AMO model as a mediator on human resource practices and employee commitment among SMEs employees in Selangor / Elaina Rose Johar

In the current era of business 4.0, small and medium-sized enterprises (SMEs), in
particular, face challenges in retaining and gaining commitment from their employees.
The aim of this research is to determine the relationship between human resource
practices (recruitment, compensation, training, employee involvement, employee
recognition) and employee commitment of service sector SMEs. The study also seeks
to provide the theory-based empirical evidence that the AMO model mediates the
relationship between human resource practices and employee commitment of service
sector SMEs. The study used Social Exchange Theory (SET) in order to explain the
theoretical rationale for human resource practices, AMO model and employee
commitment. This study intended to fill the gap of the ‘People and Performance
model’ by including employee recognition as a new human resource practices. A total
of 211 employees representing a range of Malaysian SMEs in Selangor have been
identified using systematic random sampling. PLS-SEM was used to explain the
relationship between human resource practices and employee commitment, as well as
the AMO model as mediator. Results have confirmed that training has only a direct
relationship to employee commitment for SMEs employees. Meanwhile, employee
involvement and employee recognition have had positive significant mediation effects
on employee commitment. Employee involvement has been identified as having a full
mediation effect and employee recognition had a complementary mediation effects.
However, both recruitment and compensation have shown no effect on any
relationship. Therefore, both the significant and insigificant findings of the research
study have contributed to the body of knowledge. Particularly, it has helped to place
the human resource practices, AMO model and employee commitment in the SET by
giving a new perspective theoretically that the correct approach of gaining
commitment of employees by providing the appropriate practices that employee will
reciprocate in return. Also, as majority of the respondents are from generation Y
cohort, it showed that they are seeking more recognition than compensation in order to
commit themselves. SMEs should therefore prepare for the appropriate employee
recognition schemes that could increase the commitment of employees and the
intention to stay longer in the organisation. Moreover, the findings could therefore
serve as a turning point for SMEs to start concentrating and provides more job-related
training so that employees can upgrade their skills particularly in this Industrial 4.0
era, where everything changes greatly in the way they deal with others. Notably,
SMEs should undertake a formal and detailed recruitment processes as to make future
employees feel that the employer is serious and make them more motivated to
commit. In addition, money and remuneration are no longer a motivational incentive
for employees to become committed and obliged to the organisation. Rather, there are
other ways to earn extra income. This research study has used cross-sectional research
design instead of longitudinal design which gave a snapshot of time and have not able
to record the changes occurred overtime. Similarly, the present research study only
looking at the feedback from the perspective of employees, where data based on selfreports
might lead to source-bias whereby both parties such as employees and
management or supervisors should also be observed. This research also only focused
on service sector SMEs in Selangor and hence cannot be generalised.