Tài liệu Employee turnover and retention strategies of small and midium enterprise service businesses in hanoi

ThAi nguyen University Southern luzon STATE University Socialist Republic of Vietnam Republic of Philippines Employee Turnover and Retention Strategies of Small and Medium Enterprise Service Businesses in Hanoi A RESEARCH PROPOSAL PRESENTED TO THE FACULTY OF GRADUATE SCHOOL SOUTHERN LUZON STATE UNIVERSITY LUCBAN, QUEZON, PHILIPPINES THAI NGUYEN UNIVERSITY S.R. VIETNAM IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE DOCTORS IN BUSINESS ADMINISTRATION Advisor : Prof Conrado Abraham Name: Ngo Thi Mai i Acknowledgments I would like to express our most sincere thanks to the Management Board of the Southern Luzon State University, Thai Nguyen University, the teacher, the teacher of the school has helped me facilitate the learning process throughout. I would like to express sincere gratitude and profound Professor Conrado L. Abraham , enthusiastic teacher who have dedicated guidance, encouragement, spend time and exchange orientation for me during this research. I would like to express my sincere thanks to the Department of Employment Ministry of Labour - Invalids and Social Affairs, Department of Labour, War invalids and Social Affairs Hanoi. the SMEs service business in Hanoi has helped me research material, through a questionnaire survey. I sincerely thank the Board of the University of Labor and Social affair (ULSA), colleagues in ULSA, classmates DBA1 facilitated enthusiastic help and share my experience to help complete the thesis. Finally, I would like to send the gift to the heart of my family has passed enthusiasm and encouragement to complete my thesis.. Table of contents Page Chapter I: Introduction 1.1.Background of the study 1 1.2.Statement of the problem 4 1.3. Significance of the study 6 1.4.Scope and limitation of the study 9 CHAPTER II: REVIEW OF RELATED LITERATUES AND STUDIES 2.1 Literature Review 11 2.2 Theoretical and conceptual framework 31 2.3 Hypotheses 36 2.4 Definition of terms and Variable 39 CHAPTER III: RESEARCH METHODOLOGY 3.1 Research Design 51 3.2. Research Locals 52 3.3 Samples and Sampling 52 3.4 Instrumentation 53 3.5 Procedure 3.6 Statistical Analysis of the Data 53 54 CHAPTER IV: RESULTS AND DISCUSSION 4.1 Results 58 iii 4.2. Discussion 60 CHAPTER V: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 5.1 Summary 69 5.2 Conclusions 74 5.3 Recommendations 75 List of tables and Exhibit : Page Figure 1.1 Employee Turnover 4 Figure 1.2 Voluntary Turnover Rate 5 Exhibit 1.1. Adam' Equity Theory 35 Table 1.2 Definition of SMEs in Vietnam 39 Chart No 4.1 : Applicability of Exclusive organizational structure strategy 58 Chart No 4.2 : Applicability of Mobile benefit strategy 59 Table 4.3 Sex of employees of SMEs service businesses 60 Chart 4.3 Sex of employees of SMEs service businesses. Table 4.4 Age of employees of SMEs service businesses 61 Chart 4.4 Age of employees of SMEs service businesses Table 4.5 Qualification of employees of SMEs service 63 businesses Chart 4.5 Qualification of employees of SMEs service iv businesses Table No 4.6 :Chi- square table for Exclusive organization 64 structure strategy Table 4.7: Chi - square table for Mobile benefit strategy 66 Table 4.8 : Table for Inside communication strategy 68 Figure 5.1: Employee preference for staying the company 69 Figure 5.2: Reasons for attrition in SMEs service 70 businesses in HN Figure 5.3: Percents of solvable attrition by Exclusive 72 organization structure in SMEs service businesses in HN Figure 5.4: Figure 5.4: Attrition among employees who 73 value mobile benefit structure Figure 5.5: : Percents of solvable attrition by Mobile 74 benefit structure in SMEs service businesses in HN Table No 6.1: Questionnaire data 82 v CHAPTER I: INTRODUCTION 1.1. Background of the study A general idea of the sustained presence of service is very important to understand the research environment. In addition to employee welfare such as pension fund, employees of SMEs are entitled to many other benefits including: +) Group Insurance: This plan is to provide coverage for employees in the event of illness, injuries or pregnancy in case of female workers and spouse for male workers.Special, personal accident insurance covers insury-related health care expenses. . +) Personal Health Care (Regular medical check-ups): The SMEs service businesses offer yearly health check-up for their employees. These medical checkups are normally carried out once or even twice a year in some companies. +) The lunch and Transportation subsidy: The lunch is providing by their organization and it is also subsidized. Beside, some companies provide transportation facilities to all the employees from home to the office at the lowest price. +) Credit Card businesses: Credit card businesses allow prompt payment and cost effectiveness that formal employee performance for purposes such as travel related expenses, hotel bills, airfare, etc. +) Recreation, Cafeteria, ATM and Concierge facilities: Recreational facilities include billiard tables, chess tables and coffee bars. Esoecially, taffs in some hotels can enjoy equipped gyms with private trainers. 1 +) Mobile Phone, Laptop: On the basis of business need, companies provide their staffs with mobile phones and/or laptops. Staffs are responsible for the maintenance and protection of this property. +) Loans: Many SMEs service businesses provide small loans for some different cases. For example, employees could be provided with financial aid in emergency medical situations or financial assistance at the time of their weddings. New members could be granted loans to assist them in resolving their original work at the company. +) Educational Benefits: Many SMEs service businesses develop policies to improve personality and knowledge level of their employees., They reimburse tuition fees, and also fees for exam and books. +) Performance based incentives: Many SMEs business services have planned, and implemented program-based support. The parameters for calculation are performance evaluation criteria such as: speed, accuracy and productivity of each process. From there, they give to some different bonus +) Flexi-time: Some employees in the company but not all, may be able to choose the flexi-time. The main target is to provide employees with flexible time schedule. The manager give their staffs right to choose most effective working time for them instead of a fixed schedule. Therefore the productivity will be enhanced. +) The cultural exchange programs: Companies often hold staff parties, in which they can join, share opinions and even display their talents. In addition, organizations also conduct various sport competitions such as foot ball, volleyball for their employees. +) Wedding Day Gift: Every employee in the company always receives a gift in his wedding. The gift can be different based on their levels in the company. But it often fluctuates between 20-50 USD for a member. 2 +) Employee Referral programs: There are companies which give good policy for employees if they can recommend qualified people to work in the organization. The main target is to attract the good employee for their company and create higher retention rate +) Employee Stock Option Plan. To generate loyalty of employees, the company has launched this policy; every staffs will be able to buy shares of company with discounted price. This will enable them to fully enjoy benefits of the company. So why is turnover rate still high? What retention strategies should be applied in the SMEs service business in Hanoi? 1.2. Statement of the problem An important issue facing by the SMEs service business is minimizing turnover rate. In the context of globalization, Small and medium scale enterprises (SMEs) are losing a large number of employees, especially excellent managers for large multinational companies. Particular data is as follow: Figure 1.1 Employee Turnover 3 EMPLOYEE TURNOVER 18% 16% 14% 12% 10% Series1 8% 6% 4% 2% Pr od u ct io n ev el s Su pp su p vic e ss /s er Bu sin e Al ll or t rt po na ls t Pr of es si o em en ag M an Ex ec ut ive 0% Figure 1.2 Voluntary Turnover Rate Voluntary Turnover Rate 18% 16% 14% Series1 Percents 12% Series2 Series3 Series4 Series5 10% 8% Series6 Series7 6% 4% 2% 0% 2007 2008 2009 2010 1 2011 2012 Years 4 2012 Towers watsson: Vietnam Labour Market Overview Trends Employee turnover is permanent withdrawal from an organization whether voluntary or involuntary. Straightforward ways to explain it are "how long employees tend to stay" or "the rate of traffic through the revolving door". “Turnover is measured for individual companies and for their service as a whole. If an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same service”(2012 Towers watsson.High turnover can be harmful to the company's productivity if skilled workers often leave the labor population and contains a high percentage of new employees. Therefore, the company has a deep interest in the turnover rate of their employees, because workers can replace a portion of the cost of business operations. When a company to replace a worker, it incurs costs directly and indirectly. All the tasks that must be performed during cost money, time or both. Additionally, there may be a loss of productivity during the period after the employee leaves the former and new staff have been fully trained. For some companies, employees can also replace it difficult to retain customers or clients that the employee worked. . Often managers view the company as a success or just a stepping stone to climb to the prestigious multinational companies. We are left as they are being raised in power. How can design strategies to retain employees? Well as consideration to choose the best strategy to be applied in employees retention. This is a difficult question that many Small and Midium Enterprise Service Businesses in Hanoi are eager to find answers. 1.3. Significance of the study Success in employee retention and attraction is very important for long term health and success of any organization. The ability to retain and keep your best employees ensurescustomer satisfaction, employees satisfied, retain institutional knowledge and learning and succession planning effectively. 5 Do not retain a key employee is costly to any organization because in addition to the cost to recruit and select a new employee other issues such as training time and investment; lost knowledge, and possibly insecure co-workers will all have an impact on the company. Attraction and retention of staffs in particular “key employees” is one of the largest challenges for the company The traditional approaches to attract and retention are not as effective due in part to generational change and there is a need to take a more multi dimensional approach to the issue. Retaining qualified employees in a labor intensive, demanding, and fast-paced work environment is a major struggle in the hospitality service. With the growth of tourism nationwide and the development of hotels, resorts, restaurants, spas and casinos, there is a limited supply of staff that are well-trained and experienced in the day-to-day operations, leaving a limited pool of qualified employees to hire. So that, Firstly, retaining qualified, high-performing employees is crucial to an organization.  Challenging hiring process: From a large pool of candidates, the HR professional screens job applicants and carry out preliminary interviews. Shortlisted candidates are then forwarded to managers who make further judgments to ensure that the most appropriate candidates are hired. Hiring the right candidates normally requires lots of time.  Costly orientation and training: As an individual starts a new job, he is often given orientation which informs him about organization goals, culture and background. Also, training is provided to help new employee have necessary skills to perform his work. When an individual suddenly leaves an organization, it would cause wastage of time and money. The HR department would be required to start all over again the recruiting process for vacancies as well as conduct other orientations and training. Searching for appropriate staff is a tedious task and it is a huge waste of effort when an employee quits. 6  High possibility of resigned worker joining competitors: When this happen, employees may bring strategies, policies from their current company to the new one. Many secrets of previous organization may be revealed in case of leaking out essential data, document, and statistics. Companies can limit such cases by requiring new joiners sign a document promising not to divulge any information as they leave. Another effective way to retain employees is to implement strict policies to prevent people from joining competitors.  Better performance of long-term employees: Compared to workers who change jobs often, people who work for a long period have more experience in working for the company because they understand its rules and policies as well as its culture. Therefore they can perform their duties much better.  Time for individual adjustment with others : Normally time is required to let people know and get on well with each other. An employee will understand his workmates better if they work together for longer time therefore the productivity will be enhanced. Adjustment problems occur as someone is replaced for an existing staff. Others tend to find it difficult to make a comfort level with the new comer. Moreover, after establishing a certain relationship with the old staff, they face a challenge in adjusting with the new one and especially trusting him. It is common that people compare a new person with the previous employee and always discover his faults.  Loyalty from long-term individuals: As someone sticks to an organization for a long time, he normally receives more benefits and incentives thereby forming a favor toward the management. Necessity in retaining qualified and experienced employees: High-performing employees are important to every company as they can bring their creativity, difference, boost the productivity and help in achieving better outcome for the organization. Organizations will definitely struggle without these top performers therefore it is essential to keep them staying happy and not looking for changes. The management needs to value those who can bring real benefits to companies and make special effort to retain as well as encourage them. 7 Secondly, Retention is a big challenge Considerable changes are occurring in the labor market and offices which lead to altering the way company link to its workers. Selecting, recruiting and retaining knowledgeable staffs have become a serious concern to any organization and business. To become leading player in an industry, it is essential for companies to meet their people’s needs by understanding them and applying appropriate strategies. Robust economic growth, changes in people mind about entering a profession, corporate retreats, young workforce, and life balance have led to a fierce battle for skilled employees. At the same time, people have different views about working. They tend to be more family oriented, pay more attention to living standard and job status. To retain people and attract new talents, it is important that managers learn the reasons for fluctuations in labor market and be able to determine what their people want to fulfill their needs. There are harsh competitions between companies for scare talented workers. Inside communication is a tool to make employees understand about their own working place, feel good about it and perceive equity. 1.4.Scope and limitation of the study 1.4.1 Scope of the study This study aims to determine the applicability of three new employee retention plans in the SMEs service businesses in Hanoi. This will help the SMEs service businesses to retain valuable employees. 1.4.2 Limitation of the study 1. The study only concentrates on urban service area in Hanoi. Workers in other areas might have dissimilar job preferences. Therefore, the applications of these studies are limited in Hanoi city only. 8 2. The study’s findings and conclusions demonstrate current trends in the organizations. 9 CHAPTER II: REVIEW OF RELATED LITERATURE AND STUDIES 2.1 Literature Review 2.1.1 Employee turnover “Since the employee turnover has been discussed, its nature, reasons, advantages and drawbacks were the major issues to be considered” (Morrell, Loan-Clarke and Wilkinson, 2004; Hong, Wei and Chen, 2007; Massingham, 2008). Bowden (1952) implied that “in some situations personnel turnover can be a positive change within an organisation”. He said “the employee turnover is needed due to reasons such as a company growth or a market demand, which requires an internal organisational change”. Nonetheless, “personnel changes are more often seen to have negative impacts on a company rather than positive effects” (Parker and Skitmore, 2005; Massingham, 2008). Those changes are unavoidable so learning the employee turnover reasons would be necessary to minimize its negative consequences. 2.1.1.1 Types of staff turnover 2.1.1.1 Types of staff turnover Turnover has been described as employee's “movements across organizational boundaries” (Hong, Wei and Chen, 2007, p.808). However, the word could also be used to imply within organizational movements. This section will consider both external and internal turnover, accordingly. “Employee turnover is frequently considered to be involuntary, or anticipated, and voluntary, or unanticipated, in its nature” (Morrell, Loan-Clarke and Wilkinson, 2004; Hong, Wei and Chen, 2007). Involuntary staff rotation is the case where decision is made by the organization and employees themselves cannot make much influence about their movements. On the other hand, voluntary turnover happens when an employee makes decision to move to another department or company. “External involuntary employee turnover can take place because of a company's strategy or policy, or a need to downsize its personnel” (Hong, Wei and Chen, 2007). It 10 was said “to be of a lesser interest for organization as it is known in advance and its extent and consequences are easily defined” (Hong, Wei and Chen, 2007). 2.1.1.2 Reasons for employee turnover Many researches have been carried out to find out the reasons for turnover. Generally, “the causes can be divided into two categories – inevitable and avoidable reasons” (Bowden, 1952; Hong, Wei and Chen, 2007). Company shrinkage, retirement, parental leave, permanent illness or death result in unavoidable external involuntary staff turnover. “Inevitable reasons are perceived as an element of organization’s normal life” (Bowden, 1952), and therefore their existence emphasize that it is impractical to consider organization’s personnel as an unchangeable environment while planning resource allocation and managing the company in general. Dissatisfaction might not be an original reason for staff rotation but it is the middle phase of the process. This is caused by various factors making employees dissatisfied with his job. Laser (1980) argues: “The most widely spread misconception about an employee's motive to leave is salary discontent. This opinion is widespread due to employees' stating salary dissatisfaction as a reason to leave a company. This reason is often used because of its neutrality, comparing to other causes such as conflicts with management or colleagues” (Laser, 1980). Furthermore, an improper employment procedure, “improper employee expectations set during the employment, lack of formal training, and tensions between the employee and his direct management”(Laser, 1980). It is essential for an organization to "find the right men for the right jobs" (Bowden, 1952, p.73). . These will cause voluntary or involuntary, external or internal turnover. However it could be avoided, “an organization should appreciate their selection process more and invest sufficient time and resources in investigating who is a suitable person to be employed” (Laser, 1980). 11 Other cause for employee dissatisfaction was referred by Laser (1980) is “setting inappropriate expectations upon the job”. Management often makes mistakes in employment process by emphasizing only benefits of someone’s future job, making him over fancy and get uninspired when taking over his new responsibilities. It is said that: “Causes job dissatisfaction is providing insufficient training for a new employee” (Laser, 1980). Training gives employees knowledge about organization operation, its culture and also provide him necessary skills to fit better in the company. Training failure can make new employee struggle with new challenges therefore lead to job dissatisfaction. Lastly, “tensions between employees and management as a reason for staff turnover “Laser (1980) . It can be: “Especially crucial to manage employees accurately during an organizational change” (Morrell, Loan-Clarke and Wilkinson, 2004). Employees may choose to exit the organization if they are not clearly explained the reasons for changes or received sufficient help from employer when changes taking place. The previous reasons of “Turnover and other causes identified by diverse researchers” (see Morrell, Loan-Clarke and Wilkinson, 2004, for a summary) can be a ground for both kinds of voluntary staff turnover: “internal voluntary staff rotation” (willing for changes inside an organization) and “external voluntary turnover” (cross-organisation movement). “Voluntary staff turnover can also be caused by an employees' eagerness to self-develop and have career growth opportunities” (Bowden, 1952; Morrell, Loan-Clarke and Wilkinson, 2004). Employees have a tendency to be more ambitious and more motivation for achieving further development and promotion. In case: “The current position does not encourage career growth, an employee's job satisfaction can deteriorate, which can prompt the intention to search for new work or affect performance at the present one” (Hong, Wei and Chen, 2007). However, “There is no general agreement upon the relationship between an employee's performance and staff turnover” (Hong, Wei and Chen, 2007). There are four general opinions 12 regarding the issue. The opinions claim that the staff's performance and employee turnover are found in (Hong, Wei and Chen, 2007): “A positive relationship, a negative relationship; no relationship, and a non-linear relationship” In the summary, “high performers tend to leave an organisation more often than others”.(Hong, Wei and Chen (2007)). Other studies indicate that poor performing employees tend to change job more often. However, Birnbaum and Somers (1993, cited in Hong, Wei and Chen, 2007) asserted that: “ there is no relationship between an employee's performance and his or her intention to leave a company or change a position” . Lastly, some research have shown that both excellent and poor performing workers are in risk of switching jobs often, yet employees with medium level are more willing to stay within an organization. According to Hong, Wei and Chen (2007), “the negative correlation was proved to be accurate in more studies than others, meaning that employees with poor performance are more probable to leave organization”. This raised “the discussion on whether companies should strive to reduce turnover of such employees” (Bowden, 1952). Decreasing avoidable employee rotation is not always recommended as keeping non-performers is harmful to an organization. 2.1.1.3 Consequences of employee turnover . “Staff rotation is widely seen as a harmful phenomenon and thus its disadvantages are usually considered” (Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004; O’Connell and Kung, 2007; Massingham, 2008). Furthemore “employee turnover incurs financial expenses to an organisation and therefore the disadvantages are often presented as direct and indirect costs” (Morrell, LoanClarke and Wilkinson, 2004). “Each employee who leaves his position in particular or organisation in general causes the organisation inevitable additional expenses” (Laser, 1980). “Those are costs of recruiting a new 13 employee” (O’Connell and Kung, 2007), “higher unemployment taxes” (Laser, 1980), “temporary replacement staff” (Morrell, Loan-Clarke and Wilkinson, 2004), “which all result in decreased company profitability” (Schmitt, Borzillo and Probst, 2011). However, many researchers agree that “indirect costs associated with staff turnover are much higher and thus more problematic for organisation” (Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004). Indirect costs of staff turnover proved to be “less tangible and therefore difficult to quantify” (O’Connell and Kung, 2007). These indirect expenses are associated with: 1) “costs of training of new staff “(Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004); 2) “decreased morale within organisation” (Bowden, 1952; Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004; O’Connell and Kung, 2007); 3) “emotional pressure on remaining staff “(Morrell, Loan-Clarke and Wilkinson, 2004); 4) “additional workload for remaining staff during employment and training of new personnel” (O’Connell and Kung, 2007; Massingham, 2008); 5) “decreased productivity during a new employee adaptation period” (O’Connell and Kung, 2007; Massingham, 2008); 6) “deteriorated product or service quality” (Laser, 1980; Morrell, Loan-Clarke and Wilkinson, 2004; O’Connell and Kung, 2007; Massingham, 2008; Schmitt, Borzillo and Probst, 2011); 7) “lost social capital” (Morrell, Loan-Clarke and Wilkinson, 2004; Massingham, 2008); 8) “lost human capital “(Massingham, 2008); 9) “lost structural capital” (Morrell, Loan-Clarke and Wilkinson, 2004; Massingham, 2008). Although they are considered to be complicated to calculate, indirect costs are seen to be of high significance to companies. As can be seen from the listing above, employee turnover affects many 14 stakeholders – remaining staff, employees involved in recruitment process, people who temporarily occupy vacant position and newcomers employed for holding it permanently. When staff turnover occurs, be it voluntary or involuntary, colleagues of a person leaving are affected. “Losing a team member is seen to have a negative impact on the team spirit and its development” (Tuckman and Jensen, 1977). Because, “the workload of other team members may increase in short term, which causes more emotional tensions and decreased quality of work done” (O’Connell and Kung, 2007) as well as “increasing job dissatisfaction of the remaining staff” . Massingham (2008) asserts that: “another essential outcome of employee turnover is loss of a company's social and structural capital, or loss of organisational memory and deteriorated learning ability, accordingly” . When an employee leaves company, he or she takes organisational knowledge with him or her. Nowadays, as it has been discussed earlier, “organisational knowledge is seen as crucial success factor for businesses” (Massingham, 2008). Therefore, they strive to prevent knowledge loss by making it less dependent on people who carry it and by striving to keep key knowledge holders within the company. Bowden (1952, p.73) claims that “in case external involuntary staff turnover is caused by downsizing, it negatively affects remaining employees” as they "contemplate what is happening to their fellow workers". Schmitt, Borzillo and Probst (2011) support this opinion stating that “downsizing reduces staff productivity”. However, it can be suggested that remaining employees can be observed to work harder in case they perceive good performance as the only way not to become a downsizing statistics as well. The real question: there exists no research that research considers employee turnover as a positive phenomenon?. Schmitt, Borzillo and Probst (2011, p.56) mention that “downsizing is sometimes perceived to provide” "sustainable performance improvement". Bowden (1952) states, that “a degree of employee turnover is needed for the healthy being of organisations”. Therefore, it can be claimed that unavoidable staff rotation is better for a company than endeavours to keep personnel 15