Analysis of the Hotel Industry in Malaysia
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Basically, this chapter is an introduction of the research topic. In the Section 1.2, it briefly introduces the background of this study. Introduction of hotel industry in Malaysia is included in Section 1.3. Next, problem statements are explained in Section 1.4 while the research objectives are laid out in Section 1.5. Besides, Section 1.6 and Section 1.7 have included the scope of study and the significance of this study respectively. Lastly, Section 1.8 is about the explanation of the organization of this study with a flow chart attached depicting the tasks to be carried out.
1.2 Background of Study
In today's increasingly competitive and complex business environment, being sustainable in the business arena is no longer the mission of any of the organization, but to grow. Competitive advantage gives organization to shield and isolate itself temporary from the intensive competitive environment. This advantage could be taken away when competitors improved their products or services that potentially make more appealing to customers. Therefore, organization requires a never-ending process of continuous improvement. The word kaizen has been used by Japanese for describing this ongoing process of unending improvement by setting and achieving of ever-higher goals that involves both managers and workers (Imai, 1996; Heizer & Render, 2006).
Over the years, organizations from every industry keep coming out new products, either with a different exterior or equipped with better and more advanced features. For example, today's mobile phones have almost the same function as a computer except with a smaller screen and size, auto industry comes out cars that strongly emphasize on performance, safety, comfortably, elegance and so forth. Same thing goes to services, organizations come out with services that are tailored to every customers. As a result, this provides what the customers are really wanted and undoubtedly, customer' satisfaction increased. For instance, Tune Hotels has made all services as optional, from breakfast, air-conditioned room to water-heated bathroom (TuneHotels.com, 2009). All of these are normally being provided as a package in any other hotels. As a consequence, customers have the right to select which services they want and they are being charged according to what services they have selected. To sum it up, organizations in 21st century are being very innovative in serving their customers. Instead of merely come out with novel products and services, organizations have to look into the quality issue of the products or services produced. Customers will never be satisfied if the products or services they received have no quality, regardless of how novel and unique it is.
Here we need to look into quality issue. According to Blankenship and Petersen (1999), W. Edwards Deming is known most widely for his work in quality management. Deming's 14 points help Japan in achieving very high levels of quality in products and turn out to be a great shock for the westerners because Japanese goods were perceived at low quality and cheapness before this. He used statistics to examine production processes for flaws and greatly influenced Japanese industry as it rebuilt in the years after World War II. Today, TQM is a popular topic for quality management. TQM is called total because it entire the whole organization, from the supplier to customer (Sharmma, 2008). In other words, TQM talks about the satisfaction of customer, supplier, and employee. Furthermore, quality assurance systems such as statistical process control, quality control and better conformance quality are lined to better business performance (Dick, 2000).
Other than that, people in today's world are relatively concern with the quality of the products and services they purchase. With the advancement of Information Technology (IT), gathering information regarding quality for various products has no longer a time-consuming task. All of this information can be gathered with only a few clicks. For that reason, quality has become one of the considerations at customers' pre-purchase stage. Since the quality has become more and more important nowadays, a non-govermental organization (NGO) named International Organization of Standardization (ISO) has published the ISO 9000 series of quality standards at year 1987 (Dick, 2000). The ISO 9000 series of international quality system standards provides a framework for a basic quality assurance system and a good starting point for achieving total quality (Evan & Lindsay, 1999). Generally speaking, businesses can base the development of their products and services on reference documents which have broad market relevance. This, in turn, means that they are increasingly free to compete on many markets around the world. As on the customer' side, the worldwide compatibility of technology which is achieved when products and services are based on International Standards brings them an increasingly wide choice of offers (ISO, 2009).
By implementing TQM, both the organizations and customers can enjoy ever greater benefits. From the aspect of organizations, in reality, both the tangible and intangible ones are offered by TQM, such as cost savings for the employer and greater job satisfaction for the employee (Gunasekaram, Goyal, Martikainen, & Yli-Olli, 1998). According to Shemwell, Tavas, & Bilgin (2008), the key to sustainable competitive advantage lies in delivering high quality service that will in turn result in satisfied customers. In addition, Dick (2000) has proven that better quality does have a consistent positive relationship with improved business performance.
Figure 1.1: Two Ways Quality Improves Profitability
(Adapted From: Heizer and Render, Operations Management, 2006.)
Also, Heizer and Render (2006) says profits can be increased by improved quality as the figure depicted above. Firstly, improved quality generally leads to both sales gains and reduced cost. This is because improved response, higher prices and improved reputation are all make sales gain happened. Moreover, reduction of cost happens when productivity increases, rework and scrap costs decreases and warranty costs decreases. Therefore, profits will be increased when expenditures (costs) have been lowered and revenue (sales) has been increased.
1.3 Hotel Industry in Malaysia
As a sub-sector to services sector, tourism has an increase in foreign exchange earnings from RM17.3 billion in year 2000 to RM46.1 billion in 2007 (Bank Negara Malaysia [BNM], 2008). It shows that tourism had a growth in its revenue for 166% in a period of only 7 years. This is largely due to the effects of campaigns “Visit Malaysia Year” (Poon & Low, 2005) and “Cuti-cuti Malaysia”. Up-to-date, tourism has recorded total receipts of RM49,561.2 million for the year 2008, an increment of RM3,491.2 million from year 2007 (Tourism Malaysia Corporate, 2009). Spillover effects have been generated by the increase in tourism activities into other sectors of the economy. In other words, the steadily growth of tourism industry has contributed to the growth of all related industries and businesses. These included hotel industry, retail businesses, restaurants and transportation (Bank Negara Malaysia [BNM], 2008).
Hotel industry plays a very important role in complementing tourism as it provides accommodation to travelers and tourists. Nevertheless, hotel industry has been a major player in the growth of the Malaysian economy, which contributing approximately 50 percent of the nation's real GDP (Awang, Ishak, Radzi, & Taha, 2008). As today, there are approximately 105 hotels with different ratings and sizes in Kuala Lumpur alone (Malaysian Association of Hotels [MAH], 2009). This has shown that Kuala Lumpur has an incredibly high density of hotels. Here the problem arises, how is the hotel industry in Kuala Lumpur cope with the never ending increase of tourists and travelers? In this context, it seems not possible to provide more rooms by simply adding the number of hotels in Kuala Lumpur. This is because the land area of Kuala Lumpur has only 244km², meaning that there will be 1 hotel in every 2.3km². In this sense, hoteliers have to find other ways to increase their productivities.
In recent years, governments from all over the world have been putting more and more emphasis in developing services industry in their countries. They are all now aware of the unique characteristic of services and its importance in supporting a country's economic growth. Business services showed the strongest growth in terms of value added and economic productivity (Wirtz & Ehret, 2009). Theoretically, any organization in developing countries must endeavor continuously to improve productivity in order to increase profitability (Oluleye & Olajire, 2001). As a consequence to the Malaysia economy, a higher amount of GDP will be recorded, more and more employment will be provided and so on. Hence, these have made hotel industry as a key sub-sector to services industry and these social responsibilities should not be overlooked by hoteliers in Malaysia.
1.4 Problem Statements
In general, Malaysian will have perception saying that things made by western countries and Japan have higher quality, things from China have no quality and so forth. This is partially true in reality, majority of the Malaysians opt to buy import goods where there is an option for them. Therefore, local made products are usually having less supports from Malaysian as it has been perceived to be low quality in terms of unreliable and unattractive (Damodaran, 2009). This shows that local made products have lesser competency even in local market. Consequently, government encourages both the manufacturer and services provider to look seriously in quality issue by giving several incentives (Malaysian Rubber Export Promotion Council [MREPC], 2009). However, the outcomes of it are not up to the expectation. This may due to the inadequate research carry out in Malaysia. Thus, organizations especially the small size ones will definitely lack of information when trying to implement quality management system.
Kuala Lumpur is one of the major cities in Malaysia with an estimated of 1.6 million of population at the year 2005 (KL City Plan 2020, 2009) and it is to be said as the fastest growing region in Malaysia. This figure says that Kuala Lumpur is the most densely populated district in Malaysia. Moreover, Kuala Lumpur has a vast number of tourists and it increases over years. Just to name a few, its major tourist destinations include Dataran Merdeka (the Independence Square), House of Parliament, the Istana Budaya, the Istana Negara (National Palace), the Kuala Lumpur Tower, the Muzium Negara (National Museum), Petaling Street and etc (Tourism Malaysia, 2009). With the limited land that Kuala Lumpur has, it is almost impossible to build more hotels in order to cater the increasing number of tourist in the near future. Therefore, several actions have to be taken in order to best serve the tourists with the limited number of hotels in Kuala Lumpur. This is to ensure that the receipts from tourism will not be negatively affected while the hotel industry can continuously contribute significantly to GDP.
As time goes by, Human Resource Management (HRM) has become a popular topic than ever before. Organizations have understood the importance of employees (human resources). At the same time, empirical research studies have been done by researchers to further understand and prove those theories related to motivate and compensate employees. Dessler (2005) says that employee' satisfaction and performance are positively related. Therefore, hoteliers must understand the importance to maximize their employee' satisfaction as this could lead to greater business performance. However, by solely compensating employees with both monetary and non-monetary rewards has its limitation. Performance will stop increasing when the problem arises are not come from employees but the management. For instance, it could be lacking a well-planned system in executing tasks, ineffective communications in organization and so forth. In other countries, TQM has been so popular for a period of time as it helps organizations to achieve even higher of performance. In other countries, plenty of research studies have been carried out to investigate which TQM factors are the most influential to the particular country. Unlike in Malaysia, the number of TQM study that can be applied is limited and lacking of guidelines for hoteliers is still a major problem.
Someone could say that hoteliers can simply use the findings from other countries as a guideline for implementing the TQM. But, there is always a high possibility that those mentioned as important factors are not important in Malaysia, when compared to the original country that the research is carried out. In other words, it is imperative to understand the applicability of the findings from other countries. The applicability of some of the findings from research still remains questionable. For example, information and analysis, one of the TQM factors is said to be extremely important to developed and developing countries but it is not persuasive enough to apply on third world countries. This is because they probably lack of necessary infrastructure. Therefore, it can be said that Malaysia's hoteliers are actually lack of a blueprint when initially applying TQM to their respective hotels. In other words, hoteliers may not known which factors of TQM can generally lead to better performance in the Malaysia. Furthermore, with the limited of number of such research available to Malaysia, it has nothing to show hoteliers how strong the impact of TQM factors is to labor productivity, thus lack of motivation to change their routine and ways of doing business. When this occurs, Malaysia hotel industry can never be improved, previously owned competitiveness can be competed away and GDP can be affected.
1.5 Research Objectives
The general objective of this study is to identify the impact of each of the selected TQM factors towards the labor productivity. Next, it is then to be expressed in term of its level of correlation between each of the independent variables and the dependent one. Therefore, this result could be used by the Malaysia hoteliers in increasing their labor productivity as these findings will show which of the independent variables plays a more important role in achieving higher labor productivity in the Malaysia context. The following objectives are specifically derived from the problem statements:
- To identify the relationship between the chosen independent variables and dependent variable;
- To investigate the level of impact for each of the chosen TQM factors towards labor productivity;
- To determine whether high TQM commitment hotels will generally generate higher labor productivity than the low TQM commitment hotels; and
- To provide insights and recommendations for improvement to Malaysia's hoteliers at the end of the research.
1.6 Scope of Study
The scope of this study covers a discussion on TQM as well as the importance of productivity. As the scope of both TQM and productivity are broad, this study will primarily focus on the aspect of TQM factors and labor productivity.
Besides, this study investigates the relationship between selected TQM factors and labor productivity. Theoretically, those selected TQM factors is to be said to have influences on the labor productivity. Therefore, this research is also carried out with the intention to identify the degree of impact of the selected TQM factors towards labor productivity, either a stronger or a weaker one.
Moreover, this research is intended to provide useful and relevant findings for hoteliers in Malaysia, in order to achieve the ever higher labor productivity in Malaysia hotel industry. Therefore, it is targeted to hoteliers in Malaysia primarily located in Kuala Lumpur. Lastly, a questionnaire has been included in this study and carried out on hoteliers of Kuala Lumpur in order to measure the impact of TQM factors towards labor productivity.
1.7 Significance of Study
The importance of this study is to explore the relationship between the selected TQM factors and labor productivity in the context of Malaysia hotel industry. Similar research studies have been done to prove the relationship between the TQM factors and productivity. However, most of it were not focusing on the hotel industry. Some of them might have focused in hotel industry, but the issue of applicability remains noticeable. For that reason, this study is focusing in the Malaysia hotel industry as an applicable guideline and reference for the Malaysia hoteliers.
Besides that, this study will be able to contribute relevant information to the Tourism Malaysia Promotion Board (Malaysian Ministry of Culture, Arts and Tourism). In Section 1.3, it shows the importance of tourism is to the nation GDP. Furthermore, hotel industry is relatively important to the country as an accommodation means for tourists to visit Malaysia. In addition, through this study, government is now able to identify unsuitable approaches and strategies. Therefore, essential action such as coming out new incentives scheme can be taken to effectively replace the old ones. Thus, national resources can be distributed and used even more effective and efficient than ever.
As to hoteliers, this study helps to lighten their worries when first implementing the TQM as they are now getting more supporting evidence from this study. According to Yesawich (1997), building customer loyalty is one of the biggest challenges for the hotel industry. Successfully implemented TQM contributes to customer satisfaction. From customer satisfaction, loyalty and profits are positively related. In other word, TQM can potentially overcome one of the biggest challenges in hotel industry. At the same time, organizations can enjoy the benefits from TQM such as creating competitive advantage, providing unique services and so forth.
1.8 Organization of Study
The organization of this research study comprises of 5 chapters. This research study begins with Chapter 1 that covers the introduction for the chosen topic. It consists of the background of study and hotel industry in Malaysia. Next, problem statements, research objectives, scope of study and the significance of study are laid out in different section. Lastly, organization of study that shows the overall flow of this study ends the Chapter 1.
Chapter 2 provides the literature review for the chosen topic. It includes all the related empirical studies that have been done by the previous researchers. Several of viewpoint, definition and argument have been included in this chapter as well. For instance, different point of views from different researchers for the same variable can be found here.
Chapter 3 outlines the overall methodology being used in this research study. It shows the research framework together with the explanation and hypothesis of the framework. Besides, data collection method, sources of data, sampling method and sampling size will be discussed in separated section. Furthermore, there is the outline of the questionnaire development and scaling techniques before discussion of data analysis and measurement close the chapter.
Chapter 4 discusses the findings and the results of this research study. Therefore, all related chart, graph, data will be included in this chapter. This chapter basically ends with the interpretation and discussion regarding all of the findings.
Finally, conclusions and recommendations will be formed and given to readers.
It concludes which TQM factors have a stronger effect and vice versa. Besides that, limitations of this study will also be included.
The following figure shows the overall outline of this study.
Figure 1.2: Flow Chart of Study
This chapter develops and provides the foundation for this research study. Previous works done by other researchers that relate to labor productivity, total quality management, customer focus, human resource management, information analysis, leadership and strategic management are all presented in this chapter. Besides, in order to gain a better understanding of this research, viewpoints from different researchers are then compare and contrast in this chapter.
2.2 Labor Productivity
In the 21st century, productivity growth plays an important role in GDP growth of any nation. According Chapman, Murray & Mellor (1997), the use of sales per employee has been widely used to measure labor productivity for individual companies. Besides, Sauian (2002) says that in knowledge-based economy, competitive advantage can be maintained through “high productivity” and efficiency. In the other way round, labor productivity is an important element used to gauge competitiveness in producing goods and services (Sauian, 2002). Moreover, Hoffman & Mehra (1998) argues that high productivity effects are impossible to sustain without a quality-based process-oriented environment which emanates from the support of employees, upper management, and the organization.
Malaysia registered a productivity growth of 2.9 percent from RM 48,113 in year 2007 to RM 49,526 in year 2008. Furthermore, productivity contributed 62.2 percent while employment contributed 37.8 percent to the GDP growth of 5.98 percent. This growth surpassed several major countries of the Organization for Economic Co-operation and Development (OECD). As shown in Figure 2.1, the Rep. of Korea recorded a productivity growth as much as 3.6 percent, the USA (2.1 percent), the Japan (0.8 percent), the Australia (0.4), the Germany (0.1 percent) and the rest had zero or negative growth (Malaysia Productivity Corporation [MPC], 2009).
Figure 2.1: Productivity Growth of Malaysia and Selected OECD Countries, 2008
(Adapted From: MPC, Annual Productivity Report 2008)
Thomas (1994) defined the simplest form of labor productivity (LP) as the hours of work divided by the units of work accomplished. In general, LP is a measure of output from a production as per unit of input. Therefore, it can be expressed as:
From the above formula, LP consists of the total output and total input. It can be in terms of a particular production, a department, an organization or even a nation. In general, if we want to increase productivity, it is necessary to increase the system's output, if the input is to remain constant. Similarly, if the system's output is to maintain the status quo, then we need to utilize less input. From a different aspect, if both output and input are increased, then it is mathematically obvious that the rate of increase of output should be higher than the rate of increase of input, if productivity needs to be improved (Sauian, 2002). Therefore, in order to achieve higher LP, input and output should be manipulated in various ways.
Schonewille (2001) said the effectiveness of training is lower compared to initial education when comes to contributing to labor productivity. Even thought training has smaller effects on labor productivity, still the estimated coefficient is positive (Schonewille, 2001). A number of researchers have proven the positive impact of quality on productivity, whereas both can influence positively profitability (Bylund & Lapidoth, 1994). This relationship has been generally accepted within the manufacturing industry (Chase & Aquilano, 1995). However in reality, LP is a much more complex phenomenon which largely depends on quite diverse factors such as workers' competence, motivation, supervision and so forth. Also, management does affect LP (Enshassi, Mohamed, Mayer, & Abed, 2007).
Chapman and Al-Khawaldeh (2002) has investigated the relationship between TQM implementation and labor productivity in industrial companies in Jordan, as shown in Figure 2.2. The results of data analysis indicate that there is a positive relationship between TQM (and each TQM element) and labor productivity. Interestingly, it is found that companies with ISO 9000 certification has high positive slope whereas companies without ISO 9000 certification has low positive slope.
2.3 Total Quality Management (TQM)
TQM emerged in the mid-1980s in response to Japan's invasion of US markets with their high quality-low price automobiles and electronic products. Quality has been defined differently as conformance to requirement (Crosby, 1979), fitness for use (Juran, 1979), continual improvement (Deming, 1982) and as define by customers (Ford, 1990). Whereby, Spitzer (1993) called TQM “the only source of sustainable competitive advantage”. Also, TQM is continually satisfying agreed customer requirements at lowest cost through harnessing everyone's commitment (Burton & Franckeiss, 1994). In theory, TQM seems to assure performance improvement for any organization. But, in practice, TQM works for some organization and not for others (Terzioski, 2006). According to Chapman and Al-Khawaldeh (2002), TQM is a key strategy for maintaining competitive advantage and is a way of managing organizations to improve its overall effectiveness and performance towards achieving world-class status.
During the last two decades or so, simple inspection activities have been replaced or supplemented by quality control, quality assurance has been developed and refined, and now most companies are working towards TQM (Dale & Bunney, 1999). Dale (1999) indentifies four discrete stages: inspection, quality control, quality assurance and TQM, as shown in Figure 2.2.
Figure 2.3: The four levels in the evolution of Total Quality Management
(Sources: Adapted from Dale & Bunney, Total Quality Management Blueprint, 1999)
- Inspection is defined as “activities such as measuring, examining, testing or gauging one or more characteristic of an entity and comparing the results with specified requirement in order to establish whether conformity is achieved for each characteristic” (BS EN ISO 8402, 1995).
- Quality control is defined as “operational techniques and activities that are used to fulfill requirements for quality” (BS EN ISO 8402, 1995).
- Quality assurance is defined as “all the planned and systematic activities implemented within the quality system and demonstrated as needed to provide adequate confidence that an entity will fulfill requirements for quality” (BS EN ISO 8402, 1995).
- TQM is the highest level which involves the application of quality management principles to all aspects of the business, including customers and suppliers. It is then defined as the management approach of an organization, centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction, and benefits to all members of the organization and to society (BS EN ISO 8402, 1995).
A number of research studies have been carried out to investigate the impact of TQM factors and implementation (Sila & Ebrahimpour, 2005; Khan, 2003; Terzioski, 2006). Miller (1993) reported that success with TQM depends on the facilitating conditions. Leadership, human resource management and some other TQM factors are found to have positive impact on business results (Sila & Ebrahimpour, 2005). Therefore, these findings can be reasonably useful in assisting managers so that they can allocate resources to improve their typical routines to obtain the best results.
Next, five TQM factors have been selected as the independent variables for this study, namely (1) Customer Focus, (2) Human Resource Management (HRM), (3) Information and Analysis, (4) Leadership and (5) Strategic Planning. It is said that customer focus pays more attention on the customers whereas the rest of TQM factors have focused on the internal aspect of the organization. As for HRM, it focuses on the practices involved in carrying out the “people” of a management position. Information and analysis is said to be the information and communication technology used to further enhance labor productivity as automation has been widely used. Leadership is important as it creates synergy for achieving favorable business results whereas strategic planning is a set of process undertaken in order to develop a range of strategies that will contribute to achieve organization direction. Further elaboration and review for each variable will be discussed in different sub-section later.
2.3.1 Customer Focus
According to Dean and Bowen (1994), customer focus is as important as many other TQM practices to organizational performance. Being customer-focused keeps us aware of quality, or rather it focuses our quality initiatives on what really matters to the customers (Cox, 1997). Also, Piercy (1995) says that TQM has too much focused on the internal aspect of the organization and much less attention on the customers. Customer satisfaction begins by discovering precisely what customers want and gearing every practice to their exact expectations (Kearney, 1994). Customer focus has changed mass production to mass customization. In addition, being far from depersonalizing the world, technology has the power to return us to being treated as individuals while getting all the benefits inherent in large-scale enterprise (Cox, 1997). Sousa (2003) pointed out the importance of customer focus lies in the fact that it is the starting point of any quality initiative. However, it has not received enough attention from quality management researchers (Cai, 2009).
In the final decade of twentieth century, the term, customer-centered competition has been introduced. Customer-centered company is a company that focuses on customer developments in designing its marketing strategies and on delivering superior value to its target customers (Kotler & Armstrong, 2008). It is common to hear the statement “customer is always right” in any organization. This could be the trend that organization is to focus on customer needs - to be customer-led, to be market-oriented, to care for customers and so forth (Piercy, 1995). These are to make total customer satisfaction a strategic foundation for achieving competitive advantage (Kearney, 1994). Customer focus has been therefore defined as the degree to which firms continuously satisfy customer needs and expectations (Philips, Chang, & Buzzell, 1983).
The difference between customer focus and customer understanding is, according to Lagrosen (2001), mainly a matter of perspective. Customer focus means the activities of the companies are intended to benefit the customer but the customer is seen from the companies' own perspective. Therefore, effects are usually being made to gain information about the customers' needs and wants, although always in a set framework that originates in the companies' view of the product and its features. Whereby, customer understanding needs perspective to be shifted. It means the company needs to gain entry to the customers' own perspective and adopt the customers' framework of viewing the product (Lagrosen, 2001).
Cai (2009) found that organizational customer focus affects customer relationship practices, which subsequently influence production performance and customer satisfaction, and production performance and customer satisfaction lead to financial outcomes. Ooi, Bakar, Arumugam, Vellepan, and Loke (2007) says TQM practices such as teamwork, reward and recognition, customer focus and organizational trust are positively associated with job satisfaction within their organization. For instance, customer focus was found to have a direct influence on employees' job satisfaction. Also, focusing on delivering customer value in implementing TQM, encourage managers to make the best use of their people and resources in order to create products that customers value (Chapman & Al-Khawaldeh, 2002).
2.3.2 Human Resource Management
Human Resource Management (HRM) is an important element in management process, namely staffing (Dessler, 2008) and plays important role in developing the resource capability of an organization in order to meet its objectives and for future development (Armstrong, 2001). Also, HRM has been defined as the policies and practices involved in carrying out the “people” or human resource aspects of a management position, including recruiting, screening, training, rewarding and appraising (Dessler, 2008). In general, productivity maximization and employees effectiveness optimization are the goals of HRM. At the same time, HRM continually improves employees work life and treats them as valuable resources.
Langbert (2002) says that HRM's balancing of competing values over time and can be viewed as a process of continuous improvement. Moreover, continuous improvement depends on managements' and employees' better meeting customers' expectations and systematically reducing variability in doing so (Deming, 1986; Taguchi, 1986). According to Mannion (2009), by hiring more graduates, companies are likely to see dramatic improvements in key business metrics such as labor productivity, sales growth and return on capital.
In 21st century, HRM system is the most valuable asset for any institution and an enterprise's productivity is closely correlated with the employee-related managerial system (Chen, Liaw & Lee, 2002). Other than this, a number of studies have shown that the implementations of appropriate management systems and strategies do contribute to productivity improvements (Becker & Gerhart, 1996; Truss & Gratton, 1994). According to Koch & McGrath (1996), there is positive impact on progressive HRM practices on labor productivity, especially in capital intensive organization. In the study conducted by Chen et al. (2002), they came out with four critical factors in HRM, which are HR acquisition, HR development, HR compensation and HR maintenance. It is then found out that HR acquisition and HR development do have relatively higher correlation with the productivity then the other two factors. This finding is vital for firms to monitor the major factors of HRM and hence, adjust their efforts appropriately to get the best improvement in productivity. Furthermore, the finding of the use of fuzzy C-means analysis further supports the claim that the implementations of a sound HRM system are helpful to improve a firm's productivity (Chen et al., 2002).
Other than contributing to productivity, Delany & Huselid (1996) reported the positive impact of HRM practices on organizational performance. Furthermore, the performance can be in terms of employee skills and ability, motivation and work organization (Delany & Huselid, 1996). In recent years, Campos e. Chunha and Cunha (2004) successfully confirms that complementarities across HRM practices positively impact organizational performance. But the main limitation is this study is not a comparative study. This is due to the responses were collect from 28 different countries in different continents. Consequently, it is more likely that cultural and institutional differences decrease the significance the obtained results (Campos e. Chunha & Cunha, 2004).
In general, there has commonly been a tendency for the services sector to be overlooked in HRM research (Lucas, 1996; Hoque, 1999). But, a study with the purpose of investigating whether some HRM systems affect organizational performance in hotel industry in India has been carried out by Chand and Katou (2007). Organizational performance was measured with sales growth, productivity, profitability, goal achievement and good service quality in the form of perceived opinions of the respondents. Findings of the study indicate that hotel performance is positively related to the HRM systems of recruitment and selection, manpower planning, job design, training and development, quality circle and pay systems. As a result, it implies that hotels are to achieve higher performance levels, the management should focus on “best” HRM practices indicated in the study (Chand & Katou, 2007).
In fact, the changing environment of HRM should not be overlooked. These changes include globalization, changes in the nature of work and technology (Dessler, 2008). Kim and Briscoe (1997) shows globalization has caused the transformation of HRM of Samsung, an Electrical and Electronic (E&E) manufacturer in Korea to prevent of business loss. In order to be more effective in competing in global marketplace, Samsung came out with the new HR policy with the goals of creating maximum value for the employees and the organization. New definition and measurement have been implemented in job hierarchy and promotion, compensation, training and performance appraisals (Kim & Briscoe, 1997).
2.3.3 Information and Analysis
Increasing competition leads organizations to search for more effective business strategies and these have turned to information and communication technologies (ICT) as a way to cope with turbulent environments (Sigala, 2003). Firms can gain information at a cheaper and readier access to more accurate, useful and timely information as the development of ICT goes on (Gretton & Gali, 2003). Also, Gretton and Gali (2003) said that rapid and advances in technology have improved the capabilities of ICT to provide additional storage capacity, processing power, functions, applications and user-friendly operability. According to Siguaw, Enz and Namasivayam (2000), ICT investments in tourism and hospitality have been increased tremendously.
There is difference how ICT contribute to labor productivity than the other factors. Unlike intensifying employees' competencies to increase productivity, increased ICT use leads to capital deepening effect which in general, labor (input) is being substituted by ICT (Gretton & Gali, 2003). Information gains from the use of ICTs can lead to improved labor productivity in two ways (Gretton & Gali, 2003):
- Through input substitution, which leads to capital deepening.
- By enabling product, process and organizational innovations, which are sources of multifactor productivity growth.
IT use is strongly correlated with productivity but mainly by allowing multitasking rather than by speeding up work (Aral, Brynjolfsson, & Alstyne, 2006). In other words, higher level of productivity as a consequence of using IT results from employees' higher capacities to multitask. In addition, IT and productivity demonstrate a strong positive relationship across distinct measures at the country (Dewan & Kraemer, 2000), industry (Jorgenson & Stiroh, 2000) and firm levels. Ironically, these studies have only been focused on manufacturing industries. Also, Bulkley and Van Alstyne (2004) provide evidence that investments in information technology positively influence productivity has renewed longstanding debate among economists over the sources of productivity growth.
Production frontier could be changed if the process knowledge of how to effectively use IT changes ability to multitask. The figures below show how the use of IT increases efficiency. Figure 2.3a shows the movement of the frontier (e.g. better decisions). This means achieving the same output with fewer inputs (reducing waste). As for Figure 2.3b, it shows the shift of the frontier. (e.g. new processes). It means achieving greater output with the same inputs (new technology). Therefore, any point below or to the right of the frontier is attainable by being less efficient with the same inputs (Bulkley & Alstyne, 2004).
Figure 2.4a Figure 2.4b
(Source: Adapted from Bulkley & Alstyne, Why Information Should Influence Productivity, 2004)
In order for ICT to contribute to productivity, according to Sigala (2003), it is important to ensure the quality of the data used and analyzed. In addition, ICT integration greatly increases operational efficiencies, as it eliminates manual re-entry of data, facilitates easy retrieval, sharing and search of consolidated databases. These are all vital for informationalizing products/ services and streamlining, reengineering processes (Sigala, Lockwood, & Jones, 2001). Moreover, Aral et al. (2006) examined the relationship between IT and revenues and the result shows a positive relationship.
But, some researchers reported no relationship between ICT and productivity (Byrd and Marshall, 1997; Strassmann, 1990). Or, the findings of the relation between these are plagued with ambiguities and inconsistencies.
According to Clawson (1999), the Industrial Revolution shifted America's economy from agriculture base to an industrial one and thereby, ushered in a change in how leaders would treat their followers. Therefore, a paradigm shift of new leadership theory has been created during the Industrial Revolution. As shown below, leadership has been defined differently by different researchers.
- Leadership is the ability to get men to do what they don't like to do and like it (Harry Struman).
- The process of persuasion or example by which an individual (or a leadership team) induces a group to pursue objectives held by the leader or shared by the leader and his or her followers (John Gardner).
- Leadership involves influencing task objectives and strategies, influencing commitment and compliance in task behavior to achieve these objectives, influencing group maintenance and identification and influencing the culture of an organization (Gary Yuke).
Leadership is one of the most essential elements in making a business success. Organizational viability depends in part of effective leadership. Effective leaders engage in both professional leadership behaviors and personal leadership behavior (Mastrangelo, Eddy & Lorenzet, 2004). The Ohio State leadership studies explored initiating structure and consideration (Fleishman, 1953). Besides, Michigan leadership studies explored employee-centered behaviors and production-centered behaviors (Schermerhorn & Osbom, 2008). Also, Blake and Mouton (1964) developed leadership grid that built on a 9x9 grid reflecting levels of concern for people and concern for task.
To sum it up, task-oriented leaders are those with strong concerns about group's goals and the means to achieve them (Blake & Mouton, 1964) whereby, people-oriented leaders are usually referred to those who have strong concerns about their group members' relations with them and each other and express these concerns by creating a friendly and supportive atmosphere (Beatty, 1988). Naturally, there is argument over which orientation is better than another (Dunteman & Bass, 1963; Bryman, Bresnen, Beardsworth, & Keil, 1987).
Mastrangelo, Eddy & Lorenzet (2004) suggested that professional leadership works through the personal leadership to impact willing cooperation. A lack of willing cooperation implies that other means of facilitating “cooperation” (e.g. coercion) will have to be implemented to move the organization forward. According to Yukl (1998), the use of such forceful methods to achieve cooperation is less successful in the long term than methods that achieve willing cooperation. In other word, the chances of any organization for being succeeded in the long term will have reduced due to the absence of willing cooperation. Besides, study conducted by Mannion (2009) gives clear lessons on the value of investment in leadership and management development as one of the most cost effective ways to encourage higher levels of business performance. Analysis indicated that dramatic improvements in productivity are readily and universally available to all business enterprise simply through the adoption of globally existing best practices (Mannion, 2009).
Furthermore, Sila & Ebrahimpour (2005) shows that leadership plays a significant role in shaping the quality focus of companies. Leadership has been identified as one of the factors that acts as the foundation in creating synergy for managers to achieve favorable business results (Sila & Ebrahimpour, 2005).
2.3.5 Strategic Planning
Strategic planning is the set of processes undertaken in order to develop a range of strategies that will contribute to achieve the organizational direction (Tapinos, Dyson & Meadows, 2005). A very inclusive definition is “strategic planning attempts to systematize the processes that enable an organization to attain its goals and objectives. There are five general steps in the strategic planning process: goal/ objective setting, situation analysis, alternative consideration, implementation and evaluation” (Crittenden & Crittenden, 2000). Grant (2003) provides an extensive review of strategic planning's history from “long range planning” until the current debates between “strategic management” and “strategic thinking”. Whereby, the strategic management process has been defined as the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
Actions such as analyzing a firm's external and internal environments to determine its resources, capabilities and core competencies are imperative in strategic management process as these are the sources of “strategic inputs” (Ireland, Hokisson & Hitt, 2009). As to Hopkins and Hopkins (1997), strategic process consists of three major components:
- Formulation (which includes developing a mission, setting major objectives, assessing the external and internal environment and evaluating and selecting strategy alternatives)
According to Pitt (1999), policy and strategy is one of the enablers that brings positive business results in the European Business Excellence Model (EBEM). These business results can be in terms of customer satisfaction, people satisfaction or even the impact on society. The strategic planning and performance are found to have positive relationship (Hopkins & Hopkins, 1997). Sarason and Tegarden (2003) show the use of strategic planning is beneficial for organizations. Strategic planning continues to play a central role in the management systems of large companies and its practices have changed substantially over the past two decades in response to the challenges of strategy formulation in turbulent and unpredictable environments (Grant, 2003).
In addition, strategic planning processes have become more decentralized, less staff driven and more informal, while strategic plans themselves have become shorter term, more goal focused and less specific with regard to actions and resource allocations (Grant, 2003). Bower (1970) posits that middle managers are best able to decide whether strategic issues are being considered in the proper context. According to a study conducted by Moutinho and Philips (2002), it says in order to improve competitiveness, banks should develop formal planning implementation and control systems and should employ a tactical rather than a strategic philosophy.
However, Mintzberg (1994) claims that formalized strategic procedures have limited the ability of managers to think strategically. It has no relationship between formal planning process and subjective company performance was observed (Falshaw, Glaister & Tatoglu, 2005). Also, the degree of rigidity embedded in planning implementation and control hampers overall business performance and strategic planning effectiveness (Moutinho & Philips, 2002). Furthermore, impact of strategic planning processes may be limited due to the quality of strategic decisions (Grant, 2003).
This chapter is basically illustrates the method of research in this present study. In general, this chapter covers nine sections. First of all, research framework and design for this present study will be formed in Section 3.2. Next, Section 3.3 explains the framework and hypothesis development whereby Section 3.4 shows the description of variables from previous studies. Data collection methods will be presented in Section 3.5. Section 3.6 shows the sources of data which includes both the primary and secondary data. Moreover, sampling method and sampling size will be discussed in Section 3.7 and Section 3.8 respectively. The following section, Section 3.9 shows the questionnaire development while Section 3.10 discusses the scaling techniques. After all, the last section for this chapter, Section 3.11 presents the analysis of data.
3.2 Research Framework
The theoretical framework logically describes the interrelationships among the variables that are deemed to be integral to the dynamics of the situation that are relevant to the problem defined. That is, the theoretical framework elaborates the relationships among the variables, explains the theory underlying this relation and describes the nature and directions of the relationships (Sekaran, 2003).
In this study, the dependent variable is the labor productivity, which is the variable of primary interest, in which the variance is attempted to be explained by the five independent variables. These independent variables are (1) Customer Focus, (2) Human Resource Management, (3) Information and Analysis, (4) Leadership, and (5) Strategic Planning. These five independent variables considered would significantly explain the variance in the labor productivity. Thus, these address the issues of how the researcher expects the certain relationships to be existed and the nature and direction of relationships among the selected variables. Therefore, these relationships are diagrammed in Figure 3.1.
Figure 3.1 Research Framework
Apparently, the main objective of this research, as shown above, is to identify the relationship between the dependent variable and independent variables. As mentioned in the literature review, there are various TQM factors that can generally lead to better productivity. However, the researcher has decided to narrow down the factors to five factors that are perceived as important ones to Malaysia hotel industry.
3.3 Explanation of Framework and Hypothesis Development
According to Sekaran (2003), a hypothesis can be defined as a logically conjectured relationship between two or more variables expresses in the form of testable statement. This formulating of such testable statements is then called as hypothesis development. Also, Cooper and Schindler (2003) have mentioned that a hypothesis is a relational statement as it describes a relationship between two or more variables. The hypothesis is then a statement about the relationship between them. From the research framework, there are few sets of hypothesis statements comprising of the null and alternative hypothesis developed for this study. Due to all the independent variables are the TQM factors, the null hypothesis are said to have no relationship between the independent variables and dependent variable while the alternative hypothesis are said to have relationship between the independent variables and dependent variable.
3.3.1 Customer Focus and Labor Productivity
Business will not sustain if there is no market or customer. Therefore, companies need to know what the customers' wants and how to fulfill them in order to retain these customers. Customers focus can be well-described as customer oriented. By knowing what the customers want and of course, routes to fulfill them, definitely the company can train its employees to cope with it. As a consequence, employees will do things to satisfy customers rather than doing something which can't satisfy customers thus resulting in resources wastage and lower labor productivity. With this, the following hypotheses are created.
H0: There is no significant relationship between customer focus and labor productivity.
H1: There is a significant relationship between customer focus and labor productivity.
3.3.2 Human Resource Management and Labor Productivity
Employees have been seen as one of the most valuable resources for any company. Therefore, HRM is all about employing, controlling, motivating, compensating and so forth. All of these have only one goal, which is to increase company's performance by increasing the quality and satisfaction of employees. Theoretically, HRM has positive relationship with labor productivity. But, we aren't sure in Malaysia hotel industry. With that, the hypotheses are then formed to test the existence of the relationship.
H0: There is no significant relationship between human resource management and labor productivity.
H1: There is a significant relationship between human resource management and labor productivity.
3.3.3 Information and Analysis and Labor Productivity
ICT plays an important role in any company regardless of the company size. Higher productivity can be achieved by automated the daily routines. Since most of the task that required less human involvement can now be computerized, employees can contribute to the company in different aspect. Besides, ICT allows farther customers to be reached, thus potentially increase the number of customers. As for hotel industry, occupancy rate is one of the performance indicators. The greater the number of customers, there will be higher of probability for having higher occupancy rate. Therefore, the hotel is able fully utilize its employees thus resulting in lesser employees idle time while increasing labor productivity. So, the hypotheses are formed.
H0: There is no significant relationship between information and analysis and labor productivity.
H1: There is a significant relationship between information and analysis and labor productivity.
3.3.4 Leadership and Labor Productivity
Company might go into wrong direction when there is no proper leadership. Leadership plays a role in determining where the company is heading to, what the company wants to achieve and so forth. A good leader will get the employees to do the things right as well as do the right things. The quality of a leader will affect employees' morale. Good leader will definitely give positive motivation to employees and vice versa. Motivated employees will usually perform better than those who are not motivated. Hence, the following hypotheses are developed.
H0: There is no significant relationship between leadership and labor productivity.
H1: There is a significant relationship between leadership and labor productivity.
3.3.5 Strategic Planning and Labor Productivity
Strategic planning is relatively important to hotel industry. This is because hoteliers can't predict how many customers will be for tomorrow, thus causing the occupancy rate to be fluctuated. In order to have secured revenue and profit, stabilizing the occupancy rate is a day to day task for hoteliers. Therefore, they should have contingency plans for any situation that might happen. For instance, employees know what they should do when the occupancy rate is low. Contacting and negotiating with travel agency and flight companies can be solution of it. Thus, this also reduce the employees' idle time when something new that strikes the company. So, the hypotheses below are created.
H0: There is no significant relationship between strategic planning and labor productivity.
H1: There is a significant relationship between strategic planning and labor productivity.
3.4Description of Variables from Previous Studies
The activities of the companies are intended to benefit the customer but the customer is seen from the companies' own perspective.
Human Resource Management
Tool for balancing competing values over time and can be viewed as a process of continuous improvement.
Information and Analysis
Improved the capabilities to provide additional storage capacity, processing power, functions, applications and user-friendly operability.
Gretton and Gali (2003)
Plays significant role in shaping the quality focus of companies and acts as the foundation in creating synergy for achieving favorable business results.
Sila & Ebrahimpour (2005)
Set of processes undertaken in order to develop a range of strategies that will contribute to achieve organization direction.
Tapinos et al. (2005)
Table 3.1 Description of Variables from Previous Studies
3.5 Data Collection Methods
Reliability and consistency are always determining the method of data collection used for a study. In order to further enhance the overall value of this study, both primary and secondary sources of data are used. Methods such as distributing questionnaires to Kuala Lumpur hoteliers and informal interviews with some hoteliers by random are used to obtain data for this study. Besides, distribution of questionnaire can be made in different forms, which are by hand or by post. As for the informal interviews, it acts as pilot study before distributing the finalized questionnaires to respondents. This is to ensure the questionnaire has set properly and correctly, and with no use of offensive words or terms to some culture or race. Moreover, in order to identify the relevance and validity of the data collected, secondary data such as journals, government statistical reports and so forth are included to act as supporting evidence in the end of this study.
In general, questionnaire can be subdivided into open-ended and close-ended questionnaire. A questionnaire is a pre-formulated written set of questions to which respondents record their answer, usually within rather closely defined alternatives, namely the close-ended questions (Sekaran, 2003). Whereas open-ended questions allow respondents to answer them in any way they want. Therefore, open-ended questions are not encouraged as it would further complicate the analysis in the later part.
Practically, steps have to be taken to ensure the questionnaire is set and ready for distribution. Among the steps are to ensure the validity and appropriateness for each of the question created. Most importantly, questions created must be related to the research objectives so that it will not move away from the intended topic. Moreover, each question should be carefully worded as well as the language's sophistication level used. This is to ensure that respondents can easily understand the questions. Respondents' understanding prevents the happening of confusion or misunderstanding and thus the responses obtained will be biased.
By using questionnaire as a method of data collection in research has several benefits. One and most significance benefit is the cost of using questionnaire is far lower than other primary data collection methods. In fact, it is an inexpensive way to conduct and rapid way of gathering first-hand information from respondents. Due to the target respondents are hoteliers, it is easier for them to participate in filling up the questionnaire instead of face-to-face interview. In general, interview requires longer time than filling up questionnaire, and daily workload of the respondents must be taken into consideration when deciding which data collection method to go after.
Before setting the research framework and questions, several interviews have to be conducted with managers or hoteliers to identify which of the TQM factors are the most influential in Malaysia. This step is to further enhance the applicability of this study in the context of Malaysia. Therefore, the TQM factors selected might contribute differently to labor productivity in countries other than Malaysia.
As mentioned in the previous section, interview has higher cost than questionnaire in term time consumption. But, not to forget that the advantage of using interview in getting information still remains noticeable. As an interviewer, new insights will probably be given from interviewees (respondents) by simply telling their experiences. Besides, instant feedbacks and opinions that provide by interviewees are precious in collecting information. This is something that questionnaire can't achieve. In general, researcher has to give a period of few days for the respondents to fill up the questionnaire. But, interview gives researcher the instant answers, opinions, feedbacks, suggestion or even insights.
3.6 Sources of Data
The source of the information and the manner in which data is collected could well-made a big difference to the rigor and effectiveness of the study. Data can be obtained from primary and/ or secondary sources. In general, primary data includes collection information using methods such as interviews, questionnaires, focus group, observation, case studies and so forth while the secondary data includes sources such as records, publications, the Internet and etc.
3.6.1 Primary Data
As mentioned above, the primary data used in this study comes from informal interview and questionnaires. However, questionnaire is the main tool for this research to collect information as it is deemed to be more suitable. As for the informal interview, it aids in better data collection from questionnaire in terms of quality data, validity of the questions and etc. Questionnaire that has been set has to be pretested via pilot study with three hoteliers in Kuala Lumpur before distributing the questionnaire to the sample. Questionnaire has to be revised in taking new measures suggested in the pilot study. Next, the questionnaire will be reviewed by the lecturer for final revision if necessary before distributing it to targeted respondents.
3.6.2 Secondary Data
Other than the questionnaires used in this research study, the researcher also made good use of books, journals, publications, the Internet as his secondary data source. Secondary data is crucial for this project as it is used as background reading materials to enable the researcher to gain a better understanding of this research topic. Besides, crucial information for this research can be gathered by using secondary data. Majority of the journals are taken from then online databases such as Emerald and Science Direct. Practically, secondary data is important in showing the researcher what have been done before, what the latest findings are, what the limitations are and so forth. Thus, it gives the researcher a clear direction what need to be achieved to avoid a redundant study. It is a waste of resources if conducting the same study that conducted by others before. Moreover, secondary data is used because it is all readily available and relatively cheap compared to primary data. Therefore, secondary data that have been used in this study mostly comes from journals and past literature regarding TQM factors and labor productivity. Besides, any relevant information from any source especially the Internet will be utilized as long as it is related to the objectives of this study. All of these data hel
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