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THE IMPACT OF MNC'S WORKPLACE ENVIRONMENT AND WORKPLACE

DIVERSITY ON EMPLOYEE'S MOTIVATION AND ORGANISATIONAL
PERFORMANCE

Conference Paper · August 2016

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 THE 6TH INTERNATIONAL CONFERENCE ON INTERNATIONAL STUDIES (ICIS 2016)
August 20-22, 2016, Kuala Lumpur, Malaysia

THE IMPACT OF MNC’S WORKPLACE ENVIRONMENT

AND WORKPLACE DIVERSITY ON EMPLOYEE’S
MOTIVATION AND ORGANISATIONAL PERFORMANCE
Nik Ab Halim Nik Abdullah
Universiti Utara Malaysia
abhalim@uum.edu.my

Mazatul Nadiah Sahiri

Universiti Utara Malaysia

Fakhrorazi Ahmad
Universiti Utara Malaysia
fakhrorazi@uum.edu.my

Abstract

Employees working in the subsidiary of multinational corporations (MNC) may

experience different working environment and they might also have to work with
people from diverse background in terms of their nationality, race or culture. Thus,
this study is conducted with the objective is to identify the impact of MNC’s workplace
environment and workplace diversity on the employee’s motivation and the
organisational performance. The study is conducted at the subsidiary of a Japanese
based firms located in Ipoh, Perak, Malaysia. A quantitative research design were
employed and data were collected using self-administered survey questionnaires. A
total of 161 employees from various department and demographic background were
randomly selected as a sample for this study. Hypothesis testing was conducted
using the Partial Least Square (PLS) Regression Analysis. Result of the data
analysis shows that the different working environment and workforce diversity that
exists in this MNC do have a positive significant relationship with the employee’s
motivation. In addition, employee’s motivation also positively influence the
organisational performance. It can be concluded that different working environment
and worforce diversity which exist in MNC did not create difficulties to the employees
but instead, both factors increase their motivation and eventually leads towards a
better organisational performance.

Keywords: Workplace Environment, Workplace Diversity, Employee Motivation,

Organisational Performance

Introduction
In today’s global business environment, multinational corporations (MNC) face huge
challenges in order to successfully survive in the current highly competitive
international business market. As a consequence, MNCs should continuously
improve their performance in order to remain competitive in their industry for a long
period of time. Performance of the firm depends very much on the performance of

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the employees working at that company. The organisational performance depends

on the employee performance because human resource capital of organization plays
an important role in the growth and the organisational performance (Khan et al.,
2011). Thus, it is important to conduct a study on the factors that may influence
organisational performance. Previous studies have identified many factors that may
influence organisational performance and three of them are workplace environment,
workplace diversity and employee motivation.
Workplace environment according to Haynes (2008) is a concept, which has
been operationalized by analysing the extent to which employees perceive the
immediate surroundings as fulfilling their intrinsic, extrinsic and social needs and
their reason of staying with the organization. He further adds that environment is a
key determinant of the quality of their work and their level of performance. Factors
such as workstation design, furniture, ventilation, lighting, noise, safety and
equipment at the workplace are some of the elements that make up the workspace
environment. These elements are expected to give an impact on employees and
their motivation. Subsequently, motivated employees will contribute towards
organisational performance. The second variable is workplace diversity and it refers
to the variety or multiplicity of demographic features that characterize a company’s
workforce, particularly in terms of race, sex, culture, national origin, handicap, age
and religion (Dessler, 2011). Workplace diversity is expected to play a role in
influencing employee’s motivation and the organisational performance because MNC
may gain benefit from diverse members, work group and culture that exists in the
organization if they could exploit this diversity for their own advantage.
Highly motivated employees are expected to directly influence the
organisational performance by contributing positively towards their work. Previous
study proved that motivation of employees may increase if they get their expected
reward and recognition that will initially contributes to high performance (Kalimullah
et al., 2010). The employees will also put more effort for achieving organizations goal
if they are motivated. Motivation actually can give success to organization because it
enhances employees to do their work with full concentration and determination.
Hence, there will be more output from the production line, less product defect, less
cost and job may be completed within the stipulated timeframe. The significance of
this study is that it is conducted in an MNC where the workplace environment and
level of diversity in the workplace is different with local companies. How these

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differences effect employee’s motivation and consequently on organisational

performance are worth a study. Hence, the objective if this study is to determine the
impact of workplace environment and workplace diversity that exist in a multinational
company on the employee’s motivation and the impact of motivation on
organisational performance.

Literature Review
Organisational Performance
Organisational performance is defined as a set of financial or nonfinancial indicators
which offer information on the degree of achievement of objectives and goals
(Lebans & Euske, 2006). Organizations have to measure the performance in order to
determine whether they have successfully achieved their organization goals, by
reviewing and using a structured approach of measurement. In addition, the purpose
of measuring organisational performance is to set future goals, detect the existing
problems and rectify the problems effectively.

Employee Motivation
According to Matthew et al., (2009), employees that are highly motivated contribute
towards the company’s performance through their work efficiency and effectiveness
as productive employees. In addition, Mc et al., (2014) found that the employee
motivation and job satisfaction were both positively related to organisational
performance. They added that if employees are well motivated through, for example,
fair promotions and justifiable salary differences, they will work more towards a
better performance of the organization. In addition, Malik et al., (2011) who examine
the relationship between employee motivation and organisational effectiveness in
telecommunication and banking sector in Pakistan also observed a significant
relationship between the employee motivation and organisational effectiveness
(organisational performance).

Workplace Environment
For workplace environment, Srivastava (2008) indicates that there are two major
categories in workplace environment in organization namely physical and psycho-
social environment. According to Hajjar et al., (2010), physical workplace

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environment is defined as the external and internal office layout, temperature,

comfort zone and the arrangement of office work setting at the workplace. Psycho-
social refers to the values or organisational culture inside the company. It consists of
working organization, attitudes, beliefs, practices and daily routine of the
organisational workplace environment. Other studies such as by Lundqvist (2013)
found that physical workplace environment is positively related to organisational
performance. Organization should provide physical workplace environment that is
conducive in order to enhance the productivity of employees, hence improve the
performance of the employees in the organization. In addition, Srivastava (2008)
also examines the relationship of work environment and organisational effectiveness
and found out that there is a significant relationship between these two variables.

Workplace Diversity
Jayne and Dipboye (2004) found out that the level of diversity in organization creates
teamwork relationships. They conclude that strong workplace diversity in
organization actually developed teamwork that positively contributes towards
organisational performance. Furthermore, Chatman and Spataro (2005) stated that
diversity in the workplace is good as they found out that organization which practice
collectivism gain more benefits than organization that practice individualism.
Workplace diversity is expected to play a role in determining the firm’s performance
because MNC may gain benefit from diverse members, work group and culture that
exists in the organization if they could exploit this diversity for their own advantage
(Dessler, 2011).

Theoretical Framework and Hypothesis of the Study

Based on the objective and the study of the literature, the theoretical framework of
the study is shown in figure 1. There are three hypothesis tested as listed below:

H1: There is a positive relationship between MNCs workplace environment and

employees’ motivation.
H2: There is a positive relationship between MNCs workplace diversity and
employees’ motivation.
H3: There is a positive relationship between MNCs employees’ motivation and
organisational performance.
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Figure 1: Theoretical Framework

Workplace H1
Environment
Employee H3 Organisational
Motivation performance
Workplace
Diversity H2

Research Methodology

This research employed a quantitative research design with data collected via self-
administered survey questionnaire. The population of the study are all employees in
ten different departments at one of the MNC in Ipoh, Perak. The total number of
employees is 909 people. The number of sample needed for the aforementioned
population is 269 (Sekaran & Bougie, 2009). A systematic random sampling
approach was used in order to determine the 269 respondents. This systematic
random sampling approach involves two steps. First, the list of name of all
employees was obtained from the Human Resource Department. Then, every
second name from the list was selected until 269 names were drawn as a sample for
this study. The survey were distributed to the selected employees and collected after
a week.
The survey questionnaire used in this study contains close ended questions
and all main variables were tested using a 5 Point Likert-scale. The questionnaires
have five sections. The first section (Section A) is on the profile of the respondents.
The second section (Section B) consists of nine questions on organisational
performance. The third section (Section C) has nine questions related to employee
motivation. The fourth section (Section D) includes eight questions on workplace
environment. Finally, the fifth section (Section E) contains nine questions on
workplace diversity. The Five point Likert Scales are ranged from “extremely
disagree” (1), “disagree” (2), “neutral” (3), “agree” (4), “extremely agree” (5). A pilot
test was conducted among 30 employees and the data were analysed for its
reliability. The Cronbach Alpha values for all 5 variables are above the cut-off value
of 0.70 and thus the reliability of the survey questionnaire is evidence.

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Findings
Demographic Profile of the Respondents
A total of 269 questionnaires have been distributed to the employees and only 161
questionnaires were returned. Therefore, the response rate is 60%. From the total
number of 161 respondents, majority of them are female with a total of 89
respondents or 55.3%, while 72 respondents are male or 44.7%. Majority of them
are in the age range of 21 to 25 and 26 to 30 years old with 46 respondents (28.6%)
for each range. It is then followed by the 36 to 40 years old category with 26
respondents (16.1%); and the age range of 31 to 35 and more than 40 years old with
17respondents (10.6%). There are only 9 respondents (5.6%) that are less than 20
years old. Majority of the respondents have been working at YEM between 1 to 3
years with 51 respondents (31.7%). 49 respondents have been with YEM between 3
to 6 years (30.4%), followed by more than 9 years with 47 respondents (29.2%).

Reliability and Validity

The assessment of the measurement model is done by examining the content
validity, convergent validity and discriminant validity. For content validity, the
Cronbach Alpha for each variable is above the cut-off level of 0.70 as shown in Table
1. Therefore, content validity is assumed to be fulfilled in this study. According to
Fornell and Larcker (1981), convergent validity is demonstrated when indicators load
highly (loading > 0.50) on their associated factors. Convergent validity is observed as
all items loading for each variable achieve the minimum 0.50 value. Besides looking
at items loading, convergent validity is also consider as adequate when each
constructs (variables) have an Average Variance Extracted (AVE) score of at least
0.5 (Fornell & Larcker, 1981). Table 1 show that all constructs have an AVE value of
more than 0.5 and therefore, it can be concluded that the model has an adequate
convergent validity.

Table 1: Cronbach Alpha and AVE Values

Variables Cronbach Alpha AVE

Diversity 0.92 0.65

Motivation 0.90 0.62
Performance 0.92 0.61

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Workplace Environment 0.91 0.62

In order to determine the discriminant validity of the model, the square root of the
average variance extracted (AVE) statistics were calculated and compared with the
correlations among the latent variables by using the latent variable correlation matrix
output of PLS (Chin et al., 2003). The latent variable correlation matrix and the
square root of the AVE are indicated in Table 2. The correlations between the
constructs are displayed in the lower left off-diagonal elements in the matrix. The
average variance shared between the construct and its measurements should be
greater than the variance shared between the construct and other constructs in the
model (Fornell & Larcker, 1981). Table 2 shows that the diagonal elements in bold
(square root of AVE) are greater than the off-diagonal elements at both
corresponding rows and columns. Therefore, discriminant validity is evident as all
constructs are statistically discriminated from the others.

Table 2: Latent Variable Correlations

Diversity Motivation Performance Workplace Env
Diversity 0.806
Motivation 0.726076 0.787
Performance 0.495236 0.610661 0.781
Workplace Env 0.551682 0.618265 0.548798 0.787

Result of the PLS Model Analysis

Table 3 shows the outcome of PLS model analysis and it details out the path
coefficients, their t-values and the level of significance for each variables. The
result shows that all three relationships tested illustrate positive and significant
results. Previous studies using PLS have typically considered path coefficient of
above 0.20 as having a strong relationship, path coefficients of between 0.10 to
0.20 as moderate, and path coefficients below 0.10 as weak (Johnson, 1997). Path
coefficient for all three relationships are strong as the value recorded is more than
0.20. Meanwhile, the degree to which the PLS model accomplishes its objectives of
minimising errors or to maximise the variance explained, can be determined by
examining the R2 values (Lertwongsatien, 2000). R2 is a measure of the proportion
of the total of the dependent variables, which is explained by independent
variables. Falk (2005) suggests that the R2 value should be more than 0.1, as any
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value lower than that informs very little even though it is statistically significant. The
variance explained values (R2) is 0.38, which indicates that this model explain 38%
of the variance in performance among employees at this multinational companies.

Table 3: Outcome of Structural Model Analysis

2
Path T-Value P-Value R Value
Coefficients
Workplace Environment Motivation 0.31 4.045 0.0000
Diversity Motivation 0.55 8.069 0.0000
Motivation Performance 0.61 9.372 0.0000 0.38

Discussion and Contributions of the Study

This study focuses on three objectives which are to identify the impact of MNC’s
workplace environment on employee motivation, workplace diversity on employee
motivation, and also the impact of employee motivation on organisational
performance. For the first objective which is to determine the impact of MNC’s
workplace environment on employee motivation, the finding shows a significant
positive relationship between these two variables. It shows that comfortable and
mostly ergonomic workplace environment give good impact to the employee’s
motivation. The positive relationship comes from the feeling of safety and security,
physical convenience and comfortable facilities at the workplace. Workers are also
motivated from an ergonomic workplace environment that will initially enhance
organisational performance. In terms of literature, this study confirms Lundqvist
(2013) study which found out that physical workplace environment is positively
related to organisational performance.
The second objective is to look at the impact of workplace diversity that exists
in the MNC as it consists of employees from diverse ethnicity and diverse countries,
on the employee’s motivation. Result indicates that this diversity actually helps
improve employee’s motivation as the analysis reveals a positive significant
relationship. The finding of this study is in line with other previous research such as
by Yegon and Kahara (2014), who found out that diversity in workplace actually
creates harmony around the organization. In addition, Rosado (2006) states that the
workplace diversity did contribute towards employee’s satisfaction and employee’s
performance improvement in organization. Workplace diversity may maximize the
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workers contribution towards organisational goal and objectives when all the different
individuals in the organization work in harmony.
The final objective is to determine the impact on the employee’s motivation on
organisational performance. Similar studies such as by Malik et. al (2011) found
positive correlation between employee motivation and organisational effectiveness
(performance). This study has provide further proofs that positive employee
motivation may boost the performance in organization. Furthermore, Istvan and
Nikolett (2004) stress that employee should be satisfied and committed with their
work in long period in order to contribute towards organisational performance.
Motivated workers will be more productive and contributes towards more quality
product.
This study contributes to company itself in many aspects. First, the findings
provide clear understanding on employees perception towards their level of
motivation, their working environment and the level of diversity that exist in the
company. Second contribution is in terms of factors that influence employee’s
motivation and organisational performance. Performance of the organization relies
very much on the motivation of the employee. Employee’s motivation may be
improved by having a conducive workplace environment and also workplace
diversity. These three factors need to be given full attention by the management of
MNCs as the performance is highly influenced by the behaviour of employees.
Motivated employees coupled with excellent working environment will surely
contributes towards firm’s success. At the same time, employees from diverse
background that able to work together will add further advantage to the company.

Limitation of the Study

There are some limitations of this study. First, this study was conducted at one single
MNC and one industry only which is manufacturing. Generalization of findings
towards other companies or industries may be done but with cautions. Future studies
may replicate this research throughout various organizations, not only private but
public organization and also across industry for a better generalization. Data for this
study are gathered through survey questionnaire and the measures for firm’s
performance are based on the subjective perception of the respondents only. Further
studies that look at the objective performance of a firm especially the financial data
may enrich the findings. Future researcher may also consider conducting a series of

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interviews with the respondents to enrich the data collection process and to get extra
information for a better results or outcomes for the study.

Conclusion
As a conclusion, this study has identified that organisational performance is very
much related to employee motivation. Different workplace environment and also the
workplace diversity that exist in a multinational company actually contribute towards
employee’s motivation. Different working environment and workforce diversity which
exist in MNC did not create difficulties to the employees but instead, both factors
increase their motivation and eventually leads towards a better organisational
performance. Therefore, the management of MNCs should consider these factors
and use them as strategies in improving the organisational performance.

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