Antecedents of change readiness in banking industry

Antecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industryAntecedents of change readiness in banking industry

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

ANTECEDENTS OF CHANGE READINESS IN BANKING

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

ANTECEDENTS OF CHANGE READINESS IN BANKING

INDUSTRY

ID: 21110005

MASTER OF BUSINESS (Honours)

SUPERVISOR: Lưu Trọng Tuấn, PhD

Ho Chi Minh City – Year 2014

Abstract

Banking system plays a role as super organization, usually have to cope with challenges to remain competitive and successful Their strategies, structures, policies, operations and processes are re-evaluated regularly One of the main challenge in the change management is managing change effectively because of large amount of human involvement Therefore, all of managers want to know how to encourage and prepare employees for change scenario The aim of this study was to examine the antecedents of employees for organizational change The objective were to investigate the effect of communication, affective commitment and trust in top management on change readiness in banking industry where various change reforms has been happened lately The study started with reviewing lots of literature to develop a model Data collected from banking employees by launching survey questionnaire Data analyzed by using statistical package for social sciences to test hypothesis As results, independent variables (communication, affective commitment and trust in top management) were positive and significantly correlated to the dependent variable (change readiness) This study has limitations that applying a cross sectional study which research only in banking industry at a single point in time This study provides empirical predictors that effect employee’s change readiness in banking sector, particular for Ho Chi Minh City, and may help the management and practitioners of human resources management and development in evaluating, adjusting and designing program for organizational change

I would like to extend my thanks to ISB International Institute – University of Economic Ho Chi Minh City and also many thanks to staff of ISB for kindly support during my master course

I greatly appreciate all friends, colleagues and participants for their time and assistance in participating and collecting empirical data for my thesis

I wish to thank my family and special to my husband for their love, support and encouragement during my work

TRAN NGAN HA

Ho Chi Minh City, January 2014

TABLE OF CONTENT

Abstract iii

Acknowledgement iv

LIST OF TABLES viii

LIST OF FIGURES ix

Chapter 1 1

INTRODUCTION 1

1.1 Research background 1

1.2 Research problem 3

1.3 Research objectives 4

1.4 Delimitation and scope of this study 5

1.5 Structure of the thesis 6

Chapter 2 7

LITERATURE REVIEW 7

2.1 Theory about organizational change 7

2.1.1 Different views of organizational change 7

2.1.2 Individual perspective 8

2.1.3 Group based approach to organizational change 9

2.1.4 Change based difference in perceptions 11

2.2 Employee’s change readiness 11

2.3 Research model and hypothesis 15

2.3.1 Communication and change readiness 15

2.3.2 Affective commitment and change readiness 17

2.3.3 Trust in top management and change readiness 20

Chapter 3 25

RESEARCH METHODOLOGY 25

3.1 Research process 25

3.2 Measurement scales 29

3.2.1 Change readiness 29

3.2.2 Communication 29

3.2.3 Affective commitment 29

3.2.4 Trust in top management 30

3.3 Draft questionnaire 33

3.4 Pilot study 33

3.5 Sampling method 34

3.6 Data analysis method 35

3.6.1 Cronbach’s alpha .35

3.6.2 Exploratory factor analysis (EFA) .35

3.6.3 Multiple regression analysis .36

Chapter 4 38

RESULTS AND DISCUSSION 38

4.1 Sample description 38

4.2 Evaluation of measurement scales 40

4.2.1 Cronbach Alpha Reliability Analysis 40

4.2.2 Exploratory Factor Analysis (EFA) 42

4.3 Hypothesis testing 45

4.3.1 Testing assumptions of Multiple Regressions 45

4.3.2 Regression analysis 47

Chapter 5 49

DISCUSSIONS AND CONCLUSIONS 49

5.1 Discussion of findings 49

5.2 Conclusion 50

5.3 Managerial implications 51

5.4 Research limitations and recommendations for future research 53

References 55

Appendix 1 Survey Questionnaire ……… 72

Appendix 2 Test the assumption of Multiple Regression ……… 76

LIST OF TABLES

Table 4.1 Sample characteristics 45

Table 4.2 Cronbach’s alpha reliability test result 49

Table 4.3 KMO and Bartlett’s Test for independent variables 70

Table 4.4 Total Variance Explained 71

Table 4.5 Rotated Component Matrix 52

Table 4.6 Coefficients 54

Table 4.7 The summary of overall value 56

Table 4.8 ANOVA result 56

Table 4.9 Result of testing hypothesis 56

LIST OF FIGURES

Figure 2.1 Research model 31

Figure 3.1 Research process 35

Figure 4.1 Histogram of SATIS dependent variable 76

Figure 4.2 Normal P-P Plot of regression standardize residual 77

Figure 4.3 Scatter plot 78

Chapter 1 INTRODUCTION

1.1 Research background

Organizational change has become one of the significant aspects in organizations that help them to survive in the turbulent environment of organization It is believed that change can enhance internal power and assist organization to adapt external factors Guimaraes and Amstrong (1998) report that change is necessary for a business to survive and growth while Kotter and Schlesinger (1979) insist that larger organizations have to

go through moderate organizational changes at least once a year, with major organizational change undertaken every five years

It can be said that employees have been influenced the most when change happens

in organization Their attitudes, behaviors and beliefs are impact because of transferring environment leading to confusion, anxiety and uncertainty among employees Therefore, researchers take more concentration on how to persuade employees effectively in order get them to be involved in change program According to Madsen et al (2005), an individual’s attitudes, beliefs, behaviors and reaction to change of organization is affected

by change readiness factors These factors consider related to individual’s psychological and financial predictors (Goulet & Singh, 2002)

Many researchers argue that changes in organization have failed because managers

do not take much consideration on the role of employees (George & Jones, 2001) During the time of planning and implementing change, employee reactions can be positive or

negative For example, some people show commitment and willingness to the change while the others show resistance, stress or cynicism (Armenakis & Bedeian, 1999) The reactions of employees regard to organizational change vary over time While some researchers have considered resistance to change as a major problem in organizations, others have focused on readiness for change and the role that it plays in facilitating organizational change (Armenakis et al., 1993) Armenakis et al (1993) defined readiness for change “the cognitive precursor to the behaviors of either resistance to, or support for,

a change effort” This is the process that transfer the previous beliefs and attitudes of employees to the change so as to perceive the change as necessary and achievable Past research has suggested that change readiness attitudes pre-empt change resistance (Armenakis et al., 1993)

Vietnamese banking industry has to deal with so many situations in the years lately For instance, mergers, acquisitions and restructuring are the outstanding issue in banking industry from 2011 to current time; credit grow slow down accompanied with bank’s profit, the customer’s belief decreased time to time… As a result, a series of changes happen within a bank in order to adapt to current circumstances The manager of the bank plays an important role not only in making profit but also take care of their employees In fact, the relationship between employees and employers can enhance the working environment and mutual exchanges that inspire the individual to develop his or her abilities, efforts and experiences Understanding the desires and needs of the organizational change, an employee can accept with the organization’s goals and develop

their positive attitudes Accordingly, the researcher is interested in finding out factors that force change readiness among employees that may help managers to gain valuable insight into employees change attitude development Although it has been suggested that both organizational context factors and individual dispositional factors have impact on change readiness and resistance (Oreg, 2006; Wanberg & Banas, 2000), this study focuses on the relationships between organizational contextual variables That is, the communication about a change, affective commitment, and trust in top management; and the relationship these hold with readiness to change

1.2 Research problem

After joining World Trade Organization (WTO), Viet Nam’s banking industry has grown rapidly in both size and type of operation Under its WTO commitments, foreign banks have license to set up branch in Vietnam Besides receiving many opportunities, it has to face with much difficulty in term of challenge For example, the commercial banks, especially small banks have to deal with obstacles such as lending capability, technologies, products and services of modern banking due to limited competitive capacity As stated on the report of KPMG about Vietnamese banking in 2013, the government and State Bank of Vietnam launch the banking sector restructure plan to reform the country bank system by 2015 One of the main purposes of this plan is reducing number of small and weak credit institution and restructuring some large banks

In reality, there have some successful case, for example, the merger of Saigon Commercial Bank, Ficombank and Viet Nam Tin Nghia Bank, SHB and Habubank and

the proposed cooperation agreement between Sacombank and Eximbank For that reason, changes happen in internal bank continuously in order to maintain and lubricate banking operations Therefore, managing change effectively becomes a challenge in the change management because of enormous human issue involvement Managers also have more interesting in investigating how to support and carefully prepare employees for such change situation

Indeed, change is always difficulty under any situation because it creates uncertainty and requires people to do and think differently Almost managers and specialists take consideration on capital, procedure or legislation They may forget caring about employees who are dominant workforce helping operating organization When standing in front of change, the point of view of employee may differ from the view of top manager Because of the access of information and experience involving in the decision making process, leaders understand the opportunities of change On the other hand, it brings so many confusions for employee when change happens For example, they are afraid of jobs cut, loss of stature, new manager and ability to adapt with new environment and technology They may see full of risks instead of opportunity around change and have actions resisting changing Therefore, investigating employee’s attitude before applying change is also a significant thing This can help managers have a widen vision and prepare for such situation in order to operate change smoothly

1.3 Research objectives

Understand the important of employee readiness for organizational change, it is significant to find out further readiness antecedents Thus, this study attempts to examine:

1 The relationship of communication and employees change readiness

2 The relationship of affective commitment and employees change readiness

3 The relationship of trust in top management and employees change readiness

1.4 Delimitation and scope of this study

First, in this research, only three basic components (trust in top management, affective commitment and quality of communication) considered as constructs of this research and use to measure employee’s change readiness Therefore, other measurements of change readiness are beyond this research

Second, this study only concentrate on Vietnam banking industry, other countries are not included

Third, this study investigated only from employees’ point of view working in bank Thus, the perspectives of employee from other fields are not considered

Ho Chi Minh City has been chosen as the location to investigate because it is not only the biggest city in Vietnam but also a commercial and financial centre of Vietnam where all banks, regardless of big or small banks gather in Besides, this place reflects the most realistic and comprehensive of the entire banking system

1.5 Structure of the thesis

This thesis includes five chapters along with references and appendices as following outlines:

Chapter 1 Introduction: This chapter introduces background, research problem, research aim and research question and delimitation of the study

Chapter 2 Literature review: This chapter reviews literature on theory about organizational change and the relationship between communication, affective commitment, trust in top management and employee’s change readiness in workplace The reasons for choosing employees readiness predictor are review simultaneously

Chapter 3 Research methodology: Details of empirical research methodology are discussed such as research process, data collection and data analysis

Chapter 4 Results and discussion: This chapter present the results withdrawed from the data collected before It also presents the analysis through some standard like reliability, exploratory factor analysis, linear regression and showing the outcomes of hypothesis testing

Chapter 5 Conclusions and implications: This chapter summarizes the results of this study and discusses some limitations of the research Besides, managerial implications of the study are described and future research directions mentioned as well

Chapter 2 LITERATURE REVIEW

This chapter takes a detailed look from literature that related to employee’s attitude and behaviors when they have to cope with change in organization The literature review provides sufficient ground to explore more details about factors that may support the development of employee attitudes and behaviors The chapter begins with an overview of theory about organizational change and then go deeply to figure out about employee readiness predictors

2.1 Theory about organizational change

2.1.1 Different views of organizational change

From Joseph Juran view, organizational change likes a ‘clash between cultures’, and it often arises when an organization solves its problems ( cited in Goetsch & Davis, 2010) Likewise, Shah and Irani (2010) share the same opinion by explaining that since change is concerned with solving problems and challenges of the organization, no matter small or large, planned or unplanned, change affect the organization and its members Brown and Harvey (2006) have the same idea by saying that dealing with organizational problems usually consists of introduction of change

In the opinion of Brown and Harvey (2006), there are three basic approaches to organizational changes: structural, technological and behavioral change

Structural approach tends to adjust the line of authority, control and arrangement

of work function The basic belief is that human behavior, performance and effectiveness are decided by organizational structure

Technological approach calls for changing existing technology of works and production of organization by the new and up-to-date one The aim of this strategy is to increase productivity, decrease production cost and make operation smoothly

Behavioral approach focus on switching in thinking, feeling and attitude of people

in the organization Its expectation is that changes in motivating, skills and competency

of people paying the way for changing in thinking, feeling and action Brown and Harvey (2006) validate the statement by stating that ‘changing people behavior generates emotional upheaval’

Barclay (2009) states that most research proves that change efforts should be focused on people since the main objectives of organization is to make people follow the common goal of the company Behavioral change is more complex in comparison with structural and technological strategies It plays an important role in the organizational process

2.1.2 Individual perspective

Callan (1993) states one of the most important reasons for failure when applying change is that the role of employees is neglected and managers reflect on fail change program There is an idea that without the participation and commitment of individual,

organizational change can not reach the goal, nevertheless the focus on individuals within organizational studies is almost exclusive to psychological or social psychological research (Neale et al., 2006, pp 485−487) Making individual change is a basic step before carrying out change of organization Individual must think differently and do differently

According to Burnes (2004), there are two group of individual perspective: the Behaviorist and the Gestalt-Field Following to Behaviorist school, behavior is learned and individual is the passive recipient of external and objective data It is said that in order to change behavior, it is necessary to change the conditions that cause it (Skinner, 1974) On the contrary, Gestalt-Field school think that behavior is not just a production of external stimuli, it raise from how the individual uses reason interpret these stimuli As a result, the proponents seek to help individual members of an organization change their understanding of themselves and the situation in question, which in turn, they believe, will lead to changes in behavior ( Skinner, 1974; French & Bell, 1984)

2.1.3 Group based approach to organizational change

Lewin (1997) says that organizations work in groups, thus individual behavior must be seen and change in terms of groups’ prevailing practices and norms Terry and Callan (2001) report that a further restriction when doing research on organizational change is that they have fail to take consideration of perception and responses to organizational change by members of different groups and the intergroup nature of organizational change There have different kinds of group exist in an organization, for

example divisions, professional group, work unit … Accessing employee’s intergroup at several hierarchical level by research that reframes the experience of organizational change as not only an intrapersonal process linked to stress and uncertainty (Pausel et al., 2005) but also as an intergroup phenomenon (Terry et al., 2001)

Lewin suggests organizational changes have three steps: unfreeze – move – refreeze and an organizational behavior is a result of balancing between driving and restraining forces This behavior is a product of two opposing forces, i.e driving forces and restraining forces

Unfreezing stage: this phase rely on theory that human behavioral created by past experience and cultural influence and this part of change process is usually the most difficult and stressful Change requires some forces in order to remove existing factors remaining their previous perception This means defining the current state, surfacing the driving and resisting force and picturing a desired end state

Moving stage: when the level of operation has been determined, the organization needs to move to the new state New behaviors, values and attitudes are developed through organizational structure and process change and development technique Confusion may happen sometimes since we move from the old ways of doing things in the new ways

Refreezing stage: if the new level of operation reach the goal of managers, then it has to refreeze the new change to make it permanent (Robbins et al., 2009) In this case,

the organization should establish the new policies and practice implementation as a daily routine, so as to set up new behavior and new organizational culture

2.1.4 Change based difference in perceptions

The perception of employees about changes may affected by type of change being implemented Numerous change models concern about time and reason for change For example, incremental change happens over time in small, orderly steps and with democratic leadership that includes employee consultation (Dunphy & Stace, 1990; Gersick, 1994; Beer, 1980) In this scenario, employees participate directly to the change,

so they should have positive attitude about the change (Dunphy & Stace, 1990) On the other hand, radical change includes sudden, substantial changes to organizational processes and routines (Greenwood & Hinings, 1996; Hernandez, Kaluzny, & Haddock, 2000) The organization redefines the visions, strategies and values because there has a significant change to the organization’s structure Under such situation, top management

is in charge of driving this type of change (Waddell, Cummings, & Worley, 2000), and it usually demands directive or coercive leadership (Dunphy & Stace, 1993) Employees who have lack of participation in such change tend to have more negative attitudes about change (Reichers et al., 1997) Other type of change is that change is controlled by directive leadership based on the punctuated equilibrium model (Tushman & Romanelli, 1985) This model emphasizes that change is affected by external factors and organization’s evolution through a series of stage

2.2 Employee’s change readiness

Armenakis, Harris and Mossholder (1993) explore the concept of readiness for change and examine factors affecting on it in organizations First, this research indicates that the readiness is generated from the resistance to chance basing on employees’ perception, beliefs and attitude Second, the readiness is influenced by the strategies through transferring persuasive information, managing external information and bringing new opportunities to change agents Third, building change programs is very necessary for creating the readiness of employees The programs includes the problems and the time which employees need to prepare for change Fourth, the programs and strategies must match together

Besides, Bernerth (2004) explains that “Readiness is more than understanding the change, readiness is more than believing in the change, readiness is a collection of thoughts and intentions toward the specific change effort” (p 40) Backer (1995) reports that change readiness is included the belief, intention, attitude and perception of individual and organization about the capacity to make change successfully

According to Armenakis et al (1993), employee may react differently to the same change message Reaction depends on personality, life in the past, work experience, organizational culture, mental process, personal habit Therefore, an individual is ready for change when he or she understands, believes, and intends to change because of a perceived need He also reports that there are describe two ways of creating readiness for change in an organization First, communicating a message of discrepancy in which employees see the desired result in future and make them feel that the change is a right

thing Second, strengthening the employee’s confidence, which means that creating in their mind that they have the knowledge, skills and abilities needed to deal with the discrepancy (Armenakis et al., 1993) If employees lack self-efficacy for the ability to change, then this can result in negative reactions such as defensiveness and denial (Nadler & Tushman, 1989) Chreim (2006) says that employees tend to change if they think that their personal skills and abilities match those needed to succeed in new roles

By taking these two ways of creating readiness, an organization is seen as effectively unfreezing employee’s beliefs and attitudes in preparing them for change (Armenakis et al., 1993)

Other researchers take more consideration on employee’s belief in the benefits of the change for the organization and work processes (Jones, Jimmieson, & Griffiths, 2005), and an individual belief that the changes are “both necessary and likely to be successful” (Eby, Adams, Russell, & Gaby, 2000, p.422) Readiness for change is defined as an attitude that is collectively influenced by the content of the change, the process of the change, the context of the change and the individual employees (Holt, Armenakis, Feild, & Harris, 2007)

Holt et al (2007) describes readiness for change as a multidimensional construct based on four components They develops the system to evaluate the readiness for organizational change and analyzes the factors influencing it One survey conducts on more than 900 organizational members by interview and open-ended questions The main findings pointed out that there are four factors of employees’ belief affecting on readiness

for change: (i) efficacy (i.e the belief that the change could be implemented); (ii) appropriateness (i.e the belief that the change will bring benefits to organization); (iii) management support (i.e the organization managers are authorized to change) and (iv) personal valence (i.e the change is appropriate for members of organization).In additional, the study provides the process from handling data to analyzing factors affecting readiness for change Readiness for change is reflected in the extent to which employees are emotionally and cognitively likely to accept a change plan (Holt et al., 2007)

Madsen, Miller, and John (2005) recommend that in order to prepare for employee

in front of the change, managers and leaders have to understand how to create and foster change readiness They report that employees who are change ready hold an understanding and belief about the change and have tendency to change because of a communicated need made salient Employees report higher readiness for change levels when they feel committed to their organizations (Madsen et al., 2005)

Over years, many researchers have worked over to figure out they way to get

employees involved in change programmes effectively (Armenakis et al., 1993; Bernerth, 2004; Holt et al., 2007; Cinite et al., 2009) Many predictors like change agent role,

proper process, need for change, capability of organization, participation, culture, belief, environment, and commitment have been found to be related to employee readiness

(Hanpachern et al., 1998; Eby et al., 2000; Cunningham et al., 2002; Madsen et al., 2005;

Rafferty and Simons, 2006, as cited in Shah, 2009)

Group of researchers come up with the idea that employee readiness has a relationship with individuals and workplace factors which can be conceived of employee

attitudes, beliefs, and perceptions (Weber & Weber, 2001; Cunningham et al., 2002; Madsen et al., 2005; Rafferty & Simon, 2006; Holt et al., 2007; Elias, 2009, as cited in

Shah, 2009) In the workplace factor, appropriateness, discrepancy, organizational commitment, social relationships in the workplace, job knowledge and skills, logistic and system support, social support, and wellness factors have been found in the literature

(Wanberg & Banas, 2000; Armenakis and Harris, 2002; Cunningham et al., 2002; Madsen, 2003; Miller et al., 2006; Madsen et al., 2005; Rafferty and Simon, 2006, as

cited in Shah, 2009) Furthermore, Kotter and Schlesinger (1979) discuss such strategies

as participation and communication, and facilitation and support as ways to deal with resistance to change, where these strategies can be seen to be effective in reducing resistance to change through creating readiness for change In addition, trust in top management is found to be critical in applying strategic decision (Korsgaard et al.,1995) and an necessary factor of employee’s change readiness (Rousseau & Tijoriwala, 1999)

After a long time of reviewing literature, this study aim to explore more about predictors of employee readiness related to individual and workplace specifically communication, affective commitment and trust in top management that may help increase positive employee’s attitude towards change in banking in Ho Chi Minh City

2.3 Research model and hypothesis

2.3.1 Communication and change readiness

Communication is central to the success of most all organizations Hall (1996) says that communication is the exchange of information and transferring the meaning, and it follows three directions: upward, downward, and horizontal According to Francis (1989), organization communication has two goals First, change should inform to employees, for example, why changes happen and what employee’s concern about Second, the aim of organizational communication is to create a community spirit (De Ridder, 2003; Postmes et al., 2001; Meyer & Allen, 1997, as cited in Elving, 2005)

Miller et al, (1994) finds that when change announcements communicated, they seem to help employees ready for change Several authors claim that communication of change is the primary mechanism for creating readiness for change (Amenakis & Harris, 2002; Bernerth, 2004’ Miller et al., 1994) The quality of communication will often determine how employees fill in the blanks of missing change information If the quality

is poor, people tend to develop more cynicism (Reuchers et al., 1997) Good communication can lessen employees’ fears, transmit a message that fosters employee self-efficacy for being able to perform after the change is implemented, and educate employees about the change (Mayer, Davis, & Schoorman, 1995) Madsen et al., (2005) find a link between social relationships in the workplace and readiness for change, where positive attitudes towards colleagues may facilitate an environment that promotes information exchange which can lead to openness to change The lack of a perceived need for change among change recipients is found to be a key source of resistance, and also an important barrier to the successful implementation of change Therefore, it can be said that it is necessary to provide good communication about the organizational change;

information providing insufficiency can lead to unclear purpose about the change program (Covin &Kilmann, 1990)

When change is occurring in an organization, communication is even more essential

to implement that change effectively (Bennebroek-Gravenhorst, Elving, & Werkman, 2006; DiFonzo & Bordia, 1998; Elving, 2005; Elving & Hansma, 2008; Lewis, 1999; Schweiger & Denisi, 1991, as cited in Harp, 2011) According to Schweiger and Denisi (1991), it is more stressful when setting a communication strategy than practicing aspects

of organizational change Indeed, communciation is vital to make change in organization effectively (Bordia, Hunt, Paulsen & Tourish, 2004; Schweiger & Denisi, 1991) If any information about changes is provided sufficiently, it can reduce anxiety and uncertainty among employees (Miller & Monge, 1985)

Standley et al (2005) uses communication to measure cynicism and skepticism He indicates that management should find other strategies, for example, recognizing and using employee’s trust within organization to communicate and persuade others of the sincerity of management’s motives for the change of organization He emphasis that poor communication can be source of resistance to change

Therefore, it is believed that communication is essential in shaping employee’s change readiness The first hypothesis that researcher proposes is:

H1: Communication is positive related to change readiness

2.3.2 Affective commitment and change readiness

According to Porter, Crampton and Smit (1976), organizational commitment can

be seen as insight feelings and beliefs or as the desired of employee to remain with an organization and to accept its major goals and values Various studies about organizational commitment find that there is a relationship between organizational commitment and attitudes and behaviors of employees in the workplace (Porter et al.,

1974, 1976; Koch and Steers, 1978; Angle and Perry, 1981, as cited on Angle & Perry,1981) Begley & Czajka (1993) find that employees having high commitment levels before a major change in an organization would handle their stress better Vakola and Nikolaou (2005) also find the relationship between organizational commitment and positive change attitudes Madsen et al (2005) says that employees reported higher readiness for change levels when they felt committed to their organization Several authors define the role of organizational commitment as an significant element leading to employee’s acceptance of change (Darwish, 2000; Cordery et al.,1993, as cited in Vakola

& Nikolaou, 2005) Employees with high organizational commitment are more willing to put more effort in change project, and, therefore, it is more likely to develop positive attitudes towards organizational change (Iverson,1996; Guest,1987) Thus, organizational commitment plays an important role and place in the study of organizational behavior

Organizational commitment has three conceptually and empirically distinct dimensions: affective, continuance and normative commitment (Meyer & Allen, 1997)

In that, affective commitment is refer to "an affective or emotional attachment to the organization such that the strongly committed individual identifies with, is involved in,

and enjoys membership in, the organization" (Allen &Meyer, 1990, p 2) Group of researchers look into the efficacy of three component of organizational commitment and they find out that the affective commitment performs well (Meyer et al 2002; Solinger et

al 2008; Bergman 2006; Vandenberg & Self 1993, as cited in Stazyk, 2011) In fact, affective commitment appears to be a highly reliable and valid construct capable of capturing an employee’s emotional attachment to, and identification with, an organization (Solinger et al 2008)

According to Penley and Gould (1988), organizational commitment can be seen from two points of views: instrumental and affective The instrumental view sees the organizational commitment as the exchange of compensation and rewards in return for employee’s loyalty and accomplishment with an organization On the other hand, the affective view of commitment is based on belief that feelings and emotions within an organization create employees’ attachment and personal sense of obligation to perform their tasks within working environment It relates to job characteristics in which Dunham (1994) proves that it has been found to be strongly and positively in the relation to employee’s affective commitment from a wide variety of organization Thus, affective commitment of employee is related to employee emotional attachment, identification, and involvement with the organization

The affective component of commitment has been shown to be strongly connected

to important organizational related variables such as turnover, absenteeism, performance, organizational citizenship behaviors and resistance to change (Iverson, 1996; Meyer et

al., 2002; Somers, 1995) It is also strongly correlated with forms of organizational justice (Meyer et al., 2002) When an employee perceives that they are being treated fairly, they are more likely to become committed to an organization Research also mentions that organizations are responsible for promote stronger employee engagement, for instance, empowering workers, providing robust cohesive leadership and reducing stress (Ahmad & Oranye 2010; Hulpia, Devos & Rosseel 2009; Concha 2009; Yun et al 2007; Stazyk et al 2011, as cited in Davis & Stazyk, 2013) Besides, in the opinion of Mayer & Allen (1997), affective commitment demonstrates the strongest correlation with longing organizational outcomes

Affective commitment show most strongly related to a variety of important organizational outcomes, therefore, this study chooses affective commitment as a construct to investigate So, the second hypothesis is proposed:

H2: Affective commitment is positive related to change readiness

2.3.3 Trust in top management and change readiness

Trust has been defined in different ways According to Rousseau (1998) trust is “a psychological state comprising the intention to accept vulnerability based on the positive expectations of the intentions or behavior of another”, while Mayer and Davis (1999, p10) consider trust as a “willingness to engage in risk-taking with a focal party” In the opinion of Lewicki (1998), trust is considered as the basic for interpersonal relationships,

collaboration, and stability in social organization Ridder (2004) states that ‘trust is an important generator of social capital in organizations, and for supportive attitudes’

Colquitt, Scott and Lepine (2007) use meta-analysis to make clear the definition of trust, trustworthiness and trust propensity and examined the relationship between trust and antecedents and consequences They indicated that (i) trust combine by three elements: ability, benevolence and integrity; (ii) trust is composited significantly by trustworthiness and trust propensity In addition, they have significant influence with behaviors of employees Not only trust, these factors also affect on commitment, which is used to predict the people’s trust; (iii) trust have strong relationship with risk taking and job performance It means that the individuals who keep the high trust with others have tendency to perform their behaviors better and reduce counterproductive behaviors; (iv) trust enhances the cooperation between employees and leaders and among workers

McCauley and Kuhnert (1992) explore the trust’s concept of employees in top management in order to develop the framework for research relating to it They presented that the trust in management has correlation with factors inside organizational environment such as peers, supervisors In details, the trust of employees in management depends on contribution of system-wide variables including professional development, job security and performance appraisal Professional development estimated employees perception relating to promotion and career Job security measured

by scale of job satisfaction and performance appraisal is the evaluation of employees about fairness and working system

Mayer and Gavin (2005) appreciate the role of trust in management in improving performance They show that there is a positive relationship between employees’ trust and organizational citizenship behaviors It is noted that the trust in top management enhances the task accomplishment and adds value to the organization

Alnrecht (2002) examines the influence of employees’ perceptions of trust on cynicism toward change The study is conducted on senior management in public organizations The main finding of this research is the perceptions of trust had positive correlation with cynicism toward change When employees have a credit and trust in top management, they would have more positive attitude toward change initiatives He also insists that change program would have more effectiveness when trust in top management exists As a result, managers do not have to spend much time for dealing with resistance

to change,

Uncertainty, ambiguity, complexity and stressfulness are the obstacles that employees has to face with when change happens (Difonzo & Bordia, 1998) Trust can reduce these negative feelings, because it is a resource for managing risk, dispersing complexity, and explaining the unfamiliar through the helps of others (McLain & Hackman, 1999) Therefore, the change readiness of employees is affected by trust in organization, especially in top management (Kotter, 1995) For example, if the behavior

of leaders is inconsistent with their words, readiness for change will be strongly undermined So, management plays an important role in facilitating employee adjustment during organization change (Bandura, 1986) It is believed that the emloyees are willing

to accept the change if they feel that the leader show the care, consideration, and fairness

as a form of social exchange (Konovsky & Pugh, 1994) Thus, high trust in management should be accompanied by high change readiness

Because readiness to change is a special supportive attitude of employees during organizational change, it can be said that trust in top management is an important antecedent for readiness to change So, the third hypothesis is proposed:

H3: Trust in top management is positive related to change readiness

2.4 Conceptual framework

The conceptual frame work present in Figure 2.1 consisting three hypotheses from H1 to H3 that explore the model through determine above predictors There are four concept mentioned in which one is dependent (change readiness) and three are independents (communication, affective commitment, trust in top management)

Communication

Affective Commitment

Trust in top management

Chapter 3 RESEARCH METHODOLOGY

In the previous chapter, the literature on effecting relationship and proposed model with hypotheses for the antecedents of key factors of employee’s attitude toward organizational change has been presented This chapter describes brief description of the research methodology applied for this study This includes the research process, measurement scales, sample selection method, data collection and data analysis

3.1 Research process

After defining the research problem, research questions and research scope, the literature review was carried out to review all theories related to change readiness in order to figure out a suitable conceptual model for the factors of change readiness in Vietnamese banking industry and thereby develop its hypotheses The draft questionnaire promoted from the consolidation of various questionnaires used in previous studies The research design included two phase: a pilot research and a main survey

• The pilot research: a qualitative study happened in which an in-depth interview was carried out with 15 employees so as to refine the questionnaire based on draft questionnaire developed from literature review It was different from language and culture; so, through this stage, it was determined that which questions were suitable for the research The ones makes respondents confused or had unclear meaning would be deleted

• A main survey was handled by means of email and hard copies of questionnaires Data was collected in six weeks

Data was processed and analyzed by using Cronbach Alpha and Exploratory Factor Analysis to examine the validity of questionnaire and reliability of measurement scale Multiple Linear Regression was used to test hypothesizes

Figure 3.1: The research process

The research procedure included these steps:

Step 1: Base on literature review, researcher developed the research model about factors effect change readiness of employees in an organization After that, a draft questionnaire was established from various measurement scales in previous study

Step 2: Carry out a qualitative pilot study to refine the questionnaire A series of questions about readiness of employee when facing with change of organization and the key factors affected their readiness launched to access the relevance and sufficiency of various measures in the draft questionnaire During time of in-depth interview, the measure and measurement scale of the model decided and the questionnaire was organized The sample population for the interview was suggested simultaneously

Step 3: Launch a main survey and collect data Questionnaires were released to respondents through emails and hard copy questionnaires

Step 4: Test the reliability of measurement scales by applying Cronbach’s Alpha Analysis Cronbach’s Alpha was used to investigating the internal consistency of a questionnaire The scale was considered reliable when Cronbach’s Alpha coefficient is from 0.7 and above (Hair et al., 2010)

Step 5: Using Exploratory Factor Analysis (EFA) to test the validity of scales any modify the research model accordingly if any Through this step, the inter-relationship among variables was explored It was strong when the correlation matrix for evidence of

coefficients was greater than 0.4 (Pallant, 2011), Barlett’s test of sphericity was significant (p<0.5) and the KMO index was greater than 0.6 (Hair et al., 2010)

Step 8: Testing the research hyphotheses by using linear regression analysis

3.2 Measurement scales

3.2.1 Change readiness

A seven-item scale has been adapted from Holt’s (2002) study covering three important aspects of readiness to change Sample question for this scale are: “I think that the organization will benefit from this change” and “My future in this job will be limited because of this change”

3.2.2 Communication

The communication about the change process was measured using a four items scale adapted by Wanberg and Banas (2000) based on a six items scale originally developed by Miller et al (1994) A sample question that measures communication is “It

is clear who to contact with questions about change”

3.2.3 Affective commitment

In order to measure the employee level of the Affective Commitment, seven items scale developed by Meyer & Allen (1997) was used A sample question that measure affective commitment is “I would be very happy to spend the rest of my career with this organization” In measurement of affective commitment, the items “I enjoy discussing about my organization with people outside it” and “I think that I could easily become as

attached to another organization as I am” were deleted After conducting pilot study, researcher found out that it took most respondents being confused and make mistake when answer

3.2.4 Trust in top management

Trust in top management was assessed with a 16 items scale developed by Spreitzer and Mishra (2002) Sample item is “The top management team is straightforward with employees”

In measurement of trust in top management,

The item ‘the top management team is straightforward with employees’ and the item ‘the top management team communicates honestly with employees’ being considered same meaning So the item ‘the top management team communicates honestly with employees’ was deleted

The item ‘the top management team does not try to get out of its commitments’ and the item ‘the top management team behaves consistently’ being considered same meaning So the item ‘the top management team behaves consistently’ was deleted

The item ‘the top management team is reliable’ and the item ‘the top management team can be counted on’ being considered same meaning So the item ‘the top management team can be counted on’ was deleted