Luận văn improving the performance management in techcombank

Techcombank then find out the oxist issues in the process of appraising performance in ‘Lecheombank Finding out all the problems in he process of performance appraisal in Techcombank,

VIETNAM NATIONAL UNIVERSITY, HANOI

HANOI SCHOOL OF BUSINESS

rt aHS B=

VIETNAM NATIONAL UNIVERSITY, HANOT

HANOI SCHOOL OF BUSINESS

TNTRODUCTION nen nerureeiiirrree wl

1.2.1 Benefit to the organizatton coi 6

1.3 Performanee appraisal system: -: 222sxez " essence)

1.4 Performanece measures cri†€Tia ecco.eceoocecrcee ll 1.5 Errors should be avoided in performance evaluation: - 13,

1.6 Performance appraisal methods .ccccccscccsssoseessaseseee

2.4.2 The survey's comtent sccscesetenseisiestentssensenes sie 34

3.1 Bank's defined target of work performance apprasmg - 68

3 2 Completion of job descriptions ii 68

APPENDIX B: Job description of an accountant and requirements 38

APPENDIX C: Method of giving mark lo cmployces’ performance appraisal 93

LIST OF FIGURES

Figure 2—1: Some Main Figures of Techeombank - 26

Figure 2— 2 Number of seniority in Techcombank - er

Figure 2-3: Percent of senionly in Techcombanik 35 Eigure 2— 4: Nưmnber o£ œarrcnt titc 35

Figure 2 — 7: Percent of education level - voce ST Figure 2— 8: Number and percent of Reasoablaness of salary in TCB 38

tigue 3 9 Number and percent of Fair in compensation policy

Figure 2— 10: Number and percent of reward based on results of performance

„30 Vigure 2 11; Number and percent of timely praised when perform well .39 Figure 2— 12: Number of participate in short courses - 40 Figure 2— 13: Percentage of participate in shorl courses - al Figure 214; Number of participate ImÌong gourses 1A Figure 2 — 15: Percentage of participate in long courses - ee AB Figure 2-16: Number of satisfaction level with compensation policy 43

Figure 2 17: Percentage of satisfaction level with compensation policy

Figure 2-18: Number and percentage of clearness for making plan and

ainnouneing tơ staFÏä ào 44

Iigure 2 19: Number and percentage of work suits with capacity 4ã

Figure 2— 20: Number and percentage of employees’ strengths are used and

Vigure 2 — 21: Number and percentage of encouraged and oriented to develop

Figure 2 22; Number and percentage of rotation throuah othor positions 46

Figure 2 — 23: Number and percentage of challenging with higher positions 46

Figure 2 24 Number and percentage of sufficiently informed aboul human

Number and percenlage of employees’ crealiveness is

Number of satisfaction with current job 54

Percentage of satisfaction with eurrent job 55

Number of motivation to perform assignments 35

; Pexcentage of motivation te perform assignments,

Number of employees” expectations 57

Percentage of employces’ expectations - #

Figure 2 43: Namber oÝ manapers reations 58 Tigure 2— 444: Percentage of managers' reactions 59

Figure 2— 45: Number of employees’ trend - - .80

tigure 2 46: Peroenftage of employees' trend -e:-se 60

iv

INTRODUCTION

1 Objectives and aims

There are three objectives of this thesis when mentioning to performance

appraisal aclivitics, include gathering theories relaled to appraising performance

(both concepts and models) A case study of Techcombank will be examined in order to gam a Clear understanding about the process of appraising performance in

Techcombank then find out the oxist issues in the process of appraising performance in ‘Lecheombank

Finding out all the problems in (he process of performance appraisal in

Techcombank, the student has some aims include: Suggest some solutions to improve the process of appraising performance, human resource policies If these

issues are improved, they will contribute to increase the effects of employees’

working and reinforce the loyalty of employees

2 Rescarch questions

‘Two research questions are applied when examining the Techcombank’s case

study are: How does the process of appraising performance in ‘lechcombank deploy? And Is the process of appraising performance in Techcombank effective?

3 Scope of work

Scope of work is from 2005 to 2006 and the conducted arca is departments in head office of Techcomhank

4 bata source and processing

‘the data is collected from two sources: Prumary (information is conducted

directly from interview and survey to find out the employees’ opinion on the current

performance appraisal of Techcombank) and Secondary (sludy documents related 10 appraising performance activities of banking sector, evaluation reports)

5 Methods

The method will be based on researching real case study of Techcombank and

use questionnaire (Questionnaire is built based on theory, rom the result of

questionnaire the student then tum back to the reality of appraising the employees’

performance to improve the process of Techcombank) Interview or focus group will also be used when necessary

6 Significance

‘The student hopes that, the thesis will contribute significant meanings: (i) Study deeply about the process of appraising performance activities in

Techeomibank and improve the process, (ii) Assessing the employees” perlormance

activities at their true wortly, (iii) Encourage and strengthen the loyalty and the relationship between the employees and Techcombank

7 Limitations

Because the time limitation, the thesis can not avoid mistakes Case study is only conducted in Head Office so it cannot reflect all the opinions of

Techeombank’s employees The survey’s results are provided by Human resonrea

department, therefore some sensitive information are biased, so the accuracy of

questionnaire is not absolutely accurate

8 Expected results

Firstly, the student hope to find out the existing issues in the process of appraising

performance in Techcormbank then apply the theory of human resource management

to contribute uscful solutions to improve the practices of performance management

in Techcombank

9 Outline of thesis

The thesis includes three chapters:

«© Chapter † - Theoretical foundation: This section will summarize the theorics

of performance appraisal it will give the readers an overview of performance

activities from clearly definition to the benefits of using performance

mnamagemenl, (he criteria used in performance appraisal as well as the

performance appraisal models and their advantages, disadvantages of using

them

« Chapter 2 - Findings: After analyzing the current position of Techcombank

(SWOT analysis), the survey's resulls and the data collected form secorulary

source, the thesis will point out the findings about the existing problems in

‘Techcombank from policies to practice of deploying performance appraisal All the problems of Techcombank will be analyzed in the aspect of performance management

Chapter 3 - Recommendations: Continue to the analyzed findings from chapter 2, this section will suggest some solutions and how to apply the performance appraisal methods in Techcombank The student hopes that, all the recommendations will be useful and effective far not only Techvombank but also for other commercial joint stock banks which have the same issues

bike Techcombank

CHAPTER 1: THEORETICAL FOUNDATION

Organizations thal seek to gain competitive advantage through their workers

snust be able to manage the behavior and results of all employees One of the most important challenges managers face is managing the performance of those over whom they have authonty

Performance management is defined as the means through which mangers ensure that employees’ activities and outputs are congruent with the organization’s goals Performance management is central Lo gaining competitive advantage, ©

Performance management system has three parts: defining performance, measuring performance, and feeding back performance information

A perfonnance management system specifies which aspects of performance

are relevant to the organization, primarily through job analysis It measures those aspects of performance through performance appraisal, which is only one method

for managing employce performance Ti provides feedback to employees through

performance feedback sessions so that they can adjust their performance to the

organization's goals

Every employee works im an organization has different background,

knowledge, attitude, motives, personal characteristics, skills, and so on which affect their performance at work

In order to facilitate excellence in the performance of the employees in the organization, organization is required to identify right person for right job and

ensure their contribuben lo the organization’s objectives

Giving, performance feedback and providing remuneration and reward based

on contribution are two methods for facilitating better performance of the

employees Employee performance appraisal provides a basis for providing

‘0.2 Noe Hollenbeck Gerhart Wright “Human resource management’, Second edition 1996, p.196

feedback and for deciding renmmeration and reward for contribution aud

performance

1.1 Definition of performance appraisal

Performance appraisal is a process that involves communicating to an

auiployee how well lhe employee is performing the job and involves establishing a

plan for unprovement ®)

Performance appraisals are used for many purposes are wage and salary

administration, promotions or demotions, transfers, layofls, discharges, counseling

with employees, and human resources planning

Performance appraisal systems have three principal purposes: To improve

amployee performance in the present job; lo propare employees for future

opportunities that may arise in the organization and to provide a record of employee performance that can be used as a basis for future management decisions “

Performanee appraisals are handled in most organizations in one of two ways

Informal appraisal and formal appraisal

Informal appraisal occurs in all organizations Under such a system no

formal procedures, methods, or times are established for conducting performance appraisals For example, when a supervisor conducts

appraisals informally, the employee will be given a general impression of how the supervisor feels about their performance In many cases, when

employee make a mistake, such appraisals are conducted As a resull,

employee often develop negative feelings about this type of performance

appraisal

« The other way of handling performance appraisals is to have a formal

appraisal system Under such a system, procedures, methods, and times are

established for conducting appraisals

(1) Leshe W Rue and Lloyd L.By’

(2) Leslie W Rue and Lloyd 1 Byars, Supervision: key link Lo producti Supervision: key link to productivity”, Fifth ", Hillh edition 1996, p.205 lon 1996, p.208

It is important to note that, formal appraisal systems contain an informal

element For example, general comments thal a supervisor makes about an

employee’s performance are a type of informal performance appraisal Supervisors must realize that any comment made by a supervisor about an cmployce’s performance is viewed by the cmployee as a [on of performance appraisal Thus, the supervisor must use informal reviews to

reinforce good performance and discourage poor performance

1.2 Benefits of performance appraisal

A sound performance appraisal systems dues not only bring benefils for the

organization, but also for the managers and employees

1.2.1 Benefits to the organization:

e Provides an evaluation of the organization’s human resources: In an

organization’s performance appraisal system, the managers can evaluate

the performance of employees and supervisors Thus, the managers can

know the capacity of buman resources through the results of the performance appraisal system

« Gives the organization a basis for making future human resources

decisions: Based on the results of performance appraisal, the managers can

give oul appropriate decisions aboul human resources such as training, promoting, developing, compensating, so on More over, the results of

performance appraisal reflect the success of functional activities of human

resource department in recruiling, seh

(ing, oricnling, promoling and other

activities ‘then the managers will set up plan for adjusting and developing

in future

© Increases the potential of the organization's present human resources for meeting the present and future needs of the organization: the capacity of employces and even supervisors are reflected in the results of

performance appraisals ‘Therefore, the human resource department can

casily make decisions on human resource plans like applying rotation policy, doing training programs to enhance the skills for employees,

Promoling people in higher position, carrying out special recruiting actions

to select qualified employees for meeting the needs of the organization's development

« Improves employees morale: The rationality and accuracy of using

appraisal tools and feedback information have the effect to the employees

in building and developing their morale, their atmosphere of working environment and their attitude When the employees feel that they are

approprialely evaluated, they will bry their best to work more effectively

and contribute much to the organization

1.2.2 Benefits to supervisors

© Provides the supervisor with a clearer picture of the employee

understands of what is expected to the job: Any business organization exists to serve identified needs of the sociely Finployees working in the organization are responsible for effectively serving those needs as per the assigned responsibilities So with specific Job, employee always receive the guidance and the job’s requirements When comparing the employees’ results from the performance appraisal with the requirements, the supervisors can evaluate the level of the employees’ understanding the requirements of their job The managers should link employee activities with the organization’s goals

© Gives the supervisor input into each employee's development: There is

a widespread belief that the purpose of employee performance appraisal is deciding salary increments and promotions Iowever, performance appraisal can scrve variety of organizational noods very effectively like developing employees whe are effective at their jobs When employees are not performing as well as they should, performance management seeks to

improve their performance The fesdback given during a performance

evaluation provess often pinpoints the employce’s weaknesses Ideally, the performance management system identifies not only the aspects of the cmployce’s performance that, are deficionl bul also the causes of these deficiencies hen the supervisor can help the employee make an appropriate development plan

© Improves the productivity of morale of the supervisor's employees: When the performance appraisal is conducted in fair and transparent tmammer, employee will [cel satisfied They know that il hey work morally,

the supervisor will evaluate them appropriately through a fair assessment

The accuracy of employee's performance appraisal is reflected in the resnlL help them to identify opportunitics for improvement and it motivate the productivity of employees’ morale

¢ Helps the supervisor identify capable replacements for higher-level jobs within the supervisor’s work unit: When conducting performance

appraisal, the supervisors’ dutis of supervisor are not, only assess the

employees but also assess other supervisors The results can be wed in the supervisors’ s work unit for replacements for higher level jobs

1.2.3 Benefils o employees

* Allows the employee to presemt ideas for improvement: The

performance appraisal is concusted i fair and transparont marmer will provide a bilateral communication between the supervisor (appraisor) and

the employee (appraise) The feedback given during a performance

evalualiom process often pinpoints (he employce’s weaknesses, the level of

reasonability of supervisor’s remark It makes the people in different position in an organization become closer The bilateral communication during the performance appraisal makes everything, clearer so employee will actively find out the ideas to improve both the system and themselves Provides the employees with an opportunity to change his or her behavior: ‘Lhe performance appraisal helps employees themselves evaluate

their capacity, realize their importance level in organization, identify opportunities for improvement Yo achieve higher promotions, the

performance appraisal helps employees find what requirements they need

to improve such as: knowledge and experience, skills and morale, working attitude and contribution to the organization, so on A fair and transparent appraisal wilh the adviee of supervisors will motivate cruployoes try their best to reach the future opportunities

Lets the employee know kow the supervisor feels about his or her performance: During the performance appraisal, the employee will have

chance to discuss with the supervisor and may recogn ve the feeling of the supervisor about cmployce’s work At the end of appraisal process, the supervisor will give the result to the employee includes the supervisor’ comments and advice The [ecling of the supervisor about employee's work makes the employee feel that their contribution is acknowledged, the faimess in evaluating performance between members in organization is equal (Each employee will receive different comment from the supervisor)

so employee will be encouraged to perform better in their work

1.3 Performance appraisal system:

In order to do appraising work, the organization need to set up a performance appraisal system includes three fundamental elements:

The requirements and criteria for performance appraisal: The

appraisor use several evaluating methods to measure the employees’ performance by comparing the result with the expected result; ‘he requirements to do the job is a criteria system to perform the work includes

both qualitative and quantitative requirements, The requirements need to

built based on objectivity, reasonability and they oan reflect which

behaviors are necessary to perform the work well

Measure the employee’s performance based on standard criteria: H is

a process and in this slep, the manager need io have administrative

evaluations whether the employee’s performance is good or not ‘The process of employes appraisal begins with formal commnunication of

appraisal framework and program (o the cmployces Deciding operating

goals for each of the employee is also a step in the process of appraisal as

the appraisal is conducted with respect to set operating goals The process

af performance appraisal includes 4 steps

@)

Gi)

Pre interview preparation: Appraiser should collect the information

for the appraisal period in respect of the appraisee: assigned job

responsibilities, specific assignments; programs _ participated; projects handled; events participated; nature of relationships

established with soniors, colleagues, juniors, partners and

customers; nature of interactions with seniors, colleagues, juniors, partners and customers; achievements and recognitions; failures and

punishments; issues arisen or handled; complaints received

Familiarization with operating situation and environment: In the

beginning of the appraisal interview, the appraiser should clearly and formally state the objectives of the appraisal amd explain the

process lhe appraiser initiate the conversation to create confidence

in the mind of the appraise Before beginning of the actual

appraisal the appraiser ask the questions to understand the working,

conditions and environment being encountered by the appraisee for

example: What is the most difficult operating problem you have

faced? Which cli

als’ customers/ Lusiness partner! executives you

find most difficult to handle? Where do you think organization

should concentrate for improvernents? Answers Lo [hese and similar

questions reflect the information on the working cnvironment of the

cmployees This information is uscful to weigh the gathered evidence

Gi) Fvidence gathering) Aller the appraiser has clear idea of the

appraisee’s operating environment, appraiser shall begin the formal

appraisal by gathering the evidence needed for evaluating the

employee's performance

(iv) Evidence grading: Comparing the performance of employee in the

fact with the expected result based on the requirements and standard crileria, the appraiser will conclude how well the employee has done mn their working performance

Measure the performance is the centre of performance appraisal

Personal feedback and reporting: appraisers discuss the appraisal ratings and reasons (or the rating with inchvidual employees Appraisers also record views of the employees in respect of the appraisal ‘The appraiser should also discuss the steps that an individual employee can take to improve their performance Then the organization establishes proper reporting, on the outcome of appraisal exercise for the purpose of future

analysis and improvements in the system

1.4, Performance measures criteria

Strategic congruence: Strategic congruence: is the oxteut to which the performance management system elicits job performance that is congruent

with the organization's strategy, goals, and culture “ Strategic congruence

emphasizes the need for the performance management system to provide guidance so that employees can contribute to the organization's success

Most companies’ appraisal systems remain constant over a long period of

time and through a variety of strategic emphases, However, when a

company’s strategy changes, its employees’ behavior needs to change, too

+ Noe Hollenbeck Gerhart Wright “Human resource management’, Second edition 1996, p.200

Validity; Validity is the extent to which the performance measure assesses

oflen

all the relevanl and only the relevant aspects of performance Thi

referred to as content validity for a performance measure to be valid, it must not be deficient ar contaminated © Validity is cancemed with maxiniving (he overlap between actual job performance and the measure

of job performance A performance measure is deficient if it does not measure all aspects of performance A contaminated measure evaluates inclevant aspects of performance or aspecls thal are not, job retaled The performance measure should seek to minimize contamination, but its complete elimination is seldom possible

© Reliability: Reliability refers to the consistency of the performance

measure Que noportant type of reliabilily is interrater reliability - the

consistency among the individuals who evaluate the employee's

performance © A performance measure has interrater reliability if two

individuals give Ihe same evaluations of a person's job performance Evidence seems to indicate that most subjective supervisory measures of job performance exhibit low reliability With some measures, the extent to which all the items rated arc internally consistent is important (internal

consistency reliability) In addition, the measure should be reliable over

ime (lesl-relest reliatnlity) A measure thal resulls in drastically different

ratings depending on the time at which the measures are taken lacks test- retest reliability

« Acceptabili

performance measure accept it © Many elaborate performance measures

Acceptability refers to whether the people who use the

arc extremely valid and reliable, but they consume so much of managers” time that they refuse to use it A system that is not accepted is almost

worse than no measure at all This points to the need to involve both

Soe Hollenbeck Gerhart: Wright, “Haman resource management”, Second edition 1996, p.201

managers and omployces in the development of performance measures Research has found that this increases the acceptability of the system

Specificity: is the extent to which the performance measure gives specific guidance to employees about what is expected of them and how they can

tmeel these expectations Specificity is relevant to both the siralegic and developmental purposes of performance management ™ If a measure does

not specify what an employee must do to help the company achieve its

strategic goals, il becomes difficult for i, to achiev

ils stralegic purpose

Additionally, if the measure fails to point out an employee's performance problems, i is almost impossible for the employee to correct his or her performance

LS Errors should be avoided in performance evaluation:

¢ Error of favoritism: This happens when the supervisor favor some body

than olhers Tl will make the resull of the perlormance evaluation meorrect

© Error of average tendency: The rater does not want to take offence or

displease others then he has tendency to evaluate employees a little higher

than average level

Error of extreme: ‘The supervisor prove to be so strict {manager gives low

ratings to all employees) or so easy (rater assigns high ratings to all

employes) in the process of performance evalualion These crror make

difficult to distinguish among employees rated by the same rater and create problem in comparing the performance of individuals rated by different

Fatcrs

œ Error of preconception caused by culture customs: The supervisor’s

opinion may be erroneous because of the supervisor's culture habits

‘O Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.201

Error of prejudice: The supervisor may dislike a group or a working class

then the evaluation about their performance can be subjecive and

incorrect

Error of the latest event’s influence: The supervisor's opinion can be affected by employees’ behaviors, attitudes have just occurred ‘Lhis occurs

when one posilive performance aspect causes the rater to rate all other

aspects of performance positively and in contrast, one negative aspect

results in the rater assigning low ratings to all the other aspects

1.6 Performance appraisal methods

1.6.1 Attribute approaches

The attribute approach to performance management focuses on the extend to which individuals have cerlain altribules (characleriscs or trails) believed to be

desirable for the company’s success ‘Lhe attribute approaches are used to mainly

measure characterises an employee has which are important for evaluating

performanes, The techniques that usc this approach tend to define a sct of traits such

as initiative, leadership, and competitiveness and evaluate individuals on them

Graphic rating scales: The most common form that the attribute approach

to performance management takes is the graphic rating scale Graphic

rating scales can provide the rater wilh a number of different points or with

a continuum along with the rater simply places a check mark To use this

method, there are twa important steps includes choosing the traits and

measuring the (rails The choscn trails are typically in two types: dircelly related to job and indixectly related to job With the graphic rating scale,

the supervisor is asked to evahtate an individual on such factors as

quantity, quality, initiative, dopondability, cooperativeness and quality of work Using this approach, judgments about performance are recorded ona

scale The scale is divided into categories

Using graphic raling scales have some advantages such as

@) Easy to understand (i) Comparatively simple to establish Gil) Simple to use

(iv) Relatively inexpensive to develop (v) Give the same information on all employees (vi) Quantily the number of employee" performance

However, this method contains some disadvantages like:

(i) The specific characteristics of each job may be ignored

(i) This method is easily impacted by subjective errors They can lead

to incorrect performance evaluation (bias opinion, prejudice, preconception, average tendency, leniency, so on)

Gil) Graphic rating scale method can genorale problems if chooser

criteria are not suitable

(iv) Standards are may be unclear () One of the biggest probloms with graphic raling scale is thal many

supervisors have a tendency to evaluate everyone a little above

The advantages of this method include:

(ii) This method provide detail and useful feedback for employee (point

out strengths, weaknesses)

Gv) The employees can gain the right working erienlalion from [he

suggestion and recommendation of their supervisor

The disadvantages of this method include:

GT) is difficull to use narralive information in human resource

decision

(i) The accuracy of narrative information much depends on the rater’s

wrilmg ability

(iii) ‘The length and the content of the of the written statement can vary

considerably from supervisor to supervisor ©

Gv) Tl is difficult to compare essay appraisals made by differen

supervisors

(*) Comparing essay evaluations might be difficult because no common

criteria exist

© Check list: This method requires the supervisor design a list of statement

which describes about the employees’ behavior, attitade can occur during

their work With the check list, the supervisor does not actually evaluate

but merely records performance The supervisor checks yes or no

responses ona series of questions concerning the employee’s performance

There are some advantages of check list method:

G) This aay to use (i) The scoring key for the check list is usually kept by the human

resources department, which computes the relative rating of the

employee

(iii) Individuals with high scores are rated as better employees than those

with low scores

(iv) Thus method avoid average tendency ot lenicney

‘Leslie W Rue and Lloyd T Byars, “Supervision: key link ta productivity”, Fifth edition 1996, p.210

The disadvantages exist in this method are:

Œ) Supervisor are generally not aware of the values associated with

question

Gi) ‘The questions can be figured out the positive and negative aspects,

so bias can be introduced into the answers

Gil) Assembling Ihe question is a difficult job (Gv) A different set of questions must be assembled for most job

Learning new things quickly

‘Unwilling to work overtime

Reluctant to receive critism

snuch attention is devoted to identifying those attributes relevant to job performance and carefully defining them on the rating instrument, they can be as reliable and

valid as more claborate measurement techniques

“these techniques fall short on several of the criteria for effective performance management There is usually little strategic congruence between the techniques

and the company’s siralegy These methads usually have very vague performance

standards that are open to different interpretations by different raters

Virtually none of these techniques provides any specific guidance on how an

employee can suppor! the company’s goals or on what to do to correct performance

deficiencies In addition, when the raters give feedback, these techniques tend to

elicit defensiveness from employees

1.6.2 The hehavioral approach

The behavioral approach to performance management attempts to define the

behaviors an employee must exhibit to be effective in the job, ‘The various techniques define those behaviors then require managers to assess the extent to which employees exhibit them °, Behavioral approaches are excellent source of information for employee development There are some common methods includes

© Critical incident method: the critical incident approach requires

managers to keep a record of specific examples of effective and ineffective

performance on the part of each employee When these actions significantly affects the department’s effectively both positive and negative, the managers will record it The employee 1s then evaluated based on actual behavior

‘The principal advantages of this method are:

@) Provides the employee with an opportunity to establish an

understanding of the behavior that the superior is seeking,

© Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.207

Noe Tollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.209

(i) The incidents arc used to give specific feedback to employees about

what they do well and what they do poorly, and they can be tied to

the company’s strategy by focusing on incidents that besl support

that strategy

(iii) Forces supervisor to evaluate subordinates on an ongoing basis

The disadvantages which this method used to meel are:

G) The supervisor must record pertinent incidents as they occur ‘This

can be time consuming and burdensome

Gi) The strong tendency to record or stress primary negative incidents

(ii) Many managers resist having to keep a daily or weekly log of their

employees” behavior

Gv) Tl is also often difficul to make comparisons among cmployces,

since each incident is specific to that individual

(2) The employees may feel unsatisfactory when knowing the

supervisor revord [heir bad behavior

« Bekaviorally anchored rating scales (BARS): This method is combined

the tradition rating scale and critical incident method To develop BARS,

one first gathers a large number of critical incidents that represent effective and ineffective performance on the job These incidents are classified into

performance dimensions, and the ones that experts agree clearly represent

a particular level of performance are used as behavioral examples to guide

the rater

The advantages include:

G) More accurate than other traditional rating scale

(i) The traits are chosen more carefully

(ii) Create the unity and consistency between supervisors because this

method evaluates cbservable behavior rather tham ralers’ subjective

perception

(iv) Increase interrater reliability by more specifically defining the

performance dimension

The disadvantages contain

G) Thus method can bias imformation recall, behavior that closely

approximates the anchor is more easily recalled than other behavior

Gi) Develop a BARS is more time consuming and costly than develop

to go to work, fully dressed, uscs time before roll call to review previous shift’s activities and any new bulletins,

takes notes of previous shifl’s avtivily mentioned during

roll call

Good 6 | Always early for work, gathers all necessary equipment

to go to work, fully dressed, checks activity from

previous shifls before going to roll call Modaratcly good [5 | Barly for work, has all nievessary equipment to go 1o

work, fully dressed Normal 1 | On time, has all necessary equipment to go to work,

fully dressed Bad 3 | Not fully dressed for roll call, does not have all

necessary equipment

Very bad 2 | Late for roll call, does not check equipment or vehicle for damage or needed repairs, unable to go to work from

roll call, has to go lo locker, vehieale, or home to gel

necessary equipment

Temible 1] Tate for roll call majority of period does not check

equipment or vehicle, docs not have necessary

equipment to go ta work

« Evaluation of the behavioral approach:

() ‘The behavioral approach can be very effective It can link the

company’s slrategy to the spccilic types of behavior necessary for

implementing that strategy It provides specific guidance and

feedback for employees about the performance expected of them †}

(i) The major weaknesses have to do with the organizational context of

the system Although the behavioral approach can be closely tied to

a company’s strategy, the behaviors and measures must be

constantly monitored and revised to ensure that they are still linked

to strategic focus ®,

1.6.3 The results approach

The results approach focuses on managing the objective, measurable results of

a job or work group This approach assumes that subjectivity can be climinated from the measurement process and that results are the closest indicator of one’s

contribution to organizational effectiveness ©

Performance management systems that use results is management by objectives

© Management by objectives (MBO) is popular in boll privale and public organizations It is the process consisted of having all the subordinate managers write a letter to their superiors, detailing what their performance

goals were [or the coming year and how they planned to achieve them #3

With MBO, the supervisor and the employee jointly agree on what the employee's work objectives will be and how they will be accomplished

The employee is then allowed considerable freedom in accomplishing the

(0 Nige Hollenbeck Gerbart Wright “Hurnan resource management’, Second edilion 1996, p.211

+, Patten, Jr, A Manager's Guide to Performance Appraisal (New York: Froe Press) 1982

© Noe Hollenbeck Gerhart Wright “Humun resource management”, Second edilion 1996, p.212

work objectives, The employce’s performance appraisal is based on the degree to which the work objectives are accomplished

MRO sysicms have three commen compoucnis: They require specil

difficult, objective goals, ‘The goals are not usually set unilaterally by management but with the managers’ and subordinates’ participation, The

manager gives ohjcctive [cedback throughout the rating period to monitor

progress toward the goals MBO can have a very positive effect on an organization's performance

Considering the process through which goals are set, it is also Tkely tht

MBO systems effectively link individual employee performance with the firm’s strategic goals

One major advantage of using MRO is thal it makes the performance

appraisal process more objective

One of the most difficult aspects of an MBO system is deciding in what

areas Lo sel olyjectives For an MBO system to be successful, three minimum requirements must

be met G) Individual objectives must be jointly set by the supervisor and the

employee

Gi) Employees must be periodically and regularly evaluated

(ii) Employees must be rewarded based on objective attainment

© Productivity measurement and evaluation system (ProMES): The main

goal of ProMES is to motivating employees to higher levels of

productivity It is a means of measuring and feeding back productivity

information lo personel ProMBS consists of [our sieps

@ People in an organization identify the products, or the set of

aclivilies or objectives, the organization expects 10 accomplish ©

‘Noe Tollenbeck Gerhart Wright “ITuman resource management”, Second edition 1996, p.214

kè

Gi) The staff defines indicators of the products Indicators are measures

of how well the products are being generated by the organization f)

Gu) The staff establishes Lhe contingencies between the amount of the

indicators and the level of evaluation associated with that amount”

(iv) A feedback system is developed that provides employees and work

groups with information about their specific level of performance on

each of the indicators ®)

© Fyvaluation of the results approach

G) One advantage of the results approach is that it minimize

subjeclivily, relying on objective, quantifiable indicators of

performance It is usually highly acceptable to both managers and employees

(@) Another advantage is that il links aq individnal’s resulls with lhe

organization’s strategies and goals

(iii) A disadvantage is that objective measurement can be both

contaminated and deficient — contaminated because they are affected

by things that are not under the employee’s control, such as

economic recessions, and deficient because not all the important aspects of job performance are amenable to objective measurement

Gv) Another disadvantage of the results approach is that individuals may

focus only on aspects of their performance that are measured,

neglecting those thal are nol

(*) A final disadvantage is that, though results measures provide

objective feedback, the feedback may not help employees leam how

they need to charge their behavior 1a increase their performance

‘Noe Holfenteck Getharl Wright “Hurnun resource mmmagemeat”, Second edition 1996, p.214

kề 3

CHAPTER 2: FINDINGS

2.1 Macro analysis

Changing from the planed-oriented policy to market-oriented economy at the

end of the 80s decades, Viet Nam has achieved many notable growth in economy

During 90s decades to now, the average growth rate of Viel Nam was around 8 percent It is the high growth rate Together with the growth in GDP, the income per

captla also mereased From 2000 10 2006, the income per capita has sharply inercased from USD 390 to USD 730 All cconomic scctors of the nation

experienced a faster growth rate than tn the pervious years Industrial output achieved a high incrcasc The service seclor has improved considerably The financial sector also expanded sharply, promising to improve capital use efficiency

Inflation issue has affected directly and immediately to the economy as well as the living standard of people Recently, Inllation can be controlled Foreign exchange rates and interest have been stable

With the trend of globalization, especially after open-door policy (known as Doi Moi), Vict Nam has participated in many international organizations like

ASLAN, AIPA and joining WTO in the late of 2006 can be seen as the momentous

turing point of Viet Nam’s negotiation history This success leads to the significant

inerease of foreign investment in Viet Nam recently Foreign direct investment is

the remarkable point In 2006, total IDI in Viet Nam reached over USD 10.2 billion

Some advantages that foreign investors are interested in joining Viet Nam

included high growth rate of GDP, strong consumption demand, stable

macroeconomic and socio political environment, etc., Viet Nam is known as one of the safest countries im the world More over, the population of Viel Nam is young and labor is skillful and cheap Intellectual standard of people also has been

improved, With the percentage of more than 92 percent of population are able to

read and wr , Viel Nam is considered as a very high lileravy counby This will

encourage Viet Nam rapidly approach international high technology, knowledge

2006 was a prosperous year for the Victnamese banking system High growth

rate combined with financial market reforms and commitments to free capital flow

(Drall Orditance on Foreign Exchange and Decree on Anti-money Laundering) are illustrative of the progress of Viet Nam’s financial and banking market

Thanks to the favorable policies of the government and the State Bank of Viet

Nam, the domestic banking system has taken its first steps fo open up and the legal framework for the industry is being gradually changed to meet intemational standards The banking system supplied 30% of the total capital for the economy

and met, 40% of the capilal need of busmesses Tr 2006, tolal loans oulslarding in

the banking system made up 60% of GDP with the average retum on equity reaching 30% Domestic banks, especially joint stock ones, have nat only invested

in new banking technology, persormel and financial products, bul also looked [or foreign pariners to enhance their competitiveness and to prepare for the economic

integration process

Overall, the economic and social conditions of Viectuam represent an active,

fast growing young country ‘these are fundamental factors that guarantee a long-

term growth of the financial seclor in Vietuaun in the future

2.2 Techcombank introduction

Afler “Doi Moi” period, the Government has loosened the regulations of

establishment and operation of credit institutions outside the state owned system

These policies have encouraged commercial joint stock banks trongly developed

Commercial joint stock banks are now broadly boosting various aspects of their

businesses, from capital, human resources, technology, distribution network and intemational cooperation Many banks cooperate with foreign strategic partners for

operation Till now, Techcombank has sucessfully operated in 14 years In recent

‘years, ‘l'echcombank has reached significant landmark in such aspects as registered capital, profit, risk management, banking lechnology, network and new product development With its registered capital of over VND 1,500 billion and total assets

of VND 18,000 billion, Techcombank became one of the five largest joint stock

banks Techcombank also belonged among the most suecess[ut joint stack banks itr

2006 by achieving, profit after provision and before tax of VND 356 billion (is the third highest profit bank in commercial joint stock bank system) Retum on equity

(ROR) was 16% This result has enabled the bank to significantly raise its dividend

ratio ‘these results are greatly encouraging for the Jank’s shareholders, staff, and partners, have created much prestige for the bank, and were a major factor in

taking the bank’s recen! share issuc such a sucecss The number of new brances

opened during the year reached a record, bringing the total number of branches and

sub-branches to nearly in twenty provinces and cities The network expansion was

in line with Techcombank’s retail banking development strategy and allowed the Bank to timely and effectively meet customer demand ‘The quantity and quality of

stalT also increased At the end of 2006 There are 1,584 staff's have been working in

Figure 2-1: Some Main Figures of Techcombank

[Source: Techcombank, Annual Reports]

Techcombank has strongly committed to maintain its leading position in

banking lechnology by success Cully upgrading il core banking sysiem to the newest.

version T24 R5 of Temenos Holding (Switzerland) supporting 24/7 transactions In addition, Switching and Card Management system software by Compass Plus was

also oflicially deployed, crabling the bank to issue credit and debit cards and to

manage its payment operation

‘Thanks to its advanced banking technology, Techcombank has introduced

many convenient and modern [nancial produvis lo businesses and consumers The

bank has provided a full range of high quality products to customers both

individuals and businesses

Tr the line with the Bank’s stralegy, market segmentation of individual

customers has been given special attention in recent years [hanks to efforts in expanding the bank's network, innovating banking operation processes, training

customer relationship officers as well as continuously improving and diversifying

retail banking products, Techcombank’s retail banking operations prospered more

strongly Customers have been provided with advanced technology-basaed,

favorable, diversified and valuc-added fmanvial products

Business banking activities at Techcombank imeluded all services for small and medium enterprises and corporations Tn addition to traditional products, Tcchcombauk always introduces a range of new products, Efforts to diversify

business banking products and to improve service quality have resulted in many

new services bemg provided to the bank’s business customers This can be

considered to be one of the bank’s most successful areas of operation, marked by

substantial increases in the quantity of products and services provided, as well as

the range and quality of services offered Business customers have many choices

and couveniences to select, ‘This has create a competitive advantage in the industry

for Techcombank

Tn the Treasury market, Techcombank provides a comprehensive a range of

products consisting of foreign exchange, money market and security trading,

hedging and derivative products for many domestic and international customers

Whilst concentrating on providing a wide range of financial products and

services to meet domestic customers’ diverse demands, ‘'echcombank has also been

striving for expansion of cooperation with both international and regional [nancial

institutions to satisfy customers demands and prepare for the economic integration

process

Key achievernents

e@ Improvement of service quality and corporate governance by re-

ongincering business procossos and management information systems, as

well as risk monitoring and management systems

« Launch of many new products with advanced features and functions, increase in productivity and the increasing public image of the bank, all

thanks to modern and up lo date IT systems and applications

e The volume of mobilized funds, outstanding loans and intermatioual

scitloments increased considerably compared with last year Many important marketing and business support programs in key areas such as

corporate identity, quality management, market research, slalf recruitment

and taining have been successfully implemented

Priority business directions for the period of 2005 to 2010: Techcombank has

‘been implementing strategies for the 2005 — 2010 period focusing on

¢ Expansion of retail banking customer base with emphasis on supply of

tliversified, qualitative and highly compelilive [imaneial produels and

services to all urban residents in Viet Nam, and in particular to the young

and succt

sful customers will medium to high incomes

e [ast implementation of card switching and management systems, and development of card services as the core for developing large scale retail banking services

Quick expansion of the notwouk in the key high potential economic arcas

in order to further broaden our individual and small medium enterprises

customer base, creating strong anchors for the implementation of

Techcombank’s 2005 2010 development strategies

Continuous improvement and strengthening of our service quality through the use of management information systems (MIS), the identification of

customer needs and measurement of customer salisfackon via such tools as

customer relationship management (CRM) and the standardization of

business and customer service processes

Tast development of risk management services for businesses and

investment services for individuals and high net worth customers Development of strong human resources for the bank’s development in the

year 2005 and beyond Placing high importance on raining of management and marketing slalls for managers, and customer service skills for staff

Continuation of upgrading the bank’s I'l’ system and applications, to enable the system to operate 24/7 throughout the network

Tuplementing successfully business largels and direcions plarmed will strengthen

the benk’s position and create strong foundations for it to fulfill the goal of becoming a leading joint stock bank

2.3 SWOT Analysis

2.3.4 Strengths

Onc of the longest time cstablished commercial joint stock banks Techcombank has a longer time in operations than others (established from 1993) so Techcombank is the pioneer in the joinl stock banking

The board of directors and board of management are talent and have many experience

Aflor several increases in rogistcred capital, Techeombank bas become one

of the five largest joint stock bank in terms of registered capital and total

assets.

The bank also demonstrated its leading position in terms of growth,

profitability, teclmology and network development

Credit, quality has been maintained and closely monitored, loan loss

provision has been regularly controlled to ensure the safcty of the bank's

operations

With technology support, the bank’s labour productivity has been

improved in 2005 Processes for new products have been implemented and

further improved the bank’s main balance shecl ik

such as: deposits,

loans and term structures of loans were more effectively managed

Recently, the human resource has increased both in quantity and quality The bank’s human resource quality has been steadily improved by

selective recruitment and continual training Additionally, the bank has

been streamlining transaction procedures; continuously innovating the quality management system in accordance with ISC 9001: 2000 standards

and effectively exploiting ils TT system All these measures have

considerably contributed to productivity improvement

Techcombank is eurreutly a Icading bank in the country in terms of

technological application with clearly defined targets and strategies The bank has always concentrated on imtradusmg new lechmologica as a

foundation for providing modem, accurate, automated and real time banking services

Communication and public relations activities actively suppoited the

popularizing Techcombank’s image and trademark, Communications and

marketing campaigns also contributed to a public impression of a young

and dynamic bank

'Techcombank has established a consistent image through out nearly 80

branches and sub branches nationwide from logo, desks and chairs, Wansaclion counters, slaionery, elc Thanks ta applying and implementing

30

the consistout trademark policy, Techcombank’s image has become a familiar one amongst the public

‘Techcombank is the pioneer in applying the quality management system in accordance with IS 9001: 2000 in Vietnam Simultaneously deploying the qualily management system over the bank network will serve to be a foundation for stable and sustainable development and will be a differentiating faction in the local banking industry

2.3.2 Weaknesses

It develops only vigorously in the Norther area, il does not ye develop in

the Central and Southern region while Southern market has about threefold economic scale over Hanoi

Ixpanđing present operation network results in shortage of human

resources For the very shortage of human resources, it results in

incompetence of several managers who are also promoted for the reason of

lack of staff

In the present reform work, the rate of urbanization has been taking place rather drastically, however, infrastructures in many reral areas are underdevelopment, applicd technologies in the ficld of banking are not developed synchronously At present, Techcombank has not strategies of

vigorous development in the rural areas, due ta Techcombank's products

which are mainly relied on high technology, thus many factors are not

suitable to conditions in the rural areas

‘Targeted clients of fechcombank are medium and small enterprises, at the

same time, it attaches special importance to development and expansion of

nalural clients and individual business houscholds By such stralegy, during the process of integration, it shall be limited in the ability of globally financial supply

31

¢ Most Techcombank's staffs are young, therefore their experiences are still lacked and professional skills are not Irigh

© Some new producls are designed in the features relied on high teclmology,

but infrastructure is not yet comprchensive, thus it is not appropriate in

developing use of these products, resulting in imbalance

2.3.3 Opportunities

© When VN joins WTO, many foreign Iamks will come to seek for

investment opportunities in VN TCB can cooperate with them mutually, TCH can take advantage of management style, modem technology and experience from foreign specialists

e Viemamese people's demand and level of using utilities of banking

sorvives are more and more inoreasing Bringing about these, it is a birlh of

series of diversified products, services and utilities under Vietnamese bank's brands, with a view to meet increasing demands of users

¢ Urban population, especially middle class who have developing advanced educational knowledge, shall easily approach to banking financiat products and services At the same time, urban population concentrating on three main point sectors of economy, such approach is relative easily

Several decisions of the Government in the recent times aim at encouraging and promoting development of the bank such as Government Prime Minister's Directive regarding, specding up development of salary payment to civil cervants through account ‘This is a positive policy for banking industry in general and Techcombank in particular as at present the brand of Techcombank card has been formed in the heart of users and used to win the prize of Vietnam's Gald Star

2.3.4 Threals

e Banking services forecasted shall be a fierce competitive field as protection for domestic commercial banks are no longer in (he condition of Vietnam entering WTO

« Opening financial market for foreign banks entering domestic financial market increases competitors who have the advantages in financial resources, technology, leadership, business administration ete over

Vietnamese banks

© Competition becomes severer as a move of slate-owned commercial banks

going forward medium and small enterprises (Iechcombank's targeted market sector) especially as these banks are supported and subsidized by the Slate Resides, dircet compelilion of commercial joml slock banks such

as ACB, Sacombank, Hast Asia Bank, Hximbank etc makes client market shares of Techcombank become narrower

* Banking products are very similar and easy to be imitated Once a product

of new features is come oul in the market, then just in the short time, other

banks can imitate and develop them Making a new product which can not

be imitated is general challenge for banks

« Besides, non-banking financial products such as life insurance, post saving, which are being developed very quickly are replaceable ones far

bank's ones, This is very a polontial IlrentL 2.4, Survey analysis

2.4.1 The model of the survey

‘This survey is designed in order to find out about the policy, the practical

management of human resource, the performance appraisal system and the

employees’ expectations about the bank's compensation policy Based on the

survey’s result, the human resource department will propose strategies and specific

actions to improve policies and administrative methods which can help TCB reach

strategic target in near future Staffs are invited to fill in the survey and send back to the human resource department Total number of staffs participated in this survey includes 391 people The survey is divided into 2 parts: General information and compensation policy, human management activities and working environment which are factors impact much to performance appraisal

2.4.2 The survey’s content

2.4.2.1, General information

a) Seniority in Techcombank:0 <3 years 1 3-10 years 0 >10 years

c) Graduation: 0 Highschool 0 University 0 Master 0 Doctor

Statistical results: Seniority in Techcombank

below 3 years rom 3 to 10 years more than 10 year

Figure 2 —2: Number of seniority in Techcombank

- Seniority below 3 years has 289 respondents account for 79.18%

- Seniority from 3 to 10 years has 67 respondents accoint for 18.35%

- Seniority over 10 years has 9 respondents account for 2.47%

34