4 Chapter 2: Theoretical background about reward management impact to employees' performance .... 2004 and Armstrong 2010 proposed that in order to hold the brightest employees, companie
General Introduction
Background Information and Rationale
Harrison (2003) has mentioned in his book that the human asset of an organisation is its blood which cannot be duplicated or replaced Such unique and valuable capital contains “individual capabilities, knowledge, skills, and experience of the company‟s employees and managers” those are needed to be developed, reinforced, and strengthened continuously and consistently (Dess et al 2004) To support the ideas above, General Electric (2000) has stated:
Our true “core competency” today is not manufacturing or services, but the global recruiting and nurturing of the world’s best people and the cultivation in them of an insatiable desire to learn, to stretch, and to do things better every day
However, talent employees, as it has been said by Noe, A.R., Hollenbeck, J.R., Gerhart, B., and Wright, P.M (2008) can jump out of the organization at any time to a more “competitive attraction” To cope with this talent leaking problem, Dess et al (2004) and Armstrong (2010) proposed that in order to hold the brightest employees, companies must develop a proper and effective reward system consisting both intrinsic and extrinsic rewards
Consequently, over the last twenty five years, reward management has been a main subject for thousands of research pieces analyzing different systems and its effectiveness on motivating people and obtaining their engagement and commitment, thus, building a high-performance culture (Armstrong, 2006;Torrington et al.2008) However, in the on-growing global banking industry which offers service as main products, the employees and their performance play a key role in building and maintaining customer satisfaction (Williams, R.S.2006); hence, it is crucial to have more up-to-date research about such systems and its link to employee satisfaction Furthermore, whilst most of the recent investigations about that subject of HRM were conducted in USA and Europe, almost none of them have been taken in Asia region, especially in Vietnam
In fact, banking industry in Vietnam rapid expansion at the present time According to Vietnam Banking Industry Report (2015) and Ukessays (2015),
"Vietnam has 34 joint stock commercial banks, five commercial banks, 5 joint venture banks and 35 foreign bank branches Many banks with 100% foreign capital are preparing to enter the Vietnam market" In contrast with the other commercial enterprise like education, real estate or medical, banking and finance have a progressive and passionate working surroundings Nevertheless, in comparison with the facing resources and interest physical force, the scarcity of human resource (HR) is a difficulty in the Vietnamese banking sector This assembles numerous banks regarding an emerging HR war to engage talent people assets
The booming of banking industry in Vietnam requires a lot of skilful employees, therefore, results in severe human resource shortage and urgent talent retention (Talentnet.vn, 2015) Consequently, the author has felt it extremely crucial to have a further research which can deeply analyze employee compensation system used by such Joint stock commercial bank and its affects; so, an effective solution for that matter will be found out and, possibly, adapted to the “new-born” banking industry of other Asian countries It is also expected that after devoting herself into carrying out this research, the author will gain the deep understanding and knowledge in employee reward management and practice, those are important for her future management career.
Aims of research
The topic relating to reward management, which is regard as one of the hugest dimentions in HR tool Therefore, the aim of this paper is only to critically analyze the influence of reward system (which is one characteristics inside the reward management) on employee‟s performance within the Joint Stock Commercial Bank in Vietnam, especially in case of BIDV
To answer the question proposed above, the necessary objectives are:
To assess the purposes and directions in delivering reward system at Vietnam Banking sector, especially in case of the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)
To analyze the employee‟s perception toward total reward system
To measure the effectiveness of the reward system on employees
Since the fact that, reward management is a broad study Therefore, this research is only focuses on critically analyze the reward system totally (which is one of those dimensions inside the reward management) influence on employee‟s performance
The study was carried out at the Joint Stock Commercial Bank for Investment and Development of Vietnam BIDV was selected because it is one of those biggest brands of Vietnam banking sector and it is where the researcher works Most importantly, the researcher believed that BIDV as a pacesetter might provide a rich source of information that will be provided without fear
This study was limited to those two Head Quarter Department Office (which includes: Retail Banking Department and Banking Support Department) and three banking branches of BIDV (which includes: BIDV Hai Ba Trung branch, BIDV Da Nang branch, BIDV Ho Chi Minh branch) The choice of limiting the study to only two department and three branches was for several reasons One reason was to ensure that an in-depth and critical study was done, such that the results will provide useful information on the relationship between reward management and employees‟ performance Results of this kind provide bases for generalization
This study covered the period from January 2016 to July 2017 These are 1.5 financial years, fitting the length of strategic plans for most organizations A period of 1.5 years is also good for testing a policy
- What are the influences of rewards system on employee performance at BIDV?
- Which are the most significant rewards systems that prompt employees at BIDV?
- How can the reward system/practices structure be improved to enhance performance at BIDV?
Research methodology
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Thesis structure
Chapter 2: Theoretical background about reward management impact to employees‟ performance
Chapter 4: Assessing the situation of reward management on employees‟ performance at The Joint Stock Commercial Back of investment and development of Vietnam (BIDV)
Theoretical background about reward management impact to employees'
Statement of the issues
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The concept of employee reward system
From the end of 1970s, reward had been received increasing attention of employees, managers and HR specialists, therefore, turning into a key area of human resource management (Murlis, 2004) According to Shields (2007), employee reward, as the „oil‟ or the „grid‟ of HRM process (Murlis, 2004), can be defined as tangible or intangible “benefits” given to employees in order to get or to acknowledge their abilities or work contribution The more simple definition of such HRM object is mentioned in the work of Murlis (2004) and Torrington et al (2008); and, they both believe that reward is “how much the establishment pays the employees and in what form” Taking a step further, HR specialists define that the act of reward management consists of establishing fair and stable reward strategies and policies and imposing them in proportion to employees‟ value to the organization (Armstrong and Murlis, 2007) From this theory, Armstrong (2006) has developed his own definition of employees reward system:
An employee reward system consists of an organization’s integrated policies, processes and practices for rewarding its employees in accordance with their contribution, skill and competence and their market worth
Anderson, in 1993, has stated several drawbacks of a reward system those dominate others important HRM issues; however, the critical role of this practice in an organization is obvious In general, the implementation of a reward system is directed by the need of aligning the employees‟ behaviors to an organization‟s objectives (Merchant 1989, 1998, cited in Awasthi et al 2001, p.292) In the work of Deeprose (2006), Shields (2004), and Armstrong (2010) the more specific purposes of reward management are to retain, attract and motivate employees in order to grow revenue and profit and achieve employee satisfaction
Despite the fact that specialists are holding very different definitions of employee reward system, they seem to have a lot in common about the components of such process As it can be seen from various models of reward system proposed by Armstrong (2006; 2007), and Rashmi (2009), the whole process is developed from HR strategy of the company Base on that, the reward strategy is built up consisting of two primary objects financial and non-financial rewards; and, they all, in turn, are directly reflected and guided by the organization‟s performance management process Importantly, the latter is playing a crucial role in assessing and employees‟ past performance as well as improving their current and future behaviors and outcomes (Shields, 2004) However, Armstrong in 2006 believed that there is no perfect way of combining all of the components mentioned above so that the companies can modify the models proposed in order to build up their own effective reward systems
Shields (2004) have stated that: “rewards can be seen as including not only financial rewards (i.e „pay‟, „remuneration‟ or „compensation‟) but also rewards of a beneficial non-financial nature” Another definition indicated by WorldatWork
(2000) broadens the scope of total reward as being mentioned:‟ all of the employee‟s available tools that may be used to attract, retain, motivate and satisfy employees ‟ To stress on the components of total reward, Manus and Graham
(2003) believe that it „includes all types of rewards – indirect as well as direct, and intrinsic as well as extrinsic‟ Such broad definitions indicates that it is very important to hold the total reward concept as a logical combination of various elements strongly linked with business and others HR strategies (Armstrong, 2007) Moreover, there is also a largely accepted theory that components of total rewards can be divided into intrinsic coming from the job itself and extrinsic arising from the job context (Shields, 2004)
Figure 2: Components of total reward system
It is criticized that the building up of a practical and effective rewards system must be based on true understanding of the ways by which people are motivated to work This perception is strengthened by Armstrong (2006) as he mentioned that the motivational theories are as important as the reward policies created based on them
It is very clear to explain the above link between employee motivation and reward management throughout the work of several specialists Authors like Vroom (1964) stressed the use of motivational theories in managing and improving employee performance which is one of the main objectives of reward systems In addition, Boxall and Purcell (2003) also supported that idea while they proposing the following function:
Performance = Function (ability + motivation + opportunity to participate)
There are two categories of motivations including extrinsic and intrinsic motivation Firstly, extrinsic motivation often referred to low-order needs is related to extrinsic rewards which are done to or for employees (Housldswoth, 2004; Armstrong, 2006) On the other hand, intrinsic motivation is regarded as higher needs and is strongly linked to self-generated factors influencing employees‟ behaviors (Ibid.)
Several motivations theories can explain how and why employees can be motivated to work by rewards or incentives which provide them which human needs and the chance to grow (Armstrong, 2006, 2007) Amongst such studies, the content (or needs) theories are the most well-known and practical as they indicate that the behavior of humans are designed and driven by their unmet needs and demands; as a result, give better idea about what should be included in a reward system to motivate people to perform well (Rees and McBain, 2004; Beardwell et al 2004; Armstrong, 2006, 2007; Torrington et al 2008) To look at this theory from every aspect, studies from Maslow
(1943), Herzberg (1966), and Hackman and Oldham (1980) those stress on the satisfaction of higher-order needs (extrinsic motivation) rather than intrinsic motivation are required to be critically assessed (Thorpe and Homan, 2000)
In 1943, Abraham Maslow, based on his study on successful and psychologically healthy people, proposed the Maslow‟s needs hierarchy which divides human needs into five classes He also indicated that those stages are inter- related to each other and can be arranged into a pecking order which lower-order needs at the bottom and the higher-orders are placed at higher position (Shields, 2004; Hergenhahn, 2005):
Figure 3: Maslow‟s hierarchy of needs
According to Maslow, people (employees) always behave in order to work their way up the hierarchy; yet, higher-order needs only take place when the lower- orders are met and get no concern from the subjects (Shields, 2004; Dubrin, 2009) Being strongly agree with this theory, Boxall et al (2003) support its implication to reward and performance management as it recommend employers to clarify at which levels of needs each employees is; accordingly, to build up proper reward system In addition, another widely accepted research confirming and expanding the Maslow‟s is the „Porter‟s need satisfaction questionnaire‟ (Colvin and Rutland,
2008) Using the questionnaire method, Porter (1961, 1968) had proved the five categories of needs and the relationship between them proposed by Maslow Furthermore, they also found the strong bond between hierarchical position and need satisfaction of Porter earlier study (Gibson and Teasley, 1973)
On the other hand, the finding of Maslow has been criticised by several authors including Wahba and Bridwell (1976) and Armstrong (2010) In 1976, Wahba and Bridwell indicated that Maslow‟s ranking and order of needs gets little or no clear evidence since its foundation was the interviews of a very limited sample of highly creative individuals (Armstrong, 2010) Moreover, the theory puts aside the influences of employees‟ own background and others‟ on determining which needs should be met and how to satisfy those The very example of those arguments is the case of „starving artist‟ who pursuits the self-esteem need to be recognized and respected by people instead of satisfy his talent for „bread on the table‟ which is much lower-order need (Shields, 2004)
In order to overcome the drawback of Maslow‟s hierarchy, Herzberg (1966,
1987) introduced the two-factor theory which raises the question of what really motivates employees amongst HR managers He explained that: „The factors involved in producing job satisfaction (and motivation) are separate and distinct from the factors that lead to job dissatisfaction‟ (cited in Armstrong 2010, p.140)
As a result of his study on several hundred US professional engineers and accountants, Herzberg built up the two lists of „hygiene factors‟ and „motivators‟:
Figure 4: The Herzberg„s two-factor theory
The nature of performance management
As it can be seen from the figure 1 of the component of reward management, performance management is regarded as one of the centre elements which is linked to contingent pay and non-financial units of total reward However, what are
„performance‟ and „performance management‟? In this part, the author will critically assess the definitions of the two concepts above as the human resource management‟s phenomenon
The word „performance‟ is defined by the Oxford English Dictionary as: „The accomplishment, execution, carrying out, working out of anything ordered or undertaken.‟ This definition strongly stresses on the outcomes- the act of achieving goals (cited in Armstrong, 2010, p.103) However, this theory has ignored the involvement of behavior and quality of employees those are believed to hold the key role on directing organization performance In order to come up with a highly accurate and accepted definition for „performance‟, the study of Wright and others (Wright and McMahan, 1992) called „the open system model„is taken as a base theory As a result, Shields (2004) conclude that work „performance‟, which can be divided in to three categories according to performing subjects, is a process of three elements arranged in a logical order as shown in the chart below:
The conclusion above leads to a perception that one of the core tasks of a performance manager is to look at different elements directly related individual and teams performance such as the outputs and inputs (Armstrong, 2010) In general, the concepts of „performance management‟ amongst specialists have a lot in common Most of their theories indicate that such object is not a single thing but a process through which employees‟ behaviors and achievements are assessed and directed corresponding to the organization‟s goals (Houldsworth, 2004; Lowry, 2002; Noe et al 2008)
However, Mabey, Salaman and Storey (2005) stated in their book that there is no generally accepted feature of the performance management models but the following five steps: „setting performance objectives, measuring outcomes, feedback of results, rewards linked to outcomes, and amendments to objectives and activities‟ Besides, they also proposed the performance management cycle which can be used to evaluate strategic HR‟s components or can be used to represent the way by which an organization can form its own performance management system:
Figure 7: The performance management cycle
2.3.1 The aims of performance management system
In the early of 1990s, before the concept of a “performance management process” was introduce, scholars in HRM area still believe that performance management is “ a more sophisticated performance appraisal system” and serves as a measurement tool of employee‟s result (Noe et al 2008; Armstrong, 2010) However, many others had spotted numerous problems attached to such “deadly disease” of modern management including fear building, teamwork demolishing, and the lack of strategy orientating (Bach, 1999) As a consequence, together with the introduction of more thoughtful perceptions about performance management, a new system, which holds various purposes rather than the measuring solely, has been applied at a large number of organizations (Armstrong and Baron, 1998a) Obviously, such innovation raises a crucial question to answer: „What is the role of a good performance management in an organization? ‟ in order to correctly put such practice into the strategic relationship with other components of the HRM matrix process, especially the reward system:
Figure 8: The matrix of human resource processes
According to a survey of Institute of Personnel Management (1992), there are three main reasons for building a performance management system, namely: improving organizational effectiveness, motivating employees, and improving training and development Summing up such perception, Armstrong (2006) strongly believed that the general purpose of a performance management system is to build an effective working culture based on high employee‟s competencies and commitment guided by good leadership
Shields (2004) and Noe et al (2008) supported the theory above by mentioning the four-fold objectives of an effective performance management including: strategic communication, relationship-building, employee development and employee evaluation The first two aim to develop the faithful and clear communication link between individuals and organization in term of expected competencies, behaviors, and results; therefore, they will lead to a stronger work relationship founded on regular meetings for performance reviewing and developing In addition, as being mentioned in the figure 1.2.1, the development practice is directly supported by performance management through data about employee‟s strengths and weaknesses it provide Last but not least, the evaluative purpose of performance assessment is strongly linked to the numerical rankings and ratings those are the base for employee promotion, reward, and selection (Ibid)
Despite the fact that the system introduced above is being regarded as the most practical and innovative in the modern business establishments, there are still some potential conflicts amongst its strategic purposes especially between the developmental and evaluative (Shields, 2004) or, in another way, reward-driven and development-driven (Williams, 2006) It is the fact that employees, even whom at managerial levels, usually cannot determine whether their own performance assessment is to reward their achievements or to help them develop in the future (Shields, 2004) However, such troublesome evaluation – development relationship is inevitable in any performance assessment system; because, they are, in reality, two very important connections between performance management and extrinsic reward category (see figure 1.1.2) Shields (2004) concluded that it is a big challenge for any HRM practitioner to maintain the harmony between such two purposes of performance assessment system; and, the role of each of them should be reviewed and modified on congruence with organization‟s HR strategies
The step of employees‟ performance measurement takes place right after the identification of employees‟ goals which are congruent to organizations‟ Noe et al
(2008), based on the definition of individual performance and their own performance management model, has synthesized that the overall concept of measuring such HR phenomenon They concluded that performance relatively can be measured through its three components attributes (inputs), behaviors (processes), and results (outputs) Accordingly, it is obvious to state that such element of performance management circle also is an important part of the reward system since the measurement of outcomes is strongly tied to rewards (Mabey, Salaman and
Storey, 2005) Harle (1995) point out that reward is an important part of the feedback loop in performance management Mehlmood (2013) explicates reward system is the requirement of any organization to retain and hire the most suitable employee to gain competitive edge in a competitive environment He further explains that reward system inspiring the employee towork harder and faster because employee needs motivation to put extra offort on their task Finally he concludes that reward system should match with the organizational culture and the strategy in order to achieve sustaible competitive advantages
Reviewing all these experiential investigations and findings, the researcher can deduce that a good reward system which includes both extrinsic (financial) and extrinsic (non-financial) rewards to individual performance show higher productivity When management assembles decisions on what types of rewards to apply and they should recognize the aims of their reward systems/policies All these observations suggest the need for a strategic reward system to increase employee performance with the basic goal of achieving competitive advantage
This research investigate the effect of extrinsic and intrinsic rewards on employee performance in one biggest banking organization Employee performance is taken as dependent variable and extrinsic and intrinsic rewards are taken as independent variables In independent variable, extrinsic rewards represent four dimensions, which are pay, bonus benefits and promotion Intrinsic rewards embody recognition, career advancement, responsibility and learning opportunity The methodology tested based on the conceptual framework, which is:
Based on the empirical researches, Yapa (2002) most tested extrinsic reward variable are pay, bonus, benefits, and promotions and intrinsic variables are recognition, career advancement, responsibility and learning opportunities Hence, the contemporary research concentrated to identify the effect of the above extrinsic and intrinsic variables on employee performance.
Methodology
Research approach
Due to the complexity of the objectives being assessed and the need for a true deep understanding of the phenomenon, the author chooses to use mixed-methods approach for the study Her decision is supported by Bryman (2006) who strongly stressed on the wealth of unanticipated outcomes can be achieved by adapting such approach instead of using qualitative or quantitative alone Moreover, it is also suggested that the employment of mix methods can generate „complementarity‟ (Greene, Caracelli, and Graham, 1989) which is necessary “for cross-validation when multiple methods produce comparable data” (Yauch and Steudel, 2003)
Qualitative research is believed to be a „naturalistic form of enquiry‟ because it seek to a true understanding of the social issue in its very own natural setting (Bryman, 2008; Marshall and Rossman, 2006; Newby, 2010; Saunders et al 2009) Moreover, such category of methods also content emotionalism; that is to say, the humanity or the inner reality of human is respected and critically accessed during the research (Bryman, 2008, Rossman and Rallis, 2003) As a consequence of the way that qualitative method analyze as regarded as “distinctive research strategy”, the data will be gathered through giving the voice to workers and feet on the other shoes in order to finding out the inner reality of human (employees) in seeking motivation at works (Vanderstoep and Johnston, 2009; Marshall and Rossman,
2006) More importantly, the results conducted will be critically analyzed to perceive the authenticity issues of reward management impact on employees' performance; hence, qualitative approach can be used to develop the theories about subjective purposes of HR managers in developing a reward system and the real perception (preferences) of employees toward current reward system being used
On the other hand, the quantitative approach utilization can be described as measuring the appearance ratio of a „given phenomenon in a society‟ (Geisen,
2008) and investigating the cause and effect systematic process (Shavelson and Townes, 2002; Kalof et al 2008; Creswell, 2009) Accordingly, the writer of this paper has decided to use such approach to assess the broad responses of the employees against the application of each reward dimensions, furthermore, establish the link between reward and motivation/satisfaction, hence, performance
Certainly, the author‟s main strategy in such „sequential procedures‟ is to use qualitative analysis of employee rewarding references as the foundation for the quantitative research After that, the quantitative findings, in turn, can serve as the validating tool for the qualitative theories discovered before These results, later on, will be „concurrently‟ collected and analyzed with those focus groups of employees in order to provide the critical view of the cause and consequence process in managing an employee reward system.
Sampling and Data collection
Sampling as reported by Sarantakos (1997) is the procedure of selecting the component of the accurate population which are to be included in the study in such a way that the sample of selected elements represent the population The study adopted stratified random sampling It respects the categories of employees and offers accurate results The purposive sampling are also be used in the case of qualitative generation of theory about employee rewarding preferences with the selection of amounts of such employees who are various in gender, age, education level, nationality and position Such selection, obviously, will „obtain the broadest range of information and perspectives‟ on employee perception about a proper reward system (Kuzel, 1992) On the other hand, the sample of the quantitative study was be randomly chosen
This study was conducted at two Departments of Head Quarter Office at BIDV (includes: Retail Banking Department and Banking Support Department) and three different BIDV banking branches in Vietnam (namely: BIDV Hai Ba Trung branch, BIDV Da Nang branch, BIDV TP Ho Chi Minh branch) The reason was chosen for 03 different branches with three different region in Vietnam – Hanoi city, Da Nang city, Ho Chi Minh city - were chosen is to give the research more diverse variations in order to reduce error margin (Marshall and Rossman, 2006) Moreover, the author is working at Hai Ba Trung branch which is one of biggest BIDV branches in Ha Noi Another reason for choosing Retail Banking Department, Banking Support Department, Ho Chi Minh branch and Da Nang branch to be chosen are the convenience to be accessed since the author has several friends working at that establishment who can assist her in conducting the research
In order to receive the most relevant and richest sources of data about reward practice of the three BIDV banking branches, the author will focus on quantitative generation of theory about employee rewarding preferences randomly chosen so that each employee of the two department of the head office and three banking branches has the equal chance of being represent for his/her bank (Hesse-Biber, 2010); This large survey will be distributed to the respondents with the help of various departments in BIDV (especially in case of 02 Department of Head Office at BIDV (includes: Retail Banking Department and Banking Support Department) and 03 different BIDV banking branches in Vietnam namely: BIDV Hai Ba Trung branch, BIDV Da Nang branch, BIDV TP Ho Chi Minh branch) Such selection, employees who are various in gender, age, education level, nationality and position, obviously, will „obtain the broadest range of information and perspectives‟ on employee perception about a proper reward system (Kuzel, 1992) Therefore, the result can be generalized to the whole working staffs This step will reveal the actual relationship between the impacts of specific reward on employees‟ performance The size of the sample will be determined by the margin of 5% error fixed by the author of this research (Saunders, Lewis, and Thornhill, 2009)
In order to gather requirement data for this research, the author was utilise assorted data collecting methods, which concentrate on focus group of selected employees who have been through the running of BIDV‟s performance system (ibid) Since the intricate of the objectives, the author was carried out the group interviews that involves 5 to 10 participants selected amongst 40 people from different divisions, levels (including managers and employees) working in the two department of the head office and three banking branches above and also genders to help analysing the reality of reward management engendering motivational force to BIDV employees' performance in achieving the intention of talent management strategy (Newby, 2010; Bryman and Bell, 2007) Notably, with attentive preparation which encompasses of choosing meeting room for location, the researcher‟s appearance and good knowledgeable about the issues and the BIDV organisation in Vietnam before were also taken to contemplate (Newby, 2010) Also, by shaping the commencement of the interview, the researcher was build up the interviewee‟s trustworthiness, thus, increasing the commitment of participation for the group interviews and the reliability of the information gained (Robson, 2002)
The method of in-depth interview is describe as „a conversation with a purpose‟ (Kahn and Cannell, 1957) which helps the interviewers explore several specific topics according to her objectives; hence, discover the interviewee‟s point of views (Altinay and Paraskevas, 2008; Matshall and Rossman, 2006) Furthermore, open-ended questions were being asked to identify the motives, discerned benefit, and elements modifying the intention of informants to engender in BIDV (Newby, 2010; and Saunders et al., 2009) In this sense, the author was concentrate on taking notes, recording data, listening carefully and attempting to test the understanding of those participants through repeating such questions: “what do you mean? Could you explain why the reward system/employees' performance are so different?” This step will expose the substantial association between the repercussions of reward management, employees‟ performance on managing and developing talent in-house From this step, the author hopes that she can discover some new directions in defining and perceiving rewards from employee point of view (not scholar‟s) those can be tested in the quantitative part of the research.
Selection of respondents
The sample consisted of the employees working in commercial banking organization Sampling method was used to collect the primary data A sample of
342 respondents was used In this study, the employee's perspective has been in focus Therefore, the categories of respondents were mainly is employees.
Survey/Questionnaires
The questions in the survey are either structured or open A structured question is a question with a number of different given answer An open question is formed in a way that the respondents can formulate the answer with their own words With open questions you get more data but it also make the evaluation more complex and time consuming
In the survey, the author has used structured questions instead of open questions She made this chose because she found it easier and clearer when evaluating and comparing the answer If we would have used open questions we think the risk of getting a spread in interpretation had been to big and it would have been hard to compile the information
Data was collected through a questionnaire survey of employees at selected banks in BIDV This selection of rewards factors makes the study more suited to the work settings of banking sector of BIDV employees as shown below.
In - depth Interviews
I am thankfully got to do out five interviews that also was recorded Every interview was about 10-15 minutes to make it effective and not to take up to much time from the respondents‟ work-time
The in –depth interview were of two kinds One set was targeted at management This was very critical to enable the researcher gather management‟s opinion on the relationship between performance and reward system The second set of questionnaires was directed at focus groups which is employees working at department to five the researchers
Interviewees
Five interviews were made during the time duration May 4-6th and the survey/questionnaires were noticed out May 7th Before the interview, the author did not prepare the employees with any questions because the author desired them to answer as honest and spontaneously as realizably The author put forward for the respondents before recording them if that was okay, and it was, presented that they could be anonymous.
Limitations
One of the biggest limitations of this research is that the qualitative part of this study will be constructed based on the case of only 02 two Head offices departments and three banking branches, so that the limitation caused by the constraint in the size and scope of the sample Such constraint, resulted from the finance challenge of the author may be seriously affecting the generalizability of the results Last but not least, when conducting the focus groups, the researcher may find it is difficult to manage and control the whole process as well as to analyze the large quantity of information collected in a short time (Bryman and Bell, 2007) Moreover, the restricted location and size of the sample for the self-report process also is another limitation of the research.
Assessing the situation of reward management on employees'
BIDV - Organizational background influences to rewards management on employees' performance
The author has been chosen the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam as the background for the research owning to the necessity of composing a critical investigation on EPM in those developing countries
The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), was the first specialized bank to be builded in Vietnam‟s banking institution after the State Bank Established in the year 1957, BIDV is the 2 nd largest bank in Vietnam at the present time and a varied financial group with business activities in the ranges of banking, securities, insurance and financial investment
In the firm of more than 24,000 well – qualified and well – trained officers, workers and financial consultants, BIDV serves both individual customers and institutions with an extensive system of 190 branches and more than 800 distribution points, spanning 63 provinces and cities nationwide BIDV also has a commercial existence in several of countries encompasses of Lao, Cambodia, Myanmar, and the Czech Republic; and a variety of the joint ventures in Vietnam with other foreign co-partners
4.1.1 BIDV - The foundation and development
The history of BIDV is a journey of an operation which has always shouldered the great tasks of Vietnam Following the Decision No.177/TTg dated 26/04/1957 of the Prime Minister; BIDV's original mandate was to manage and allocated basic construction capital from budget to fund all economic and social sectors (BIDV Annual Report, 2016)
BIDV bank‟s names through different stages which can be describes below:
* From 1957 to 1981: The Vietnam Construction Bank
Established when the country was operate in the chapter of economic recovery, the Bank for Construction of Vietnam assembled important benefaction to the management and allocation of capital for manufacture Right from the first year, BIDV offered assets for hundreds of works, donating to balance accounts, facilitating market management and price stability
In the period 1975 – 1981, the Bank joined to upgrade economic facilities in the South and mature new infrastructure after the war The bank provided money for “industrial, agricultural, transportation, public welfare projects”, and key assignment critical for the national financial system
* From 1981 – 1990: The Bank for Investment and Construction of Vietnam
In the duration 1981 – 1990, the Bank for Investment and Construction of Vietnam gently destroyed difficulties and improved operational movement for continued development Especially, this was also the period when the bank made strong advance in line with the national renovation in general and the banking sector in special, progressively becoming one of the leading specialized banks in the Vietnam
* From 1990 - 27 April 2012: The Bank for Investment and Development of Vietnam
BIDV in the period 1990 – 2000 made some positive developments, specifically:
- BIDV cooperated with Banque Pour Le Commerce Exterieur Lao Public (BCEL) to set up Laos – Viet Joint Venture Bank with the aim of “establishing to the economic development and financial and banking organization for Laos; supporting trade relations between the two countries, thereby contributing to promoting the comprehensive economic cooperation between the two countries
- In 1998, following directions of the Government and the Governor of the State bank of Vietnam jointed to form a committee to handle the debts and assets of Nam Do bank
- As the leading bank to establish a joint venture bank with a foreign partner, in May 1992 BIDV established VID Public Bank headquartered in Hanoi and branches in Ho Chi Minh city, Hai Phong,…
* From 2012 until today: The Joint Stock Commercial Bank
BIDV was equitized according to the direction of the Government, ensuring the harmony in the interest of the State, enterprises, investors and employees On 27 April 2012, BIDV officially transformed into the Joint Stock Commercial Bank for Investment and Development of Vietnam and has been listed on the stock exchange since January 2014
On 25 May 2015, BIDV officially merged with Mekong Housing Bank (MHB), marking a milestone in the network expansion
4.1.2 BIDV - Organizational and managerial structure
- Organizational structure: According to BIDV Annual Report (2016), BIDV is operating as a joint stock commercial banks, the organizational structure including:
Figure 10: Organizational Chart at BIDV
-Management team: According to BIDV Annual Report (2015, 2016),
BIDV's executive management structure assembled of: the Board of Directors
(BOD), the Board of Management (BOM), the Supervisory Board and the Chief Accountant
- Board of Directors is the highest authority, taking action in the name of BIDV in term of making resolution, exercising rights and obligations of BIDV that are out of jurisdiction of Shareholders‟' General Meeting The BOD also has capacity of describing business operation plans and assembling plans relating business strategies and inclusive development plans of BIDV
- According to BIDV's charter, Board of management (BOM) has the responsibility for day-to-day operation of BIDV, worked in the supervision of the BOD The BOM composes of committees, including “Asset and liability management committee, credit committee and off-balance sheet debt sale committee”
- Supervisory Board members are voted by BIDV's General meeting of shareholders, take action on behalf of shareholders to objectively and sincerely supervise and gauge every business operation, corporate governance and financial status of BIDV
Figure 11: Managerial Chart of BIDV
4.1.3 Overview of BIDV business operation
- Main products and services : According to BIDV Annual report (2015,
2016), BIDV have four main products and services which include:
Figure 11: BIDV main Products and Services
* For Banking detail: BIDV has prosperity of maturity in Vietnam, furnishing a full scope of modernistic and appropriate banking goods and services encompassing loans, deposits, deposits, business finance, wages and transaction services, and card services and among others
* For Insurance detail: BIDV furnish “life insurance and non-life insurance” goods bundles, tailored to the necessity of separate customers
* For Securities detail: BIDV furnishes a extensive range of brokerage usages, investing consultancy with the capacity of quickly expanding a system of order receiving organization nationwide
* For Financial investment detail: BIDV donates capital to set up firms for investment in key national enterprise and take hold of the guide in a amount of notable conception for example: Vietnam Aircraft Leasing Company
The situation of reward management impacts on employee' performance at
BIDV began as a grocery story, however, at the present time; the competition in the banking sector in Vietnam has increased Tough competition and economic conditions within the Vietnam, after the recession, various challenges have evolved that threaten competitions position of Vietnam Employee productivity can serves as one of the major sustainable competitive advantages for the BIDV and thus this study aims to explore the reward system in BIDV and its impact on performance of its employees
According to BIDV Annual Report (2015, 2016), various factors have caused a decline in the market share of BIDV in the last 3 years In order to enhance its performance and retain competitive edge, BIDV must find efficient and effective strategies
Especially, according to the Decision No.589/QD-NHNN dated April 24, 2015 by the State Bank, BIDV and the Mekong Housing Bank (MHB) signed a minutes of handover and announced the merger MHB into BIDV Following that decision, after May 22, 2015, MHB brand was officially dissolved From May 25, 2015, all branches of MHB was operated under the name of BIDV
Since the fact that, human resources management in Vietnam banking are facing with high-staff turnover rate, which consist of lack of potential employees, weak performance management, career development opportunities and especially inexperienced team of hospitality graduates
Presently, in 2015-2016, “the labor turnover was arrived at 21.18 %” when comparing with the other neighbors like Singapore or Thailand in the same Asian context It is the reasons why banking organizations in Vietnam are still challenging in retaining the qualified employees in the competitive labor market
In BIDV various reward packages are used and these involve monetary (extrinsic) and non - monetary (intrinsic) rewards For example, in the context of monetary reward salary increase is sought to be highly essential for employees' satisfaction
The study conducted by shows that by adequate rewards, management can motivate employees, particularly low performance, but also increase job satisfaction particularly of high achievers However, due to differences in personalities and personal preferences, some employees are more motivated by monetary rewards while others prefer non-monetary rewards Reward systems are also related to career and professional development of employees Adequate rewards create a feeling in employees that they are valuable and their efforts are recognized and appreciated by the management.
Analyzing
There was one general category of respondents‟ namely random employees/managers of two departments at Head Office BIDV (which includes: Retail Banking Department and Banking Support Department) and three BIDV branches in Vietnam (which includes: Hai Ba Trung branch, Da Nang branch, Ho
For the survey, 535 questionnaires were sent out and only 342 questionnaires were returned conclude and unable The investigation took into account respondents general characteristics and information, in this examination the researcher considered respondents in term of gender, age, and marital status, education level to represent understanding of the influences of reward management on the employees' performance of BIDV
Part 1 Demographic Data a Gender of respondents:
Table evidences that 63% of respondents are female and 37% are male These results propose that the demonstration is reasonably representative Moreover, the female workers are care about the reward system more than the male
Listing Rate of occrance Percentage
Figure indicates that 44% of respondents are below 30 year old, 36% from 30 -40 years old This indicates that BIDV have young and energetic employees Next 16% of respondents were 40 and 50 years old and only 4% are aged above 50 years These results generally imply that majority of employees of BIDV are young and not yet settled, poor reward system to them will cause more turnover so as to find the green pasture And good reward system will retain them
Figure 14: Age of respondents c Level B o e f lo e w d 3 u 0 c y a e t a i r o s n old 30 -40 years old 40 -50 years old Above 50 years old
Table point out that only 8% of the workers have Diploma certificate, 61% of the respondents have first degree level of education and 30% of them have master degree These findings identifies that a greater number of BIDV employees are have good education level, which in turn they can get have more job in the other working environment if the organization not provide a good reward management to build up the retaining strategy
Listing Rate of occurrence Percentage
Part 2 To determine the reward system currently used in BIDV a What are rewards systems currently used in BIDV?
Table point out that 41.00 % of employees demonstrates training and development is one of the rewards provided by BIDV, 39.00 % of them states financial, 17% promotion and 4% other types of rewards These results suggest that larger number of employees (41.00%) consider training and development as the most important reward management followed by Financial and next other reward like Promotion and the other types of reward systems
Table 4: Financial Reward systems currently used in BIDV
Listing Rate of occurrence Percentage
Sum 342 100.00% b Are they satisfied with the current level of financial rewards at BIDV? Table 5: The current level of employees' satisfaction about financial rewards at BIDV
Listing Rate of occurrence Percentage
Table shows that 62% of employees are satisfied with the financial rewards offered at BIDV, 23% are strongly satisfied, 11% are dissatisfied and 1% is very satisfied These results states that almost of BIDV employees are happy with overall financial reward management at BIDV c Which of the following non-financial rewards are used in BIDV?
Table 6: Non- financial Reward systems currently used in BIDV
Formal recognition (Certificate, employee of the month)
Send out for training/seminar 113 33%
End of the year social part 9 3%
As stresses on Table above, 33% of employees were choses to send out for a training/seminar, 36% received the formal recognition, 4% received informal recognition and 3% saw end of the year party as reward for appreciation of job well done These results point out that BIDV uses numerous of non-financial rewards to encourage their employees d Are they satisfied with the current level of non-financial rewards?
As indicated in the table, 43% of respondents are not happy with the current level of non-financial rewards provided to them by BIDV, 10,0% strongly dissatisfied, 38% are satisfied and 9% are very satisfied These results states that majority of BIDV employees are not happy with overall financial reward management at BIDV
Table 7: The current level of employees' satisfaction about non-financial rewards at BIDV
Listing Rate of occurrence Percentage
Part 3 To access the effect of extrinsic rewards (salary, promotion, remuneration) in organization performance
What are the effects of extrinsic rewards on employee performance? a For the point “Commonly of increase in salary level”
Table 8: The current level of employees' satisfaction for Commonly increasing salary
Expression of view Rate of occurrence Percentage
As indicated in Table below, 43% of respondents are dissatisfied with the commonly of increase in salary level, 9% are strongly disagree, 39% agreed and 8% strongly agreed These results suggest that the majority of employees in BIDV are not happy or satisfied with the increase of salary level commonly and as result they are not motivated to improve their job performance b For the point “When get a bonus enlargement their job performance increase”
Table 9: The current level of employees' satisfaction in Increasing job performance when get a bonus
Expression of view Rate of occurrence Percentage
As shown in Table, 60% of employees agreed that they are encouraged to perform their better and consistently during the year when they are convinced of getting bonus, 11% strongly agree with this statement, 29% disagreed These findings describes that the larger number of BIDV employee would raise their performance when satisfied of better benefits/extra bonus than they are currently receiving c For the point “When promoted by their employer, the workers motivate to work hard during the year”
Table 10: The current level of staffs‟ agree/disagree when they have prompted by their employers
Expression of view Rate of occurrence Percentage
Table shows that 76% of employees agreed that getting job promotion to higher position or responsibility encourages them to work harder during the year, 12% are strongly agreed, and 11% of them disagreed These investigation stresses that the larger number of BIDV employees now are getting more encouraged when furthered and that the bank performance would similarly boost
Part 4 To access the effect of intrinsic rewards (Praise and recognition) on employee performance
What are the effects of intrinsic rewards (Praise and recognition) on employee performance
(a) Praise for a job well done from supervisor motivate those employee to perform job better
Table 11: The current level of staffs‟ agree/disagree when they have Praise for a job well done from supervisor
Expression of view Rate of occurrence Percentage
Table indicates that 80% of staff agrees with the statement, 12% strongly agreed, 7% disagreed and 1% strongly disagreed These findings indicate that the larger number of BIDV employees get motivated to perform the work better when they received from their superviors
(b) When get formal recognition such as certificate of employee after month, certificate of good customer service:
Table 12: The current level of staffs‟ agree/disagree when they get formal recognition
Expression of view Rate of occurrence Percentage
Table indicates that 54% of staff agreed that formal recognition such as certificated offered to employees as recognition of exemplary performance employee and co-workers to perform better, 28% disagreed, 10% strongly agreed, and 8% strongly disagreed
(c) Informal recognition (such as thank you, very done, you are star)
Table 13: The current level of staffs‟ agree/disagree when they get in-formal recognition
Expression of view Rate of occurrence Percentage
Table indicates that 64% of staff agrees with the statement, 28% strongly agreed, 6% disagreed and 1% strongly disagreed These findings indicate that the larger number of BIDV employees get motivated to perform the work better when they received some informal recognition (such as thank you, very done, you are star)
(d) Overall non-financial reward encourages the workers at BIDV?
Table 14: The current level of staffs‟ agree/disagree of the point “overall non – financial rewards encourages the workers”
Expression of view Rate of occurrence Percentage
Results
4.4.1 To evaluate the impact of rewards on employees’ performances at BIDV
As stated by both the qualitative and quantitative examination it was concluded that there is a productive influences of reward management on the employees‟ performance at BIDV As a consequently, when cooperating the questionnaire amongst employees, it was stressed that determined on the level of the rewards given to the employees, there is performance is similarly affected From the interviews with the BIDV managers it was showed that the managers preferred to rewards the employees frequently in order to make sure their commitment levels are high
Moreover, the managers also pointed out that at BIDV, there is diverse range of rewards available hence each employee is motivated to perform well based on their personal favor regarding the rewards they are given The two reward classes that were stressed encompass extrinsic rewards and intrinsic rewards Within the extrinsic category, the employees denoted that they preferred Cash rewards and bonuses whereas in term of the extrinsic reward category the employees preferred the option of promotions According to the managers, most of the employees at BIDV had the option to choose their own preferred reward category
4.4.2 To determine the most important rewards that motivates employees at BIDV
According to the questionnaires survey it was highlighted that the most preferred form of reward system at BIDV was Appreciation and Promotions This is indicative of the fact that the employees favored intrinsic and non-monetary reward systems as compared to monetary rewards However, there were also a few employees who preferred monetary rewards over the benefits offered by BIDV In order to ensure that all employees are given their preferred option therefore BIDV managers stated they preferred to use a combination of monetary and non-monetary rewards when apprising employees on their performance
4.4.3 To offer recommendations on how reward system of BIDV can be improved in order to improve employee performance
In order for BIDV to improve their overall employee performance they can increase the frequently of their performance appraisal Furthermore, the BIDV