Problem statement
In 2013, the Vietnamese government focused on controlling inflation and stabilizing the macro economy, which posed significant challenges for the banking sector in achieving credit growth and profit targets The State Bank of Vietnam reported that the total revenue of the banking industry in 2012 was 28.6 trillion dong, reflecting a 50% decrease compared to 2011.
In their annual reports for 2012, Vietinbank, Vietcombank, Eximbank, and Seabank revealed a decline in employee salaries compared to 2011 Banking finance expert Nguyen Tri Hieu noted that the average salary in the banking sector in 2012 was on par with that of other sectors.
Employees in the banking sector face significant work-related pressure, resulting in limited personal and family time, coupled with relatively low salaries, leading to a high turnover rate A 2012 survey by Towers Watson revealed that the banking sector has the highest turnover rate at 16% compared to other industries Additionally, interviews with human resources managers at Vietinbank indicated an average voluntary turnover rate of 7.3% during 2012 and the first half of 2013.
Table 1: The turnover rate of Vietinbank in 2012-2013( Source: Human resources managers of Vietinbank)
Vietinbank’s Branch Turnover rate of 2012 Turnover rate of first six month in 2013
In challenging circumstances, banks aim to retain skilled and experienced employees to achieve their business objectives It is essential to explore the factors affecting employee retention rates and identify effective human resource strategies for maintaining top talent within the banking industry.
Bank leaders prioritize employee retention and have implemented strategies such as salary increases, skill training, and promotion opportunities Despite these efforts, turnover rates remain high Understanding the motivating factors and the extent of their impact on employee retention is crucial for addressing this ongoing challenge.
Previous studies have identified key motivators influencing employee retention, including basic needs such as hunger, thirst, shelter, safety, social interactions, and esteem (Maslow, 1954) Additionally, factors like achievement, recognition, the nature of work, responsibility, opportunities for advancement, and personal growth have been highlighted (Herzberg, 1959) Understanding these factors is crucial for enhancing retention rates within the banking industry.
This study aims to identify the key motivating factors that influence employee retention in the banking industry, offering innovative solutions and evidence to enhance human resource management practices.
Research Objectives
This research aimed at clarifying the impact of motivator factors to the employee retention in the banking industry in Vietnam with the specific objectives:
To identify the impact of motivation factors (in Herzberg‘s two factor theory) on employee retention in banking industry in Vietnam
To measure the impact level of these factors on employee retention in banking industry in Vietnam
To examine the differences the impact of motivation factors on employee retention among groups of working duration, and the level of intention between manager and staff.
Research scope
Due to constraints in resources and time, the research gathered empirical data from commercial banks in Binh Duong province, specifically Vietinbank, EximBank, and Vietcombank A total of 300 employees from these banks participated in the study.
Thesis structure
Chapter 1: Introduction presents the research background, problem statements, research objectives, and research scope and thesis structure
Chapter 2: Literature review presents literature review, research model and hypotheses
Chapter 3: Research methodology illustrates the methodology of this paper
Chapter 4: Data analysis and findings presents research results based on collected data
Chapter 5: Discussion, conclusion and recommendations summarizes the research results, provide the findings and recommendations.
LITERATURE REVIEW
Predictors of employee retention
Employee retention focuses on implementing strategies to minimize unnecessary turnover within an organization It is essential for businesses to keep employees who possess the necessary skills and experience to sustain operations effectively.
When employees depart from an organization, it results in the loss of valuable knowledge regarding production, ongoing projects, competitors, and loyal customers Various factors influence employees' decisions to remain with a company, highlighting the importance of understanding these motivators To enhance employee retention, organizations must identify what drives job satisfaction and actively monitor it to foster a committed workforce.
Employee retention is influenced by several key factors, including career opportunities, a positive work environment, work-life balance, organizational justice, and a favorable leave policy, as highlighted by Cappelli (2000) Cole (2000) further emphasized that employees are more likely to remain with organizations that value their contributions and allow them to perform at their best Essential reasons for employee loyalty include an effective reward system, opportunities for growth and development, competitive pay packages, and a healthy work-life balance.
There are some of the more famous theories within this motivation category: Maslows‘ Hierarchy of Needs Theory (1954) , and Herzberg‘s Two-Factor Theory (1959)
Maslow's Hierarchy of Needs Theory, developed by Abraham Maslow, is a prominent motivational framework that outlines five levels of needs in a pyramid structure These needs begin with physiological essentials like hunger, thirst, and shelter, progressing through safety, social, and esteem needs, culminating in self-actualization—the pursuit of one's full potential The pyramid illustrates that certain needs take precedence over others, emphasizing that foundational needs must be met before higher-level needs can motivate individuals.
Herzberg's Two-Factor Theory categorizes job satisfaction into two distinct groups: motivation factors and hygiene factors Motivation factors, which drive employee satisfaction, include achievement, recognition, the nature of the work itself, responsibility, opportunities for advancement, and personal growth In contrast, hygiene factors, which can lead to dissatisfaction if not addressed, encompass company policies, supervision quality, relationships with supervisors and peers, working conditions, salary, personal life, status, and job security Understanding these factors is essential for enhancing employee motivation and satisfaction in the workplace.
Table 2: Maslow vs Hertzberg - Comparative Analysis:
Maslow's theory is based on the concept of human needs and their satisfaction
Hertzberg's theory is based on the use of motivators which include achievement, recognition and opportunity for growth
According to Maslow's model, any needs can act as motivator provided it is not satisfied or relatively less satisfied
In the dual factor model of Hertzberg, hygiene factors (lower level needs) do not act as motivators Only the higher order needs (achievement, recognition, challenging work) act as motivators
(Comparative Analysis between Maslow vs Hertzberg (Source: Akrani, 2011)
A job enrichment program implemented at Hill Air Force Base in Utah, based on Herzberg's principles, demonstrated that enriched jobs lead to decreased personnel turnover and reduced overtime.
Maslow's theory is based on the hierarchy of human needs He identified five sets of human needs and their satisfaction in motivating employees
Hertzberg refers to hygiene factors and motivating factors in his theory Hygiene factors are dissatisfies while motivating factors motivate subordinates Hierarchical arrangement of needs is not given
Maslow's theory is rather simple and descriptive The theory is based long experience about human needs
Hertzberg's theory is a prescriptive framework that identifies effective motivating factors, grounded in empirical data gathered from interviews with 200 engineers and accountants.
Maslow's theory of motivation is highly regarded and frequently referenced, particularly in the context of developing countries where financial needs remain a primary motivator.
Herzberg's theory is an extension of Maslow's theory of motivation Its applicability is narrow It is applicable to rich and developed countries where money is less important motivating factor
Maslow's theory or model is descriptive in nature
Herzberg's theory or model is prescriptive in nature rework, a reduction in man-hours, and material savings (Herzberg 1976, 1977)
Table 2 : The result of job enrichment program by Herzberg 1976
Motivation factors Reported increase prior to enrichment (%)
Source: Adapted from Herzberg and Zautra (1976)
Mausner and Snyderman (1999) identify organization-based motivational variables that influence employee job satisfaction, which is a key predictor of retention and turnover Their theory distinguishes between satisfaction and dissatisfaction, attributing each to different factors: motivation and hygiene factors Motivators are the elements of a job that encourage employees to perform well and influence their choice to remain with or leave an organization.
Job satisfaction plays a crucial role in organizational success, as dissatisfaction can result in decreased motivation and commitment among employees Research indicates that a lack of job satisfaction is a significant predictor of employee turnover (Alexander, Lichtenstein, and Hellmann, 1998) When employees are not adequately motivated, they are more likely to consider leaving their jobs (Bolarin, 1993).
Research indicates a strong correlation between perceived work motivation, job satisfaction, and employee retention Studies by Tang and LiPing (1999) demonstrate that higher job satisfaction is linked to reduced employee turnover Additionally, Stokes, Riger, and Sullivan (1995) found that motivation significantly influences job satisfaction and the intention to remain with a company High levels of job satisfaction foster greater motivation among employees, which in turn leads to lower turnover rates, as supported by multiple studies (Abraham, Ando, and Hinkle, 1998; Mael and Ashforth, 1995; Ellemers, Spears, and Doosje, 1997; Wan-Huggins, Riordan, and Griffeth, 1998).
Research indicates a significant relationship between motivation and employee retention, yet previous studies predominantly emphasize hygiene factors such as company policies, supervision, peer relationships, work conditions, salary, and job security To better understand the impact of motivator factors on employee retention, this study will focus on key motivators like advancement, responsibility, and recognition.
Achievement, and Growth) of Herzberg‘s theory to answer this problem in banking industry in Vietnam.
Motivators of Employee retention
Base on Herzberg‘s theory, there are five main motivators as follows:
This refers to the expected or unexpected possibility of promotion An example of negative advancement would be if an employee did not receive an expected promotion or demotion
Oosthuizen (2001) identified advancement as a key motivator, fostering personal growth, greater responsibility, and enhanced social standing Arnolds and Boshoff (2001) argue that providing more promotion opportunities can significantly boost employee job performance Therefore, there is a strong correlation between advancement opportunities and employee retention, leading to the hypothesis that promoting career growth positively impacts workforce stability.
H1: There is a positive significant impact of advancement on employee retention
Employee autonomy plays a crucial role in decision-making and idea implementation, leading to increased motivation and job satisfaction When managers trust their employees' choices and support their innovative efforts, it fosters a sense of responsibility that enhances confidence in their work This responsibility is a key motivator for effective management, ultimately driving better performance and outcomes.
H2: There is a positive significant impact of responsibility on employee retention
Recognizing employees for their achievements significantly boosts job satisfaction, while neglect or criticism can lead to dissatisfaction According to a 2002 Watson Wyatt survey in the USA, employees value acknowledgment and appreciation from their organization, highlighting the importance of recognition in the workplace.
Some previous studies stated that recognition has a positive impacted on employee‘s retention
(Allen, Shore & Griffeth 2003; Bergiel et al 2009) Therefore, the hypothesis is:
H3: There is a positive significant impact of recognition on employee retention
Completing a task or project ahead of schedule and receiving high reviews can significantly boost an employee's satisfaction and motivation Positive feedback often correlates with better remuneration, including salary, benefits, and incentives Both monetary and non-monetary rewards play a crucial role in enhancing employee motivation and engagement.
Bergiel (2009) suggested that there is a significant and positive relationship between compensation and job embeddedness Thus, hypothesis is:
H4: There is a positive significant impact of achievement on employee retention
Opportunities for advancement and skill development are crucial motivation factors for employees When growth prospects are limited or when individuals encounter a glass ceiling, it can lead to decreased job satisfaction and overall fulfillment in their roles.
Providing adequate training opportunities is essential for employee growth and development (Dockel, 2003; Kraimer et al., 2011) According to Storey and Sisson (1993), training and promotion reflect an employer's commitment to their staff Moreover, effective training and promotion strategies can enhance employee retention rates (Frazis et al., 1998; Wetland, 2003).
H5: There is a positive significant impact of growth on employee retention.
Model and Hypothesis
According to hypotheses that stated above, the proposed research model was shown below:
Hypothesis 1: There is a positive significant impact of Advancement on employee retention
Hypothesis 2: There is a positive significant impact of Responsibility on employee retention
Hypothesis 3: There is a positive significant impact of Recognition on employee retention
Hypothesis 4: There is a positive significant impact of Achievement on employee retention
Hypothesis 5: There is a positive significant impact of Growth on employee retention
Chapter summary
This chapter explores employee retention and examines various motivational theories associated with it It references prior research to bolster the existing literature on the topic The literature review highlights key motivator factors, leading to the proposal of a new model for employee retention in this study.
Data collection, data analysis and hypothesis testing Hypothesis testing
RESEARCH METHODOLOGY
Research design
The research procedure is depicted in Figure 2:
Research methodology
The sample size for this study, which employs Exploratory Factor Analysis (EFA), is determined by the analytical methods used According to Hoang and Chu (2005), a minimum sample size should be five times the number of observed variables, resulting in at least 150 observations for the 30 variables examined Additionally, Hair et al (1998), as cited in Nguyen (2011), support the 5:1 ratio of observed variables to measured variables, emphasizing that each measured variable should have at least five corresponding observed variables.
(1991) cited in Nguyen (2011), suggested that regression analysis to achieve best results, the sample size to satisfy the formula: n ≥ 8k + 50 (3.1)
( n is the sample size and k is the number of independent variables of the model)
This research conducted with sample sizes of about 228 is considered appropriate
Sampling method of this study was convenience sampling method; the object is officer employees in banks in Binh Duong provinces
This study collected data from approximately 300 employees working in banks located in Binh Duong province.
Participants in this study are classified as employees, supervisor and head / deputy department
The study achieved an impressive response rate of 83%, equating to 250 completed questionnaires However, several responses were discarded due to significant missing values, resulting in a final sample size of 228 questionnaires This data will be utilized for subsequent analysis.
For all statistical calculations, the Statistical Package for the Social Sciences (SPSS) version 20.0 was utilized, employing both descriptive and inferential statistics such as Cronbach's alpha, exploratory factor analysis (EFA), correlation, and multiple regression analysis The analysis process was systematically executed to ensure accurate results.
To ensure the reliability, unidimensionality, and validity of a multi-item scale, it is essential to evaluate these aspects systematically The most widely used method for testing reliability is Cronbach's alpha, which indicates a high correlation among items (Hair et al., 1998) Unidimensionality, defined as the presence of a single underlying construct for a set of items (Garver and Mentzer, 1999), must be assessed prior to conducting reliability tests This is crucial because while reliability measures like Cronbach's alpha assume unidimensionality, they do not confirm its existence (Hair et al., 1998).
In the second step of the research, exploratory factor analysis (EFA) is employed to evaluate the convergence of variables within the model This assessment primarily utilizes two fundamental extraction methods: common factor analysis and principal component factor analysis.
EFA with principal component, eigenvalue >= 1 and varimax rotation was applied to
The study by Conway and Huffcutt (2003) investigates six constructs to determine if each scale is unidimensional or multidimensional For a scale to be considered empirically unidimensional, factor analysis must yield a single extracted factor Additionally, items with a factor loading of less than 0.40 are discarded, as they do not adequately align with the latent construct they aim to measure (Hair et al., 1998).
In Step 3, we analyze the linear regression to assess how independent variables influence the dependent variable This involves evaluating the model's suitability, constructing multiple regression models, and testing relevant hypotheses.
Measuring instrument
Responses are scored on a five-point scale ranging from 1 for ―strongly disagree‖, 2 for
―disagree‖, 3 for ―neutral‖, 4 for ―agree‖, and 5 for ―strongly agree‖
Adv01 The opportunities for advancement on this job
Weiss, Dawis, England, and Lofquiest (1967), Sungmin Hyun (2009).
Adv02 The chances of getting ahead on this job
Adv03 The way promotions are given out on this job
Adv04 The chances for advancement on this job
Res05 The chance to be responsible for planning my work
Weiss, Dawis, England, and Lofquiest (1967), Sungmin Hyun (2009)
Res06 The chance to make decisions on my own Res07 The chance to to responsible for the work of others Res08 The freedom to use my own judgment
Res09 The responsibility of my job
Rec10 The way I am noticed when I do a good job
Weiss, Dawis, England, and Lofquiest (1967), Sungmin Hyun (2009)
I consistently receive full credit and recognition for my work, which is reinforced by regular feedback on my performance The praise I receive for my accomplishments motivates me and highlights the value of my contributions.
Ach15 Being able to see the result of the work I do
Weiss, Dawis, England, and Lofquiest (1967), Sungmin Hyun (2009)
Taking pride in a job well done is essential for personal fulfillment Engaging in worthwhile activities not only enhances motivation but also contributes to a sense of purpose Having the opportunity to consistently perform at my best fosters growth and achievement Ultimately, the feeling of accomplishment derived from my work reinforces the value of dedication and hard work.
Gro20 I am proud to work in my company because I feel I have grown as a person
Teck Hong Tan and Amna Waheed (2011)
Gro21 My job allows me to grow and develop as a person
Gro22 My job allows me to improve my experience, skills and performance
Ret23 I‘m planning on working for another company within a period of three years
Filip Dochy, Maya Michielsen, Bastiaan Moeyaert (2009)
Ret24 Within this company my work gives me satisfaction
Ret25 If I wanted to do another job or function, I would look first at the possibilities within this company
Ret26 I see a future for myself within this company
Ret27 If it were up to me, I will definitely be working for this company for the next five years
Ret28 If I received an attractive job offer from another company, I would take the job
Ret29 The work I‘m doing is very important to me
Ret30 I love working for this company.
Chapter summary
This chapter outlined the research design, the characteristic of the sample, the method used to collect the data, the measuring instruments and statistical techniques to test the research hypotheses.
DATA ANALYSIS AND FINDINGS
Sample characteristics
Data was collected from 250 questionnaires distributed through banks in Binh Duong province After filtering, several questionnaires were excluded due to missing information, resulting in a final sample size of 228 completed questionnaires.
The following sections describe the main characteristics of the sample.
There are 31.6 % or 72 male respondents and 68.4% or 156 female respondents These percentages reflect the ratio of female in the banking industry is 2/3
Table 3 : Descriptive Statistics by gender
Frequency Percent Valid Percent Cumulative
Base on the data, age of employees can divide in to four groups:
1 Less than 25 year old: There were 48.7% or 111 people are under 25 years old They are new employees in the company
2 Between 25 and 35 year old: there were 31.1% or 71 people They are senior employees in the company They have experience in banking industry
3 Between 36 and 45: There were 9.2% or 21 people They are supervisors
4 Greater than 45: There were 11% or 25 people, they may be the managers of the banks
Table 4: Descriptive Statistics by age
Frequency Percent Valid Percent Cumulative
According to survey results, company employees account for 80.3% (n3) and the remaining 19.7% respondents was manager/supervisor (nE) This structure shows that the banks focus on supervision on their transaction
Table 5: Descriptive Statistics by working position
Frequency Percent Valid Percent Cumulative Percent Valid
Assessment of measurement scales
The process of assessment and refinement of measurement scale are implemented using SPSS 20.0 software EFA and Cronbach alpha were used to assess unidimentionality and reliability
The criteria of refinement of item included factor loading > 0.40, item-total correlation > 0.3, Cronbach alpha > 0.60, % of variance (Hair et al., 1998)
Before implementing Exploratory Factor Analysis (EFA), it is essential to assess the reliability of the scale components for employee retention using Cronbach's Alpha The testing results indicate that the variable components utilized to measure employee retention are validated through Corrected Item-Total Correlation.
Particularly, two items of retention have Corrected Item-Total Correlation < 0.3 (Corrected Item-Total Correlation = 0.015 and -.007) and, so they are eliminated (Corrected Item-Total Correlation at least > 0.3)
Table 6: Cronbach's Alpha test results
This job offers significant opportunities for advancement, with a high likelihood of getting ahead Promotions are distributed fairly, enhancing the chances for career growth within the organization.
Having the opportunity to plan my work is crucial, as it allows for greater responsibility and ownership of my tasks Additionally, the ability to make independent decisions enhances my sense of autonomy in the workplace Furthermore, being accountable for the work of others fosters leadership skills and promotes a collaborative environment.
Res08 The freedom to use my own judgment .700
Res09 The responsibility of my job .690
I appreciate being recognized for my contributions, as it reinforces my motivation and commitment to excellence Receiving full credit for my efforts is essential, as it highlights the value of my work The acknowledgment I receive when I perform well, along with the praise given for my achievements, plays a significant role in my professional growth Regular feedback about my performance not only boosts my confidence but also encourages me to continue striving for success.
Ach15 Being able to see the result of the work I do 703 Ach16 Being able to take pride in a job well done
.819 Ach17 Being able to do something worthwhile 721
Ach18 The chance to do my best at all times 814 Ach19 The feeling of accomplishment I get from the job 811
Gro20 I am proud to work in my company because I feel I have grown as a person .815
Gro21 My job allows me to grow and develop as a person .830
Gro22 My job allows me to improve my experience, skills and performance .733
Ret23 I‘m planning on working for another company within a period of three years .015
Ret24 Within this company my work gives me satisfaction .761
Ret25 If I wanted to do another job or function, I would look first at the possibilities within this company .655 Ret26 I see a future for myself within this company .667
Ret27 If it were up to me, I will definitely be working for this company for the next five years .657
Ret28 If I received an attractive job offer from another company, I would take the job -.007
Ret29 The work I‘m doing is very important to me .654
Ret30 I love working for this company .731
Ret24 Within this company my work gives me satisfaction .825
Ret25 If I wanted to do another job or function, I would look first at the possibilities within this company .733 Ret26 I see a future for myself within this company .796
Ret27 If it were up to me, I will definitely be working for this company for the next five years .705
Ret29 The work I‘m doing is very important to me .722
Ret30 I love working for this company .825
4.2.2.1 EFA for all scale of antecedent factors
In this procedure, Item loaded highly on more than two factors were eliminated, loading of items smaller threshold value of 0.40 are eliminated, % of variance > 50% and eigenvalue > 1;
KMO (Kaiser-Meyer-Olkin) is between 0.5 and 1 (0.5