Small and medium-sized enterprises (SMEs) suffer persistent challenges due to global market competition, time limits to respond strategically, talent retention, productivity, and uncompetitive operational expenses. Enhancing employee performance (EP) then becomes critical in defining SME success. The purpose of this study is to evaluate the influence of strategic management (SM) and leadership capabilities (LC) on EP and recommend solutions to improve EP. The function of employee engagement (EE) as a mediator between interactions involving LC, SM, and EP is also investigated. A quantitative research method was employed by collecting empirical data of employees working with Malaysian SMEs. Analysis including reliability and normality assessments, confirmatory factor analysis, and structural equation modelling with AMOS 22 were carried out. According to the data, SM exerts a positive and substantial impact on EP. In the context of Malaysian SMEs, the novel findings provide a strong reason for the use of SM, emphasising the need to strengthen managers' knowledge in SM capabilities.
TopIntroduction
Due to increased market rivalry and changeable market dynamics, a company's success is typically determined by the quality of its goods and services. As a result, human capital efficiencies have been identified as the most important factor in boosting the value of product delivery by a number of studies (e.g., Adesina, 2021; Kuzey, Dinc, Akin, & Zaim, 2021). According to Ali and Anwar (2021), EP is crucial to an organization's effectiveness, which in turn impacts the company's revenue. In hindsight, performance is the degree of accomplishment of a predetermined business objective (Bakker & de Vries, 2021). According to Ployhart (2021), human resources are the sole assets that must be developed and nurtured in plenty. Due to the fact that people are an organization's most valuable resource, talent management has been identified as a crucial performance indicator for HR practitioners. In a simple correlational example, the more the staff strives to exceed expectations, the higher the company's competitive advantages (Iqbal, 2018). Numerous studies showed that high-performing employees may contribute to the company's growth, increase customer happiness, and reduce employee turnover (Kuzey et al., 2021; Ployhart, 2021).
Without a question, strategy and organisational performance are becoming more significant than ever (Miller and Cardinal, 1994). Consequently, the outcome of an effective human management plan to accomplish organisational KPIs has become a leader's top priority (Deborah Schroeder-Saulnier, 2010). According to Kuriakose and Tiew, (2022), Malaysia, and specifically its SME sector, is often characterised as a workplace in which its executives have the most authority and control. The same set of leaders defines the rules and regulations and makes the decisions (Jayasingam & Cheng, 2009). According to Ansari et al. (2004), Malaysian employees are required to obey and carry out the directives of their superiors and disputing with them is not a common occurrence in the employee-employer relationship. As a result, the dominant impact of leadership qualities is a crucial denominator that must be well comprehended in light of the leadership's prominent position and great authority in Malaysia.
The SME sector is the subject of research since it is one of Malaysia's most important economic drivers, contributing more than 5.4% to the country's GDP through exports, investment gains, and employment indicators (Tham & Atan, 2022). Explaining the significance of the SME industry to Malaysia is the fact that without them, the country would suffer the “dual deficit” and trade deficit phenomenon, which would negatively affect the trust of foreign investors (Kuriakose & Tiew, 2022; Tham & Atan, 2022). Small- and medium-sized enterprises (SME) suffer persistent challenges due to global market competition, time limits to respond strategically, talent retention, productivity, and uncompetitive operational expenses (Ahmad et al., 2017). Recently, industry actors, notably business chambers, have begun to emphasise the calibre of Malaysian SME employees. According to Kuriakose and Tiew (2022), Malaysian employees' productivity rate of 1 PPP was the lowest among the selected major manufacturing nations. Productivity is the single most important factor in a country's long-term growth. The rise in productivity in Malaysia is flat and unequal (Haba & Dastane, 2019; Kuriakose & Tiew, 2022; Tham & Atan, 2022).