European Online Journal of Natural and Social Sciences 2015; www.european-science.

com
Vol.4, No.4 pp. 787-797
ISSN 1805-3602

Impact of Training and Development on Organization Performance

with Mediating Role of Intention to Quit as Human Resource
Quality Cost
Hafiza Sadia Mansoor1*, Faisal Tehseen Shah2, Ateeq-ur-Rehman3, Asma Tayyaba4
1
Department of Management Sciences, COMSATS Institute of Information Technology;
2
Department of Statistical Sciences, COMSATS Institute of Information Technology; 3Department
of Chemical Engineering, University of Engineering and Technology; 4University of Engineering
and Technology, Lahore, Pakistan
*E-mail: sadiam99@gmail.com
Tel.:0092-334-9517906

Received for publication: 22 August 2015.

Accepted for publication: 01 November 2015

Abstract
The study is focused on the analysis of the impact of the training and development efforts in
the Small and Medium Enterprises of Pakistan on the intention of employees to leave the
organization considering it as an expense and the wastage of time and resources by the
organization. The study will also evaluate the ultimate impact of the intentions of the
employees on the performance of the organization. The salary based employees of the
organizations having 5 – 250 employees have been selected on the basis of stratified
sampling technique for the data collection purposes. Out of 600 questionnaires distributed,
290 were returned and 278 were used for the study. The relationship of training and
development and organization performance has been found to be positively mediated by the
intention of employees to quit the organizations. The positive relationship might exist due to the
number of other factors like inflation, less job opportunities existing in the Pakistani context.
The study will be highly significant for the practitioners in the SMEs, shifting their focus towards
the increased training and development efforts.
Keywords: Cost of Quality; HR Practices; Intention to Quit; Organization Performance;
Pakistan; Small and Medium Enterprises; SMEs; Training and Development

Introduction
Much literature has been available on the HR practices and Quality of the processes in the
organizations but the emphasis on the training and development efforts in the SMEs especially in the
emerging economies like Pakistan has not been focused in the literature. The emphasis on the
training and development needs in the SMEs is of utmost importance for the small businesses in the
21st century where the world is rapidly changing and becoming a global village. The impact of the
training and development practices on the organizational performance has been accepted by most
quality oriented companies but is still considered as an expense in the SME sectors of developing
countries. The impact of increased efforts on the behavior and intentions of the employees and
ultimately on the performance of the organization needs to be measured in the SME sector of
Pakistan. The current study is an empirical research work on the impact of training and development
efforts of the SMEs on the organizational performance considering the intentions of employee to
quit the organization as the mediating factor.

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 Hafiza Sadia Mansoor, Faisal Tehseen Shah, Ateeq-ur-Rehman, Asma Tayyaba

Literature Review
Distinction among the Small and Medium Enterprises (SMEs) and the multinational
enterprises (MNEs) is a difficult task. The establishment of the SMEDA by the Government of
Pakistan in the 80s was the first formal authority for the handling of the SMEs in Pakistan. The
definition given by the SMEDA for the distinction of SMEs from all other organizations on the basis
of the number of employees includes the organizations which are not the public-limited
organizations and does not employee more than 250 persons (with total assets at cost up to 50
million rupees excluding land and building) in the manufacturing sector and 100 persons (with total
assets at cost up to 50 million rupees excluding land and building) in the trade and service sector and
net sales must not exceed 300 million rupees according to the latest financial statements (SMEDA,
2013). It includes all the trade, manufacturing sector and the services sector. The implementation of
the quality HR practices and analysis of the Costs associated with those practices in the SME sector
of Pakistan is a field that needs the detailed study (Raziq, 2011; Asad, et al., 2011). The costs of
quality were explained by Armand Feigenbaum in 1943 (Schiffauerova & Thomson, 2006).
According to (Feigenbaum, 1956)the costs incurred to ensure the processes providing required or
demanded quality are the prevention costs. Costs incurred to measure the quality level attained by
the processes is the appraisal cost, whereas the costs associated with correcting the quality problems
in the products and services before or after the delivery of products or service to the customer is
known as the internal and external failure costs respectively. The current study is about the impact
of training and development (HR Practice) on the organization performance considering Intention to
quit (Cost of Quality) as the mediating variable.

HR Practices in the SMEs of Pakistan

The SMEs in Pakistan are working in every field of life and serving all the national and
international markets. These are mostly run by the one person or the few individuals of the family
making all the decisions of the enterprise and having no distinction of the personal and
organization’s assets. In the informal sector many enterprises are reporting low profitability while in
formal sector many are reporting high profitability so having good lifestyle for its employees
(Dasanayaka, 2008).The SMEs are contributing almost 30% in the GDP of Pakistan (Gallup, 2004)
but they still seem to be struggling, and so the lack of commitment and motivation, high turnover,
low employee involvement are the major problems faced by the SMEs in Pakistan (Raziq, 2011).
The employees mostly got confused if asked about the implementation of the HR practices and
much comfortable if asked that how they manage people. The SMEs in Pakistan are highly growth
oriented but still they need much to do in the fields of training and proper performance management
of the employees (Asad, Haider, Akhtar, & Javaid, 2011). Accordingly,(Asad, Haider, Akhtar, &
Javaid, 2011), the HR practices like hiring criteria, training, employee involvement in the decision
making, performance appraisals, and performance based compensation systems have highly positive
impact on the organizational performance levels. If they are not done well, they could lead to the
increase in the failure costs of the organization and can seriously question the survival of the SME in
this globalized and the competitive world.In the Netherland and Australian context, the relationship
of the family owned businesses and their management were studied by the (de Kok, Uhlaner, &
Thurik, 2006). According to him, the small firms in the region make less use of the recruitment
activities or practices in the organizations, provide minimum training to their employees and less
likely to implement the formal performance appraisal systems in their organizations (Bhutta, Rana,
& Asad, 2008).

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Training and development (TAD)

Training being an important factor has been categorized into general and specific employee
training programs. Employers offer general training to the temporary employees in the organizations
while otherwise the training programs are specific in nature (Almeida-Santos & Mumford, 2004). In
SMEs in Pakistan, SMEDA organizes specific training programs with respect to area and
requirement of the SMEs. Training programs, workshops, seminars, and conferences are organized
by SMEDA in major cities of Pakistan for enhancing awareness and increasing capacity of the
SMEs. According to (SMEDA, 2013), these programs are affordable for employees and appropriate
aimed at improving technical, financial, marketing, compliance, regulatory, legal, policy and
commercial functions of the SMEs. The focus of the programs is to improve the performance
indicators of organizations like quality, productivity, competitiveness etc. the programs help in
human resource development and in enhancing efficiency of the organizations (SMEDA, 2013).

Training and Development in TQM Models

The importance of training and development has been emphasized by the number of
scholars, academicians and practitioners. According to (Bohoris, 1995; Bowen & Lawler III, 1992;
Ruben, 1995; Curtis, Hefley, & Miller, 2009), the major TQM models has paid much attention to the
training and development needs in the organizations to move towards the knowledge and quality
organization. As now-a-days, businesses need to have customer oriented quality based business
strategies in all the processes of the organization, to be successful in this competitive world. The
standards defined by the quality and the quality models are the best guidelines to decide about the
strategies to better achieve the objective of the customers and the organization, as they clearly define
all the strategic requirements of the products and processes.Firms are now convinced to believe that
the major source of competitive advantage is actually their human resource (HR) (Pfeffer, 1994).
Building competitive advantage through the HR of the organization needs vigilant attention to the
TQM based HR practices of the organization that best influence these assets (Wright, Gardner, &
Moynihan, 2003). Increasing product competition and the changing demands of the customers and
investors along with the deregulation and globalization of world markets, has made the quickly
changing economic environment a norm for most of the organizations, which further made it
compulsory for them to improve or enhance their performance, to be competitive (Becker &
Gerhart, 1996). For this purpose, many organizations have decided to become a successful ‘TQM
Organization’. But the main challenge for organizations is to decide their definitions of quality. For
this purpose many regional and international quality awards and models are introduced by different
authors and institutions. They are developed to promote and enhance quality and it help
organizations to better analyze their own activities and compare them with their competitors, and to
make their organizations a continuous improvement organization by implementing quality in human
resource strategies (Henry, 1990). The major factor that is ignored by the SMEs in the context of the
emerging economies like Pakistan is the training of the employees and the owners. The TQM
Models of People Capability Maturity Model(Curtis, Hefley, & Miller, 2009), European Quality
Award (Bohoris, 1995), Malcolm Baldridge National Quality Award (NIST, 2011), and the Deming
Application Prize (Deming Institute, 2012; Powell, 1995), all have placed much emphasis on the
training and development of the employees and the owners of the SMEs of the country.
The main factor keeping the SMEs away from the training and development efforts is the
perception of it as an expense. The impact of the training and development on the intention of the
employees to quit the organization has been evaluated by the survey.The behavior of the employees
to quit the organizations is of primary focus for the organizations and the researchers.

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 Hafiza Sadia Mansoor, Faisal Tehseen Shah, Ateeq-ur-Rehman, Asma Tayyaba

Intention to Quit (ITQ)

One of the most important determinants of the actual behaviors of the employees is their
intentions (Ajzen & Fishbein, 1980) and (Igbaria & Greenhaus, 1992). The researchers now-a-days
are much concerned about the intentions of the employees as once the feeling or intention is
developed it is almost impossible or much difficult for the management to gain the prior position
back. A longitudinal study by the (Sager, 1991) has reported that the intentions of the employees in
the workplace vary greatly among the leavers and those who remain the members of the
organizations. Hence, it is reasonable to argue that the intentions are the indicators of the behaviors
of the employees (Williams, 2003).
The intention to quit the organization is the most important predictor of the employee
turnover and it is a major problem for the employer facing continuous lack of employee continuity,
high costs in rehiring and retraining, and issues of organizational productivity (Firth, Mellor, Moore,
& Loquet, 2004). Job stressors (job ambiguity and work load), job dissatisfaction (Moore, 2002),
low level of communication among managers and subordinates, and lack of confidence in the
organization (lack of vision to grow in the organization) are the major factors giving rise to the
feelings of intention to quit the organization (Firth, Mellor, Moore, & Loquet, 2004), which in turn
are decreasing the organizational performance and productivity.According to (Williams, 2003) the
HR practices impact the intention of the employee to quit the organization if the trust of the
employee got affected. The lack of trust on the organization due to the poor HR practices can lead to
the lack of commitment and intention to quit the organization, which are the major predictors of the
organizational performance. As the management has to spend much more in the hiring; training;
development; and retaining of the new employee; if the employees’ intention to quit leads to
increase in the turnover rate, subsequently impacting largely on the performance levels of the
organization and other employees of the organization.

Organization Performance (OPF)

Organizational performance is now a very important factor in the empirical researches of the
business policies (Dess & Robinson, 1984). According to (Yucthman & Seashore,
1967)organizational performance can be assessed by the internal and external factors on which the
survival of the organization depends. Regardless of this, the operationalization of the concept is very
difficult as it is a multi-dimensional and complex phenomenon (Dess & Robinson, 1984).
Considerable research has been done, identifying the relationship between HR practices and the
performance of the organization (Rogers & Wright, 1998).The effect of HR practices on the
organizational performance is greatly influenced by the COQ of the organization. The higher the
failure costs of quality the more lower the levels of organizational performance will be. As the
failure costs caused by the lack of commitment (Steers, 1977; Williams, 2003), cynicism
(Andersson & Bateman, 1997), absenteeism (Harridon & Martocchio, 1998), intention to quit the
organization (Firth, Mellor, Moore, & Loquet, 2004), redesign of training programs (Storey, 2004)
and losing potential employees (Somaya, Willaimson, & Lorinkova, 2008) greatly push the levels of
organizational performance towards the lower end. Hence, the better the HR practices
implementation the higher will be the performance levels.

Model of the Study

The impact of the Training and Development on the organizational performance is analyzed
in the study considering the intention to quit as the very important HR Cost of Quality (COQ). The
strength and the direction of the relationship are also analyzed during the study in the SME sector of
Punjab, Pakistan as compared to the impact outlined in the literature.
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Social science section

Hypothesis
H1: Training and Development has positive and significant relationship with Organization
Performance.
H2: Training and Development has negative and significant relationship with employee’s
Intention to Quit.
H3: Intention to Quit has negative and significant relationship with Organization
Performance.
H4: Intention to Quit acts as the negative and partial mediator in the relationship of Training
and Development and Organization Performance.

Methodology
Participants and Procedure
The Small and Medium Enterprises of Punjab, Pakistan were selected for the survey,as being
the biggest contributor to the GDP of the country (Financial Expo, 2012). The sample is taken from
four provinces of Lahore, Faisalabad, Sialkot and Lahore. The Small and Medium Enterprises of the
manufacturing and the service sector are taken as the target population. The number of districts in
the Punjab is 36, out of which in 19 districts, the Chambers of Commerce are established by the
Government of Pakistan where the listing of the SMEs is done. Among these Chambers of
Commerce the 12 districts are identified by the SMEDA for the potential areas for investments. The
study took these 12 districts as the stratas of the target population, and chose Okara and Sialkot as
small, and Faisalabad and Lahore districts as the large stratas for the collection of the sample, using
simple random sampling technique. The lists of the SMEs in the four districts are obtained from the
respective Chambers of Commerce. The sampling units are then selected using the simple random
sampling from the lists.
Sample Size and response Rate
The sample of 120 companies is selected from the population. Forty companies each from
Lahore and Faisalabad were selected for the sample as these cities are having the 60% of the SMEs
of Punjab, and 20 companies each from Okara and Sialkot were selected. 5 questionnaires in each
organization were distributed randomly to the salaried employees only. The returned questionnaires
were 290, out of which 12 were discarded due to incomplete responses and 278 were finally used
making the response rate of 46.3%.

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 Hafiza Sadia Mansoor, Faisal Tehseen Shah, Ateeq-ur-Rehman, Asma Tayyaba

Measures
Five points measure is developed for Training and Development, after the detailed analysis
of the best practices TQM models of P-CMM, MBNQA, EQA and DAP, as done by (Quazi &
Padibjo, 1998) and (Black & Porter, 1996). These items were first tested by the pilot study to
measure the reliability and later on after the analysis their reliability, face validity, convergent
validity, Nomological validity and discriminant validity were reassured through the Confirmatory
Factor Analysis (CFA) in Amos. For the intention to quit, two items from the scale of Tate, et al.,
1997 and one item from the scale of Lee, 2008was used. For organizational performance four items
from the scale of Kim, 2004 were used for the study. Both scales of intention to quit and
organizational performance were also reassured for the reliability and validity issues through CFA.
The results of the data are analyzed by the regression analysis on the SPSS 16.0. The items of the
variables are given in Table I.

Table 1 Items of the Questionnaire

TRAINING & DEVELOPMENT
Employees are given regular opportunities for training and development.
Training needs are regularly analyzed and subsequent training plans are revised by the authorities.
The training programs are continuously improved after training impact assessment.
There are formal orientation training programs for quality awareness and skill development in the
organization
Explicit efforts were made to train potential successors for their future role in the organization.

INTENTION TO QUIT
I often think of leaving my present job.
I am looking for the new job in the next year.
I am presently looking and planning to leave this organization.
ORGANIZATION PERFORMANCE
In the past two years, the productivity of my work unit has improved.
. In general, all employees are treated with respect in my organization, with no regard to status and
grade.
. It is rare to make big mistakes in my organization when conducting work.
. The occurrence of goal attainment is very high in my organization.

The measures were also converted into Urdu for the better response and understanding of the
respondents. The multilingual questionnaire was used after the analysis from the pilot study of the
research questionnaire in English language. The Urdu questionnaire was analyzed by a TQM and
Urdu language expert before being used. Direct or one-to-one translation was done for the study. the
direct translation must not be confused with indirect or less straightforward. It is just the simple
translation to the best ability of the translator as defined by the (Sechrest, Fayand Zaidi
1972;McKayet al., 1996). The measures of reliability and validity are taken to ensure the
equivalence between the translated and original instrument (e.g., Hulin, Drasgow and Komocar
1982; Hulin, 1987; Hayashi, Suyuki and Sasaki, 1992). The reliability and validity of the instrument
before and after translation is ensured in the study.

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Table 2 Convergent & Discriminant Validity

CR AVE MSV ASV FOPF FTAD FITQ
FOPF 0.816 0.535 0.258 0.129 0.731
FTAD 0.863 0.559 0.258 0.150 0.508 0.747
FITQ 0.748 0.562 0.041 0.021 0.005 0.203 0.750

Findings & Results

The exploratory and confirmatory factor analyses were performed to confirm the items of the
three variables used for the study. The Kaiser-Meyer-Olkin Measure of Sampling Adequacy value
of 0.811 and the significance of 0.000 shows significant factor loadings on each construct. The
application of confirmatory factor analysis confirms the construct’s items by having GFI=0.893,
CFI=0.900, NFI= 0.875 and CMIN/DF=4.25. The CFA Model for the three constructs is shown in
the appendix II.Three items were removed from the analysis after the confirmatory factor analysis
due to factor loading less than 0.4. After that the reliability of the constructs was measured through
the Cronbach’s Alpha. The values of 0.862, 0.748 and 0.802 were observed for the scales of training
and development, intention to quit and organizational performance respectively. The face validity
and convergent, discriminant and Nomological validity of the constructs was ensured. The results of
the convergent and discriminant validity are reported in Table 1.
After establishing reliability and validity of the constructs the biasness of the data was
ensured through the Harman’s Single factor test and also by Common latent factor. 35.9% variance
was explained by all the items of the study which is less than 50% and hence ensuring absence of
biasness in the data. Same results were reported by the standardized regression weights in the
common latent factor test.
After that regression diagnostics were performed to fulfill the assumptions for applying the
regression analysis. The multi-collinearity, auto-correlation, outliers, leverage values and influential
values tests were satisfied for the data, with the Durbin-Watson value of 2.062. The Pearson
correlation value was also calculated to check the correlation among the three variables reporting
moderately positive correlation among variables.
Finally, the regression analysis was performed. Four step model of Baron and Kenny (1956)
was used to check the mediating role of intention to quit on the relationship of training and
development and organization performance. At the first step, the direct relationship of independent
variable “training and development” with the dependent variable “organization performance” was
analyzed. The = 0.409 and = 0.000 shows the positive and highly significant relationship
between the two variables. At the second step, the relationship of mediating variable “intention to
quit” and training and development was tested. The positive and significant values are shown in the
results (= 0.402 and = 0.000) with 34% of the variance explained by the relationship. Following
the third step in Barron and Kenny (1956) model, the relationship of Intention to quit and
organization performance was tested. Results showing positive and significant relationship (=
0.183 and = 0.000) with 23% of the variance explained. At the final step the mediation of
intention to quit was checked for the relationship of training and development and organization
performance. The highly significant and positive values shows the positive mediation of the
relationship (for training and development = 0.395 and = 0.000 and for intention to quit =
0.118 and = 0.014). The Sobel test-statistic of 2.284 and the significance value of 0.02 in the
Sobel test application shows that the mediator “intention to quit” significantly carries the influence
of training and development on the organizational performance at the 5% significance level. This
shows 2% variance by the indirect effect and 48.2% reduction in the power training and
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 Hafiza Sadia Mansoor, Faisal Tehseen Shah, Ateeq-ur-Rehman, Asma Tayyaba

development to predict organization performance. The above results show that the first hypothesis is
accepted as it is but for the other three, although the relationships are highly significant but are
having the positive relationship instead of negative relationship.

Discussion
Training and development of employees is an important factor to be catered if organizations
try to shift their focus from being profit oriented to the quality oriented organization. In Pakistan,
major research work is done on the quality culture of the multinationals and SME sector is ignored
irrespective of being the major contributor to the GDP of the country. Almost 90% of the
organizations in Pakistan are SMEs (Gallup, 2004) and they are giving 30% to the GDP of the
country (Financial Expo, 2012). The study is basically to fulfill this gap and the presence of the
training and development efforts and its impact on the behaviors of employees (intention of
employees to quit) in the SMEs of Punjab, Pakistan is analyzed.
The survey results show that the focus of SMEs in Pakistan is shifting towards providing
trainings to the employees especially after the development of the SMEDA and importance given to
the sector by the government of Pakistan. But still the “saith” culture is more prominent and
informal discussion with the respondents had shown that the owners still do not appreciate highly
skilled employees in the organizations. The frequency analysis of the items of intention to quit also
confirms the fact that the desire of employees to quit the organization is there in the sector. More
than 40% of the employees in SME have positive intentions to quit the organization due to lack of
longterm vision.
The mediating role of intention to quit is having positive direction, which means if the
efforts of the organizations towards training and development increase the intentions of the
employees to quit the organizations also increase. This is quite unexpected result as the models and
awards studied above in the literature provide totally opposite relationship. In the Pakistani context,
the reason for positive relationship might be the high inflation rate, large families to support,
unawareness of training needs among the employees in the SMEs or the consideration of the activity
as being the wastage of time and money by the employees. The data also shows that the intention to
quit affects the relationship of training and development and organization performance by 48.2%
that is approximately 50%, which is a considerable impact. Hence, the impact of training and
development on the intention to quit of the employees cannot be ignored and needs to be catered by
the owners of the organization to have the positive shift towards the quality culture in their
organizations.

Conclusion
The shift of the focus of the SMEs in Pakistan towards the quality organizations cannot be
ignored, as organizations are taking actions under the supervision of the policies of the SMEDA for
making their organizations as quality organizations, but still the presence of HR quality cost, that is,
intention to quit prevails in the market. The impact of training and development efforts on the
intention to quit is opposite to what is expected from the literature and practitioners’ analyses.
Hence, serious efforts need to be done to analyze and rectify the impact of the training and
development efforts. Intention to quit plays significant role in the relationship of training and
development and organization performance and hence cannot be ignored by the SMEs.

Limitations and Future Recommendations

Although the study holds much importance in the literature world and is a significant
contribution to the knowledge world of training and development, intention of employees to quit the
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organization and organization performance, in the Pakistani context, but still there are certain
limitations in the study like the small sample and limited target population. There are number of
areas that are not explored in the study, as it is impossible to study each and every aspect in one
research work.
The analysis of the financial impact of the poor training need analysis and intention s of
employees to quit the organization on the organization performance is not the part of the study and if
done can be much beneficial for the researchers and practitioners at the same time. Secondly, the
longitudinal research can be a better determinant of the shift of focus of the SMEs towards the
quality oriented organizations. An important and quite significant study can be done on analyzing
the factors that are playing their role in the positive impact of training and development efforts on
the intention to quit the organization in the Pakistani context. At last but not the least, the study is
focused on the salary based employees of the SMEs, there is a need to assess the level of training
and development efforts undertaken for the daily wage employees working in the SMEs of Pakistan,
who are a comparatively bigger part of the SME employees.

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