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Human Capital Issues and Challenges of the Manufacturing Industry in Perak

© 2013 INSTITUTE OF TECHNOLOGY PETRONAS SDN BHD

All rights reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means (electronic,

mechanical, photocopying, recording or otherwise) without the permission of the copyright owner.

1

Table of Content

Team Structure

Background

Problem Statement

Scope of Research

Research Methodology

Demography of the Participating Companies

Data Analysis Methods

Reliability of the Scales

Research Findings

Recommendations

TEAM STRUCTURE

This research project is a collaboration between IDR,

Universiti Teknologi Petronas (UTP) & Universiti Teknologi Mara (UiTM Perak)

Project leader:

Dr. Rohani Salleh (UTP)

Team Members:

Hairuzila Idrus (UTP)

Khalidah Khalid Ali (UTP)

Azelin Md Noor (UTP)

Haryanni Harun (UTP)

Md. Anwar Yusoff (UiTM)

Research Assistants:

Taha Nasir

Yahia Bashaar

Perak put high emphasis on human capital as part of its aspiration

to achieve Perak Maju 2015.

In line with this, one of the key focused areas in the Perak Amanjaya

Development Plan is to transform Perak

as the main destination of choice for people to work and live.

Retention of quality human capital has been included as an

important key result area of the state government, as indicated in

“Sub-KRA 2.2: Pengekalan modal insan berkualiti”.

BACKGROUND

Sources: http://idrperak.com

http://idrperak.com/

…ensure that Perak achieves

the developed state status by

2015

a high and equitable distribution

of income

the creation of well-educated

and highly skilled human

capital

maintaining a high quality of life

for the people

a dynamic and sustainable

economy

Vision of Perak Amanjaya

Development Plan by

focusing on the delivery

of… "3Qs“..that will

to improve the

socio-economic

status of Perak

through the

development of

policies and

innovative

strategies, and

programs with the

aim of driving

peace, stability and

progress

BACKGROUND

Sources:

IDR AMANJAYA Bulletin Issue 1, 2011

http://idrperak.com

http://peraktoday.com/wp/?p=7139



Quality Individual

Human

Capital

Development

Program

Improving student

outcomes: High

education Career

development

service centre

Improving student

outcomes:

Pre-school

education

..that will enable Perak to

achieve…

the creation of well-

educated and

highly skilled

human capital

Perak Amanjaya Development Plan

BACKGROUND

Sources:

IDR AMANJAYA Bulletin Issue 1, 2011

http://idrperak.com




Under the Perak Amanjaya vision introduced by the State Government of

Perak, the State has set its goal to achieve RM50.88 billion in GDP by 2020,

where at least 25% of it is contributed by the manufacturing industry.

A number of new focused sectors have been identified by the State which is

able to propel the State towards achieving the target.

BACKGROUND

Perak is yet to be seen as an attractive state to work in and has been

less successful in attracting and retaining talents compared to other

states in Malaysia.

In order to make Perak as a preferred state for investors, it is imperative

that human capital issues and challenges be addressed at both the

strategic and operational levels.

This scenario needs to be critically addressed by the state

government as failing to attract and retain human capital would bring

detrimental implications on organizational work productivity and the

state‟s overall economic development.

Understanding the human capital issues would provide a good basis for

the state government to establish initiatives that would assist the

sector in recruitment and employee retention if Perak aspires to be

identified as a high income economy / developed state in Malaysia.

PROBLEM STATEMENT

To investigate and identify

the current and emerging

issues and challenges faced

by the manufacturing

industry in Perak from the

human capital perspective.

SCOPE OF RESEARCH

RESEARCH

METHODOLOGY

DATA COLLECTION METHODS

This study employed both quantitative and qualitative data

collection methods.

– Quantitative data was gathered through self-administered

questionnaires distributed to the Human Resource Manager of

the participating companies. The selection of companies was

obtained from the FMM Perak directory and online search.

– Qualitative data was gathered using semi-structured interviews

and focus group discussion with selected HR practitioners of

leading manufacturing companies in Perak. The practioners‟

viewpoints provided valuable in-depth input on the issues and

challenges gathered based on the quantitative data.

REVIEW OF LITERATURE

IDENTIFYING AND LISTING KEY

HUMAN CAPITAL ISSUES AND

CHALLENGES BASED ON LITERTURE

REVIEW

VALIDATING KEY ISSUES AND

CHALLENGES WITH THE INDUSTRY PLAYERS AND

ACADEMICS FROM OTHER HIGHER

LEARNING INSTITUTIONS

QUESTIONNAIRE

DEVELOPMENT OF QUESTIONNAIRE

KEY DIMENSIONS OF THE STUDY

12 KEY DIMENSIONS

Skill level

Recruitment

Workforce

Diversity

Labor cost

Technological changes

Education system Employee

retention

Perception towards the

industry

Support & infrastructure

Environment

HRM Practices

Work Values

RESEARCH QUESTIONNAIRE

TARGET RESPONDENTS

1. Abric International Sdn Bhd

2. Nihon Canpack (M) Sdn Bhd

3. Dindings Poultry Processing Sdn Bhd

4. Camfil

5. South East Asia Paper Products Sdn Bhd

6. Carsem Semiconductor Sdn Bhd

7. Idaman Pharmaceuticals (M) Sdn Bhd

8. Imerys Minerals (M) Sdn Bhd

9. B.K.B. Hevea Products Sdn Bhd

10. Omya (M) Sdn. Bhd.

11. Kinta Press and Printing (M) Sdn Bhd

12. Carpet Art Manufacturing Sdn Bhd

13. UNISEM (M) Bhd

14. Finisar (M) Sdn Bhd

15. Tor Minerals (M) Sdn Bhd

16. Sydney Industries Sdn Bhd

17. D.K. Laboratories (M) Sdn Bhd

18. Associated Pan Malaysia Cement Sdn Bhd

19. Murata Electronics (M) Sdn Bhd

20. Tasek Corporation Bhd

21. Mardec Processing Sdn Bhd

22. Associated Air-Pak Industries (M) Sdn Bhd

23. Bromma (M) Sdn Bhd

24. Osaka Corporation Sdn Bhd

25. Hovid Pharmacy Sdn Bhd

26. Spritzer Factory

The companies were selected based on locality, size (i.e. paid up capital

>RM2.5mil), and company type (i.e. a mixture of local / multinational corporation).

PARTICIPATING COMPANIES

1. Abric International Sdn Bhd

2. Nihon Canpack (M) Sdn Bhd

3. Dindings Poultry Processing Sdn Bhd

4. Camfil

5. South East Asia Paper Products Sdn Bhd

6. Carsem Semiconductor Sdn Bhd

7. Idaman Pharmaceuticals (M) Sdn Bhd

8. Imerys Minerals (M) Sdn Bhd

9. B.K.B. Hevea Products Sdn Bhd

10. Omya (M) Sdn. Bhd.

11. Kinta Press and Printing (M) Sdn Bhd

12. Carpet Art Manufacturing Sdn Bhd

13. UNISEM (M) Bhd

14. Finisar (M) Sdn Bhd

15. Associated Pan Malaysia Cement Sdn Bhd

As to date, out of 26 companies,

15 have responded (57.7%

response rate).

Data collection is still on going,

pending responses from several

companies for various reasons.

RESPONDENTS

DEMOGRAPHY OF THE

PARTICIPATING COMPANIES

DISTRICTS

LOCATION

INDUSTRIAL AREA

NO. OF EMPLOYEES

LOCAL VS. FOREIGN EMPLOYEES

Companies Local (%) Foreign (%)

Associated Pan Malaysia Cement Sdn Bhd 100 0

Nihon Canpack (M) Sdn Bhd 100 0

Idaman Pharmaceuticals (M) Sdn Bhd 99 1

Camfil 92 8

Imerys Minerals (M) Sdn Bhd 80 20

Kinta Press and Printing (M) Sdn Bhd 80 20

Carsem Semiconductor Sdn Bhd 76 24

Omya (M) Sdn. Bhd. 75 25

Dindings Poultry Processing Sdn Bhd 70 30

UNISEM (M) Bhd 70 30

South East Asia Paper Products Sdn Bhd 67 33

Abric International Sdn Bhd 66 34

Finisar (M) Sdn Bhd 60 40

B.K.B. Hevea Products Sdn Bhd 52 48

Carpet Art Manufacturing Sdn Bhd 50 50

INDUSTRY SECTOR

COMPANY TYPE

DATA ANALYSIS METHODS

Demographic data

Frequency distributions (descriptive statistics) were computed

to analyze the demographic details of the respondents.

Reliability of the scales

Cronbach‟s alpha reliability tests were run to test the internal

consistencies of the scales used in the study.

Key Dimensions

Mean scores and standard deviations (descriptive statistics)

were computed to analyze the research dimensions.

RELIABILITY

Variables Number of

items

Cronbach’s

alpha

Skill level of workforce 4 0.88

Attracting, Recruiting and Selecting Employees 8 0.67

Labor cost 5 0.78

Technological changes 3 0.70

Education system 2 0.83

Employee retention 6 0.83

Perception towards manufacturing sector 4 0.83

Support & infrastructure 6 0.96

Surrounding environment 3 0.89

HR practices 13 0.95

Work values/attitudes 9 0.89

*Workforce diversity 3 0.32

* Excluded from further analysis due to low reliability of the scale

RESEARCH FINDINGS

OVERALL FINDINGS

CRITICAL ISSUE #1 - RISING LABOR COSTS

Items Mean SD

Minimum wage policy will increase company's labor cost 4.53 0.52

Challenge in developing/maintaining a competitive wage structure 4.27 0.70

Remaining competitive with pay and benefits 4.13 0.83

Rising healthcare cost 4.07 0.70

High training cost 3.73 0.70

Scale Mean Score 4.15 0.51

Overall, the findings indicated that rising labor costs is the biggest challenge of

the manufacturing sector in Perak.

• The manufacturing companies are facing aggravating challenges to remain

competitive with pay and benefits.

• The challenge is further heightened with the introduction of the minimum wages

policy by the government. In addition, rising healthcare costs and high training

costs have also increased the company‟s total labor costs.

CRITICAL ISSUE #2 - RETAINING EMPLOYEES

Items Mean SD

Difficulty in engaging talented employees 4.13 .83

Difficulty in retaining operators 3.87 .99

Difficulty in retaining engineers 3.87 .74

High attrition rate due to competitors' offer of better salary 3.87 .83

High attrition rate due to competitors' offer of better financial incentives 3.60 .99

High attrition rate due to competitors' offer of better benefit package 3.60 .91


• The findings identified retaining employees (skilled and unskilled)

as the 2nd key challenge of the manufacturing sector in Perak.

• Companies are facing retention difficulties and high attrition rate due

to better compensation and benefits offered by competitors.

KEY ISSUE #3 - EDUCATION SYSTEM

The findings highlighted that the current education system in the

higher learning institutions has not fully prepared graduates in

meeting the needs and requirements of the manufacturing industry.

Items Mean SD

The education system has failed to equip graduates with the relevant skills needed by the industry

3.80 0.86

Course syllabus in higher learning institution is not meeting the skill requirements of the industry

3.80 0.86


KEY ISSUE #4 - ATTRACTING, RECRUITING &

SELECTING EMPLOYEES

Items Mean SD

Skilled workers do not want or like to come and work in Perak 3.87 0.83

High competition for labour in the manufacturing sector 3.87 0.83

People are less interested to work in Perak 3.87 0.64

Lack of interested engineers to work in the manufacturing sector in Perak 3.73 0.80

Difficulty in recruiting people 3.67 1.23

Recruitment effort failed to attract local (Malaysians) people to work 3.67 0.82

Short supply of Malaysian talent in the labour market 3.67 0.98

Perak-born graduates are not interested to work in Perak 3.53 0.92


Attracting and recruiting both skilled and unskilled employees is another

major issue faced by comapnies in the manufacturing industry in Perak.

• Perak is yet to be seen as an attractive state to work in, including among

Perakians.

KEY ISSUE #5 - SURROUNDING ENVIRONMENT

Perak is yet to be seen as an attractive state to work in, mainly due to

the inconducive environment that may not meet the requirements and

lifestyle of young people (Gen Y).

Items Mean SD

Industrial areas in Perak are not attractive to young people 3.87 0.74

Inconducive environment in the industrial park 3.67 0.90

Unattractive lifestyle in Perak especially in the manufacturing areas 3.47 0.92


KEY ISSUE #6 - SUPPORT AND INFRASTRUCTURE

This findings showed that support from the state government is still rather inadequate

in the above aspects.

Items Mean SD

Lack of learning and development opportunities provided by the state govt 3.67 0.82

Limited training facilities provided by the state government 3.67 0.72

Lack of investment policies from the state government to support manufacturing sector

3.60 0.83

Lack of infrastructural development to support manufacturing sector 3.60 0.74

State government has insufficient strategy and structured approach to assist in manufacturing sector

3.47 0.74

Insufficient energy supply in the manufacturing area 3.33 0.90


The findings indicate that companies are experiencing problems in meeting

the skills requirements of the industry.

KEY ISSUE #7 – SKILL LEVEL OF WORKFORCE

Items Mean SD

Insufficient supply of qualified, skilled and experienced employees 3.67 .900

Lack of multi-skilled operators 3.40 1.18

Employees' skills are not alligned with job skill requirements 3.27 1.03

Shrinking pool of skilled workforce in the manufacturing sector 3.80 1.08


OVERALL FINDINGS

Primary

HIGH LABOR COSTS

EMPLOYEE RETENTION PROBLEM

EDUCATION SYSTEM

RECRUITMENT PROBLEM

INCONDUCIVE ENVIRONMENT

LACK OF SUPPORT FROM

STATE GOVERNMENT

INADEQUATE

SKILL LEVEL

Secondary

PERCEPTION

WORK VALUES

TECH CHANGES

HR

CHALLENGES FACED BY

MANUFACTURING INDUSTRY IN

PERAK

RECOMMENDATIONS

ISSUE RECOMMENDATIONS

FOR IMPROVEMENT

ACTION PLAN

LABOR COSTS

• New technology

• Incentive to

companies (especially

SMEs)

• Training

• Companies to restructure operations

by introducing semi-automation or

full automation machineries to

reduce dependency on unskilled

labours.

•

The state government may introduce

a short term incentive programme to

assist employers while findings

solutions/ways to adapt to the newly

introduced minimum wage policy.

• Retrain employees to be more skilful

and thus more productive at work.


FOR IMPROVEMENT

ACTION PLAN

EMPLOYEE

RETENTION

• Retention strategies

• Competitive

compensation and

benefit package

• Learning and

development

opportunities for

employees.

• Conduct a comprehensive state level market study

on compensation and benefits in the manufacturing

sector.

• To facilitate the efforts made by manufacturing

companies to retain employees through active

involvement of state‟s human resource executive

council members.

• Introduce awards to recognize „Best employers” in

the Perak manufacturing sector.

• Companies need to focus on developing in house

talent.

• Increase investments in training to cultivate and

retain the best available personnel.

• Introduce attractive employee benefit package.

RECOMMENDATIONS

ISSUES RECOMMENDATIONS

FOR IMPROVEMENT

ACTION PLAN

EDUCATION

SYSTEM

SKILL LEVEL

• Continue to build training

partnerships with the

industry.

• Ensure relevance of

training to the

requirements of the

industry .

• Companies and HLIs need to establish

strong collaborations in identifying skills

deficiencies in the manufacturing sector.

• The state government can initiate open

forum and discussion sessions between

HLIs and the industry people.

• Syllabus at HLIs need to be revised (as

necessary) to take into consideration the

requirements from the industry.

• State government to provide financial

assistance for college students who want to

obtain short term working experience

during semester break.

RECOMMENDATIONS

RECOMMENDATIONS

• Companies

–

–

–


FOR IMPROVEMENT

ACTION PLAN

RECRUITMEN

T

• Innovative

recruitment strategies

• Strategic

collaboration and

alliance

• Branding of PEKA

• Strengthen the role of AMANJAYA Career Centre

(PEKA) in assisting the manufacturing companies to

attract, recruit and select the right talent pool by setting

up a dedicated unit for the manufacturing sector.

• Enhance the link between PEKA, manufacturing

companies and educational institutions.

• Aggressively promote and market the services

provided by PEKA.

• PEKA to develop a close link with HLIs all over

Malaysia to promote job opportunities and vacancies in

the manufacturing companies in Perak.

• Intensify recruitment effort through various methods

such as employee referral programmes and websites

(company website and/or general employment

websites).

• Provide internship opportunities to college and

university students.


FOR IMPROVEMENT

ACTION PLANS

SUPPORT AND

INFRA-

STRUCTURE

INCONDUCIVE

ENVIRONMENT

• Learning and

development

• Training facilities

• Infrastructural

development

• State government and manufacturing companies

to jointly organize employee training programmes

for employees in the manufacturing sector.

• To conduct a study on skills and training needs

analysis (TNA) of manufacturing employees at

various sectors.

• Set up decentralized state-owned training centers

nearby industrial parks in Perak.

• Develop a more structured infrastructural

development to create a more conducive

industrial area that meet the needs and

requirements of the industry.

• To conduct a study of infrastructural need analysis

of industrial parks in Perak.

.

RECOMMENDATIONS

THANK YOU © 2013 INSTITUTE OF TECHNOLOGY PETRONAS SDN BHD

All rights reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means (electronic,

mechanical, photocopying, recording or otherwise) without the permission of the copyright owner.

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