Some solutions to improve human resource management at Dai Viet construction company

HCM UNIVERSITÉ LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MBAVB3 LE THI ANH TUYET SOME SOLUTIONS TO IMPROVE HUMAN RESOURCE MANAGEMENT AT DAI VIET CONSTR

TRƯỜNG ĐẠI HỌC MỞ TP HCM UNIVERSITÉ LIBRE DE BRUXELLES

HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL

MBAVB3

LE THI ANH TUYET

SOME SOLUTIONS TO IMPROVE HUMAN RESOURCE MANAGEMENT AT DAI VIET CONSTRUCTION COMPANY

PROJECT MASTER IN BUSINESS ADMINISTRATION

(Part-time)

Ho Chi Minh City (2012)

ii

UNDERTAKINGS

I hereby certify that I have myself studied this research applied the academic knowledge gained from the MBA course and through the discussions with my professors

The project has been conducted based on the real information and context of Dai Viet Construction Company who is the case study in this project

I undertake that this is my own research project, all information, data and survey results are true and never announced in any other research projects

Ho Chi Minh City, March 2012

Le Thi Anh Tuyet

ACKNOWLEDGEMENT

First of all, I would like to express my deepest and sincerest gratitude to my tutor Dr Nguyen Van Ngai for his invaluable guidance, suggestion and encouragement to complete this research study

Many thanks are also extended to the director and all managers and staffs of Dai Viet Construction Company for their generous support and help during the time

of data collection for completing this project

My grateful acknowledgement is extending to the Universiteù Libre De Bruxelles-Solvay Business School and Open University Of HCMC, which provided

me a chance to follow this Part time MBA program

In addition, I am delighted to express my gratitude for all the faculty members and staff at Open University, and Board of Coordinator for their support Also I am indebted to all of my classmates, especially to my group 05 who supported me during my study at HCMC-OU

Finally, my delighted gratitude is for my family who are always my endless backing and inspiration for me to overcome the challenge during the study

v

TABLE OF CONTENTS

List of Abbreviations vii 

List of Charts viii 

List of Tables ix 

CHAPTER I INTRODUCTION 1

1.1  Background 1 

1.2  Rationale Of The Study 1 

1.3  Problem Statement 2 

1.4  Objectives Of The Study 2 

1.5  Research Methodology 2 

1.6  Scope Of The Study 3 

1.7  Structure 3 

CHAPTER 2 LITERATURE REVIEW 6 

2.1  Human Resource Planning 6 

2.2  Job Description: 7 

2.3  Human Resource Recruitment and Selection 7 

2.4  Training and People Development 11 

2.5  Performance Appraisal System 12 

2.6  Employee Motivation 13 

2.7  Workflow 15 

2.8  Compensation and Benefit 15 

CHAPTER 3 HUMAN RESOURCE MANAGEMENT PRACTICE IN DAI VIET 16

3.1  Construction Industry Overview 17 

3.2  Background of Dai Viet 19 

3.3 Human Resource at Dai Viet 24

CHAPTER 4 FINDINGS AND DATA ANALYSIS 27 

4.1  Profile of Respondents 27 

4.1.1.Age 27 

4.1.2.Gender 28 

4.1.3.Marital status 29

4.1.4.Education 30

4.1.5.Position 31

4.1.6Seniority 32

4.2.Human Resource Management Practices in Dai Viet 33

4.2.1 Human Resource Planning 33

4.2.2 Job Description 33

4.2.3 Staff Recruitment and Selection 34

4.2.4 Training and People Development 36

4.2.5 Compensation and Benefit 37

4.2.6 Employee Motivation 38

4.2.7 Performance Appraisal System 40

4.2.8 Job Satisfaction 42

4.2.9 Workflow within Dai Viet 43

4.2.10 Staff Workload 44

4.3.Correlation Between Staff’s Profile And HRM Factors 45

CHAPTER 5.CONCLUSIONS AND SOLUTIONS 50

5.1.Conclusions 50

5.2.Solutions 51

REFERENCE 59

APPENDIX 60

Appendix 1: Questionnaire (English) 60

Appendix 2: B ng câu h i 66

¬ HCMC : Ho Chi Minh City

¬ HRM : Human Resource Management

¬ KPI : Key Performance Indicator

¬ KPA : Key Performance Areas

¬ MBO : Management By Objectives

¬ PMS : Performance Management System

¬ SME : Small Medium Enterprise

¬ SPSS : Statistical Package for the Social Sciences

List of charts

Figure 1-1: Framework of the Research 3

Figure 2-1: The Appraisal Process 13

Figure 3-1: GDP over the years 17

Figure 3-2: Organization chart 20

Figure 4-1: Respondents’ Age 28

Figure 4-2: Respondents’ Gender 29

Figure 4-3: Respondents’ marital Status 30

Figure 4-4: Respondents’ Educational background 31

Figure 4-5: Respondents’ Position status 32

Figure 4-6: Respondents’ Seniority 33

Figure 4-7: Problem in Job description 34

Figure 4-8: Recruitment and Selection Policy in Dai Viet 35

Figure 4-9: Issues around Recruitment and Selection 35

Figure 4-10: Suggestion on Training and Development 35

Figure 4-11: Satisfaction on C&B schemes 40

Figure 4-12: Motivation Policy in Dai Viet 39

Figure 4-13: Employee's expectation on Motivation 39

Figure 4-14: The importance of Performance Appraisal in Dai Viet 40

Figure 4-15: Quality of Performance Appraisal System in DAI VIET 40

Figure 4-16: Problems in Workflow 44

Figure 4-17: Main Causes of Heavy Workload Problem 44

Figure 4-18: Heavy Workload on Staff's age 45

Figure 4-19: Heavy Workload with Seniority 46

Figure 4-20: Motivation with Staff's length of work 50

Figure 4-21: Motivation Degree on Staff's Marital Status 47

Figure 4-22: Satisfaction on Educational Background 47

ix

List of Tables

Table 3-1: Income statement of Dai Viet from 2008 to 2011 22

Table 3-2: Productivity of Employees 23

Table 3-3: Seniority structure of employees 24

Table 3-4: Age structure of employees 24

Table 3-5: Gender structure of employees 25

Table 3-6: Educated level structure of employees 25

Table 3-7: Marital status structure of employees 25

ABSTRACT

In the growing economy, construction industry is remarkably developing in Vietnam during the last decade despite of certain difficulties Dai Viet is an SME specializing in construction contracting civil works, industrial projects require high quality, building-design, construction project management, investing in the construction of residential area projects In a perfect competition, it is really difficult for the company to grow up stably In recent years, operating result of the company insignificantly increases lower than the average of in the industry and also lower than the target of the company Moreover, Human Resource Management in Dai Viet has been in problem Many employees in Dai Viet feel that they are overload and they do not feel comfortable at work This state can lead to low productivity and low morale of the staffs, so they are always in stress and they want

to quit their job This problem not only occurs to workers but also to high positions and in all departments The labor turnover increases every year and become more serious in year 2011

There is a need to study what happened, why and how to improve the situation The researcher conducts a research to have a helicopter view on the current situation of the company via methodology: qualitative interview of some managers as well as quantitative survey to 62 employees of Dai Viet

The finding analysis indicates that the company has a problem in Human Resource Management in which job dissatisfaction, low motivation, unclear job description, complicated workflow, ineffective recruitment-selection, lack of communication and lack of workforce are the main causes that lead to low productivity of staffs and not good business result in the organization Also, performance appraisal system of the company is not really proper and effective

Further to the above findings and analysis, some feasible recommendations to improve the situation in long and short term should be raised

1 Introduction

CHAPTER I INTRODUCTION

1.1 Background

Human resource is one of the most important assets in the company among traditional sources such as capital, technology, location Attracting and retaining good employees is vital for the sustainable development of an organization It is a basis for its competitive advantage Therefore, Human Resource Management is much more integrated and strategically involved in management of the company Human Resource Management examines what can or should be done to make people both more productive and more satisfied with their working life, and ultimate contribute to the goal achievement of the company…

1.2 Rationale Of The Study

Human Resource Management is really a crucial factor of general management in the company The importance of job analysis and design, staffing, assessing performance, training and development, compensating, motivating, rewarding and empowering the workforce is recognized by the managers in every units and functional areas of an organization In construction market, there is a tough competition in attracting skilled technical employees of consulting, architectural design, civil engineering and construction management among companies

They are a valuable asset of the organizations Thus Human Resource Management

in a construction company like Dai Viet nowadays is more and more important

However, since the establishment of the company in 2007, Human Resource Management in Dai Viet has been under performance and the management board has not yet taken it strictly serious The employees work with low productivity and low morale In accompany with that, a high staff turnover is also bad for Dai Viet as it can impact on the atmosphere of the company The staying employees feel unstable and depressed

Therefore it is necessary and urgent to conduct a research to understand what has happened and find out a way to improve the current situation

1.3 Problem Statement

In recent years, Human Resource Management in Dai Viet has been in problem Many employees in Dai Viet feel that they are overload and they do not feel comfortable at work This state can lead to low productivity and low morale of the staffs, so they are always in stress and they want to quit their job This problem not only occurs to workers but also to high positions and in all departments The labor turnover increases every year and become more serious in year 2011 – around 17%

In the consequence, the operating result of the company increases around 3% which

is lower than the average of 5% in the industry and also lower than the 8% target of the company

What are the root causes of the problem and what actions should be taken by the management board to solve this problem and retain the staffs?

1.4 Objectives Of The Study

The objectives of the research are:

- To analyze the current human resource management practices of Dai Viet company

in order to find out root causes

- To suggest some solutions to improve Human Resource Management of Dai Viet

1.5 Research Methodology

Methodology applied in this study is descriptive statistical analysis

Data required for this research study:

¬ Secondary data: Reviewing the Dai Viet Personnel Policy, Dai Viet's annual report, Human Resource Management textbooks, courses, magazines, manuals, catalogs, printed materials, internet, etc in relation to Human resource management

¬ Primary data: Conducting interviews with persons in Dai Viet

Questionnaire design: The collection of research data would be obtained from questionnaires which was designed based on literature review Questionnaires

3 Introduction

shall be sent to all the staff of Dai Viet in all departments to get their opinion and comment

1.6 Scope Of The Study

Dai Viet company is an SME operating in construction industry in Ho Chi Minh City This research is conducted in the whole company with 62 permanent staffs

1.7 Structure

The research report includes five chapters structured as follows:

Chapter 1: Introduction

Chapter 2: Literature Review

2.1 Human Resource Planning

2.2 Job Description

2.3 Human Resource Recruitment and Selection

2.4 Training and People Development

2.5 Performance Appraisal System

2.6 Employee Motivation

2.7 Performance Appraisal System

2.8 Competency Improvement

Chapter 3: Human Resource Management Practice at Dai Viet

3.1 Construction Industry Overview

3.2 Background of Dai Viet

3.2.1 Dai Viet’s Vision and Mission

3.2.2 Dai Viet Strategic Plan

3.2.3 Operational Network

3.2.4 Organizational Chart

3.2.5 Roles and Responsibilities of Departments

3.2.6 Financial Statement of Dai Viet

3.3 Human Resource at Dai Viet

Chapter 4: Finding and Data Analysis

4.1 Profile of Respondents

4.2 Profile of Respondents

4.3 Human Resource Management Practices in Dai Viet

4.4 Correlation Between Staff’s Profile And HRM Factors

Chapter 5: Conclusion and Solution

5.1 Conclusion

5.2 Solutions

5.2.1 Human Resource Planning

5.2.2 Job Description

5.2.3 Human Resource Recruitment and Selection

5.2.4 Training and People Development

5.2.5 Performance Appraisal System

5.2.6 Employee Motivation

5.2.7 Policy and Procedure

5.2.8 Job Satisfaction

5 Introduction

Figure 1-1: Framework of the Research

Introduction and Objectives

Findings and Discussion

Conclusion and Recommendations

CHAPTER II LITERATURE REVIEW

In this literature review, the concept of human resource management such as staff

recruitment and selection, employee motivation, human resource planning, training

and development, job description, compensation and benefit, motivation, etc are

reviewed And then the theory should be compared with human resource

management practices of Dai Viet including research result in order to draw

conclusion and make recommendation to the senior management team of the

company

In a competitive and volatile market, besides traditional sources and means such as

capital, technology or location, firms are more paying attention to innovative

sources, one of which is human resource Thus effective human resource

management is viewed increasingly as a source of competitive advantage (Dunford

& Snell, 2001)

Human Resource Management is concerned with the effectiveness of people at

work (Ivancevich and Glueck, 1983) Human Resource Management examines what

can or should be done to make people both more productive and more satisfied with

their working life, and ultimately contribute to the goal achievement of the

organization In other words, the purpose of Human Resource Management is to

improve productive contribution of people to the organization in an ethical and

socially responsible way

2.1 Human Resource Planning

Human Resource Planning is very important for the organization because it can help

the organization making sure that it has enough staff to implement its program

activities (DeCenzo and Robbins, 2005) Moreover, it helps the company in human

resource management because through the planning, the human resource

department can determine the number of staff that is required by the organization,

what kind of employees they want to recruit and how to place those selected staff in

7 Literature Review

the right positions and at the right time It also helps the organization to identify the

capable persons in order to complete the tasks at hand effectively and efficiently

and then it will contribute to achieve the organizational goals and objectives The

purpose of this planning is to determine human resource management requirements

that exist for current and future supplies and demands for workers in the labor

market

According to Byars and Rue, 2004, human resource planning is not only the

responsibility of human resource manager alone to handle, but also the duty of all

line managers The role of HR manager is to assist those managers in developing

their departmental plan and then consolidate those plans into organizational human

resource planning Human resource and line managers should link their human

resource planning to the long-term strategic plan of the organizations and this is one

of the solutions in order to get collaboration from other line managers to achieve the

plan Failing to do this will lead to problems in staffing for the organization in the

future

2.2 Job Description:

Job descriptions are based on objective information obtained through job analysis,

an understanding of the competencies and skills required to accomplish needed

tasks, and the needs of the organization to produce work job descriptions clearly

identify and spell out the responsibilities of a specific job Job descriptions also

include information about working conditions, tools, equipment used, knowledge

and skills needed, and relationships with other positions

2.3 Human Resource Recruitment and Selection

The main purpose of the recruitment is to choose the best and qualified candidates

from the pool of applicants to work for the organization Noe, Hollenbeck, Gerhart,

and Wright, 2003 have mentioned that human resource recruitment is a continuous

process conducted by the organization in order to identify and attract potential

employees If the organization receives more unqualified applicants, it will incur

high costs and low productivity

In recruiting employees, the organization has to consider three factors: personnel

policies, sources of applicants for the jobs, and the behaviors and characteristics of

people who involve in recruiting staff The recruitment activities will affect on the

numbers of people who apply for the jobs, type of applicants and the likelihood of

applicants in accepting the jobs if offered

The recruitment source is very crucial for the organization because it can pinpoint

the qualifications of applicants in order to meet the organization need Byars and

Rue, 2004 indicated that employee referral were the most effective recruitment

source Recruitment can be done both from an internal and external sources There

are both advantages and disadvantages in selecting employees from those sources

From the internal source, staffs are knowledgeable about the organization and have

more understanding about the organizational works, process, procedures and

projects Moreover, the organization is aware of staff member's strengths and

weaknesses and that is a kind of employee motivation It provides internal career

development opportunities for staff as well as helping to reduce staff turnover

Nevertheless, the staff might be promoted to the level which beyond their abilities

On the other hand, it can have a negative effect within the organization because of

the other employees may be jealous to each other and it also can stifle new ideas

and innovation

As for the external source, the organization can select qualified employees from

pool of latent candidates and they will bring new initiatives and understanding to

contribute with the organization Moreover, it is normally easier, cheaper to hire

technical, managerial, and skilled staff from outside On the other hand, it is

difficult to attract and get potential employees from outside It will also take time to

induct and train the new staff

9 Literature Review

Selection: the process of choosing best and qualified candidates from the available

applicants that are most fit and likely to perform the job successfully (Byars and

Rue 2004)

The employee selection is different from one organization to the others i.e it is

dependent on the size of organization, job types, number of staff that organization

want to select and other pressure from outside Generally, selection process consists

of the following steps:

Screening of the application form: review of curriculum vitae or resume, the way

that applicants have written the cover letter, certificates, and other documents

enclosed with the application form in order to shortlist the applicants for the

interview

Preliminary interview: is the step where interviewers and employers meet the

applicants in order to identify whether applicants have enough experiences, skills,

abilities to perform the job; and to explain applicants about the jobs and their

requirements The purpose of this interview is to screen out unqualified and

uninterested candidates and the questions raise are related to job and aimed at

validating and evaluating the applicants

Employment testing consists of:

Aptitude test: a kind of tests that used to measure people's ability and talent to learn

and perform a job

Psychomotor test: test applied to measure people's strength, coordination and

eternity

Job knowledge test: is the test that used to measure job-related knowledge of the

candidates While Proficiency test is used to measure how well the applicant can

perform a sample of job

Interest test: is designed to determine the interests of people compare with the

interests of successful candidates

Personality test: is related to characteristic testing and personality trait testing of

applicants

Second or Follow-up Interview: is an important step in selection process because it

gives information that supplements the information that obtained in the first

interview to determine the suitability of applicant to the job The questions used in

this interview are job-related and they can be structure- predetermined outline that

based on a thorough job analysis and unstructured questions which is not based on

predetermined checklist i.e interviewers use opened-ended questions

Reference checking: this step can be done before or after second interview Many

organizations realize the importance of it and require the applicants to provide the

list of referees in the application form Most perspective employers contact

personal, school, or past employment references Generally the information given

by previous employers is usually clear and objective, while the information

provided by individual have limited value because generally applicants will list

down those who give positive recommendation to him or her As for teachers or

lecturers at the university, the information provided is also of limited value, which

is similar to individual referees

Physical examination: is performed after job offer to determine not only about

applicant’s physical ability to perform the job but also about his or her eligibility for

health and disability insurance

Final Decision: is the final step of the selection process to choose one individual

from more than one qualified person for the job Employers or interviewers gather

all information from previous step in order to select the most qualified applicant

The management of different levels of organization has responsibility in making

final selection decision

Placement: Fitting a person to the right job is called placement

More than anything else, placement of human resources should be seen as a

matching process Gaps between an individual’s skills and the job requirements are

11 Literature Review

common factors that lead to rejection of an applicant How well an employee is

matched to a job affects the amount and quality of the employee’s work This

matching also directly affects training and operating costs Workers who are unable

to produce the expected amount and quality of work can cost an organization a great

deal of money and time

Socialization: The staffing process should not be completed once applicants are

hired or promoted To retain and maximize the human resources who were so

carefully selected, organizations must pay careful attention to socializing them

Socialization involves orienting new employees to the organization and to the units

in which they will be working It is important that new employees become familiar

with the difference between a new worker’s feeling like an outsider and feeling like

a member of the team Although socialization is a crucial part of the hiring process,

it is an ongoing activity that continues after hiring (Gomez-Mejia et al., 1998)

2.4 Training and People Development

Training is a learning system set up by the organization in order to improve

knowledge and skills of employees so that they can apply it to daily works as That

helps them to be successful in their job performance Assessment in training process

is very important for the organization to find out whether the training is necessary

or not and whether trainees have basic skills to fully benefit from the training

content or not Moreover, organizations have to make sure that they create a good

environment for learning After the training, the organizations should do the

follow-up to ensure that the trainees put it into practices in their everyday works

Furthermore, this will help evaluate the training outcome and objectives whether it

is achievable or not The assessment helps determine the needs of training, for

example what kind of training that the organizations should provide to their staffs

and who should attend the training courses In addition the organization can also

find out the specific areas to be focused on for training (Noe, Hollenbeck, Gerhart,

and Wright, 2003) The training program should be developed to meet the outcome

that organizations want: it is also very important because it links to effectiveness of

training

After training, trainers should develop a form for participants to evaluate both

content and techniques used in the training in order to improve future trainings The

organization should make itself become a learning organization so the staff is

continuously willing to learn the new work practices and apply what they have

learnt to improve the quality of their works

Goals are important points to consider before conducting any training and the goals

must be clear and realistic These goals help trainers to determine appropriate

training’s content and they can be used to evaluate training result and effectiveness

after the training Without clear goals, the organization will use its resources

ineffectively or wrongly with wrong reasons and it will result in unsatisfactory

results

Training involve high costs because it is not include only training cost itself but also

include the cost to analyze and evaluate the training program’s effectiveness In

some cases, training is appropriate, but it not cost-effective Manager must study

about the costs and benefits analysis of training by comparing between the costs of

current problem with the costs of training to eliminate it

Training is a tool of people development by improving their knowledge and skills in

order to enhance their performance

2.5 Performance Appraisal System

In performance appraisal process, employees should have agreed job goals with

their manager in early of the period, and basing on that the managers will evaluate

the performance of staffs with actual results (DeCenzo and Robbins, 2005) The

results of performance appraisal can be increased salary, promotion, or personal

development

There are six steps in an appraisal process as the below flow chart

13 Literature Review

Figure 2-2: The Appraisal Process

(Source: Decenzo D A and Robbins S P 2005)

2.6 Employee Motivation

Motivation is very important for staffs and the organization because through

employee motivation, the organization can retain good and qualified staff and they

will contribute to the success of the organization with more cost effectiveness

achieving a low staff turnover Employees who are motivated will have good

performance and better job quality In addition, if employees stay longer with the

organization, it will not require the organization to recruit and train new staff and

this will make organization save a lot of costs and time (Staff Motivation Retrieved

May 04, 2006 from http://www.revision-notes.co.uk) Motivation of staff is not just

only money or benefits given to them but also the good working environment For

example, with the staff working in an environment where they are friendly and

helpful to each other, without nepotism nor unfair treatment from the supervisors,

5 Discuss the appraisal result with employee

4 Compare the actual performance with standards

1 Establish performance standards with employees

3 Measure or assess the actual performance

2 Mutually set SMART goals

6 If necessary, initiate the corrective actions

the office has enough space, the rooms are adequately ventilated; the staff will like

to work for that organization and they will not want to leave that company

Moreover, motivation can be achieved by inspiring for high performance or hard

work or by giving key staff to have chance for skill development for instance

opportunities to attend the trainings that they think necessary to them and is also

beneficial to the company or organization Staff motivation is a very important

factor for the organization because it can make the project of the organization

succeeds or fails

In order to motivate employees, the organization’s management has to put

themselves in their workers' shoes, but there are no universal rules on how to

motivate staff because every organization is different However, general advice

exists on how to create a working environment where staff is motivated One of the

ways to motivate staff is to make sure that staff is given clear, measurable and

achievable goals and then perform staff appraisal that include feedback and a

discussion about past performance and let them give comment about themselves

Rewards for example bonus scheme should be given to staff who performed well

i.e beyond expectation Furthermore, we can motivate staff by giving chance to

employees to get involved in decision-making process (How to motivate staff

Retrieved August 29, 2006 from http://business.timesonline.co.uk/article)

• Rewarding

Rewarding means providing incentives to and recognition of employees,

individually and as members of groups, for their performance and acknowledging

their contributions to the agency's mission

• Empowerment

Empowerment means the manager give decision-making authority and

responsibility to employees who have the knowledge and experience to be able to

make decisions more quickly and reliable than the manager It is argued that

empowerment cannot be imposed but to be successful, it must be welcomed and

accepted by those who become empowered It involves both the freedom to act but

also the responsibility for results (Blanchard et al., 1996)

15 Literature Review

2.7 Workflow

A workflow consists of a sequence of connected steps Emphasis is on the flow

paradigm, where each step follows the precedent without delay or gap and ends just

before the subsequent step may begin This concept is related to non-overlapping

tasks of single resources

It is a depiction of a sequence of operations, declared as work of a person, a group of

persons, an organization of staff, or one or more simple or complex mechanisms

Workflow may be seen as any abstraction of real work For control purposes,

workflow may be a view on real work under a chosen aspect, thus serving as a

virtual representation of actual work The flow being described may refer to a

document or product that is being transferred from one step to another

Workflow concepts are closely related to other concepts used to describe

organizational structure, such as silos, functions, teams, projects, procedure, policies

and hierarchies Workflows may be viewed as one primitive building block of

organizations

2.8 Compensation and Benefit

Compensation is a systematic approach to providing monetary value to employees in

exchange for work performed Compensation is essential in order that pay may serve

to motivate employee production sufficiently to keep labor costs at an acceptable

level The ability of the pay program is to gain employee acceptance while

motivating employees to perform to the best of their ability When setting these

compensation policies, organizations must establish their pay practices to comply

with federal and state laws and regulations (Arthur et al., 1998)

Compensation means more than wages and salaries It may include incentives that

motivate employees and relate labor costs to productivity Without adequate

compensation, current employees are likely to leave and replacements will difficult

to recruit (Werther, Jr et at., 1996)

Different types of compensation include direct financial compensation, indirect

financial compensation and non-financial compensation Direct financial

compensation consists of the pay that a person receives in the form of wages, salary,

bonuses, and commissions Indirect financial compensation (benefits) includes all

financial rewards that are not included in direct compensation Non-financial

compensation consists of the satisfaction that a person receives from the job itself or

from the psychological and/or physical environment in which the person works The

rewards employees receive in a total compensation program may be based on

several factors including membership in the organization, seniority, or other

elements (Mondy et al., 2002)

Human Resource Management practice in Dai Viet

17

CHAPTER III HUMAN RESOURCE MANAGEMENT PRACTICE IN DAI VIET

3.1 Construction Industry Overview

During the last decade, accompany with the growth of the GDP in Vietnam, the construction industry in Vietnam keeps growing well more than 10% in average despite of some difficulties in the international and national economy recently

Figure 3-3: GDP over the years

GDP over the years

7 6

5.89 5.32

6.78

Source: VN General Statistic Office

Construction Industry 2009 2010 2011 2012E 2013E Operating Value (billion

VND) 65,113 82,578

135,419 104,988 98,141 Weight of GDP (%)

5.63 6.05

7.92 6.14 5.74 Growth rate (%)

10.06 23.00

17.80 13.80 12.90

Source: VNEconomy The construction industry has developed sustainably thanks to Government policy of encouragement and investment in infrastructure, demand of urbanization, public social benefit projects, crucial national economic areas, etc Investment development

expense is the second big amount, taking around 20% of annual Government budget Year 2011, the Government spent 145,000 billion VND on basic construction investment In addition, the construction industry is less impacted from import materials (except metal steel) which are much influenced by currency and foreign trade policy of other countries That is why the companies in this industry can actively arrange their operation with stable cheap local sources for more effective business

According to General Statistic Office, FDI capital invested in Vietnam in 2011 was

700 million USD for 90 projects in which construction is the third attractive industry, taking 7% of total FDI capital

However, construction industry market is a perfect competition with more than two hundred competitors Therefore, it is also a tough condition for the players in the market It is still difficult for construction industry this year 2012 and it will not be a driving factor to develop the economy when its input and output are not yet solved out The industry has been badly impacted from the monetary banking policy of the Government to curb inflation since year 2011 Moreover, there is a lack of workforce, especially skilled workers in construction, which is an obstacle for the industry Basing on the information from Planning Training Ministry, currently there are 2.9 million people working in construction which can meet 25% of demand Targeted to year 2020, Vietnam needs 15-16 billion USD capital per year and total 9 million people in construction to meet the demand of infrastructure

In brief, despite of some difficulties as mentioned, the construction industry still keeps growing to catch up demand for social development and it is a good opportunity for construction enterprises

Human Resource Management practice in Dai Viet

19

3.2 Background of Dai Viet

Dai Viet construction company was established in 2007, located in Ho Chi Minh City, specializes in construction contracting civil works, industrial projects require high quality, building-design, construction project management, investing in the construction of residential area projects

As the market is perfect competition, Dai Viet which is an SME can only cover a small 0.7% market share in value Annual growth rate of Dai Viet is about 7-8 % Those figures imply a matter that Dai Viet does not run business much effectively The result is always behind their target and lower than the average of the industry

3.2.1 Dai Viet’s Vision and Mission

Vision: Become a renowned company that ensures the best possible working environment in which all employees can achieve their full professional potentials Mission: The mission of Dai Viet is to provide the best quality of construction services and exceed the expectations of clients Their reputation is based on high-quality products, safety of our construction sites, cost-effective solutions, as well as punctual implementation processes

3.2.2 Dai Viet Strategic Plan

Dai Viet’s definition of success is to be profitable and keep developing its capacity

in 3 years The construction industry is a very competitive environment; especially for a small company The current net profit around 3% is lower than expectation; however, they have increased the number of projects handled and earn money just after one year of operation They want to be a leading brand name in the construction industry in the next 5 years by making a difference in construction practices such as pay attention to social benefits, environmental preservation beside the high quality works, on-time delivery and reasonable price associated with their projects

As a result, the company can create more added-value to their customers and they would also make a higher profit about 8% and annual growth rate more than 15%- in

Ho Chi Minh city

3.2.4 Organizational Chart

Figure 3-4: Organization chart

Source: Dai Viet Company

3.2.5 Roles and Responsibilities of Departments

HR & Administration Department includes one manager and four staffs This

department plays a role of consultant for management board on researching and

Human Resource Management practice in Dai Viet

21

developing of the business organization structure effectively Moreover, they are responsible for recruitment and management of the workforce, arrange rank of individual wage and labor related polices They also arrange training and development of staffs, supervising and reviewing the implementation of ISO in each department and managing the procedure of rewarding, hygiene, working safety, fire and explosion prevention, vehicle and material asset

Finance and Purchasing Department consists of one manager and three staffs and

responsible for managing the accounting, working capital and cash-flow effectively; liaising with banks and financial governances to sort out required financial assignments; controlling book keeping and variation order on track In addition, they also prepare financial guarantees to commence construction projects (apply for bidding documents); monitoring, checking and executing the internal contracts and expenses; and prepare monthly financial reports and report directly to the Manager

Technical Department which includes four managers, twenty six office staffs, and

twenty workers is responsible for setting standards for how projects are run, ensuring project management, gathering of project data and production of information for management review, sourcing of guidance and advice for project managers; and Managing and facilitating the portfolio management process

Sale and Marketing including one manager and two staffs play the role of

consultant for managing board on sale and marketing strategy; making and deploying implementation of short term and long term marketing -business plan; cooperating with other departments on collecting bill and solving the late dept; finding customers and advising and reporting to the director on selecting the bidder for projects

3.2.6 Financial Statement of Dai Viet

Financial status of Dai Viet is reflected through below table

2 Less deductions (revenue

4 Cost of sales (cost of goods

18,288 24,485

5 Gross profit

2,051

2,509 3,390

10 Operating profit

1,114 1,389

15 Business income tax -

Table 3-1: Income statement of Dai Viet from 2008 to 2011

Source: Dai Viet Company

Human Resource Management practice in Dai Viet

Although there was an economic crisis in 2009 not only in Vietnam but also in the world, Dai Viet still kept their revenue increased around 30% Since 2010, the national economy strongly recovered and the company won an attractive result in

2011

However, cost leadership in Dai Viet, especially General and Administration expenses, were not properly controlled Cost of Goods Sold increased 46% in 2010 and 34% in 2011 General and Administration expenses take around 7% of total sales This percentage is really high

In addition, productivity of employees is shown with the indicators of revenue and net profit per capita

Year 2008 2009 2010 2011

Employees (people) 25 37 54 62

Revenue per capita 442 393 389 454

Net profit per capita -41.12 19.78 13.96 14.47

Table 3-2: Productivity of Employees

Source: Dai Viet Company

Looking to net profit of Dai Viet during the years, it is not really a good growth for them to re-invest to the company Moreover, from the above table revenue and net profit per capita, the number of employees increases year by year but revenue and profit per employee are going down

There should be a problem in performance of human resource which Dai Viet needs

to study Productivity from human resource management is unstable and still in low

level

3.3 Human Resource at Dai Viet

Since the establishment, Dai Viet already realized the importance of human factor

to the company development and paid much attention to training and developing

this kind of human asset with granted a large budget

According to the information from HR Manager, the annually turnover rate is high

around 15-17% (as proved with the figure of under 1 year seniority in below

structure) The management board just recognized this phenomenon as a problem in

human resource management There are some indicators of demography implying

the current situation of human resource in Dai Viet

Table 3-3: Seniority structure of employees

Seniority Number of staff Portion

(Source: Personnel Department of Dai Viet, October 2011)

Table 3-4: Age structure of employees Education Number of staff Portion

Human Resource Management practice in Dai Viet

25

Table 3-5: Gender structure of employees

Gender Number of staff Portion

(Source: Personnel Department of Dai Viet, October 2011)

Up to now, there are total of 62 employees with permanent labor contract in Dai

Viet The average age of staff is 28 years old It is the young, active, and creative

human resource devoted to company Moreover, majority of the employees in this

company are male and single In term of psychology, they tend to be free and

innovative to the new things or to change their job

Table 3-6: Educated level structure of employees Education Number of staff Portion

Total 62 100.0%

(Source: Personnel Department of Dai Viet, October 2011)

Table 3-7: Marital status structure of employees

Marital Status Number of staff Portion

The statistical table above shows that Dai Viet owns 60% high educated workforce which is the precious asset of company and an advantage of learning and enriching cutting edge knowledge and technology serving for company development With the point of view of considering the human as the key factor determining the success of the company, Dai Viet not only gives their staffs plenty of skill training courses but also keeps concerning on their spirit life, like social activities, and helps them feel comfortable in working for Dai Viet

27 Findings and Data Analysis

CHAPTER IV FINDINGS AND DATA ANALYSIS

This chapter presents result and findings from the research which was conducted among staffs of Dai Viet The research had been started with a preliminary interview to Member of Managing Director Board, Human Resource Manager and some relevant staffs within the organization before questionnaire was designed The research was done by sending out the questionnaire to 62 plus staff members in order to get their opinion, comment and feedback on human resource management

The second majority is the above 35 years old They represent 19% of the respondents The remaining 11% are accounted for the new staffs who are under 25 years old, and most of them have just graduated and did their first job in Dai Viet

Figure 4-1: Respondents’ Age

(Source: Author’s Calculation)

29 Findings and Data Analysis

Figure 4-2: Respondents’ Gender

(Source: Author’s Calculation)

4.1.3 Marital status

In traditional Vietnamese culture, people usually get married at the age of 25-30, and this survey gives the result according with that of their age In which, the majority of respondents got married with 46%, while the single staffs account for 54

% It is because the company is in construction industry and most of male staffs usually travel on business everywhere They do not have many opportunities and good conditions for marriage The chart also indicates a matter that the single employees usually feel free to change their job than the married ones The company should pay more attention to this point for a proper policy

Figure 4-3: Respondents’ marital Status

(Source: Author’s Calculation)

4.1.4 Education

The pie chart below shows that Dai Viet are owning the huge number of high educational employees with more than 59% of respondents being bachelors and masters The others who are mostly direct workers taking 41% are in high school level It is resulted from the company‘s recruitment policy for requirements of construction industry The question is whether it is the advantage point of Dai Viet

or not We will discuss on this matter in later parts

31 Findings and Data Analysis

Figure 4-4: Respondents’ Educational background

(Source: Author’s Calculation)

4.1.5 Position

This research focuses intentionally on the technical staffs who are working in core department of the company Getting to understand direct workers is also useful to improve their performance Besides, we also get some manager’s opinion for reference purpose

There are 43% of 54 respondents who are technical staffs, 31% workers, 15% supporting staffs , and 11% managers respectively