Determinants of Employee Engagement: The Mediating Role of Job Satisfaction in SMEs in Malaysia

Wong, Jia Le (2024) Determinants of Employee Engagement: The Mediating Role of Job Satisfaction in SMEs in Malaysia. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study investigates the determinants of employee engagement in small-to-medium enterprises (SMEs) in Malaysia, focusing on perceived organisational support, psychological empowerment, reward and recognition, work environment, work-life balance, career growth, and AI adoption. SMEs, which account for 98.5% of businesses in Malaysia, are crucial to the country’s economic success. Employee engagement, defined as the physical, cognitive, and emotional investment in work, has been shown to improve productivity, performance, and well-being. The rapid transformation of work models, particularly following the Covid-19 pandemic, has posed new challenges in maintaining engagement, including managing work-life balance and preventing burnout. Drawing on the Conservation of Resources Theory, Maslow’s Hierarchy of Needs, and Herzberg’s Two-Factor Theory, this study develops a framework to explore the factors influencing employee engagement. It also examines job satisfaction as a mediating factor. Using a quantitative approach, 153 responses from SME employees were analysed through multiple regression to identify key relationships. Results indicate that perceived organisational support, career growth, and AI adoption significantly impact engagement, while work-life balance negatively influences it in the Malaysian context. The study also reveals that job satisfaction plays a mediating role, reinforcing the importance of fulfilling employees' psychological and professional needs to boost engagement. Furthermore, The study highlights AI adoption as a crucial determinant, reshaping work processes and enhancing operational efficiency. These findings offer practical insights for SME managers aiming to boost employee engagement, driving overall organisational performance. To conclude, this research contributes to the existing literature on employee engagement by providing empirical evidence from SMEs in Malaysia, offering a comprehensive understanding of the factors driving engagement and presenting actionable strategies to enhance organisational performance through engaged workforces.