The impact of human resource management practices on employee's job satisfaction in Vector Aviation Co., Ltd

HCM UNIVERSITE LIBRE DE RUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MBAVB3 DUONG THI KIEU CHINH THE IMPACT OF HUMAN RESOURCE MANAGEMENT PRACTICES ON EMPLOYEE‟S J

TR NG I H C M TP HCM UNIVERSITE LIBRE DE RUXELLES

HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL

MBAVB3

DUONG THI KIEU CHINH

THE IMPACT OF HUMAN RESOURCE MANAGEMENT PRACTICES ON EMPLOYEE‟S JOB SATISFACTION

IN VECTOR AVIATION CO., LTD

MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION

(PART-TIME)

Tutor‟s Name: Dr VU VIET HANG

Ho Chi Minh City

(2011)

DECLARATION

I hereby would like to certify that this work is original and was done by myself In certain cases, contributions of others that were involved partially or completely were quoted clearly with sources presenting in the references list

The work was performed under the guidance of Dr VU VIET HANG and followed the framework of the Master Business Administration program – The join Masters

Program between Ho Chi Minh City Open University (Vietnam) and Solvay Brussels School (Belgium) The work was completed in February 2011, in Ho Chi Minh City - Vietnam

(Candidate’s name and signature)

DUONG THI KIEU CHINH

SUPERVISOR’S COMMENTS

As a supervisor for this project, I highly appreciate the working attitude of this candidate

In consideration of the project’s contents as a whole, I would like to suggest the Board of

Examination to allow this candidate to defend this project

Ho Chi Minh City, 27 February 2011

Dr VU VIET HANG

ACKNOWLEDGEMENT

First of all, I would like to express my deepest gratitude and great appreciation to my supervisor Dr VU VIET HANG for her valuable guidance, advices and great supports throughout the research study

I would like to express my great appreciation to all colleagues in Vector Aviation Co., Ltd Deep appreciation and thanks are reserved to Mr Do Xuan Quang – CEO, Mr Nguyen

Ngoc Nhien – Vice Director for their valued discussions as well as providing me with the

necessary information Special thanks also to be sent to Ms Van - Head of Human Resource Department, Mr Duc – Commercial Director, Mr Thanh – RFS department, Mr

Nghia – Business Development Manager and Mr Son – Head of offline sales department

for valuable ideas, advices to complete this research

I would like to express my sincere thanks to all my classmates MBAVB3 for their sharing with me the knowledge and skills during the challenging courses of this program

I wish to express my deepest gratitude to all members of my family for their endless supports, encouragement during my course and this project

Finally, I would like to thank all professors of this program for transmitting the valuable lectures and thank to the members of the Examination Committee for taking time and giving valuable comments to improve this study

HCM City, February 2011

DUONG THI KIEU CHINH

ABSTRACT

For services companies, human resource has been considered as one of the most valuable assets in the organization Vector is an aviation services company, and it now is facing with a big issue that the labor turnover is increase, while the additional well-trained workforce is severe shortage This problem is greatly concerned by Vector‟s Board of

Director They want to know: what kinds of problem does human resource management (HRM) face with? What do professional employees expect? Do existing employees satisfy with their job? This research was carried out to provide the comprehensive answers for those questions of BOD

The research has three main objectives Firstly, it identifies various components of HRM practices which impact on job satisfaction for Vector Secondly, it tests a model on the impact of HRM practices to job satisfaction Finally, it gives some suggestions to improve HRM practices basing on the findings from the research

Based on the literature review, a proposed research model and hypotheses have been developed for Vector Two sets of questionnaire were prepared, one set for qualitative survey and one set for quantitative survey

Data from quantitative survey was collected and first used to assess and refine the measurement scales via exploratory factor analysis Then, it was used to test the model and the results were discussed Data from qualitative study and from documentation were collected carefully for further analysis and recommendations

The findings of this research investigated a positive link between current HRM practices and job satisfaction in Vector This research provides valuable insights of HRM practices to BOD of Vector understanding key factors impact on job satisfaction

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION 1

1.1 GENERAL BACKGROUND AND STATEMENT OF PROBLEM 1

1.2 RESEARCH OBJECTIVES 2

1.3 SCOPE OF STUDY 3

CHAPTER 2: LITERATURE REVIEW 4

2.1 JOB SATISFACTION THEORIES 4

2.2 THE IMPORTANT ROLE OF HUMAN RESOURCE MANAGEMENT 6

2.3 HUMAN RESOURCE MANAGEMENT PRACTICES 7

2.3.1 Job design 7

2.3.2 Recruitment and selection 8

2.3.3 Appraisal 8

2.3.4 Training and development 9

2.3.5 Compensation 11

2.4 PROPOSED RESEARCH AND HYPOTHESES FOR VECTOR 12

CHAPTER 3: INTRODUCTION TO VECTOR AVIATION 15

3.1 HISTORY OF VECTOR 15

3.2 VECTOR‟S VISION, MISSION & GOALS 16

3.3 CURRENT WORKFORCE AND JOB FAMILY 17

3.3.1 Workforce 17

3.3.2 Job family and its roles 18

CHAPTER 4: RESEARCH METHOD 20

4.1 RESEARCH PROCEDURE 20

4.2 DATA NEEDS 20

4.3 DATA SOURCES 21

4.3.1 Secondary data 21

4.3.2 Primary data 21

4.4 DATA COLLECTION METHOD 22

4.5 MEASUREMENT OF SCALES: 22

4.6 METHOD AND STEPS OF DATA ANALYSIS: 25

CHAPTER 5: DATA ANALYSIS AND FINDINGS 26

5.1 INTERVIEW DATA ANALYSIS AND FINDINGS 26

5.1.1 Data analysis 26

5.1.2 Findings 27

5.2 DATA ANALYSIS FOR THE MAIN SURVEY AND FINDINGS 29

5.2.1 Data analysis 29

5.2.2 Findings from survey 38

CHAPTER 6: DISCUSSION, CONCLUSION AND RECOMMENDATIONS 40

6.1 DISCUSSION 40

6.2 CONCLUSION 43

6.3 RECOMMENDATIONS 44

6.4 LIMITATIONS AND FURTHER RESEARCH DIRECTIONS 51

REFERENCES 53

APPENDICES 57

APPENDIX 1: MODELS OF HRM 57

APPENDIX 2: CURRENT ORGANIZATIONAL STRUCTURE 59

APPENDIX 3: QUESTIONNAIRES FOR INTERVIEW 60

APPENDIX 4: RELIABILITY ANALYSIS 62

APPENDIX 5: ASSESSMENT SUITABLE DATA 68

APPENDIX 6: FACTOR EXTRACTION 70

APPENDIX 7: REGESSION ANNALYSIS 75

APPENDIX 8: SURVEY SUMMARY_VECTOR 79

APPENDIX 9: DESCRIPTIVE REPORT 83

APPENDIX 10: CURRENT JOB DESCRIPTION 86

APPENDIX 11: PROPOSED NEW JOB DESCRIPTION FORM 89

APPENDIX 12: QUESTIONAIRES 91

LIST OF TABLES

Table 3.1 Company‟s performance and market share 15

Table 3.2 Gender structure of employees 17

Table 3.3 Educational background of employees 17

Table 3.4 Recruitment versus resignation in Y‟2010 18

Table 4.1 Summary of scales for 6 constructs 23

Table 5.1 Summary results of reliability analysis 31

Table 5.2 Summary results of assessment suitable data 32

Table 5.3 Rotated Component Matrix (a) 33

Table 5.4 Summary result of factor analysis 34

Table 5.5 Collinearity statistics 35

Table 5.6 Model Summary and statistics significant 36

Table 5.7 Model Summary and statistics significant- extracting ANOVA 37

Table 5.8 Multiple regression result 37

Table 6.1 Suggestion several training course for Vector in 2011 46

Table 6.2 Proposed job analysis process for Vector 49

LIST OF FIGURES

Figure 2.1 Maslow‟s hierarchy of Needs 4

Figure 2.2 Herzberg‟s two-factor theory 5

Figure 3.1 Growth rate in volume (unit: 1,000tons) 16

Figure 3.2 Market share in 2010 16

Figure 5.1 Job position of respondents 29

Figure 5.2 Age of respondents & Educational level of respondents 30

Figure 5.3 Members of year experience & No of years works for Vector 30

Figure 5.4 Normal Q-Q plot of standardized residual 36

Figure 5.5 Confirmed research model 39

LIST OF ABBREVIATIONS ABBREVIATION MEANINGS

IATA : International Air Transport Association

FEDAGSA : Federation of Airline General Sales Agents

TIACA : The International Air Cargo Association VIFFAS : Vietnam Freight Forwarders Association GSSA : General Sales and Services Agent

baggage, aircraft leasing, expressed cargo transportation Vector‟s clients are logistics

companies who need transport their cargo by aircraft to destinations out of Vietnam territory

In Vietnam, aviation services business has been operating for about four or five year Before that it was protected and only run by state-owned companies In 2006, Vietnam Government issued a new civil aviation law in order to promote the aviation business and industry growth This was a golden business opportunity for aviation services providers in Vietnam Catching up the said opportunity, Vector was established to enter into new services business - aviation services Right from beginning, Vector was aggressively planning its business activities to cover key area of aviation services such as acting as general cargo sales agents for many foreign airlines like Malaysia airline,

Scandinavian airline, Etihah Airline, Egypt Airline… For five-year actively operating,

Vector has greatly increased its market share from 1.08% up to around 10% of total cargo export volume by air from Vietnam

Most recently, Vietnam Government has signed Air Transport Agreements with 56 countries that created a great variety of potential business opportunities for Airlines and Agents doing aviation services business in Vietnam The total loading capacities of aviation market now increases essentially that can meet the market growing demand which before was a serious shortage of space As a consequence that time, most of cargo had been transported by sea In the year of 2010, Vietnam was reached over 22% growth in exports in which air cargo export was growing by 30% versus year 2009

Overall, aviation services market in Vietnam is growing fast and the outlook is highly potential in future Vector is now searching for additional professional workforce that can manage continuing its growth strategy Personnel, who work in aviation services, are required to have a sound background in both air logistics and aviation services However, this is very new services industry Therefore, almost of existing universities, transportation association do not have any appropriate teaching or training programs to meet the new jobs demand of aviation services In addition to that, air logistics industry is also facing the severe shortage of well-trained workforce

Dealing with the above said problem and in order to well prepare human resources

to meet the growing business trends, BOD of Vector has applied several methods in human resource management (HRM) such as organizing in-house training courses, oversea

training course; applying sales incentives, allowances, increasing basic salary … However,

there are still some key personnel stopped working and leaving Vector Within the first two months of the 2rd quarter last year, five key personnel and three senior employees resigned By December 2010, the labor turnover rate hit 6% The reasons why employees left the company were different from case to case that may be salary, career opportunity,

promotion, appraisal… BOD has greatly concerned so much about current situation of the company‟s workforce They want to know and understand what was the root causes that

made some those employees left the company? What do professional employees expect? What are their needs? Are they satisfied with their current job? What kinds of problem does HRM face with? To provide comprehensive answers to all above listed questions, the company has not only conducted the exit interviews collecting comments from resigned staffs but also the statistical data necessary for analyzing the root causes That is the background for why this study is carried out

In respond to above problem statement, this study will aim to:

 To identify key elements of HRM practices which impact on job satisfaction for VECTOR

 To test a model about the impact of HRM practices on employee‟s job satisfaction

 To give some suggestions for improving HRM practices based on the key findings

of this study

1.3 SCOPE OF STUDY

 This study mainly focuses on one dimension of HRM that is HRM practices And only 5 key elements in HRM practices model of Guest (1997) are concerned Other possible factors are beyond scope of this study

 This study focuses on all employees, five resigned people in year 2010 Probation staffs are not subject of this study

CHAPTER 2: LITERATURE REVIEW

This chapter will introduce some key concepts relating to job satisfaction, HRM practices such as job analysis, recruitment and selection, performance management, training & development, compensation Proposed research model and hypotheses are also to be presented in this chapter

Job satisfaction refers to the attitude and feeling of people about their work which determine their work performance (Armstrong, 2006) If employees have positive and favorable attitudes towards the job, that indicates job satisfaction Similarly, Robbins and

Judge (2007) viewed job satisfaction as a factor of an employee‟s emotions Therefore, job

satisfaction will provide people inner motivation and self encouragement When people satisfy with the job, they will often have higher productivity than others (Vroom, 1964) So understanding what should be done to achieve the high performance through people is always hot subject of all organizations

Figure 2.1 Maslow’s hierarchy of Needs

(Sources: www.businessbolls.com)

Various theories have been constructed in attempt to explain what makes people satisfied with their job Among of those theories, two conceptual frameworks have been concerned to be prominent in review of literature First is content theory This theory explains why human needs change with time and indicates specific factors that motivate people Content theory was developed originally by Maslow (1954) He said that people feel be satisfied when their needs are filled up Needs, according to Maslow, have been classified at 5 levels which could be displayed as figure 2.1

Based on the needs theory, Herzberg (1957) then identified a numbers of fundamental needs Herzberg defined two group factors of needs that affect on job satisfaction: motivation and hygiene Hygiene issue, according to Herzberg, cannot motivate employee but can minimize the dissatisfaction It includes salary, working condition, company policies, supervision and job security While motivation, in other

hand, creates satisfaction by fulfilling individual‟s needs and growth It includes the work

itself, achievement, recognition, responsibility, personal growth and advancement

Herzberg‟s two factor theory has been summarized as following

Figure 2.2 Herzberg’s two-factor theory

Another concept theory is “three-need theory” or acquired-need theory of David

(1958) According to David, the needs of people are influenced by culture background and life experience He defined three needs including achievement, affiliation and power The important of each of three needs to an individual will vary from one person to another People with different needs are motivated differently In the point of his view, which group

of people having high need for achievement should be given challenging projects with reachable goals They should be provided frequently feedback While money is not an

important motivator, it is an effective form of feedback To people having high need for affiliation, they need perform best in a cooperative environment And to people having high need for power, management should provide power seekers the opportunity to manage others

Second is process theory, it attempts to explain job satisfaction through looking at expectations, goal achievement and feelings about equity Within this framework, Vroom (1964), Latham & Locke (1979) and Adams (1965) have become the most prominent theorists According to Vroom (1964), expectations are defined as a momentary belief concerning the likelihood that a particular act will follow by a particular outcome This expectancy theory says that individuals have different sets of goals and can be motivated if they believe that there is a position link between efforts and performance Favorable performance will result in desired rewards Rewards will satisfy a need and satisfied need

is strong enough to make more efforts Latham & Locke (1979) stated that when individual are set specific goals and receiving feedback on performance, they feel be satisfied because of goal achievement As suggested by Adams (1965), feelings about equity are the perception of employee having about the fairness with areas such as performance appraisal, promotion being operated

Reviewing job satisfaction theories above helps to recognize some key factors that affect on job satisfaction such as nature of work, pay, achievement, recognition, performance, personal growth Those factors are also key elements of HRM practices which have been mentioned in several models of HRM practices, especially in Guest model of HRM practices (1997)

MANAGEMENT

HRM involves all management decisions and practices that directly affect, influence the people or human resource, who works for the organization (Fisher, Schoenfeldt and Shaw, 1996) The results of job are created by people, thus it could be said that people determine the organization outcome (Boselie,2002; Guest,1997; Delery and Doty, 1996) More and more business leaders nowadays accept that competitive advantages could be achieved only through the effort and creativity of the people employed by them (Margaret and Caroline, 2005) Therefore, in order to get the

competitive advantage or to increase the firm outcome, the HRM policies and practices must be considered and done well to satisfy the existing employees, one of important factors increase employee retention rate

HRM is composed of the policies and practices that effect employee‟s behavior,

attitude and performance (Noe, Hollenbeck, Gerhart, and Wright, 2007) HRM can be regarded as a set of interrelated policies with an ideological and philosophical underpinning (Storey,1989) There are some tops model of HRM such as Fombrun, Tichy and Devenna model of HRM (1984), Harvard model of HRM (Beer et al,1984), Guest model of HRM (Guest,1997), Warwick model of HRM(Hendry and Pettigrew,1990) in appendix-1 Among those models, almost elements of HRM practices in Guest model are compatible with current HRM practices in Vector Those are job design, recruitment and selection, training and development, appraisal, rewards Those factors are considered to affect job satisfaction which being reviewed in theory of job satisfaction above except

element “selection” However, “selection” is a part in “company policies”, while hygiene

factors in Two-factor theory of Herzberg included the factor “company policies” Therefore, “selection” will be chosen in proposed research model of this study

In short, five elements of Vector‟s HRM practices such as job design, recruitment

and selection, training and development, appraisal, rewards are chosen for this study

Below are reviewing briefly about function, roles of each element

2.3.1 Job design

The functional structure will be built basing on the strategy, goals of firm Each function in the structure must be defined clearly in details such as job purpose, job

summary, job duties, skills, knowledge, abilities, reporting line.… Job design or job

analysis aims to produce information for use in recruitment and selection, performance management, evaluation for training and development Therefore, job analysis takes an important role in HRM

According to McCormick (1979), job design is the process with several steps such

as collecting and recording job information, checking the job information for accuracy, writing job description based on the information, using the information to determine what skills, abilities, and knowledge are required on the job Loher et al (1985) found that

relation between job characteristics and job satisfactions were stronger for employees in high growth need strength Job design is the process of determining the specific tasks to be performed (Mondy and Noe,1996) Job analysis is a systematic process for collecting information on the important work related all aspects of a job (Ivancevich,2001) Job design provides for high levels of employees control also increase opportunity for the development and exercise of skill (Morrision et al, 2005)

Job profile will be written after the job analysis process It is a combination of two important terms that are job description and job specification In which, job description is a narrative descriptive the activities performed on a job such as job purpose, job summary, duties, responsible to, responsible for, job area It also includes information about the equipment used and the working condition under which the job is performed Job specification indicates the specific skills, knowledge, abilities, personal characteristic

2.3.2 Recruitment and selection

The aim of recruitment and selection is to obtain the qualified employees in order

to satisfy the human resource needs of the company with minimum recruitment cost The goal of a personnel recruitment and selection system is to bring into an organization individuals who will perform well on the job (Fisher, Schoenfeldt and Shaw, 1996) Better recruitment and selection strategies result in improved organizational outcomes The more effectively organizations recruit and select candidates, the more likely they are to hire and retain satisfied employees (Sheila and Paul Bernthal,1999) When the company recruits key individuals who will contribute significantly to value – creating capacity of the firms

is crucial to success (Scarborough and Elias 2002) On the other hand, the poor recruitment choice can have undesirable result for organization such as higher rate of turnover, reduced performance effectiveness and work motivation, lowered HRM outcome

2.3.3 Appraisal

Performance management is a continuous and flexible process for improving organization performance by developing the performance of individuals and teams It aligns individual objectives to organizational objectives The aim of performance management is to develop the capacity of people to meet and exceed expectations and to achieve their full potential to the benefit of themselves and the organization Importantly, performance management is concerned with ensuring that the support and guidance people

need to develop and improve are readily available (Michael Amstrong,10th) Fletcher

(1993) wrote: “the real concept of performance management is associated with an

approach to creating a shared vision of the purpose and aims of the organization, helping each employee understand and recognize their part in contributing to them, and in so

doing, manage and enhance the performance of both individuals and the organization”

Other definitions about performance management are also mentioned by Hartley (1997),

Walters (1995), Fowler (1996) ….which all emphasize the important role of performance

management and why it should replace to performance appraisal in traditional HR management

Performance management system has parts such as goals setting, performance appraisal There are three basis categories of performance appraisal system: trait-based appraisal system, behavior-based appraisal system and result – based appraisal system

Trait-based appraisal system is used to assess the personal characteristics

of employees such as their ability to make decision, loyalty to the company, communication skill,

Behavior-based appraisal system is used to consider the behavior of employees rather their personal traits Employees are assessed on what they do on their job For example, a shy employee may always be shy, a behavior-based appraisal may point out particular thing that person should do in different way…

Result-based appraisal system may measure the result of work This approach deals with bottom-line issue such as how many machines an employee sold or how much profit they brought to the firm in a month

Using performance appraisal as an employee development tool by providing feedback on past performance, the managers or supervisors can encourage employee to perform better in the future by pointing out the strength, weakness and help employees to identify effective ways to reach important task The supervisor can use the performance appraisal data to determine the training needs for employees

2.3.4 Training and development

Training is the use of systematic and planned instruction activities to promote learning for employees (Armstrong, 2006), that helps to modify their attitude, knowledge, skill behavior through learning experience to achieve effective performance in an activity

or range of activities (Barrington, 1994) Its results lead to improve customer satisfaction and reduce need for supervisor and saves cost in the long run (Porter, 2005)

In addition, training is a necessary tool to motivate and inspire employees that how important their jobs are and what subjects they need to update for improving their knowledge, skills to perform their jobs (Susan, 2002) Each employee use their updated knowledge from training will do their job best to contribute good results for company performance

Sloman (2003a) expressed about value of training as follows:” Interventions and

activities that are intended to improve knowledge and skills will increasingly focus on the learner Emphasis will shift to the individual learner (or team) And he or she will be encouraged to take more responsibility for his or her learning Efforts will be made to develop a climate that supports effective and appropriate learning Such interventions and activities will form part of an integrated approach to creating competitive advantage

through people in the organization”

Training needs can be assessed by analyzing two major human resource areas: the organization as a whole, and the needs of the individuals The organization training needs that means any person joining to company must be trained as standard criteria careless who they are; while individual training needs is set up to improve knowledge, skills for individuals The difference between two types of training program that company can cut off budget for individual training program in future by putting more criteria in job description when recruiting employees

The result of training will help more for development of employees Because development is an unfolding process that enables employees to progress from a present state of understanding and capability to a future state in which higher-level skills, knowledge and competencies are required (Armstrong, 2006) Harrison (2000) has been

defined about development as: “Learning experiences of any kind, whereby individuals

and groups acquire enhanced knowledge, skills, values or behavior Its outcomes unfold through time, rather than immediately, and they tend to be long-lasting‟

2.3.5 Compensation

Once employees have done their job and got appraisal, they expect to be paid Thus, compensation is an important factor to impact how and why people choose to work for one company over others ( Armstrong, 2006)

No standard compensation system is being applied for all organizations All forms

of pay or rewards going to employees and arising from their employment (Dessler, 2009)

A good compensation system will help organization to gain a competitive advantage and

to achieve its major objectives through its employees Because good compensation system will attract and retain skilled employees, encourage them to develop the skill and abilities, motivate them to perform job effectively The position of employee in the company affects the reward structure, and the consequences of the performance on the strategically formed goals

Setting up any compensation system, the organization should base on equity theory Equity theory was first developed by Adams (1963), who said that equity is the balance between inputs versus outcomes which an individual brings to a job and receives from it Anger is induced by underpayment inequity and guilt is induced with overpayment equity (Adam,1965) Therefore, payment is the main concern and the cause of equity or inequity in most cases In any position, an employee always wants to receive rewards basing on their contributions and work performance) However, psychological theory states that the importance of fairness is a basic need for the well being and satisfaction of employees (Blau,1964) Therefore, building a compensation system, organization must concern this issue The underlying assumption being that money can influence behavior (Parker and Wright, 2001)

There are three elements of equity: internal equity, external equity and individual equity

Internal equity refers to the relationship among jobs within an organization

It exists when the pay differentials between different jobs within the firm are perceived as fair Usually, higher-level employees will earn more than lower-level employees

Individual equity refers to comparisons among individuals in the same job within an organization

External equity refers to compare similar jobs in different organizations in the same industry via salary survey

Basing on the elements of equity above, an organization will set up a compensation system In most organizations, the compensation system may include multiple packages, not just pay for work position and performance, which are called compensation mix The element of the compensation system can be classified into direct pay and indirect pay as following

There are countless researches about job satisfaction, also many studies about HRM practices Among of these researches, there are just several studies which investigated that HRM practices has been a positive link with job satisfaction Author concerns to research of Mir Mohammed N and associations (2010).This research model was measured by following constructs: (1) Recruitment and selection (2) Training and development (3) Performance appraisal (4) Compensation (5) Industrial Relations (6) HR planning and (7) job satisfaction Respondent‟s profile were of 20 manufacturing firms in

Bangladesh The significant result showed that there has been a positive relationship between HRM practices and job satisfaction Other research also indicated the significant relationship between HRM practices and job satisfaction was of Bradley and association (2004) Constructs were measured by this model including (1) recruitment and selection, (2) training and learning, (3) pay, (4) work organization, (4) supervision, (5) employee involvement and (6) job satisfaction However, starting with different research problems, elements of HRM practices in those researches were not the same

sick leave, jury duty

Based on fundamental theories above and previous researches, author proposes a research model including six constructs: job design, recruitment & selection, compensation, training & development, appraisal and job satisfaction

Proposed research model and hypotheses for Vector are as follows

H5: Performance management has a significant positive impact on job satisfaction

Proposed research model:

In summary, the research model is suggested for Vector consists of 6 constructs which are job analysis, recruitment & selection, compensation & benefit, training & development, performance management and job satisfaction In which job satisfaction plays a central role and to be affected by other constructs

Next chapter will present briefly about Vector‟s history, its performance,

company‟s goals and current workforce

CHAPTER 3: INTRODUCTION TO VECTOR AVIATION

Vector was established in 2005 by two joint stock logistics companies that are

Vinafreight and Vinatrans Vector‟s head office is located at A8 Truong Son, Tan Binh

Dist, Hochiminh City, Vietnam It has branches in Hanoi, Danang and two foreign representative offices Recently, Vector is an official member of some famous international associations such as IATA, FAGSA, TIACA From three staffs at the first day of establishing, now Vector has over 180 employees who have deep knowledge, vastly experience in foreign trade, air logistics and aviation services Aviation services business

is still core business of Vector, who is providing aviation services for totally 20 international airlines in Vietnam market such as Scandinavian Airlines, United airway,

Etihah, Egypt Airlines, China Southern Airlines… Consequently, Vector ensures a guarantee that customers‟ business needs are met in the most effective and profitable way

In line with the fast developing of logistics industry in Vietnam, Vector is growing quickly Its market share increase year by year Currently it accounts for 10% of share of market in total export cargo by air from Vietnam

Here are some figures to modify the growth rate in Vector from 2005 to 2010

Table 3.1 Company’s performance and market share

(Sources: Vector; www.gso.gov.vn; Tan Son Nhat Cargo Services company, VIFFAS)

GROWTH RATE IN VOLUME AT VECTOR

Figure 3.1 Growth rate in volume (unit: 1,000tons)

MARKET SHARE OF VECTOR IN YEAR 2010

Figure 3.2 Market share in 2010

VISION: to continue to be the leading international aviation service company that constantly maintains best quality service and fast growth

MISSION

 To provide efficient air transport solutions

 To dedicate the highest quality of Customer Service

 To provide professional staffs with in-depth knowledge of worldwide aviation

industry to partners and profitable services

 To provide employees a stable work environment, and equal opportunity for learning and personal growth

GOALS (Period 2010-2012)

 The growth rate will be at 9% - 10% per annual revenue

 To become exclusive distributor for at least 8 new airlines in year 2011

 To increase market share to 12% -14%

 To build bonded warehouse for air shipment not later than 2012

3.3.1 Workforce

According to the record of HR department, there are 185 employees as of 31 Dec

2010 (including eight probation staffs) The average age of employees is around 28 years old Employees having bachelor degree accounts for 80% All line managers have at least

8 experience years in air logistics services Deep knowledge, vast experiences about foreign trade, international transportation are actually the critical strength of workforce in Vector

Here are some figures to describe current workforce in Vector

Table 3.2 Gender structure of employees

Gender No of person Portion

Table 3.3 Educational background of employees

Educational level No of person Portion

Table 3.4 Recruitment versus resignation in Y’2010

recruitment

No of attrition

3.3.2 Job family and its roles

Organizational structure of Vector has been built based on job function Depending

on the characteristics of aviation services, job family could be classified as follows:

Business development: being responsible for planning and implementing activities

related to exploration and development of new business opportunities

Sales: being responsible for building the sales and service plan; designing the

action plan with time schedule; to develop new clients; to maintain existing clients, also documentation including sales contracts

Booking and Customer Service: handling booking orders, sales indoor, and

tracking loaded cargo Executing customer service policies and procedures to ensure customer satisfaction and positive customer relations

Operation: perform all activities relating to receive cargo, loading cargo,

unloading; to comply strictly with aircraft weight and balance regulation and process; to ensure the loaded cargo complying with international aviation transportation standard to cooperate with officers of ground handing companies for related operation during cargo loading time

Accounting & Finance: being responsible for establishing and maintaining

accounting system and practices in order to ensure on time, accurate and reliable data necessary for business operations; to control the cash flow efficiency; to provide financial advisory to the management by preparing and analyzing financial reports; to assess the organization's exposure to risk and accordingly to develop strategies to avoid or reduce the negative effects of the risk

IT: to provide general IT supports relating to hardware, software, internet,

networks, database processing; to organize, and control the smoothly work of LAN, server and work stations; to control all active web pages, emails; to set up, prepare, maintain software, hardware if necessary

Human resource: to maintain all personnel files and records; to provide guidance

to managers on policies and regulatory issues; to find out candidates, and prepare test exam, select right person; to organize training course; to organize compensation scheme;

to design, assess performance appraisal process; to make sure for the organizations‟

compliance with Labor Law, Internal Regulations Agreement and other regulating contracts

Admin & Legal: to do various clerical tasks such as correspondence, preparation

of documents, scheduling and preparing meetings, administration of travels, screening calls and receiving visitors; to ensure that the company's operations comply with respective laws and regulations

Organizational structure of Vector is presented in appendix-2

CHAPTER 4: RESEARCH METHOD

This chapter presents research method and data analysis It includes some parts such as research procedure, data needs, questionnaires design and testing, method of data collection, method and steps of data analysis

Secondary data collection Primary data

collection

4.3 DATA SOURCES

Both primary and secondary data were used for this study

4.3.1 Secondary data

Secondary data was collected from following sources:

 HR policies, regulation book, labor contract

 Financial statement, sales target, sale plan, sale reports, business plan,

In-depth interview with 10 line managers to recognize their comments, evaluation and their contribution ideas on current HRM practices

Data from qualitative study and from documentary analysis are used to support for questionnaire design and further analysis Questionnaires for interview are attached in appendix-3

4.3.2.2 Questionnaires survey

The purpose of this approach is to find positive significant relationship between HRM practices and the job satisfaction of employees Then analyze collected data to find out which factor of HRM practices must be concerned or improved

Questionnaire includes 7 sections:

Recruitment and selection

Job analysis

Compensation and benefit

Training and development

Performance management

Overall satisfaction of employees

Characteristics of respondents and their open ideas

Due to small population (185 employees), the questionnaire can be sent to all employees for main survey via email which contents the link of website named www.surveymonkey.com However, main survey excluded 8 probation staffs and 10 line managers (who already joined into qualitative study), CEO and author The time of survey was from 20 November 2010 to 02 December 2010 Using one of interesting function of

website “surveymonkey.com” to accept only one answer per PC, this technique helps to

make sure that all employees actually join into the survey by themselves Expected respondent rate would not less than 70%, therefore HR department assisted author to send questionnaire and remind people to join the survey The questionnaire was translated into Vietnamese language before sending

To minimize the researcher‟s errors from happening in the main survey, draft

questionnaires were sent to two specialists for reviewing Then pilot study was carried out

in attempt to avoid time being wasted on inadequately designed project This step helps to ensure the correct understanding and the ease of answering for people in main survey Finally, revised questionnaire was updated on website www.surveymonkey.com and the link was sent to all employees (165 persons) by HR manager for starting the survey

Measurement scales for this study is used Likert scale ranging from 1=strongly disagree, 2= disagree, 3= fairly disagree, 4=either disagree or agree, 5=fairly agree, 6= agree and 7=strongly agree; or 1= strong dissatisfy, 2=dissatisfy, 3= fairly dissatisfy, 4=either dissatisfy or satisfy, 5=fairly satisfy, 6= satisfy and 7=strongly satisfy to recognize the evaluation or ideas of employees about current HRM practices for section 2

to 5 in questionnaire Nominal scale is also used to classify some characteristics of respondents such as gender, jobholder, education level, marital status…

The statement featuring for the observed items are built based on adjustment from different sources

Table 4.1 Summary of scales for 6 constructs

(Appendix12-Eng-version & Appendix13-Vie-version)

Job analysis You have been informed all information relating your job (roles, duties,

supervisor, report process, specification of job, standard performance)

The current recruitment practice has process and clear selection criteria RS1 Modified

Recruitment committee has enough competences and experience RS3 Modified Having suitable sets of exam for each job title when recruitment RS4 Modified

Group incentives package is quite clear criteria and reasonable target CB3 Robert & John(2003)

Incentive amount which you‟ve received is adequate with your contribution CB4 Robert & John(2003)

You are satisfied with allowances package (such as transportation, telephone, overtime - if occur)

CB6 Spector (1994)

Benefit package is very appropriate (Health insurance, medical insurance, annual vacation)

CB7 Spector (1994)

Training and

development

Training opportunities are allocated fairly to all employees TD2 Nancy(2008) Training program is held regularly in accordance with job requirement TD3 Nancy(2008) Direct manager or supervisor often supports you to learn more issues beside

your current job

to ensure fairness for all staffs in your department

Employee satisfaction The company is really a good place to work S01 Hilb(2003)

Demography Gender, marital status, educational level, age, year of experiences…

4.6 METHOD AND STEPS OF DATA ANALYSIS:

Data was downloaded from online survey website and eliminated invalid responses Observed items will be encoded and updated into SPSS software version 13.0 for further analysis Inferential statistics methods are used to validate the hypotheses

First, reliability analysis is used to test the reliability of scales before using the

collected data for further analysis This test is conducted through calculating Cronbach‟s

alpha coefficient If the Cronbach alpha coefficient of scales above 0.7, the scales are accepted to use (Peterson,1994) If not, items with low item-total correlations are removed

to improve the coefficient (Pallant,2001)

Second, factor analysis is used to assess unidimensionality, convergent and discriminated validity (Kline,1998) Three main steps are required to follow: first step is to assess the suitability of data For a good factor analysis, KMO index should not less than

0.6, and Bartlett‟s test of sphericity should be significant (p<0.05) (Tabachnick & Fidell,

2001) Second step, principle component analysis is used to extract the number of

underlying factors Only factors with eigenvalue ≥1 are retained for further investigation

Final step, Varimax rotation is used to maximize the sum of variances of the squares loading

Final, multiple regression analysis is used to determine whether the hypotheses developed in this study obtained empirical support

CHAPTER 5: DATA ANALYSIS AND FINDINGS

In this chapter, data analysis basing on two data sets collecting from interviews and survey

is analyzed and presented

5.1.1 Data analysis

The purpose of this approach is to explore and recognize the employee‟s ideas,

comments and expectations to current HRM practice Five resigned employees (two sales managers, operation manager, two senior customer services) and 10 line managers were chosen

The interviews via telephone were conducted separately with 5 former employees All of them have the same comment about based salary on labor contract They wondered that why the minimum salary of company in January 2010 was announced increase: all of employees were required to sign the appendix of labor contract for reason above, but total amount they received end of month was unchanged One sales manager said that his based salary was unchanged during two years, while inflation ratio has been increasing year by year Thus his salary cannot cover basic needs of family Other sale manager complained about the way of salary increase He suggested supervisor and HR manager several time to review his based salary, but received no feedback Making a complaint to CEO, his salary was increased at once in that month He actually did not feel happy when salary was increased by that way It does not motivate employees and is unfair for rest Others advised that performance appraisal system should be applied regularly with specific and practical KPI sets Some different ideas mentioned about training and development They suggested that company should have in-house trainer‟s team or hire experts for regular internal

training courses Recently, new staffs are trained by their direct manager But they were not sure that line managers have enough teaching skill or can cover all aspects of aviation services Some ideas talked about standard performance, job‟s goals, job duties, responsibility… relating to their job description

Next, Vice Director was invited for face to face interview He confirmed that the company is continuing to perform growth strategy for period 2008-2012 Core business is also in aviation transportation For the goal in year 2011, BOD would like to win at least 8

contracts with international airlines He said that several key job holders are till vacancy It will influence strongly the implementation progress of some new projects

In another interview, HR manager has confirmed that the HRM policies and practices are not standardized She also expressed her hope that several formal process of HRM would soon be in place HRM policies and practices cannot be done successfully by

only HR manager, she said It must be concerned as company‟s project

Other interviews with 8 line managers included one branch manager in Hanoi and 7 department leaders Author also received the same complaints about basic salary, bonus, training, appraisal … However, those line managers specially evaluated and gave more

suggestions about recruitment & selection and performance appraisal process They recommended the vacant positions should be informed to all line managers or public notice

on website of company They wonder why they do not have rights to know basic salary of staffs in their department They required HR department to inform KPI sets in details for appraisal Sometime, they have been required to welcome new staffs, while their department does not need Finally, they would like to join into recruitment committee in case selecting new staffs for their department

Recruitment and selection

The current official recruitment process is as follows: request from department leaders 

HR department  getting approval of CEO  HR finding sources  select candidates 

pre-interview via telephone by HR department  Invite candidates for joining exam or interview  final interview by CEO  employment

The current recruitment process has weak point that it has not enough exam question archives to be used for testing knowledge or competences of candidate Recently, there is only one written exam for testing English language level And it used in recruiting for all job position

Compensation system

The current compensation system in Vector includes two parts

Direct payment is divided two types that based pay system and variable pay system:

 The based pay system has been received so much complaints Indeed, Vector

has not been developed its own based pay system They are currently using the popularized based pay system which promulgated by the ministry of labor - invalid and social affairs for state-owned company The criteria sets are not clear It mainly depends on the educational certification, working condition, year experience to classify and decide pay grade Other important factors relating to skills, competences are not defined

 Variable pay system includes sales incentive and bonus In the first month of

each year, sales department leaders will receive approved sales plan from BOD The excess target will be considered as sales incentives for whole department at

an approved ratio Bonus is applied for non-sale employees basing on the performance of whole company every six months

 Indirect payment system includes some types such as allowances

(transportation, telephone, over time, training), healthcare insurance, annual medical examination, yearly vacation

Training and developing

The company does not have an official training policy Some courses were organized by CEO to update new information and aviation knowledge Some soft skills courses were organized by outsourcing However, those mentioned courses have not been organized regularly In year 2009, there was only one course named “multiple-transportation” In year 2010, two communication courses and one sales forum were

organized In case the CEO would receive more complains from clients, he will design specific courses to train staffs Second type of training in Vector is oversea training

courses Those are organized by airlines where Vector acts its distributor If airline has any training program for distributors, some persons in charge for that airline will join the oversea training course

Performance management

Because the job analysis is not concerned, KPI or other standard performance indicators cannot be built Recently, Vector is applying performance appraisal process However, without clear KPI sets and job profiles, all line managers said that the results from appraisal are not considered valid and reliability for further goals setting process

The next section will present analysis for data collecting from main survey with mentioned steps in previous chapter

Figure 5.1 Job position of respondents

Sales development

executive 30%

Booking/Custome

r services 43%

Finance &

accounting 8%

Job position of respondent

Sales development Sales executive Booking/Customer services Operation

Admin & Legal IT

Finance & accounting

The age of respondents from 25-35 years old accounts for 73.33% 87.33% of respondent has high education level – bachelor degree This workforce in this age range is

very dynamic, enough experience, depth knowledge and a main labor resource for any company

Figure 5.2 Age of respondents & Educational level of respondents

Although 82.67% of respondents work for the company less than 4 years, but 31% have experience over ten years in air logistics industry and aviation services

Figure 5.3 Members of year experience & No of years works for Vector