Subject Of Customer Satisfaction In Malaysia Business Essay


Customer satisfaction is a key issue for all organizations in both public and private sectors. This is a highly important challenge as service standards today relies on excellent service quality delivery and high customer satisfaction levels. All employees have a role in determining the degree of satisfaction experienced by their customers. In the public sector, due to increased levels of information dissemination, governments are expected to be more sensitive to the demands and needs of the peoples and societies they serve. Many public sector organisations are undergoing reforms in order to provide better, faster and even wider range of services to the people. The customer has a prominent place in these reforms.

In recent history, much has been written on the subject of customer satisfaction, but comparatively little regarding customer satisfaction in the public sector. This is despite the issue of customer satisfaction in public services has been growing in importance, particularly in Malaysia due to the perception of deteriorating levels of satisfaction as perceived by most quarters of the public. In the past ten years with the explosive growth of broadband internet penetration levels in the country, public agencies have been increasingly placed in the spotlight for their shortcomings as larger segments of the public are made aware of the lack of satisfaction encountered by others.

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In most countries including Malaysia, local government has the most direct impact on the resources in the economy as they are most involved in the implementation of national and state government policies. The range of activities involving the local government sector is primarily labour intensive.

There are therefore a number of reasons for the need of this research particularly in the Malaysian environment. Firstly, local government has a monopoly on the provision of most of their services, and do not have forces of competition and profit driving efficiency and effectiveness in meeting customers' needs (Caruana, Ramaseshan, & Ewing 1998). Members of the public who are unhappy with the local authority administering their premises or property are not able to change to another local authority or opt out of receiving services from that authority (and thus not paying taxes due) without moving to another area administered by another local authority. Secondly, demand for government services is on an increasing uptrend due to increased expectations by the people. More and more people expect the government to assist them in resolving various issues encountered. Such issues includes the provision or maintenance (or lack of provision or maintenance) of infrastructure and services. Thirdly, due to increasing pressure on governments as a service provider for an increasing range of services, local government has to set up and maintain competence in many aspects of performance. An instance of this can be seen with the advent of information technology (IT). Many local authorities responded by setting up an IT department which was put in charge of computerising operations. Hence local government organisations will be perceived to be competent, knowledgeable, courteous and reliable if and when their employees possess competencies to allow effective execution of their prescribed duties.

This study will be undertaken with the objective of investigating the impact of employee competencies as perceived by customer satisfaction in the services provided by Majlis Bandaraya Alor Setar (MBAS) or Alor Setar City Council. Additionally, this study will also evaluate the relationship between employee competencies and perceived customer satisfaction. It is important to undertake this research at this time particularly at MBAS because it is now in transition to move towards a new stage of increased employee competencies in the new era of internet-enabled services.

1.1 Local government in the Malaysian Context

Local authorities in Malaysia are governed primarily by various national and state legislative provisions. At the national level, the Local Government Act of 1976 is the primary legislation that specifies the functions and responsibilities of local government bodies in Peninsular Malaysia. These functions and responsibilities not only include mandatory functions but also discretionary functions too. These functions include solid waste management, street maintenance and activities pertaining to public health. Examples of discretionary functions include development and infrastructure functions like providing amenities, recreational parks, housing and regulating certain aspects of commercial activities such as licensing.

According to a report by the United Nations Economic and Social Commission for Asia and the Pacific (2001), provisions of the Local Government Act 1976 grants local authorities in Malaysia the following roles in their respective jurisdictions or areas:

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Local planning authority

Licensing authority

Manage to impose certain kinds of taxes

Take in charge housing, building and commercial construction (markets, hawker stalls and many others)

Manage to perform urban planning, landscaping and management functions

Manage public transport systems

Manage to plan and provide public utilities.

Source: United Nations Economic and Social Commission for Asia and the Pacific (2001).

As can be see above, local authorities in Malaysia have a wide range of functions and responsibilities which has significant impact in the environment which they operate in. It is highly important for available competencies to be studied and further developed in order to improve the delivery of services to the people (their customers). The fact that the Malaysian government is aggressively pursuing economic growth can be seen with the introduction of the New Economic Model (NEM) initiative and 10th Malaysia Plan by Prime Minister Datuk Seri Najib Tun Razak recently. As part of these initiatives, local authorities will play important roles in the further development of the country.

As of July 2010, there are 147 local authorities in Malaysia as summarized in Table .

Table Local Authorities in Malaysia

Local Authorities


City Councils


Municipal Councils


District Councils




Source: Ministry of Housing and Local Government.

1.2 The Background of Majlis Bandaraya Alor Setar (MBAS)

MBAS is one of the local authorities in Peninsular Malaysia. At its inception in 1735, MBAS was established as a sanitation board when the city was founded by Sultan Muhammad Jiwa Zainal Adilin Mu'azzam Shah. The city of Alor Setar and the local authority body which oversaw it has grown in size and functions since then. MBAS is the local authority entrusted with providing services for the governance and development of Alor Setar. It is the only local authority in the state of Kedah with city council status which was awarded by the federal government on 31 December 2003. This upgrade of status came after Alor Setar officially became a city on 22 August 2002. From the Population, Household & Living Quarters Malaysia 2009 publication by the Department of Statistics, we find that the district of Kota Setar (which includes Alor Setar) has a population of 429,900 people.


1. Majlis Bandaraya Alor Setar.

2. Department of Statistic, Malaysia.

According to the Local Government Department of the Ministry of Housing and Local Government, a city council should meet the following criteria:

Area under jurisdiction includes the administrative centre of the state

Population above 500,000

Fiscally sustainable with annual revenues exceeding RM100 million capable of sustaining a balanced budget

Provision of high level of services

Sustainable development with an emphasis on tackling urban issues like squatters, illegal factory operation, security, housing for low-income groups and environmental conservation

Achieves stable city classification under Malaysia Urban Indicator Network System (MURNInet)

Availability of industrial centres, financial institutions, cultural centres, sports and recreational facilities and educational institutions

Complete infrastructure provision and public utilities inclusive of public transportation facilities, traffic management system, efficient road network and ICT services, public areas which are disabled-friendly; and

Recognition as a city either at national or international level in certain areas

Source: Ministry of Housing and Local Government.

The current mayor of Alor Setar is Dato Khazali Din. He has been in office since 1 December 2008. Besides the mayor, there are also 14 local councillors who are appointed by the State Government under provisions in the Local Government Act 1976 to administer MBAS. It employs approximately 250 employees ranked from Head of Departments to labourers.

There are nine major departments and divisions in MBAS as follows:


Development planning


Assessment and Property management

Management services

Municipal services and Health

Community development

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Source: Majlis Bandaraya Alor Setar.

The main objectives of MBAS are as follows:

Provide a comfortable living for the community of Alor Setar city from the aspects of services, planning and development;

Transform the employees of MBAS to an efficient, clean, trustworthy and disciplined workforce;

Increase and diversify the sources of revenue so that MBAS will become a financially strong institution;

Management system which is of quality, dynamic and innovative; and

Develop a caring society environment among the workforce through the provision of welfare, health and safety schemes

Source: Majlis Bandaraya Alor Setar.

Throughout its 275 years of existence from a sanitation board up to the current incarnation as a city council, MBAS has been contributing a strategic role in the delivery of local government services in Alor Setar. It's official mission statement is to provide the highest level of services based on the latest technology. The primary functions of MBAS as a local authority includes development and operational functions such as solid waste management, cleaning of public areas and amenities, traffic system design and street maintenance, landscaping and beautification works, provision of shared public facilities and amenities like sports and recreation areas and infrastructure works. The most important secondary function of MBAS is to regulate business and commercial activities by means of licensing provisions. An example of the usage of these regulatory powers can be seen in the recent controversy regarding sports betting. While the federal government had approved a sports betting license to Ascot Sports Sdn Bhd, the state governments led by Pakatan Rakyat (PR) had declined to issue licenses for premises to be used for sports betting activities. This was done by instructing the various local authorities in PR-controlled states not to issue premise and other business licenses for sports betting activities to Ascot Sports Sdn Bhd. This effectively ensured that Ascot Sports will not be able to operate sports betting activities in those states.

Source: The Star, June 2010

Other secondary functions of MBAS include the promotion of commercial and tourism activities and health and safety regulations of the community. This is done through the provision of infrastructure like roads and public facilities like parks, recreational areas, museums and the like. In terms of health and safety regulations, a commonly seen example would be the enforcement of laws against aedes mosquito breeding areas and building inspections and renovation regulations to ensure that such work is done within acceptable limits and meets minimum safety standards.

1.3 Background of the study

There are many opinions with regards to the issue on how to manage service quality and delivery. In terms of service-based businesses, while the basis is similar to that of manufacturing-based businesses, the challenges posed are quite different. This is mainly due to the different attributes of both businesses. In manufacturing businesses, typically a product is made to certain specifications. The outcome of the process to create and manufacture a particular product should produce very little variation. This contrasts with service businesses whereby the outcome of services provided by the business can be significantly different due to the interaction between the business and its customers in the process. There are variations in expectation, expertise and material inputs from one customer to the next. Because of this, the outcomes of the process as perceived by customers can vary significantly even when businesses try to control for as many variables as possible.

In terms of the public sector and civil service in Malaysia, the government has set up a number of agencies and undertook various measures to improve performance and service quality delivery. Some of these agencies and measures along with a brief history are mentioned below.

One of the earliest attempts in post-independence Malaya to formalise and standardise training procedures for Public Services Department (PSD) employees is the setting up of the National Institute of Public Administration (INTAN). It was set up in September 1959 as the Staff Training Centre in Port Dickson, Negeri Sembilan. The centre provided training in administrative areas such as financial, land, office management and local government administration. The Staff Training Centre became INTAN in June 1972 and now has a mission to develop human resources in the public sector though the provision of quality training programmes.

Source: National Institute of Public Administration, Malaysia.

The Malaysian Administrative Modernisation and Management Planning Unit (MAMPU) was initially created as the Development Administrative Unit (DAU) in 1966. The DAU was created based on a report by Prof. John D. Montgomery dan Milton J. Esma in Development Administrative in Malaysia which called for steps to improve professionalism in the public service by providing training and conducting educational programmes for all levels of the civil service. DAU was responsible to spearhead improvements in the civil service. In 1972, DAU was merged with the Implementation, Coordination and Evaluation Unit (ICEU) to form the Implementation, Coordination and Development Administration Unit (ICDAU). MAMPU was set up in 1977 as a new agency which took over the responsibilities of modernising and human resources planning from the ICDAU.


1. Malaysian Administrative Modernization and Management Planning Unit, Prime Minister's Department.

2. Implementation Coordination Unit, Prime Minister's Department.

The Public Complaints Bureau (PCB) under the Prime Minister's Department was mooted by former Prime Minister Tun Abdul Razak. It started operations on 2 August 1971 and is the leading organisation in Malaysia for the management and monitoring of public complaints regarding government departments and agencies (Suddle, 2009).

Source: Suddle, 2009. Report on Study Tour of PUBLIC COMPLAINTS BUREAU MALAYSIA.

Probably the most well known effort by the government to improve the civil service by reducing instances of corruption would be the Malaysian Anti-Corruption Commission (MACC) which was mooted by former Prime Minister Tun Abdullah Ahmad Badawi which officially commenced operations on 1 January 2009. The history of MACC began as an agency when the National Bureau of Investigation was set up in 1973 to consolidate corruption and other special cases which were being handled by different teams in the police, Prime Minister's Department and the Law Ministry. The name was then changed to the Anti-Corruption Agency in 1982 to reflect its role as the main agency in Malaysia in the fight against corruption.

Source: Malaysian Anti-Corruption Commission.

To improve civil service performance, former Prime Minister Tun Abdullah Ahmad Badawi in January 2005 had suggested various means on reinventing the civil service in Malaysian. According to him, to safeguard the image of civil service, public sector employees must be creative, inventive, fluid, consultative and free of corrupt practices. He addressed this issue to 3000 decision makers in public sector, ministers and chief executive officers of government-linked companies in order to have a free flow of ideas between top-level officers and their subordinates for the betterment of the service. He said civil servant must be able to "think out of the box" and make strategic adjustments so that they could act speedily when faced with adversity. On free flow of ideas within the service, department heads must be willing to acknowledge good suggestions which were given by their subordinates. Civil servants should be encouraged to provide feedback on approaches undertaken and these responses must be taken seriously by decision makers who should also institute changes whenever necessary.

Source: The Star, January 2005

In February 2005, Tun Abdullah Ahmad Badawi reminded the civil service to increase emphasis on integrity, accountability and high work ethics in its efforts to improve efficiency in serving the people and the business community to safeguard the image of the public sector in order to enjoy the support and confidence of the people.

Source: The Star, February 2005

The Special Taskforce to Facilitate Business (PEMUDAH) was established on 7 February 2007 under the Prime Minister's Department. Mooted by former Prime Minister Tun Abdullah Ahmad Badawi, the terms of reference for the objectives and operations of PEMUDAH is as follows:

To review the status of the public services delivery system in terms of processes, procedures, legislation and human resource towards introducing improvements;

To study best practices in the private sector that can be adopted by the public sector;

To coordinate programs across public sector agencies towards enhancing Malaysia's competitiveness;

To monitor the implementation of policies, strategies and procedures aimed towards improving the efficiency and effectiveness of the public delivery system; and

To take appropriate action in addressing issues raised during Cabinet meetings regarding the public delivery system.

Source: PEMUDAH Secretariat Office, Ministry of International Trade and Industry.

On 13 April 2007, the government introduced the concept of One Stop Centre (OSC) for local government agencies under the Ministry of Housing and Local Government. According to Chief Secretary to the Government, Tan Sri Mohd Sidek Hassan, the OSC was set up based on the concept of "No Wrong Door" whereby it will be a "single point of entry" which allows customers to obtain various services from multiple agencies using an integrated method. OSC will coordinate all stages from documentation submission until a decision is reached and provided to the customer.

Source: The Office of Chief Secretary to the Government. About One Stop Centre.

Within half a year of assuming office, Prime Minister Najib Tun Razak had mooted and established the Performance Management & Delivery Unit (PEMANDU) on 16 September 2009. A unit under the Prime Minister's Department, its main role and objective is to oversee the implementation and assess the progress of the government transformation programme (GTP) and to facilitate and support the delivery of both National Key Result Areas (NKRAs) and Ministry Key Result Areas (MKRAs) of the various ministries and government agencies.

Source: Performance Management & Delivery Unit, Prime Minister's Department.

On 1 January 2010, the MBAS Complaints Portal was launched as an online application to allow the public to lodge complaints to the local authority. The portal accepts submissions both online and though Short Message Service (SMS). The public can then follow up on complaints lodged though the portal. The portal also provides a forum for the council to receive feedback from the public.

Source: MBAS Complaints Portal. About Complaints Portal.

1.4 Research Problem

Many business organisations these days would no doubt agree that the environments in which they do their businesses is becoming more and more complex and more challenging to understand due to rapid pace of change. There have been many studies which concluded that no business can be successful without taking the needs of their customers into serious consideration.

There are several factors which have played significant roles which has changed the impact customers have on businesses. One of them would be the rise of consumerism in the 20th century. Rapid economic expansion due to the agricultural and industrial revolutions along with explosive population growth has rapidly increased the number of consumers in the market. Prior to this, only a small percentage of the population had sufficient disposable incomes to make an impact outside of their local societies. Due to rapid economic growth, more and more people earned enough to start having significant levels of disposable income which could be used for discretionary purchases. New inventions and improvements allowed businesses to transport goods faster and cheaper allowing more people to have increasing choices in the goods and services available to them. The services industry started being recognised as an arm of the economy in its own right and in more advanced economies, is more important than manufacturing and trading industries. Customers now have more choices and could demand more from businesses. Any business which does not respond adequately to the rapidly changing business environments may face overwhelming challenges and can even go out of business.

As a local authority and a government body, while it is very difficult for MBAS to "go out of business" per se, it is still a service organisation that provides multiple services to the people. MBAS cannot deny the expectations of its customers because their customers are taxpayers and voters. As a government body, it receives all income from public sources (i.e. taxpayers) and if they are not happy, they will show their displeasure during elections and effect changes through the government. We can thus surmise that employees in service organisations play an important role in ensuring that customers have a positive first impression. If customers are not provided with a level of service which they expect, this will lead to dissatisfaction and as a consequence, the number of complaints will increase. According to MBAS Public Relations Section, the authority receives on average 29 complaints per day sent by the public through various channels namely the MBAS Complains Portal, telephone, mail and fax.

In order to reduce dissatisfaction with its services and thus the number of complaints, it is necessary for MBAS to increase the quality of services it provides. It is highly important for them to plan, coordinate and then implement a comprehensive program to promote and disseminate the mindset of service quality excellence among employees in the organisation. It is imperative for MBAS to improve its services because its customers (the public) expect to interact with competent employees who are able to display high levels of professionalism and provide equally high levels of service quality whether in terms of explanation or physical services provided.

Local authorities play an important role in the growth of both in the state they are located in and their own jurisdiction. You can go to virtually any part of Alor Setar and the name of the local authority administrating the city can be clearly seen. This has an effect of ensuring that services (or in contrast, the lack of services) provided by MBAS is always in the public eye. For example, a pedestrian bridge along Jalan Alor Setar-Sungai Petani at Batu 3, Tandop which has been in a state of disrepair for some time caused a scare when a large metal piece measuring 3 x 24 metres and a banner celebrating the Sultan's recent birthdaye road isrepair for some time caused a scare when piecen of S is always in the public eye. t services or fell on the road underneath the bridge. While no vehicles or people were hurt in the incident, there has been several earlier incidents of smaller pieces of metal falling off the bridge. A road user claimed that he had informed MBAS about the earlier incidents but thus far no action has been taken. A few questions had arose from the incident namely why the local authority did not take any action upon receiving complains about the bridge earlier? While there may be a lack of allocation at this time to repair the bridge, perhaps if MBAS had more competent staff, perhaps any loose metal pieces could have been removed and the bridge temporarily closed while awaiting allocation to fully repair the bridge. This would have helped to ensure no untoward incident happens.

Landscaping and beautification activities of public areas and amenities are one of the local authorities' primary functions. It was reported recently that the Taman PKNK football field has not been properly maintained for several months. This had made the field unusable due to the tall grass which has now became homes to poisonous snakes and other animals. According to the news report, MBAS follows a schedule whereby grass will be cut on fields located in residential areas every 21 days. The questions that are being asked is what had caused the oversight in maintaining the field? The oversight was not noticed by the council despite multiple 21 days cycles having passed. Could it be due to incompetence of MBAS employees that lead to the oversight in providing the required service? Employees should be more innovative and creative in overcoming obstacles faced when providing such services.

The attitudes and procedures of MBAS once again came into question when a conflict occurred between the council and Chinese associations over what was felt as a new requirement to pay two different license fees for mahjong activities. The council had issued a letter on 7 July 2010 requesting payment for licensing fee but the associations had already paid a licensing fee to the Kota Setar district office for their mahjong activities. According to them, that is the only license they have always paid to conduct their activities. It was later clarified by Alor Setar Mayor Datuk Khazali Din that the license paid to the district office was to conduct mahjong activities but a separate license for the premises was also required to be paid to the council but was not enforced earlier. The questions raised in this incident relates to why if there were indeed such rules, it was not informed or explained to the Chinese associations earlier to prevent the misunderstanding from occurring in the first place.

As the mahjong activities has been going on for some time, the point now is that the attitude of the council and lack of tack in approaching the matter had caused the disruption of legitimate activities of other people. The approach used to approach the Chinese associations regarding the licensing issue reveals the inflexibility of the council. MBAS could have used more gentle approaches when approaching the associations and prevent the misunderstanding from occurring in the first place like giving them a suitable grace period rather than threatening immediate fines and legal action for non-compliance with its demands. MBAS will be categorised as a quality service provider if its employees have initiative, accountability, motivation and work as a team to accomplish their tasks or projects. Perhaps if the council had employees with the correct competencies in place, the various incidents mentioned above would not have happened?

MBAS has to provide sufficient skills, ability, and the correct knowledge and resources to their employees and place them at the right positions. At the same time, the council should also adopt new forms of work organisation such as work teams, management delayering, job sharing, reengineering and downsizing redundant employees. In this context, MBAS should not only improve business performance but must also focus itself on making the necessary management changes related to combination of factors such as employee competencies, new computing and communications technologies and measure the productivity of service staff and knowledge workers. There is precious little studies in the past to measure perceived service quality in MBAS. As a service provider, MBAS is expected to be more competent and innovative. Given the situation that the council now finds itself in, service quality will be an undoubtedly interesting area to study.

1.5 Research Objectives

The objective of this study is to determine if service quality at MBAS is driven by employee competencies. To be more specific, we want to:

Identify employee competencies which is important for MBAS to improve customer satisfaction;

Examine customer satisfaction as perceived by the public at MBAS; and

Investigate the relationship of employee competencies in relation to perceived customer satisfaction in MBAS.

1.6 Research Question

This study was motivated by our determination to answer the following questions:

What are the competencies that employees at MBAS should have?

What is customer satisfaction as perceived by the public?

What are the relationships between employee competencies and perceived customer satisfaction?

1.7 Definition of Terms

Local Government Employee

A worker who is employed to provide services to a company on a regular basic in exchange for compensation and who does not provide these services as part of an independent or self-employed business.


A cluster of related knowledge, skills and attitudes that affects a major part of role or responsibility that correlates with performance on the job, that can be against well accepted standards, and that can be improved via training (Competencies Workgroup, September 2002).


Service can be defined as "any primary complementary activity that does not directly produce a physical product that is the non-good part of the transaction between buyer (customer) and seller (provider)". This classification of service includes all manufacturing organizations except industries such as agriculture, mining and construction. It also includes in the category real estate, financial services, transportation and public utilities.

Public Sector

According to The Macmillan Encyclopaedia, public sector is defined as parts of productive and non-productive sector of the economy that are financed out of taxation, are under state or local government control or both. It includes all employees and activities of national and state governments, public institutions and nationalised industries.

Local Government

A local government is the local authority formed in population centres to provide a range of services as their core business such as garbage collection, traffic and roadways, parking, building and planning control, zoning and others. A more detailed definition specific to the Malaysian context was provided above earlier.

1.8 Scope of the Study

This study stands on the strength of existing studies on customer satisfaction in public services. It analyses customer satisfaction as perceived by the public in MBAS. Some comments are made about employee competencies and how these competencies relates to customer satisfaction. These comments will provide thoughts about areas which should be examined regarding the relationship of these competencies with the customer satisfaction at MBAS.

1.9 Significance of the Study

The responses from the questionnaire survey is used to provide some input on customer satisfaction levels perceived by the public in MBAS. In view of the importance for MBAS to achieve high levels of competencies in their organisation, it is hoped that this study will benefit MBAS to improve their service quality and increase customer satisfaction. The results of this study can serve as a reference for MBAS on the level of employee competencies that relates to customer satisfaction.

1.10 Organization of the study

There are five chapters in this research. The introduction is found in chapter 1 which also contains the research background, research problem, research objectives and research question. The research problem is to address the importance of conducting this research. Chapter 2 will cover the literature review of all variables found in the course of this study. This chapter will highlight previous research and findings made by various researchers. This chapter is important to not only indicate that all variables is supported by previous study, it is also used to strengthen the research that will be carried out. Chapter 3 will elaborate on how the study will be conducted and the methodology used in the research. This chapter will show the population, sample, design, instrument and statistical analysis that will be conducted. Chapter 4 will cover the analysis of the results. We will conclude in chapter 5 and present our discussion, conclusion and implications of the research. We will also propose on future research to be conducted in order to follow up on this research.