Luận văn impacts of human resource management practices on firms’ performance the case of machicon

Research methodolagy This research employs qualitative research method via 36 face-to-face in-depth interviews with employees and managers in MACLUICON, Research findings and contributio

th Ae Lunghwa Universityof Scienceand Technology

Thesis for a Master’s Degree

Impacts of human resource management

practices on firms’ performance:

The case of MACHICON

Researcher: Le Thu Huong

Supervisor 1: Assoc Prof Dr Chu, Chih-Chung

Supervisor 2: Dr Mai Anh

November 2018

Lunghwa LUnivcrsity of Scicncc and Tcchnology Approval Certificate of Master's Degrcee Examination Board

‘This is to certify that the Master's [Degree Examinations Board has

approved the thesis Impacts of human resource management practices on

firms’ performance: The case of Machicon.,JSC published by Ms Le Thu

Huong in the Master Program of Graduate School of Department of

Business Administration

Master’s Degree Examination Board

Roard Members: Prot, PhD Tsan Eric

Dr Nguyen Phu Tung

Dr Nguyen Thi [long [anh

Advisors : Assoc Prof Dr Chu, Chih - Chung

Dr Mai Anh

Chair : Prof, Pht) Tsan Eric

ABSTRACT

Thesis title: Impacts of human resource management practices on firms’ performance:

The case of MACIHCON

Pages: 67 University : Lunghwa University of Science and Technology

Graduate School : Department of Business Administration

Researcher: Le Thu luong Advisors: Dr Mai Anh

Assoe Prof Dr Chu, Chih-Ching

Keywords: Lluman resource, Liuman resource management, finn’s performance, MACHICOW

Rationale

Tun

resource mmagemen (TRM) is the host importamt function of managing,

an enterprise, Reforming HRM to improve enterprises” performance and efficiency has been a practical requirement especially for state-owned companies which have

cquilized This study arises from the nocd to manage the HR of the Vietnamese firms more effectively, especially at the state companies affer their equtisation process MACHICON is a joint stock company which has been owned 51 percent of the capital

by the Vietnamese government Investigating the impacts of IZM on the firm's performme: is especially important to the MACHICON With special ownership characteristics of combining state and private owners, the HRM in the company has influenced by both the traditional and modern methods of personal management Tt is

critical for this company to reform its HRM toward market rules Moreover, the changes

in HRM of MACHICON is also able to reflect the common trend of HRM in Vietnam

as the company has been transforming in lo a joinl slock company since 2008 Examining HRM practices in this company might provide a view of HRM practices changed toward adapting marker rules in Vietnam

Research objectives

‘The aims of this thesis are to examine the theoretical background of the IRM and

its Tinkages Lo improve Grins’ performance and lo investigate how HRM practic

MACHICON influence the company’s efficiency These findings ftom theoretical and empirical aspects will be used to provide suggestions for the Machicon to improve their

HRM strategy toward improving the company’s performance

To obtain these aims, the rescarch will address thuce research questions

1) What are HRM practices in MACHICON?

2) Wut are solutions to reforming the TIRM practices in order to improve the company’s performance?

‘Yo answer these research questions, the thesis will have the following targets:

= To make clear about! the theoretical background of HRM, firrn’s performance, amd the linkages between these two issues, especially for enterprises in a transitional economy

- To analyze and to identify the current model of IIRM practices in MACIIICON

- To analyses the company’s performance

- To investigate influences of the current model of HRM practices on the company’s performance

- To provide practical implications for HRM practices to improve the company’s performance

Scope of the research

The research focuses on the model of HRM practices and performace of the MACHICON since 2008 when the company started transforming into a joint stock company

Research methodolagy

This research employs qualitative research method via 36 face-to-face in-depth interviews with employees and managers in MACLUICON,

Research findings and contributions

The research has found that for MACHICON, the human resource management system is strongly influenced by the traditional management of personnel: there is a need for reforming its human resouree system to help the company improve performance

‘The research findings have contributed to reforming the company’s HRM practices and then to improving the company’s porformancs Furthermore, this study has

contributed to enrich knowledge about IRM and firm’s performance in Vietnamese

under their transitional context

ACKNOWLEDGEMENT

First and forcmost, I would like to thank Iceturers at International School, Vietnam

National University, Hanoi and Lunghwa University of Science and Iechnology,

Taiwan, Their leclures has helped me to develop my knowledge and research skill to complete this thesis

My special thanks go to managers and employees working at MACHICON for their time and help to participate in interviews in my research ‘Their contributions to this

study ørc pounlless

T also would like to express iny profound gratitude to Dr Mai Anh and Assoc Prof, Chu Chih-Chung, my supervisors for their generous guidance and time ‘They have helped me gradually to develop my tescarch skill and inspired me to de my best al every stage of the process, I could not complete this study without their enthusiastic supervision and unconditional support

My warm thanks arc to my classmate for sharing happiness and difficultics with me inthe memorable EMBA course

Lastly, | am especially indebted to my parents and parents-in law, and my siblings, who always provided unconditional support to me throughout my FMBA course T especially want to extend tay greatest thanks to my beloved husband, and my children, I could not complete this thesis without their presence, love, and inspiration

Thank yout!

Author

Le Thu Huong

4

2.2.1 Definitions nh HH HH Hong eeererooeeaeof

3.2.3 Interview questions - 32

3.4 Reliability and accuracy of data SOUCE .ccsssenensninneennenenensenee SS

4, RESEARCH FINDINGS AND ANALYSIS

4.1 Impacts of HRM on the company’s perlOnttanee ccsesesee sneer senna dS 4.1.1 The companyˆs huruan ros0ticc nianagcienf praetics 35 4.1.2 Impacts of human resource management on the company’s performance .41 4.2 Tmpacls of other Gictors on the company’s performance 48 4.2.1 Innpaets 0Ÿ orpanizationaÏ cuÏfte csesereererroiee.đS

5.1 Synthesis of the study

§.2 Contributions of the study 32

LIST OF TABLES

‘Table 1 Characteristics of traditional personnel management

Table 2 The mnain produels of the Company

Table 3 The Company’s business outcomes 2015, 2016, 2017

Table 4 The Company’s planned business outcomes from 2015 to 2019

Table 5 MACHICON?’s labor force statistical report 2017

‘Table 6, Statistical summary of direct employees by skill levels

Table 7 Statistical details of direcl employces by skill levels

Table 8 Statistical summary of indirect employees by qualification levels

Table 9, Human resource plans 2014-2017

‘Table 10 Lluman resource development plans until 2020

Table 11, Changes of the Company AR and ils operation business outecrnes

Table 12, Characteristics of interviewees

‘Table 13 LIRM practices and the company’s performance

LIST OF FIGURES AND GRAPH

Figure 1 Average labor productivity

Figure 2 Rate of return an cquily

Figure 3, Participants’ seniority

Figure 4 Groups of participants

Figure 5 Quality of the Company’s HRM planning

Figure 6, Evaluate the effectiveness of the recruitment of the company

Graph 1 The company management, structure

vii

ACRONYMS

1IRM Eiuman resource management

US United State

1.INTRODUCTION

1.1 Rationale

Human resource is one of the most important inputs that divsclly affect firtes”

performance Human resource management (HRM) is a vital function of the business

management that deals with personnel issues in an organization 1IRM policies and practices strongly influence working environment, individual and firm performance, and

then the success of cvery cnterprisc Under the cconomic view, HRM is a process

combining management activities toward employees in order to employ efficiently their capacily and working potentials (o improve productivity and firm competition capacily

Under the social view, HRM presents a focus on the values of labor paid by the

companies through their compensation and welfare packages ‘herefore, HRM usually

is considered asa core of an organization maragement

This study arises from the need +0 manage the HR of the Vietnamese firms more effectively, especially at the state companies after theix equtisation process The quick development of the market system in Vietnam since Doi Moi occurred has increased in cnvironmental variability and degree of competition thet all enterprises need La consider their efficiency to exist in the markets, Especially, the increases in labor tưnover and costs of employee replacement have forced firms to pay more attention on their IRM practices

MACHICON is a joint stock company, which has been owned 51 percent of the

capilal by the Vietnamese government IL was a stale company and established in 1984

methods of personal management It is critical for this company to reform its IRM toward market tules Morcover, the changes in HRM of MACHICON is also able to reflect the common trend of HRM in Vietnam as the company has been transforming in

to a joint stock company since 2008 Examining IRM practices in this company might provide a view of HRM practices changed loward adapting marker rules in Vietnam

1.2 Research objectives

The aims of this thesis are to cxamine the theoretical background of the HRM and

its linkages to improve firms’ pertormance and to investigate how HRM practices in MACITICON influence the company’s efficiency These findings from theoretical and empirical aspects will be used (a provide suggestions for the Machicon to improve their

HRM strategy toward improving the company’s performance

‘To obtain these aims, the research will address three research questions:

1) What HRM practices itn MACHICON?

2) What are sohmions to reforming the HRM practices in order to improve the

company’s performance?

To answer these research ques ions, the (hesis will have the follawing largels

- To make clear about the theoretical background of HRM, firm’s performance, and the linkages between these two issues, especially for enterprises in a transitional economy,

- To analyze and to identify the cuzrent model of HRM practices in MACHICON

- To analyses the company’s performance

- To investigate influences of the current moilel of TIRM practices on the company’s performance

- ‘To provide practical implications for HRM practices to improve the company’s

perlompmes

1.3 Scope of the research

The research focuses on the model of HRM practi

cs and performance of the MACHICON since 2008 when the company started transforming info a joint stock company,

1.4 Research methods

This thesis cmploys qualitative rescarch method to investigate the rescarch questions This is a suitable research method to investigate opinions, attitudes and feelings of people In this study, this method helps to investigates insights of the relationships betwoen HRM practices and ths case sludy company by using both primary data ftom in-depth interviews and secondary data such as government documents, company’s reports, or related research has been conducted ‘through these data sourecs, the resvarch topie has becn broadly and deeply examined

The author uses thematic analysis to analyze the collected data with the help of Nvivo software to keep and classify and synthesis the data sources

1.5 Structure of thesis

‘To achieve the research objectives, this thesis 1s structured as follows:

Chapler 1: Introduction This chapter firsily presents reasons for choosing the

research topic, then the research aims, research questions, scope of the research

Chapter 2: Literature review This chapter present theoretical background of IRM

and relationships between HRM and firm’s performance Characteristics of Victnamesc

HRM practices has been also presented in this chapter in order to help the readers

understanding the research context

Chapter 3: Rescarch methodology This chapler introduces the research methods

employ to investigate the research questions, Qualitative research approach, in-depth interviews and data analysis methods are presented in detail in the chapter

Chapter 4: Rascarch ñndingss and analysis

Chapter 5: Conclusion,

2 LITURATURE REVIEW

2.1 Introduction

The aim of this chapier is to provide an overviow of HRM theoretically and

practically in Vietnam context It analyses of the concept of HRM and the underpiming LIRM theories Reviews of previous research on relationships between [IRM practices

and firm’s performance have been also presented These reviews provide suggestions to

investigate the similar sclationships in the MACHICON

2.2 Tluman resource mangement

2.2.1 Definitions

THUHEHH resmarce

There are different views of human resource Broadly, human resource is the human resources of a country, a territory ‘This is one of the basic input resources that can be mobitived and managed in order to contribule Io that nation’s socio-ceonomic development, Anothar view sees human resoures is labor force or social labor force; is a part of the working-age population who have capacity to work (Nguyen 2010)

To an clixprise, human resoures is all employs with thoir expericnces, skills, training aul dedivalion to participate in the various activities of the enterprise, to ercale added value and to increase its competitive power (Boxall et al 2007; Nguyen 2010)

To an economy, Inman resource is the basic resouree to create motivation for cconomic development Through using human resources, other resources such as capital resource, science and technology can be used and demonstrated their fictions ‘To an onganivation, human resource is a major faclor affecting the performance All the activities of the organization can only be effective if the employees are trained, used, managed, and developed well ‘Therefore, organizations want to develop well, it is vital

to well understand and effectively use the human resources

Human resource management (HRM)

HRM involves in the application of policies and practices in designing and developing an organization It includes human resource development, compensation, and provision af welfare services for employees The contents of HRM are bass on

human resources strategies that are interrelationships and aligned with the business stralcgy HRM ean be viewed as a philosophy of how to mamge workers on the basis of

a number of theoretical and organizational theories HRM concerns with both the enhancement of organizational effectiveness through the human person, and the ethical aspecl - how pcople are treated according to moral values (Armstrong & Taylor 2014), Frederick Taylor, known as the fathor of management scicnec, played an important role in the development of personnel management in the early 1200s, His theory on TIRM mainly focuses on optimizing efficiency in the production enviroment Taylor advocates the choice of “science” and worker training, and is a pioneer in building incentive systems that reward workers to achieve and / or exceed performance standards His principles laid the foundation for working on FRM in the future However, in the 1920s and the 1930s, the second industrial revolution deeply affzcted the entire economy in advanced industrialization countries Under these efffects, workers face the tisk of unemployment due to the replacement of machinery and automation Since then, the social welfare for workers has boon got attention of both acadomia and

practice

In the 20th century, the United States saw 2 boom in the number of union members between 1935 and 1950, which led to a greater cmphasis on bargaining and collective bargaining in personnel management Managing human resources have opened up to the scope of labor relations, collective bargaining, aul a more complex labor relations environment, Philosophies of human relations and labor relations were the main concerns of personnel management in the 1940s and the 1950s

In the 1980s, human resource management has a conceptual framework that

includes management philosophies based on a number of theories of behavioral seiences, strategic management, human capital, and labor relations, Concems and

concepts of IIRM are integrated into the company's general strategic plans to cope with

rapid clumge, ficree compelition, and pressure for increasing eflicieney, However, managing human resource in this period was mainly personnel management,

TInman Resource Management (ITRM) is a comprehensive and coherent approach

to human recruitment and development today (Aumstrong & Taylor 2014), It includes hmman resource strategy, human capital management, knowledge management, social responsibility of enterprises, organizational development, and human resources

(recruitment planning, recruitment and talent management), study and development, compensation and reward, labor relations, welfare and providing services lo cunpÏoysos The concept of human resource management given by Watson (2010: 919) is more

comprehensive According to this author, LIRM is management of efforts, knowledge,

competence and comunitment that people contibule to a business as part of their cxchange (or temporary contract) to carry out tasks, Thesc contributions help the

enterprises continuing to develop in the future

‘The purposes of human respurce managernent| are Lo:

© Assist the organization to achieve the goals set by developing and implementing

personnel strategies integrated with the business strategy

© Contribute to the development ofa cullural onviromnent with high productivily

© Ensure that the organization has talented, skilled and committed workforce

© Establish a positive working relationship between management and employees and the working environment of mutual trust

Encourage the application of cthical approach to imman management

2.2.2 Functions af human resource management

Human resource management directly affects cmployces’ performance if it encourages flexibility, skill development, and working opportunities to employees Hence, the fimctions of human resource management are io develop human resources that reflect the worker's interest in the necessary skills, motivation and quality of their works

‘The main fictions of hnman resource management include human resources planning, recruitment, Iraining, salary and benefits, job evaluation, management and employment

Jhwsnan resources planning

Human resotzec planning is the process of developing human resouree strategies and establishing programs or strategies to implement them This process is to meet the organization's objectives and to develop work plans Tfuman resource planning is the identification of demand and supply for human resource that is to find solutions for balancing these relationships (Nguyen & Nguyen 2010)

Humen resovtce planning strongly influences perfection of an organization It plays

a contral role in management of human resource stralogy Process of humm resource

planrring in enterpriss shonld he đone in a close relation with process of planning and implementing business stralegics and policies, Normally, the planning process includes

several steps such as environmental analysis, human resource status, demand forecasts and supply-demand balance (Analysis of demand and supply relationships), the ability

to adjust, and the developinent of policies, plans and programs to help businesses adapt

to new demands Improving offcetiveness human resouree planning requires evaluation

of the human resource plans, This evaluation is important for each organization to successfully complete Iheir work goals (Nguyen & Nguyen 2010)

Recruitment

Recruiting is the process of finding, attracting and recruiting the qualified staif to fill the vacancies in an organization From hove understanding, it ean be 1 that

recruitment has a great influence on other activities within the organization, through

recruiting to build the quality and quantity of human resources needed by the organization, so the hiring process should be carefully demonstrated

Recruitment has a great influcnee on other functions of human resource

management such as assessment of work performance, salary, training and development

of mman resources, labor relations In practice, bad recruitment will result in financial

losses (hiring costs, salarics, cte.), wasting time (recruiting, training, mentoring), and

causing internal conflicts

To rectuil effectively, organizations need lo develop recruitment strategies through

specific recruitment policies such as Needs identification, Planning (identifying sources and methods, locations and time, fimding and specific standards); Assessment of the recruitment process, Guiding new employees to integrate Preparations such as job

analysi

should be clear and accurale with specific reeruibnent information, details Tis also necessary to use testing tools and absolute objectives in the recruitment process to increase the effectiveness of recruitment

Training

Training is an activity that maintains and erthances the organization's quality of HR

Tt helps the organization moving forward and developing in a competitive environment Training includes learning activities that cnable employees to perform their functions and tasks mor effectively, The learning process makes workers understand their works

as well as improve their skills (Nguyen & Nguyen 2010) At the present, most ongenivations arz interested in ara focus on the training of cmployces ta improve the

working efficiency ‘rhe role of trammg not only focuses ơn equipping or enhancing Knowledge and skills for crployces, bul also enable: lo share their

employ

perceptions, views and training links with the organization's goals

‘The training process is conducted through the following steps: ‘Training needs analysis (organization level, lasks and individuals), Define training objectives, Planning and conducting, training (sclection of subjects, sclcction of programs, contents, training

methods, cost estimates ); Hvaluating training results In practice, these steps are

carried onl simultaneously, supported and linked These strong interrelations of the training steps make training of the organization is successfully

Compensation and benefits

Salarics arc fixed and regular amounts paid to workers for a unil of working lime

‘The incentive system is non-wage compensation to pay for employees doing good work such as commissions, bonuses, dividing productivity and distributing profits (Nguyen &

Nguyen 2016)

Other types of benefits arc indirect renmncrations such as insuranec, pension; payments for holidays / Lumar New Year holidays; entertainment; accommodation; transportation and other benefits associated with working relationships or membership

in the organization In addition to the above, the remuncrations also include non- financial factors such as job content suitability and good working environment,

Tn practice, remuneration generally has a great influence on job choice, employee

performance, and organizational performance The basic objective of the labor remuneration is to attract good workers, in line with the organization's work requirements, It is vital to be carefully considered some following issues when set up a

Temuncration sysiem, First, remuneration

an musi be Tegal (complying with the regulations of the state such as minixmim wage, overtime payment, ) Second, compensation package should be sufficient (enough to attract qualified heman resources

to work [or the organization) Jo encourage cumployees and to orcale their nuolivation for accomplishing highly effective work Third, compensation system must be equitable because if the temnneration system is unfair, labor motivations are eliminated Equity here is considered in two respects of internal and extemal equity, Fourth, compensation system is assurance that makes employees feel their monthly income is guaranteed and predictable Finally, the compensation management system is efffsctive and must have financial resources ta support the s

ain lo be implemented in the feng term

‘Yo develop remuneration policy, organizations should pay attention to the factors

thal affect the crmplayces* remuneration such as favlors of the external cnvirorment; the elements of the organization; factors of work; thetors belong to individual workers

Job evaluation

Job evaluation is the process of providing information about the performance of an cmployce during completing a given job, Results of the performance asscssment allow clarifying both level of job completion of individuals and units, and reasons for completing or not fulfilling the tasks and expectations of the slail This will serve as a basis for developing work plans and individual employee development plans in the

following business cycle (Le 2008)

Establishing a fair, unbiased and aeourale job evaluation system is an important element of human resource development, especially in building a transparent HRM that creates a good working environment, Llaving a good job evaluation system contributes

to attract and to retain talents, is an accurate basis to pay salaries, bormses

To be successfid, job asscssment criteria umst be carcfully designed and implemented, By doing so, the organization must develop a detailed and descriptive system for job descriptions When building an assessment system, organizations should basc on standards such as suitability, scnsitivity, scliability, applicability, and practicality, ‘The condition for a successful evaluation program is that, Some methods used when constructing a rating syslem are job ranking: classily;, grading; compare factors Each method has certain advantages and disadvantages In fact, many orpanizations need to use more than one methodology to build an effective assessment system ‘To implement this system, it requires co-operation between managers and the

cmployces

Managing and staffing

Managing and staffing include many activities in the 118M but this study pays more attenlion on HR relations regarding (o personal relations, HR communication and health and safety issues for workers, These are core issues to help managing human resource in

an organization

ER relations include human resource inanagement activities having a great irnpact

on the overall labor relations in the organization They affect attitudes, behaviors and interests of employees that managers need to understand Clear, appropriate, consistent and cqual discipline will help cmplayces to be more disciplined, productive, and

positive attitudes and behaviors l'or punishment, forcing to leave is the most severe punishment hurting stployces and affecting their Grmity life so the management needs

to carefiilly consider when using it Promoting is a positive activity for encowaging employees, but it is also important to consider carefully because the decision to promote

a person may influences entire the organization, Transmission refers to transfering somcone fiom one department to another This activity might basc on the needs of the organization and may be due to personal preferences However, management needs to consider every detail to ensure thal the (rans(er will bring changes thai are more positive for both individual workers and the organization,

Humen resource communication is all communication between the people in the ongenivation in order to roach harmony and understanding In terms of HRM, HR communication not only informs, it also engages employees so they’re prepared to take action to help the organization achieving its goals in an effective way To do that, managers need to master organizational behavioral theories, motivational motivations, and cruployce relations theory in management,

Finally, managing HR needs to pay attention to health and safety issues for workers, This can be considered as a workplace condition, which is a collection of cnvironmental factors such as hygicnc, psycho-physiological, social and acsthctic affecting the human body and the ability of employees to work, his is so important that the Labor Code has a mumber of mandatory requirements for organivalions such as occupational safety, occupational health, occupational disease, etc Organizations are required to comply with the regulations, At the same time, there are plans to implement health and safety for workers ina concrete and effective way

Tn summary, HR management and stalling play a very important role in firm management in general and HRM in particular, Proper placement of the right person and proper handling of all labor relations situations have positive influences on the culire omganization’s performance Therefore, managers need to know rules and procedures of these activities to ereating a common success for the organization

2.3 Firm’s performance

By Nash's definition (1983), the word ‘pertormance' means the execution and completion Tffective performance means parforming a goal or task effectively Performance is the fulfillment of a task.

Venkatraman and Ramanwjam (1986) state that firm performance reflects

Many researchers argue that firm performance is based on non-financial indicators thal are tore effective and reliable them on financial indicalors This factor includes labor productivity (Chang & Chen 2002, Huselid 1995; Kato 2006), the quality of products and services (MacDuifie 1995); job satisfaction (Bjo"rkman et al, 2007); the

intention of leaving a job (Hatt 2002}; evade work (Carraher & Buckley 2008); trust in

management (Cascio 2018); and responsibility for work (Tsai 2006)

Based on previous studies on firm performance, together with difficulties in accessing information about financial results of the case study company, this study will assess fim performance in eras of non-financial performance includes: produstivily; the level employee of satistaction with the work; employze responsibility for the work

2.4 A review of empirical research on the rclationship between HRM

and firm’s performance

Number empirical stufics have been conducted to explore relationships betweest

HRM and firm performance, Research by Abmad and Schroeder (2003) attempts to

extend the effectiveness of hnman resource management fianctions studied by Pfeffer (1998) in terms of a country and industry This sludy focuses only on innpacts of HRM

on firm’s operational performance, The seven activities of human resource management inchide job security, selection, group use and decentralization, salary and benefits based

on performance, extended training, slalc, and share infbrmation Performance considered in Pieifer's (1998) study is in relations to cost, quality, product distribution, Hexibility, and organizational responsibility, ‘The research generally coniirms an exist of the selationship between human resaurce management and the firm performance

In 2002, Chang and Chen (2002) conducted a comprehensive study to assess the relationship between human resource management and the performance of Taiwan's high-tech compares in the Hsinchn Industrial Park, They found the activities of taman resource management such as training, and development, teamwork, welfare, staffing plans and performance evaluations that affect employee productivity in the workplace

In addition, welfare and personnel planning have negative effects on the number of cmptoyces quitting job, Corbett and Harrison (1992) in a study of employee engagement and productivity in New Zealand and Australia have identified workforce- related programs that strongly promote quality progress This study indicates that communication within an organization can help sustain accomplishments, In addition, a well-trained workforce will help companies gain market share because they can produce high qualily products that meet the needs of their customers

Huselid et al, (1997) studied the effect of human resource management on the performance of 293 US finns, They clarify human resowee management into two groups ‘I'he first one is effective human resource management that includes wages and bonefils, recruitment and training, labor relations, seleclive tesls to evalnate works and attitudes of employzes The second group is strategic human resource management inchiding teamwork, employes engagement and employee empowerment, communication belwecn management and stall, developing management capacity This study’s findings show that there is a consensus between eftzctive management strategy and firm performance, but the effectiveness of technical management is not related to the performance

Sang (2005) studies impacts of human resource management on firm performance (including production efficiency and firm performance) of firms in Cambodia and Taiwan, This author solects mine vspocts of human resoures managemen!: tmman

resource planning, recruitment, incentives, evaluation, training, teamwork employee

engagement, and jab rankings and job sccurily) te explore their relationships wilh perceptions of firm performance {including financial performance and non-financial performance)

Culcher-Gershenfeld (1991) studies cfivets of different types of labor relations on firm performance in 25 different work areas which have unions, The author points out three main types of labor relations: tradition, transforming, and completed transformation The traditional form reflects a management style wilh emergence of high frequency disputes and slow-paced solutions, less effort to address informal complaints, less problem-solving efforts, and less information sharing and employee

These empirical studics sugecst that studying relationships between human resource management and firm performance has been interested by both academia and practices, However, tnost stutiss are conducted in developed countries and some olhers

in developing countries, These issues have studied in Vietnam are still limited Vietnam's economic and political characteristics are relatively typical: this is a socialist cotmiry, and the economy is in the process of transition ftom central planning to an orientated socialist markel coonomy Given these unique characteristics, it requires studies on relationships between human resource management and firm performance in

the unique context of Vietnam

2.5 Characteristics of HRM in Vietnam

Tiuman resource management in Vietnam is deeply influenced by economic reform

process at the macro level Before Doi Moi started in 1986, the cconomy fully operated

under a centralized and subsidized management mechanism The state controlled and

managed alt economic activities from production to distribution and organization of

personnel, Under the centralized mechanism, there was no market sxists, Enterprises arc

only the government’s tools that did not have authorities to decide on their own production and human resources Afler Doi Moi, the economy has gradually stifled ta

market economy, state-owned enterprises gradually become autonomy These changes

have had a huge impact on human resource management in enterprises Due to this

conten! of transforming process, human resource maragement in Vietnam has different

perspectives in the two periods: before and after the reform In this chapter, the thesis

will olarify the characteristics of human resource management in enterprises in Vietnam

before and afler the economic reform

2.5.1 Human resouree management in Vietnam before 1986

Bofors Dei Mei, Visinam ccanomic model was similar to the madel created by the former Soviet Union Accordingly, the economy was under a centralized and planned state management State plans were the highest authority that decides the allocation of

resources actoss the country Production strategies and plans for the entire country were

determined by the state administrative orders During this period, workers in state- owned enterprises enjoyed a lifetime employment This is a typical example of traditional human resource management in former socialist countries Accordingly, when an cmployce is cmployed by the state, he or she will work wntil retirement regardless of their performance, and it is very difficult for enterprises to be laid them off Characleristics and dominance of human resource management in this period are stuctly to obey state policies and plans, Employees are employed and paid directly by the state, There is no concept of labor market, Accordingly, all workers have jobs, no

qnemployment (Collins 2009)

Tn addition, the organizational and mmmagerial structure followed a top-down administrative order that led all managers at enterprises level have no opportunity to practice their leadership skill ‘Ihe responsibility of managers under this management mncchanism is just to follow orders fiom the superiors A sludy by Quang & Vuong (2002) on labor relations in Vietnam during the transition reveals characteristics of management imder the centralized and planned economy as shown in Table | below

Manageiuent of human resource before Doi Moi wes inefficiency, Labor

productivity in the state-owned enterpuises were low, the state often had to compensate

for these enterprises In 1986, the Vietnam’s economy was in a very difficult situation,

in addition to the collapse of the socialist bloc led by the Sovict Union The

disadvantages of the socialist countries caused a dramatically reduce in aid resources to the country Consequently, the state budget could nol be cnough to subsidize enterprises and to pay employees’ compensation Thus, the sixth National Congress of the

Vietnamese communist party in 1986 officially announced that Vietnam started to build

a sovialist-oricnted muuket coonomy (Dao 2000), Since 1987, new personnel management praeticcs under labor contracts have begun to implement for state-owned enterprises and employees” wages have also separated fiom the government budget The economic renovation in 1986 marked 2 luming point in he economic management al macro level in general and management of state-owned enterprises in particular, in which management of hnman resources in state-owned enterprises had great changes

Table 1 Characteristics of Lraditional personnel management

2.5.2 Human resource management in Vielnam since Doi Moi 1986

Humen resource management in Vietnam since Doi Moi started has significantly changed The Labor Code 1994 is the first law that formally regulate in detail labor

relations betwecn cmployces and cmploycrs in a markct economy The law covers arcas

of human resource management such as training, labor contracts, collective bargaining agreements, holidays, recruitment and dismissal, union, wages and beuefits, male workers., Changes in the legal system of labor relations has ereated a precondition for the change of human resource management practices After more than 30 years of the Doi Moi, recently, human resource management in enterpuises has som: common features as follows

Husnan resources planning

Al the presenl, there have few enterprises planning human resources in the long tam According to statistics, up to 85% of the total enterprises forecast their labor demand based on the nmmber of employees who need to be replaced Only about 15%

†muuan resourcos in thơ short term ot even based on the present time to make a decision, Only companies with $0-300 employes are interested in human resource strategies, but these strategies are very sketchy (Financial Magazine 2014)

Recruitment

Each company has its own recruitment method, but there has been a common process of recruitment thal most of the companies carry out The selection process inchades stages as followings: recsiving dossiers and research; select qualified candidates for interview When conducting interviews, the interviewees are interviewed

by the directors, the head of the human resources department and the personnel inlerviewer Candidates who pass the inlorview will be accepted Lo starl a working trial within 3-6 months, If the candidates meet requirements for a the trial works, then the company will sign a formal contract After that, very few companies conduct performance: evaluations of the recruilments lo investigate reasons for the recruilment success or failure,

There are two human resource for teortitment: internal and external human resource, For internal recruitment, if it has a need for recruitment, the organizational administration office will inform the units in the organization and other professional departments to find suitable candidates Each department then consider their current

slaff to find persons who meet the reeruiiment requircinent ard suggest therm Lo the

recruitment center ‘he internal recruitment is convenient for both the enterprises and

employ

s they arc Similiar cach other However, it is limiled the quantity and quality of the selected candidates because the human resources in enterprises are offen small

For external reeruitrnent, enterprises have # number of ehice for recruitment new staffs, Chances to choose good and suitable cmployees arc much moze than the internal recruitment, Enterprises might through employment agencies or advertisement via mass inedia for ensuring to get the right people lo work This form is mainly applied in enterprises with a size of 50 laborers or more, in which the recruitment via the internet and the press According to statistics, 25% of enterprises recruited through the media, this figure is very low compared lo devcloped countries es well as some commtrias in the

analysis is mainly donc by an approved individual and thon sent down to the HR department, Even though the contents of job analysis reports are quite similar to the

for vacancies in the enterprise Job

current imi

srtational standard, that include job litle; natne of the department responsible

for work; name of supervisor; a brief description of the work; standards of completion, working conditions However, the process is not really scientific The sources of data to

conduct job analysis are very subjective that depends on the approved person who is

allowed Lo do this

Appraisals

Companies use the point-based assessment method to conduct appraisals Llowever,

the criteria are often subjective because they arc not based on the job description They

are mainly based on the attendance of the employees The assessment of employees is a

very few companies apply, especially in the state companies

experts or technical specialists, workers, the form of traimng is mainly self-training or the workers have to imprave [heir skills by themselves

Compensation and benefits

Recently, enterprises build their own compensation systems depending on their

business conditions They arc autonomy to decide their omployces" salary and bencflts

In practice, compensation system in Vietnam cnterprises has been criticized not efffective because it is not based on employees” performance and contributions

To establish the remuneration system, organivations use one of the wo following approaches or use a combination of these two ways The first one is to follow the system of wage scales of the Decrees ‘There are two decrees guiding wage scales and wage lable lems have boon employed by slate onterpr No 204/2004 / ND-CP, and Decree No 205/2004 / ND-CP Decree No 204/2004 /XD-CP

dated on December 14, 2004 by the Vietnamese Government on the salary regime for

Mechanical and Construction Joint Stock Company A (MACHICON) is a member

of Vietnam Automobile Industry Corporation, operating in the eld of construction of trafiic, inrigation, civil, industrial, cleetrical, mechanical mechanical cnginccring, rueta] structures; trading, and importing and exporting Over a quarter of century of development it was transformed from a state-owned enterprise into a joint stock

company It is now rename as Mechanical and Construction Joint Stock Company A (MACHICON) that th: Victnamese government holds dominant shares (51%)

So fir, MACHICON has made many big projects and became one of the strongest companies in the construction field MACLIICON has participated in all key projects of the Slate, the transportation seetur, such us Song Moi bridge - Tien Lang disuiict - Hai Phong, National Highway 5, Hai Duong; Ho Chi Minh Road, Lam La - Nghia Trung section, project QL 6 package 3, package 13; construction of Highway No.3 through Bac Kan town, Besides these key projects, MACTIICON also parlicipates in inany ather civil construction of houses and roads in many provinces and cities such as Phu Tho, Hai Duong, Hai Phong, ‘Ira Vinh,

With oustanding achicvements in production and business frorn 1996 to 2000, MACHICON was awarded the Third Labor Medal granted by the Vietnamese Government in October 2001 ‘This award was the pride of the company's employees, and marked a historie milestone in the company’s development In the coming time, MACHICON will continue to carry out traffic constructions, irrigation, advanced civil and industrial projects tor the electricity industry, electric control and automation, investing on projects of manufacturing mechanical products and developing many other

‘business ficlds and services

Table 2, ‘The main products of the Company

Construction, fabrication and installation of mechanical products 28 years

The company's business outcomes

Summary of the Company’s business outcomes over the three latest years is in the

following Table 3

‘Table 3 ‘The Company's business outcomes 2015, 2116, 2017

Units of calculation: LO0OVND

6 Profil before tax 4.594.838 53.115814 5.727.396

7 Profil aller tax 3.790.741 4.220.547 41.167.396

Revenue

Year Transportation] Ố cw Total

production | construction irrigation, electricity

(Source: Financial capacity profile of the Company)

‘The Company's Report shows Ibat the Company's parformance has increased over the years, Labor productivity of the Company increases anmually, The Company’s reports show that the number of employees has remained constant over the past three yoats (with 250 cmplayces) white its revenue have increaszd every year Summary of the Company productivity is presented in Figu 1, as follows

2

Figure 1 Average labor productivity

2.6.2 The company’s management structure and human resources

The organizational structure

MACHICON is a joint stock company, thus its management model follows a management model of a joint stock company as shown in Graph 1 below ‘the Company's management structurs includes the Goncral Mecting of Sharcholders, the Board of Directors, the Director and the Supervisory Board Accordingly, the Gencral Assembly of Shareholders is the highest decision-making body of the Company Resolutions of the Gensral Meeting of Shareholders are valid only when they are approved by shareholders and shareholders’ representatives hold at least 65% of the total voting shares attending the General Meeting of Shareholders ‘he Board of Direelors has the righ! to make decisions om is acs Tolalod fo the Campany's objectives and interests in accordance with the law, except for matters filling under the authority

of the General Meeting of Shareholders, In terms of personnel, the Board of Directors has appointed and dismissed the director, deputy director, chief accountant of the company, approved the organizational plan and personnel of the subsidiary companios The Board of Directors decides on salaries, bonuses and other incomes for employees working at the company Besides, the Board of Directors also decides on the regulation

on recruitment and dismissal of employces in compliance with the relevant laws Levels

of responsibility allowance for the members of the Board of Directors and the Supervisory Board are decided by the General Meeling of Shareholders The Board of Supervisors is the organization on behalf of shareholders to control all business activities, governance of the company,

22

Graph 1 The company management structure

T | Bachelor and college degrees 0

2 | College and TALE 15

1I | Ligh skill technique workers 150

II | Unskllled lahnrs 40

Total (411) 250

The direct labor force is accounted for 76% of the Company's labor torce They are all tramed before taking their jobs The number of skilled workers at levels of 3/7 and 4/7 are the highest numbers, then followed by the number of laborers at skill level of

2/7, These statistical numbers show that although traincd laborers, the majority of

workers are still at low skill levels Statistical summary and statistical details of the skill levels of the direcl workforce are shown in Table 6 and Table 7 as follows

Tabke 6, Statistical summary of direct cmployces by skill tevels