Improving the performance management in Techcombank

A case study of Techcombank will be examined in order to gain a Clear understanding about the process of appraising performance in Techcombank then find out the exist issues in the proce

vietnam national university, HANOI

hanoi school of business

vietnam national university, HANOI

hanoi school of business

TABBLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TÓM TẮT iv

LIST OF FIGURES iii

INTRODUCTION 1

1 Objectives and aims 1

2 Research questions 1

3 Scope of work 1

4 Data source and processing 1

5 Methods 1

6 Significance 2

7 Limitations 2

8 Expected results 2

9 Outline of thesis 2

CHAPTER 1: THEORETICAL FOUNDATION 4

1.2 Benefits of performance appraisal 6

1.2.1 Benefits to the organization: 6

1.2.2 Benefits to supervisors 7

1.2.3 Benefits to employees 8

1.3 Performance appraisal system: 9

1.4 Performance measures criteria 11

1.5 Errors should be avoided in performance evaluation: 13

1.6 Performance appraisal methods 14

1.6.1 Attribute approaches 14

1.6.2 The behavioral approach 18

1.6.3 The results approach 21

CHAPTER 2: FINDINGS 24

2.1 Macro analysis 24

2.2 Techcombank introduction 25

Figure 2-1: Some Main Figures of Techcombank 26

2.3 SWOT Analysis 29

2.3.1 Strengths 29

2.3.2 Weaknesses 31

2.3.3 Opportunities 32

2.3.4 Threats 33

2.4 Survey analysis 33

2.4.1 The model of the survey 33

2.4.2 The survey’s content 34

CHAPTER 3: RECOMMENDATIONS 68

3.1 Bank's defined target of work performance appraising 68

3 2 Completion of job descriptions 68

3.2.1 Job descriptions: 68

3.2.2 Set up a performance appraisal criteria system: 70

3.3 Selection of appraisal methods 70

3.4 Build-up of multi-way appraisal system 71

3.5 Complete the interview of performance appraisal 72

3.6 Training provided to those who take charge of performance appraisal 73

3.7 Strengthening use of performance appraisal results to operations of human resource work of the Bank 74

3.8 Researching and strengthening deployment of personnel rotation 75

3.9 Build-up of business' atmosphere and culture 76

3.10 Action plans 78

CONCLUSION 81

REFERENCE 82

APPENDIX A: Questionnaire 84

APPENDIX B: Job description of an accountant and requirements 88

APPENDIX C: Method of giving mark to employees’ performance appraisal 93

LIST OF FIGURES

Figure 2 – 1: Some Main Figures of Techcombank 26

Figure 2 – 2: Number of seniority in Techcombank 34

Figure 2 – 3: Percent of seniority in Techcombank 35

Figure 2 – 4: Number of current title 35

Figure 2 – 7: Percent of education level 37

Figure 2 – 8: Number and percent of Reasonableness of salary in TCB 38

Figure 2 – 9: Number and percent of Fair in compensation policy 39

Figure 2 – 10: Number and percent of reward based on results of performance 39

Figure 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 short courses 41

Figure 2 – 14: Number of participate in long courses 42

Figure 2 – 15: Percentage of participate in long courses 42

Figure 2 – 16: Number of satisfaction level with compensation policy 43

Figure 2 – 17: Percentage of satisfaction level with compensation policy 43

Figure 2 – 18: Number and percentage of clearness for making plan and announcing to staffs 44

Figure 2 – 19: Number and percentage of work suits with capacity 45

Figure 2 – 20: Number and percentage of employees’ strengths are used and developed 45

Figure 2 – 21: Number and percentage of encouraged and oriented to develop career 45

Figure 2 – 22: Number and percentage of rotation through other positions 46

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

Figure 2 – 24: Number and percentage of sufficiently informed about human policies 46

Figure 2 – 25: Number of complain with colleagues 47

Figure 2 – 26: Percentage of complain with colleagues 48

Figure 2 – 27: Number of complain with managers 48

Figure 2 – 28: Percentage of complain with managers 49

Figure 2 – 29: Number of administration’s reaction 50

Figure 2 – 30: Percentage of administration’s reactions 50

Figure 2 – 31: Number and percentage of people like working atmosphere 51

Figure 2 – 32: Number and percentage of employees’ ideas are listened 52

Figure 2 – 33: Number and percentage of employees’ creativeness is encouraged 52

Figure 2 – 34: Number and percentage of people feel their job is challenging, interesting 52

Figure 2 – 35: Number of the relationship with Techcombank 53

Figure 2 – 36: Percentage of the relationship with Techcombank 54

Figure 2 – 37: Number of satisfaction with current job 54

Figure 2 – 38: Percentage of satisfaction with current job 55

Figure 2 – 39: Number of motivation to perform assignments 55

Figure 2 – 40: Percentage of motivation to perform assignments 56

Figure 2 – 41: Number of employees’ expectations 57

Figure 2 – 42: Percentage of employees’ expectations 57

Figure 2 – 43: Number of managers’ reactions 58

Figure 2 – 44: Percentage of managers’ reactions 59

Figure 2 – 45: Number of employees’ trend 60

Figure 2 – 46: Percentage of employees’ trend 60

INTRODUCTION

1 Objectives and aims

There are three objectives of this thesis when mentioning to performance appraisal activities, include gathering theories related to appraising performance (both concepts and models) A case study of Techcombank will be examined in order to gain a Clear understanding about the process of appraising performance in Techcombank then find out the exist issues in the process of appraising performance in Techcombank

Finding out all the problems in the 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 Research questions

Two research questions are applied when examining the Techcombank’s case study are: How does the process of appraising performance in Techcombank 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 area is departments in head office of Techcombank

4 Data source and processing

The data is collected from two sources: Primary (information is conducted directly from interview and survey to find out the employees’ opinion on the current performance appraisal of Techcombank) and Secondary (study documents related to 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, From the result of questionnaire the student then turn 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 Techcombank and improve the process; (ii) Assessing the employees’ performance activities at their true worth; (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 Techcombank’s employees The survey’s results are provided by Human resource department, therefore some sensitive information are biased, so the accuracy of questionnaire is not absolutely accurate

The thesis includes three chapters:

 Chapter 1 - Theoretical foundation: This section will summarize the theories

of performance appraisal It will give the readers an overview of performance activities from clearly definition to the benefits of using performance management, the 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 results and the data collected form secondary

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 for not only Techcombank but also for other commercial joint stock banks which have the same issues like Techcombank

CHAPTER 1: THEORETICAL FOUNDATION

Organizations that seek to gain competitive advantage through their workers must 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 authority (1)

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 to gaining competitive advantage (2) Performance management system has three parts: defining performance, measuring performance, and feeding back performance information

A performance 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 employee performance It provides feedback to employees through

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

organization’s goals

Every employee works in 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 contribution to 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

(1), (2) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.196

feedback and for deciding remuneration and reward for contribution and performance

1.1 Definition of performance appraisal

Performance appraisal is a process that involves communicating to an employee how well the employee is performing the job and involves establishing a plan for improvement (1)

Performance appraisals are used for many purposes are wage and salary administration, promotions or demotions, transfers, layoffs, discharges, counseling with employees, and human resources planning

Performance appraisal systems have three principal purposes: To improve employee performance in the present job; to prepare 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 (2)

Performance 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 result, 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) Leslie W Rue and Lloyd L.Byars, “Supervision: key link to productivity”, Fifth edition 1996, p.205 (2) Leslie W Rue and Lloyd L.Byars, “Supervision: key link to productivity”, Fifth edition 1996, p.208

 It is important to note that, formal appraisal systems contain an informal element For example, general comments that 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 employee’s performance is viewed by the employee as a form 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 does not only bring benefits for the organization, but also for the managers and employees

1.2.1 Benefits to the organization:

 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 human 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 out appropriate decisions about 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 recruiting, selecting, orienting, promoting and other activities Then the managers will set up plan for adjusting and developing

easily make decisions on human resource plans like applying rotation policy, doing training programs to enhance the skills for employees, promoting 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 appropriately evaluated, they will try 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 society Employees 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 However, performance appraisal can serve variety of organizational needs very effectively like developing employees who are effective at their jobs When employees are not performing as well as they should, performance management seeks to improve their performance The feedback given during a performance

evaluation process often pinpoints the employee’s weaknesses Ideally, the performance management system identifies not only the aspects of the employee’s performance that are deficient but also the causes of these deficiencies Then 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 manner, employee will feel satisfied They know that if they work morally, the supervisor will evaluate them appropriately through a fair assessment The accuracy of employee’s performance appraisal is reflected in the result help them to identify opportunities 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’ duties of supervisor are not only assess the employees but also assess other supervisors The results can be used in the supervisors’ s work unit for replacements for higher level jobs

1.2.3 Benefits to employees

 Allows the employee to present ideas for improvement: The

performance appraisal is conducted in fair and transparent manner will provide a bilateral communication between the supervisor (appraisor) and the employee (appraisee) The feedback given during a performance evaluation process often pinpoints the employee’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: The performance appraisal helps employees themselves evaluate

their capacity, realize their importance level in organization, identify opportunities for improvement To 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 with the advice of supervisors will motivate employees try their best to reach the future opportunities

 Lets the employee know how the supervisor feels about his or her

performance: During the performance appraisal, the employee will have

chance to discuss with the supervisor and may recognize the feeling of the supervisor about employee’s work At the end of appraisal process, the supervisor will give the result to the employee includes the supervisor’ comments and advice The feeling of the supervisor about employee’s work makes the employee feel that their contribution is acknowledged, the fairness 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; The 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 can reflect which behaviors are necessary to perform the work well

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

a process and in this step, the manager need to have administrative evaluations whether the employee’s performance is good or not The process of employee appraisal begins with formal commnunication of appraisal framework and program to the employees 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

of performance appraisal includes 4 steps:

(i) 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 seniors, 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

(ii) 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 and explain the process The appraiser initiate the conversation to create confidence

in the mind of the appraisee 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 clients/ customers/ business partner/ executives you find most difficult to handle? Where do you think organization should concentrate for improvements? Answers to these and similar questions reflect the information on the working environment of the

employees This information is useful to weigh the gathered evidence

(iii) Evidence gathering: After 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 criteria, the appraiser will conclude how well the employee has done in their working performance

Measure the performance is the centre of performance appraisal

 Personal feedback and reporting: appraisers discuss the appraisal ratings

and reasons for the rating with individual 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 extent to which the

performance management system elicits job performance that is congruent with the organization’s strategy, goals, and culture (1) 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

(1),

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

 Validity: Validity is the extent to which the performance measure assesses

all the relevant and only the relevant aspects of performance This is often referred to as content validity For a performance measure to be valid, it must not be deficient or contaminated (1) Validity is concerned with

maximizing the 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 irrelevant aspects of performance or aspects that are not job related 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 One important type of reliability is interrater reliability - the

consistency among the individuals who evaluate the employee’s performance (2) A performance measure has interrater reliability if two

individuals give the 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 are internally consistent is important (internal

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

time (test-retest reliability) A measure that results in drastically different ratings depending on the time at which the measures are taken lacks test-

retest reliability

 Acceptability: Acceptability refers to whether the people who use the

performance measure accept it (3) Many elaborate performance measures are 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

(1), (2), (3) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.201

managers and employees 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 meet these expectations Specificity is relevant to both the strategic and developmental purposes of performance management (1) If a measure does not specify what an employee must do to help the company achieve its strategic goals, it becomes difficult for it to achieve its strategic purpose Additionally, if the measure fails to point out an employee’s performance problems, it is almost impossible for the employee to correct his or her

performance

1.5 Errors should be avoided in performance evaluation:

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

than others It will make the result of the performance evaluation incorrect

 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 employees) in the process of performance evaluation These error make difficult to distinguish among employees rated by the same rater and create problem in comparing the performance of individuals rated by different raters

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

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

(1)

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 subjective and incorrect

 Error of the latest event’s influence: The supervisor’s opinion can be

affected by employees’ behaviors, attitudes have just occurred This occurs when one positive 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 certain attributes (characteristics or traits) believed to be desirable for the company’s success The attribute approaches are used to mainly measure characteristics an employee has which are important for evaluating performance The techniques that use this approach tend to define a set 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 with a number of different points or with

a continuum along with the rater simply places a check mark To use this method, there are two important steps includes choosing the traits and measuring the traits The chosen traits are typically in two types: directly related to job and indirectly related to job With the graphic rating scale, the supervisor is asked to evaluate an individual on such factors as quantity, quality, initiative, dependability, cooperativeness and quality of work Using this approach, judgments about performance are recorded on a scale The scale is divided into categories

Using graphic rating scales have some advantages such as:

(i) Easy to understand

(ii) Comparatively simple to establish

(iii) Simple to use

(iv) Relatively inexpensive to develop

(v) Give the same information on all employees

(vi) Quantify the number of employee’ performance

However, this method contains some disadvantages like:

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

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

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

(iii) Graphic rating scale method can generate problems if choosen criteria are not suitable

(iv) Standards are may be unclear

(v) One of the biggest problems with graphic rating scale is that many supervisors have a tendency to evaluate everyone a little above average (1)

 Essay method: This method requires the supervisor to write a series of

statements about an employee’s performance, strengths and weaknesses, potential for promotion as well as the rater’s suggestions, recommendations for employee’s work The essay can be written according to different subjects such as: behavior on employee’s work, the demand for training, opportunities for development

The advantages of this method include:

(i) Simple to use

(ii) Help to provide opportunity to point out the characteristics of employee

(1)

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

(iii) This method provide detail and useful feedback for employee (point out strengths, weaknesses)

(iv) The employees can gain the right working orientation from the suggestion and recommendation of their supervisor

The disadvantages of this method include:

(i) It is difficult to use narrative information in human resource decision

(ii) The accuracy of narrative information much depends on the rater’s writing ability

(iii) The length and the content of the of the written statement can vary considerably from supervisor to supervisor (1)

(iv) It is difficult to compare essay appraisals made by different supervisors

(v) 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, attitude 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 on a series of questions concerning the employee’s performance There are some advantages of check list method:

(i) It is easy to use

(ii) 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) This method avoid average tendency or leniency

(1)

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

The disadvantages exist in this method are:

(i) Supervisor are generally not aware of the values associated with each question

(ii) The questions can be figured out the positive and negative aspects,

so bias can be introduced into the answers (iii) Assembling the question is a difficult job

(iv) A different set of questions must be assembled for most job categories

(v) General narrative statement can not reflect specific characteristics of each job

Here is an example illustrated for check list method:

………… Having Team work spirit

………… Keeping the working place clean and tidy

………… Finishing the work on time

………… Learning new things quickly

………… Unwilling to work overtime

………… Reluctant to receive critism

………… Having a tendency to get into unnecessary conflicts with

other people

………… Ability to acquire knowledge and to use it in concrete

situations

 Evaluating the attribute approach:

Managers need to be aware that attribute based performance methods are the most popular methods in organizations They are quite easy to develop and are generalizable across a variety of jobs, strategies, and organizations In addition, if

much 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 elaborate measurement techniques (1)

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 strategy These methods 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 support 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 behavioral 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 (2) 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 is then evaluated based on actual behavior

The principal advantages of this method are:

(i) Provides the employee with an opportunity to establish an understanding of the behavior that the superior is seeking

(ii) The incidents are 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 best support that strategy

(iii) Forces supervisor to evaluate subordinates on an ongoing basis The disadvantages which this method used to meet are:

(i) The supervisor must record pertinent incidents as they occur This can be time consuming and burdensome

(ii) The strong tendency to record or stress primary negative incidents (iii) Many managers resist having to keep a daily or weekly log of their employees’ behavior

(iv) It is also often difficult to make comparisons among employees, since each incident is specific to that individual

(v) The employees may feel unsatisfactory when knowing the supervisor record their bad behavior

 Behaviorally 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:

(i) More accurate than other traditional rating scale

(ii) The traits are chosen more carefully

(iii) Create the unity and consistency between supervisors because this method evaluates observable behavior rather than raters’ subjective perception

(iv) Increase interrater reliability by more specifically defining the performance dimension

The disadvantages contain:

(i) This method can bias information recall, behavior that closely approximates the anchor is more easily recalled than other behavior (ii) Develop a BARS is more time consuming and costly than develop other methods

Here is an example of rating employees’ performance by applying this method

Supervisor Department: Patrol Officer

Date of appraisal Excellent 7 Always early for work, gathers all necessary equipment

to go to work, fully dressed, uses time before roll call to review previous shift’s activities and any new bulletins, takes notes of previous shift’s activity mentioned during roll call

Good 6 Always early for work, gathers all necessary equipment

to go to work, fully dressed, checks activity from previous shifts before going to roll call

Moderately good 5 Early for work, has all necessary equipment to go to

work, fully dressed Normal 4 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 to locker, vehicale, or home to get necessary equipment

Terrible 1 Late for roll call majority of period does not check

equipment or vehicle, does not have necessary equipment to go to work

 Evaluation of the behavioral approach:

(i) The behavioral approach can be very effective It can link the company’s strategy to the specific types of behavior necessary for implementing that strategy It provides specific guidance and feedback for employees about the performance expected of them (1) (ii) 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 (2)

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 eliminated from the measurement process and that results are the closest indicator of one’s contribution to organizational effectiveness (3)

Performance management systems that use results is management by objectives

 Management by objectives (MBO) is popular in both private 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 for the coming year and how they planned to achieve them (4) 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

(1), (2) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.211

(3) T Patten, Jr., A Manager’s Guide to Performance Appraisal (New York: Free Press) 1982

(4) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.212

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

MBO systems have three common components: They require specific, difficult, objective goals; The goals are not usually set unilaterally by management but with the managers’ and subordinates’ participation; The manager gives objective feedback 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 likely that MBO systems effectively link individual employee performance with the firm’s strategic goals

One major advantage of using MBO is that it makes the performance appraisal process more objective

One of the most difficult aspects of an MBO system is deciding in what areas to set objectives

For an MBO system to be successful, three minimum requirements must

be met:

(i) Individual objectives must be jointly set by the supervisor and the employee

(ii) Employees must be periodically and regularly evaluated

(iii) 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 to personnel ProMES consists of four steps:

(i) People in an organization identify the products, or the set of activities or objectives, the organization expects to accomplish (1)

(1)

Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.214

(ii) The staff defines indicators of the products Indicators are measures

of how well the products are being generated by the organization (1)2)(iii) The staff establishes the contingencies between the amount of the indicators and the level of evaluation associated with that amount (2) (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 (3)

 Evaluation of the results approach:

(i) One advantage of the results approach is that it minimize subjectivity, relying on objective, quantifiable indicators of performance It is usually highly acceptable to both managers and employees

(ii) Another advantage is that it links an individual’s results with the 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 (iv) Another disadvantage of the results approach is that individuals may focus only on aspects of their performance that are measured, neglecting those that are not

(v) A final disadvantage is that, though results measures provide objective feedback, the feedback may not help employees learn how they need to change their behavior to increase their performance

(1), (2), (3) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.214

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 Viet Nam was around 8 percent It is the high growth rate Together with the growth in GDP, the income per capita also increased From 2000 to 2006, the income per capita has sharply increased from USD 390 to USD 730 All economic sectors of the nation experienced a faster growth rate than tn the pervious years Industrial output achieved a high increase The service sector 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, Inflation 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), Viet Nam has participated in many international organizations like ASEAN, AFTA and joining WTO in the late of 2006 can be seen as the momentous turning point of Viet Nam’s negotiation history This success leads to the significant increase of foreign investment in Viet Nam recently Foreign direct investment is the remarkable point In 2006, total FDI 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 in the world More over, the population of Viet 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 write, Viet Nam is considered as a very high literacy country This will encourage Viet Nam rapidly approach international high technology, knowledge

2006 was a prosperous year for the Vietnamese banking system High growth rate combined with financial market reforms and commitments to free capital flow (Draft Ordinance 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 to open up and the legal framework for the industry is being gradually changed to meet international standards The banking system supplied 30% of the total capital for the economy and met 40% of the capital need of businesses In 2006, total loans outstanding in the banking system made up 60% of GDP with the average return on equity reaching 30% Domestic banks, especially joint stock ones, have not only invested

in new banking technology, personnel and financial products, but also looked for foreign partners to enhance their competitiveness and to prepare for the economic integration process

Overall, the economic and social conditions of Vietnam represent an active, fast growing young country These are fundamental factors that guarantee a long-term growth of the financial sector in Vietnam in the future

2.2 Techcombank introduction

After “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 international cooperation Many banks cooperate with foreign strategic partners for mutual benefits

Techcombank is the abbreviated name of Viet Nam Technological and Commercial Joint Stock Bank The establishment of Techcombank was immediate after the Government relaxed the regulations about banking establishment and

operation Till now, Techcombank has sucessfully operated in 14 years In recent years, Techcombank has reached significant landmark in such aspects as registered capital, profit, risk management, banking technology, 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 successful joint stock banks in

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) Return on equity (ROE) was 16% This result has enabled the bank to significantly raise its dividend ratio These results are greatly encouraging for the Bank’s shareholders, staff, and partners, have created much prestige for the bank, and were a major factor in making the bank’s recent share issue such a success 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 staff also increased At the end of 2006 There are 1,584 staffs have been working in Techcombank

Unit: VND billion

Registered Capital 117.8 180.0 412.7 617.7 1,500.3 Total Asset 4,060 5,510 7,667 10,666 17,326 Loan Outstanding 1,896 2,297 3,465 5,380 8,696 Earning Before Tax 14.93 42.17 107.0 286.0 356.5

Figure 2-1: Some Main Figures of Techcombank

[Source: Techcombank, Annual Reports]

Techcombank has strongly committed to maintain its leading position in banking technology by successfully upgrading it core banking system 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 officially deployed, enabling 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 financial products to businesses and consumers The bank has provided a full range of high quality products to customers both individuals and businesses

In the line with the Bank’s strategy, market segmentation of individual customers has been given special attention in recent years Thanks 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 value-added financial products

Business banking activities at Techcombank included all services for small and medium enterprises and corporations In addition to traditional products, Techcombank always introduces a range of new products Efforts to diversify business banking products and to improve service quality have resulted in many new services being 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 conveniences to select This has create a competitive advantage in the industry for Techcombank

In 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, Techcombank has also been striving for expansion of cooperation with both international and regional financial institutions to satisfy customers demands and prepare for the economic integration process

Key achievements:

 Improvement of service quality and corporate governance by engineering business processes and management information systems, as well as risk monitoring and management systems

re- 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 to date IT systems and applications

 The volume of mobilized funds, outstanding loans and international settlements increased considerably compared with last year Many important marketing and business support programs in key areas such as corporate identity, quality management, market research, staff recruitment and training 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 diversified, qualitative and highly competitive financial products and services to all urban residents in Viet Nam, and in particular to the young and successful customers with medium to high incomes

 Fast 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 network in the key high potential economic areas

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 satisfaction via such tools as customer relationship management (CRM) and the standardization of business and customer service processes

 Fast 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 training of management and marketing skills for managers, and customer service skills for staff

 Continuation of upgrading the bank’s IT system and applications, to enable the system to operate 24/7 throughout the network

Implementing successfully business targets and directions planned will strengthen the bank’s position and create strong foundations for it to fulfill the goal of becoming a leading joint stock bank

2.3 SWOT Analysis

2.3.1 Strengths

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

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

 After several increases in registered capital, Techcombank has 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, technology and network development

 Credit quality has been maintained and closely monitored, loan loss provision has been regularly controlled to ensure the safety 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 sheet items 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 ISO 9001: 2000 standards and effectively exploiting its IT system All these measures have considerably contributed to productivity improvement

 Techcombank is currently a leading bank in the country in terms of technological application with clearly defined targets and strategies The bank has always concentrated on introducing new technologies as a foundation for providing modern, accurate, automated and real time banking services

 Communication and public relations activities actively supported 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, transaction counters, stationery, etc Thanks to applying and implementing

the consistent 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 ISO 9001: 2000 in Vietnam Simultaneously deploying the quality 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 Northern area, it does not yet develop in the Central and Southern region while Southern market has about threefold economic scale over Hanoi

 Expanding 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 rural areas are underdevelopment, applied technologies in the field of banking are not developed synchronously At present, Techcombank has not strategies of vigorous development in the rural areas, due to 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 Techcombank are medium and small enterprises, at the same time, it attaches special importance to development and expansion of natural clients and individual business households By such strategy, during the process of integration, it shall be limited in the ability of globally financial supply

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

 Some new products are designed in the features relied on high technology, but infrastructure is not yet comprehensive, thus it is not appropriate in developing use of these products, resulting in imbalance

2.3.3 Opportunities

 When VN joins WTO, many foreign banks will come to seek for investment opportunities in VN TCB can cooperate with them mutually, TCB can take advantage of management style, modern technology and experience from foreign specialists

 Vietnamese people's demand and level of using utilities of banking services are more and more increasing Bringing about these, it is a birth 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 financial 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 speeding 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 Gold Star

2.3.4 Threats

 Banking services forecasted shall be a fierce competitive field as protection for domestic commercial banks are no longer in the 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 etc over Vietnamese banks

 Competition becomes severer as a move of state-owned commercial banks going forward medium and small enterprises (Techcombank's targeted market sector) especially as these banks are supported and subsidized by the State Besides, direct competition of commercial joint stock banks such

as ACB, Sacombank, East Asia Bank, Eximbank 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 out 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 for bank's ones This is very a potential threat

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:  <3 years  3-10 years  >10 years

b) Current title:……… c) Graduation:  High school  University  Master  Doctor

Statistical results: Seniority in Techcombank

289

67

9 0

50 100

below 3 years from 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%