1.

1 Background of the Study

To be a free will agent of self, entrepreneurship is a more suitable profession for one than
traditional regular employment. Entrepreneurs can discover a line of difference in nature;
they are guided by their own foresighted power in their own way and set their own intonation
to it. Consequently, they do something unprecedented, innovative through their
entrepreneurial activity. They invent new products, develop the organizations, and bring them
into market. They introduce new technologies and ensure proper utilization of resources.
Training is an important component of successful business concerns. However, although
there is growing acceptance amongst scholars that small- and medium-sized enterprises
(SMEs) are engines that drive economies across nations, through their contribution in terms
of job creation and poverty reduction; extant research portray that these organizations often
lack the resources required to undertake training. Bangladesh, as a developing country, is not
an exception. To ensure a smooth transition along the business life cycle and fulfil their
objectives, it becomes important to gauge into the training practices of these SMEs. This
paper therefore aims to investigate into the barriers which SMEs face in the provision of
training to their employees and their productivity in the Khulna city.

1.2 Origin of the Study

This report has been prepared for fulfilling the requirement of the MBA program. The
heading of the report is “Employee training and their productivity in small and medium sized
enterprises in Khulna district.” This project has been assigned by our honorable advisor, Dr.
Md. Nur Alam (Professor, Business Administration Discipline, Khulna University), to make
the theoretical knowledge more fruitful and long lasting the practical knowledge, which
opportunity is offered by Khulna University for its potential business students to get practical
experience through this course.

1.3 Objectives of the Study

The main objective is to increase the understanding regarding employee’s training and
development in relation to organization's performance.
1. To explore the importance of employees training program in small and medium
enterprises in Bangladesh and see as good, bad or acceptable performance.
2. To explore the perception of employers in small and medium enterprises about the
training program.

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 3. To explore the employee training contributes to their performance. To explore why
training is important for employees and firm performance.

1.4 Rationale of the Study

Entrepreneurship contributes more on employment creation, GDP growth, full- employment

opportunities, poverty alleviation, gender discrimination reduction, utilization of creativity
and energy. And succession of all these sectors indicates that these are the result of
sustainable success of business with having good capacity like trees with healthy root system.
There are many individuals who want to be successful entrepreneurs and economically
independent, if it is possible to use their skills, knowledge and qualities with combination of
proper utilization of resources then rapid economic change and development with bring about
in Bangladesh as well. And employee training is effective tool that supports capacity building
for entrepreneurs in SMEs. Therefore, this study tries to clarify the impact of employee
training in capacity building and improve their productivity of SMEs development that will
add some value with existing literature.

1.5 Scope of the Study

The report is intended to assess the impact of employee training on their productivity of
SME. For this purpose, the survey was conducted on sixty employees of Khulna district. This
study has focused on in what ways employee training helps businesses.

1.6 Limitations of the Study

Even though all the possible cautions are maintained during planning, selection of methods
and techniques, the study is not free from limitations. It is confined in Khulna. As convenient
sampling technique was used, the sample could be suffering from sampling bias and it may
not represent entire population. Certain business may not be represented appropriately in the
sample due to recognition of entrepreneurship and there is every possibility of generalizing
the result of the study. Furthermore, some findings may be related to the perception of
respondents which may not be representative to predict situation of entrepreneurs who take
loans from bank in SME.

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1.7 Report Review

The body of this report has been designed in the following chapters.

In chapter 2, some literary aspects of employee training and their productivity, early
researches relating to this study have been discussed.

Next chapter 3 is the methodology part where it is discussed about the ways of designing,
preparing, analyzing and interpretation of this study. It has included the design of the study,
sample design, data analysis and data collection and so on.

In chapter 4 which are the heart of this study, focuses on the presentation of data and
analysis of the data collected and interpretation.

Finally, there is a concluding part-Chapter5 where findings are summarized and the
conclusion of this study has been dawn.

2.1 Definition of Small and Medium Enterprise (SMEs)

There is no indefinite definition of SMEs. It depends on investment levels and number of

workers, technologies and technical complexities of production, degrees of skills demanded
from workers and managers, end use of products and so on, which varies from country to
country. According to Bangladesh Bank circulation published on 29/06/2017 small
enterprises are those enterprises which maintain following criteria:

Service Concern: The range of total fixed assets has been set at BDT 1,000,000 (Ten lac) to
BDT 20,000,000 (Two crore), excluding land and building and the number of employees 16-
50.

Trading Concern: The small enterprise that engaged in trading business should have a total
asset of BDT 1,000,000 (Ten lac) to BDT 20,000,000 (Two crore), excluding land and
building and the number of employees 16-50.

Manufacturing Concern: The small enterprise that engaged in manufacturing should have a
total asset of BDT 7,500,000 (Seventy Five lac) to BDT 150,000,000 (Fifteen crore),
excluding land and building and the number of employees 31-120.

According to the same circulation of Bangladesh Bank the Medium enterprise are those
enterprises who maintain the following criteria:

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Service Concern: The range of total fixed assets has been set at BDT 20,000,000 (Two
crore) to BDT 300,000,000 (Thirty crore), excluding land and building and the number of
employees 51-120.

Trading Concern: The small enterprise that engaged in trading business should have a total
asset of BDT 20,000,000 (Two crore) to BDT 300,000,000 (Thirty crore), excluding land and
building and the number of employees 51-120.

Manufacturing Concern: The small enterprise that engaged in manufacturing should have a
total asset of BDT 150,000,000 (Fifteen crore) to BDT 500,000,000 (Fifty crore), excluding
land and building and the number of employees 121-300 but in case of garment/ Laborious it
will be maximum 1000.

2.2 Characteristics of SMEs

• These are typically family/extended family owned

• They react quickly with the changes.
• Low Capital base.
• Product Lines are limited.
• Records and operating information are inadequate.
• Small ticket size.
• Acts, very often, as supply chain to big corporate bodies.

2.3 Employee Training

Among the various existing organizational HR practices, training has been considered to be
very beneficial if not most important to many organizations wanting to survive the
competitive world. In the words of Beaver and Hutchings (2005, p. 595), it is “crucial” for
business concerns to integrate training and development activities into key business decisions
and activities. However, while issues pertaining to training in large the current is
organizations have attracted a lot of attention, training related to small- and medium-sized
enterprises (SMEs) remains in a state of infancy. There is no single, uniformly acceptable
definition of the “small firm” Story, 1994), rather the definition of SMEs differs from country
to country [International Labor Organization (ILO), 1996] and there is no global definition
commonly used across the world. However, SMEs are a very “heterogeneous group” (Saru,
2007, p. 36) which includes a wide range of firms cutting across all sectors of the economy

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and operating under varying economic and social environments. SMEs are dissimilar from
microenterprises but nevertheless they tend to share the same principles. Microenterprises
normally operate in semi-formal and informal sector, while SMEs in formal sector of the
economy.

Irrespective of the meaning attributed to SMEs, it is an agreed fact across the world that
SMEs represent a powerful engine of growth for the global economy. They are regarded as a
high potential sector for employment generation, poverty alleviation and source of livelihood
of millions of people in both developed and developing countries. Their role in building a
solid industrial base can be gauged from the fact that they account for more than 95 per cent
of manufacturing enterprises and an even higher share of many service industries in
Organization for Economic Co-operation and Development (OECD) countries (OECD
Reports). However, in developing countries, the SME picture varies greatly. The World Bank
estimates that SMEs contribute, on average, 51.5 percent of gross domestic product in high-
income countries but only 15.6 per cent in low-income countries. In this sense, as it is a
recognized fact that SMEs contribute considerably to the economic development of a nation
(Robertson, 2003; Panagiotakopoulos, 2011), Beaver and Hutchings (2005) further argue that
existing literature which addresses human resource aspects in SMEs draws attention towards
the need for training and development together with the role of the owner manager in
engendering an organizational culture in line with the broad definition of HRM. Moreover,
according to De Ferranti and Ody (2007), SMEs typically employing between 10 and 250
persons are considered to form the backbone of modern economies and can be crucial engines
of development through their roles as seedbeds of innovation. However, in much of the
developing world, SMEs are under-represented and are stifled by perverse regulatory
climates and poor access to inputs as far as the training function of HRM is concerned. There
is thus little empirical evidence to date to support the association that training has with the
performance of SMEs. (Macpherson and Jayawarna, 2007). So much so that the empirical
evidence linking performance and training among SMEs is still considered inconsistent and
inconclusive. (Morgan et al., 2002; Storey, 2004; Hashim and Wok, 2013). However,
existing researchers suggest that there are “significant differences between the training and
associated human resource development activities undertaken by businesses of different
sizes” (Devins et al., 2004, p. 449). In line with the above study by Saru (2007) indicates that
since the effect of employment in SMEs is considerable in a growing economy, it becomes
thus important to study the training function in SMEs (Panagiotakopoulos, 2011). More so,

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when it is acknowledged that small establishment including SMEs are important for a
developing economy, as they provide employment opportunities and a basis for developing
new ideas, and contribute to economic growth and sustainable development as well
(Ricupero, 2002). It becomes also important to study training in SMEs, as it has also been
argued that SMEs constitute the dominant form of business organization, accounting for over
95 per cent and up to 99 per cent of enterprises depending on the country. They are
responsible for between 60-70 per cent of net job creation in OECD countries. Small
businesses are particularly important for bringing innovative products or techniques to the
market (OECD Policy Brief NOV 2006).

2.4 Productivity of Employee

Capacity building is the development in a planned way to increase knowledge, skills,

management, output rate in manufacturing and other capabilities of an organization through
technology, training as well as acquisition and incentives. It is an action or activity that
improves effectiveness and ability to work. It strengthens core capacities of an organization
delivering socio-economic and environmental benefits. In more comprehensive way, it can be
defined as an ongoing long-term development process that involves ministries, professionals,
local authorities, academics, nongovernmental organizations, community mangers and more
using national capacities and capabilities like human, scientific, technological, institutional
,and organizational and resource capabilities which ultimate goal is to enhance performance
of individual ,team society and organization building measurably sustainable result.
Numerous studies have concluded that capacity building is the key to poverty reduction and
sustainable development ( Eade, 1997;UNEP,2002;Black,2003; Chandler,2003;USAID,2011
and Wikipedia,2013). The UNDP (2008) cited in Wikipedia (2013) defined capacity building
as the “organization’s core contribution to development.” Then, it can be said that capacity
building is a process that builds an environment for sustainable development by enhancing
management, leadership as well as organizational skills, abilities and resources to ensure
quality of life and thrive in the world of fast-changing (Rickett,2000;CIDA,,1996 cited in
Sapovadia, 2007 and Temple, 2011).

3.1 Research Design

Cooper and Schindler (2012) stated that research design refers to a framework for identifying
the relationship among variables of the study. In this study, the research design incorporates

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quantitative approach to identify the interrelationship among bank lending, capacity building,
entrepreneurship, SME development, and sustainable business success. The survey is
conducted to probe the respondents. According to Zikmund et al. (2013), survey is associated
most often with quantitative findings and it is a method that collects primary data based on
communication with a representative sample of target population.

3.2 Population and Sample

The population of the research is entire owner or manager of SME organization in Khulna
city. The respondent is best matched who are entrepreneur and owner of business. Sample
size is 60 entrepreneurs. Samples are taken from different parts of Khulna city.

3.3 Sampling Technique

A non-probability sampling design, convenient sampling was followed to select the

participants. The purpose of using convenient sampling is to the selection of sample units left
primarily to the interviewer and often, respondents are chosen for the reason that they happen
to be in the right place on right time (Malhotra and Dash, 2013)

3.4 Instrument Development

Main instrument of this study is questionnaire. Beside secondary literature and prior research
on this field were used to obtain research objective. The study has been conducted through
survey methodology with two structured close- ended questionnaires having total 22
questions. A sample of the questionnaires has been given in Appendix-1

3.5 Questionnaire

The questionnaire was used to collect the data. One set of questionnaires was prepared for
pilot study. After getting the result some problems were founded out. By discussing with our
honorable course instructor, we modified our questionnaire for the more perfection. The
variables selected for employee training had discussed about perception of employees,
benefits of training, cost of training, Items selected to measure these variables were adopted
form previous studies and literature conducted on employee training. The final questionnaire
consists of three parts. Part A includes questions to collect demographic information of the
employee. Part B aims at measuring the respondents’ views about training. Last part includes

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total 7 items request owner to provide information about their employee productivity. A likert
type of scale is used, 1 to 5, with 5 being most significant and 1 the least.

3.6 Data collection

Data are collected from both primary and secondary sources. The secondary data includes
information that are collected from different reports, articles, bulletins, published literature,
journal, books etc. the primary data are collected through survey on the questionnaire.

In this study, secondary data are used to identify the relation between employee training and
the effectiveness of training to interpret primary data more insightfully.

For this study, personal method of survey is used, because the respondent were asked and
interviewed directly. As the research is on SME enterprises, the entrepreneurs who took loan
from banks are interviewed.

3.7 Data analysis

Descriptive statistics (mean and standard deviation), Coefficient of correlation and regression
have been computed and presented in table form. Means and Standard deviations, regression
and correlations of coefficient for the two variables have been computed using SPSS.

Correlation Analysis: The Pearonian co-efficient of correlation is most widely used for
summarizing the degree and direction of relationship between two variables and the value
always lies between + 1 to -1 (Gupta and Gupta, 2005). Gupta and Gupta (2005) and Morgan
et al.(2004) cited in Siddiqi (2011) stated that:

• -1.0(a perfect negative correlation)

• 0.0(no correlation)

• +1.0 (a perfect positive correlation)

This study is based on this mechanism. The correlation procedure has been subject to two
tailed tests of statistical significance at two different levels-highly significant (p<0.01) and
significant (p<0.05).

Regression analysis: Regression analysis is a measure of the degree of association of

correlation is obtained (Gupta and Gupta, 2005). There is a dependent variable that is tried to
vibe explanation along with a single or more independent variable which are associated with

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it. One of the measures of how well the model explains the data is the r^2 value. Regression
analysis allows an independent variable which has another number attached to it in the
regression outcome that is known as p- value or significance level. Generally variable are
accepted with a p-value of less than 0.05 or 0.01 as significance (IDRE-UCLA, 2014).

Hypothesis:

H1: There is positive impact of Training on the productivity of employees.

H0: There is no positive impact of Training on the productivity of employees.

4.1 Correlation between Employee Training and Productivity

Correlations

EmployeeTraini Zscore(Producti
ng vity)

**
Pearson Correlation 1 .709

EmployeeTraining Sig. (2-tailed) .000

N 60 60

**
Pearson Correlation .709 1

Zscore(Productivity) Sig. (2-tailed) .000

N 60 60

**. Correlation is significant at the 0.01 level (2-tailed).

Hence, the Pearsonian Correlation value is .709 in .01 levels along with positive sign. The
table shows that both the variables are positively correlated, which means that an increase in
training program will result in a proportionate increase in the performance of employee.

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4.2 Regression Analysis of Employee Training and Productivity

b
Model Summary

Model R R Square Adjusted R Std. Error of the

Square Estimate

a
1 .709 .503 .494 .71123005

a. Predictors: (Constant), EmployeeTraining

b. Dependent Variable: Zscore(Productivity)

R Square (called the coefficient of determination) tells the proportion of the variance in the
dependent variable (Employee Productivity) that can be explained by variation in the
independent variables (Employee Training). Thus, the value .503 is indicating that it is
acceptable research model.

a
ANOVA

Model Sum of Squares df Mean Square F Sig.

b
Regression 29.661 1 29.661 58.636 .000

1 Residual 29.339 58 .506

Total 59.000 59

a. Dependent Variable: Zscore(Productivity)

b. Predictors: (Constant), EmployeeTraining

The significant value is .000 which is less than .05. So it is a valid research model.

a
Coefficients

Model Unstandardized Coefficients Standardized t Sig.

Coefficients

B Std. Error Beta

(Constant) -3.626 .482 -7.517 .000

1
EmployeeTraining 1.073 .140 .709 7.657 .000

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 a
Coefficients

Model Collinearity Statistics

Tolerance VIF

(Constant)
1
EmployeeTraining 1.000 1.000

a. Dependent Variable: Zscore(Productivity)

Table 4.2 shows that H0 is rejected. It means that the training program have a positive impact
on the productivity of the employees. So our results justify the theoretical background. The
value of beta i.e. 0.709 shows a high level of significance.

4.3 Histogram of Employee Training and Productivity

The histogram which is shown above represents Employee Training and their Productivity.

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5.1 Findings

In this study, it was designed to assess whether employee training helps in their productivity.
A sample of 60 employees and 25 entrepreneurs, who gets training, was taken for study using
convenient sampling technique. Based on the 60 respondents and survey the major findings
of this study are summarized as follows……………

This study found that there are highly significant and positive correlation with the employees
getting training and their productivity which means that training has great impact on their
productivity.

The relativity and validity of the questionnaire is high. The items are highly valid.

5.2 Conclusion

 According to our research training have a positive impact on their productivity.

 Training is considered as a positive step towards augmentation of the knowledge base
by the respondents.
 The objectives of the training programmes were known to the respondents prior to
attending them.
 Some of the respondents suggested that the time period of the training programmes
were less and thus need to be increased.
 The training programmes were able to improve on-the-job efficiency.
 Some respondents also recommended that the number of training programmes be
increased.

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Reference

Panagiotakopoulos, (2011) “Barriers to employee training and learning in small and medium sized enterprises
(SMEs)”, Development & Learning in organizations.

Karen Johnston, Kim Loader, (2003) "Encouraging SME participation in training: identifying practical
approaches".

Kesseven Padachi, Soolakshna Lukea Bhiwajee, (2016) "Barriers to employee training in small and medium
sized enterprises: Insights and evidences from Mauritius"

Khalil Al-Hyari1, (2013) “Identification of Barrier Factors and Potential Solutions to SMEs Development
among Jordanian Manufacturing Sector".

Agarwal , Dr. S. P.(2007) Technology Capacity Building for Internationalization of SME[online]. s.n.
Available from: www unescap.org/tid/projects/ sisindo_agarwal.pdf [accessed 4 April 2016]

https://www.scribd.com/doc/31187389/A-Project-Report-on-Training-and-Development-of-
HAL

https://www.longdom.org/articles/the-impact-of-employee-training-and-development-on-
employee-productivity.pdf

https://www.worktolive.info/blog/how-employee-training-drives-productivity

Beaver, G. and Hutchings, K. (2005), “Training and developing an age diverse workforce in
SMEs: the need for a strategic approach”, Education Training,
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Cassell, C., Nadin, S., Gray, M. and Clegg, C. (2002), “Exploring human resource
management practices in small and medium sized enterprises”, Personnel Review, Vol. 31
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Devins, D., Johnson, S. and Sutherland, J. (2004), “Employer characteristics and employee
training outcomes in UK SMEs: a multivariate analysis”, Journal of Small Business and
Enterprise Development, Vol. 11 No. 4, pp. 449-457.

http://www.smef.org.bd/

Jayawarna, D., Macpherson, A. and Wilson, A. (2007), “Training commitment and

performance in manufacturing SMEs: incidence, intensity and approaches”, Journal of Small
Business and Enterprise Development, Vol. 14 No. 2, pp. 321-338.

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