results of the analysis in the previous section, there is an impact of COVID-19 on each of the sustainability, employee retention and innovative performance of the Malaysian industries. Due to COVID-19 the employees in Malaysia are not able to ensure their presence in the same organization for the current month or year, those talented employees who have been fired created a gap in the organizational performance and creativity and innovativeness chain. The Malaysian industries influenced by the pandemic COVID-19 which effects the innovation performance in the country too, due to several conditions and changes in the working-environment. Thus, the unsustainable employees and unsustainable performance surely result into unsustainable organizations and economy. This study attempts to discuss this issue because it’s necessary to be aware of to be able to continue developing the country. This kind of research might lead the researchers to a point of adapting the latest style of work fitting the current situation.
7. Limitation and Direction for Future Research
This model is not implementable in countries and industries, the researcher faced the issue of not getting detailed instruction to implement the model in the industries. This model needed for experiment and further studies to be developed and structured to fit the organizational structure. For further future research there should be many studies to reexamine the variables of the study in details and reach to the point of how to overcome this crisis and pandemic in Malaysia by these variables.
8. Conclusion
This study concludes that there is a huge impact of Pandemic COVID-19 on the Malaysian economy generally and sustainability, employee retention and innovative performance specifically. As the sustainable organizations are the base and strengthen forward a sustainable economy, the employment rates in the country are important too in the different industries.
More further losing skilled, talented and experts’ employees will impede the innovativeness of the firms. This model should be concerned and explored in the future for further guidelines to the betterment of the Malaysian industries.
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