The effects of empowerment and job enrichment on employee loyalty in a downsizing and reducing salary enviroment empirical evidence from the banking industry in vietnam

Huynh Thi Kim Hanh THE EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY IN A DOWNSIZING AND REDUCING SALARY ENVIRONMENT EMPIRICAL EVIDENCE FROM THE BANKING INDUSTRY IN V

Huynh Thi Kim Hanh

THE EFFECTS OF EMPOWERMENT AND

JOB ENRICHMENT ON EMPLOYEE LOYALTY IN A

DOWNSIZING AND REDUCING SALARY

ENVIRONMENT

EMPIRICAL EVIDENCE FROM THE BANKING INDUSTRY IN

VIETNAM

MASTER OF BUSINESS (Honours)

Ho Chi Minh City – Year 2014

Huynh Thi Kim Hanh

THE EFFECTS OF EMPOWERMENT AND

JOB ENRICHMENT ON EMPLOYEE LOYALTY IN A

DOWNSIZING AND REDUCING SALARY

ACKNOWLEDGEMENTS

Firstly, I would like to express my sincere gratitude to my research advisor, Dr Vo Xuan Vinh, who made me believe in myself and gave me the possibility to complete this thesis He has supported me a lot with the thesis preparation and motivated me throughout the journey of the thesis His guidance helped me in all the time of research and writing this thesis I am sure that this thesis would not have been possible without his support

I also thank Dr Nguyen Thi Mai Trang I am extremely grateful and indebted to her for her expert, valuable guidance, insightful comments, and encouragement extended to me

I would like to express my grateful thanks to my friends and colleagues in my bank and others who participated in filling the questionnaires and provided the valuable information for this study

I would like to extend deep senses of gratitude to lecturers who have taught and transferred me valuable knowledge and experience during the period of Master of Business course at International School of Business Besides, I would like to express my gratitude to all ISB staffs that supported necessary materials and helped summit my papers

Personally, I would like to give my special thanks my family for supporting me spiritually throughout my life

Huynh Thi Kim Hanh

Ho Chi Minh City, December 8th, 2014

ABSTRACT

Maintaining and increasing the loyalty of the survivors in a downsizing and

reducing salary background is a complex problem for management trainees The

study tests the affection of the empowerment and job enrichment policies to

employees in the downsizing and post-retrenchment context using a case of the

banking industrial sector in Vietnam It focuses on the impact of lossing job and

reducing salary on the survivors (those who remain in the organization after

downsizing), and organization This study was designed with the primary objective

of determining the relationship between empowerment behaviors of management,

awareness of job enrichment, and loyalty behaviors of the staffs, who had survived

in a downsizing and reducing salary environment on the specific case to employees

of the Vietnam’s Banks A sample of population will be selected using random

sampling technique So, the purpose of the current research thesis is to investigate

the direct and indirect relationship between empowering managerial practices and

employee loyalty as mediated by job enrichment, particularly, review in a

downsizing and reducing salary environment of the Vietnam’s banking sector The

results show that loyalty is affected more by empowering loyalty through indirect

effects by job enrichment, rather than a direct relationship The study ends with a

discussion of limitations and suggestions for future research

Keywords: Employee Loyalty, Empowerment, Job Enrichment

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TABLE OF CONTENTS iii

LIST OF FIGURES v

LIST OF TABLES v

CHAPTER I: INTRODUCTION 1

1.1 Background of the Study 1

1.2 The Research Problem 3

1.3 Research Objectives and Research Questions 5

1.4 Research methodology 6

1.5 Scope of the study 7

1.6 Thesis structure 7

CHAPTER 2: REVIEW OF LITERATURE 9

2.1 Empowerment, Job Enrichment and Employment Loyalty 9

2.1.1 Employee Empowerment 9

2.1.2 Job enrichment 13

2.1.3 Employee loyalty 16

2.2 Literature review and Empirical studies 19

2.2.1 The relationships between empowerment and loyalty 19

2.2.2 The relationships between empowerment, job enrichment and loyalty 20 2.2.3 The relationships in a downsizing and reducing salary environment 21

2.3 The Research Model and Hypotheses 25

CHAPTER 3: METHODOLOGY 28

3.1 Research process 28

3.2 Measurement scales 32

3.3 Pilot Study Design – Qualitative Research 35

3.4 Main Study Design – Quanlitative Research 37

3.4.1 Sampling methods 37

3.4.2 Data analysis methods 39

CHAPTER 4: RESULTS AND DISCUSSION 42

4.1 Decriptive analysis 42

4.2 Measurement Assessment 44

4.2.1 Scale validation 44

4.2.2 Model fitness 51

4.2.3 Hypotheses Testing 53

4.3 Disscussions of the findings 55

CHAPTER 5: SUMMARY AND CONCLUSIONS 58

5.1 Findings of the Study 58

5.2 Managerial implications 62

5.3 Limitations and directions for future research 63

REFERENCES 66

APPENDICES 79

APPENDIX A: Questionnaire (English Version) 79

APPENDIX B: Questionnaire (Vietnamese Version) 83

APPENDIX C: Pilot Study 86

APPENDIX D: List some of result tables and figures 89

LIST OF FIGURES Figure 2.1: Proposed Research Model 26

Figure 3.1: The research process 31

Figure 4.1: Saturated model of the first CFA 94

Figure 4.2: Saturated model of main survey 49

Figure 4.3: SEM result of research model 52

Figure 4.4: SEM result of research model (Standardized) 95

LIST OF TABLES Table 3.1: The Empowerment Measurement Scale 32

Table 3.2: The Job Enrichment Measurement Scale 33

Table 3.3: The Employee Loyalty Measurement Scale 34

Table 4.1: Descriptive statistics of the data Sample size = 336 observations 43

Table 4.2: Standardized Regression Weights (The first CFA factor loading of items) 46

Table 4.3: Confirmatory factor analysis of measurement model 50

Table 4.4-1: Standardized Regression Weights: (Group number 1 - Default model) 90

Table 4.4-2: Regression Weights: (Group number 1 - Default model) 91

Table 4.5: Relationship between constructs of research 92

Table 4.6: Relationship between constructs in research model (standardized) 53

Table 4.7: Result of hypotheses testing 55

CHAPTER I: INTRODUCTION

This chapter is starting point of this study In this chapter, the research

background of thesis is first introduced Subsequently, the research problem is discussed Research objectives as well as research questions are presented in the next section Then, methodology and scope of this research is introduced

summarily Final, structure of this study is presented This chapter aims at

specifying the purpose of this research and the research content

1.1 Background of the Study

Due to the continued economic downturn, many organizations have

difficulties to maintain a large workforce The organization had to restructure their operations apparatus, cutting the excess staffing and poor morale in a difficult position, which is one of the measures used by the organization during the past Due

to economic constraints, most organizations are required to make difficult decisions about the distribution of human capital as they try to control costs and competition One of cost-cutting program is usually used by companies including reducing the number of employees, reduce salaries and decrease the budget, reduce hiring and cut bonuses (Datta, Guthrie, Basuil, & Pandey, 2010)

For the bank financial system, the crisis can occur in cycles or irregular, causing major damage to a bank, or even lead to bankruptcy or cripple the system Specifically, customers can withdraw mass money from a bank because of bad information, then the bank fall into the inability to pay For example, in 2003, the rumor which Asia Commercial Bank’s director general had fled caused a confusion

and panic psychological for customers who had deposits at Asia Commercial Bank

In all the causes of bankruptcy of a bank, the liquidity can cause the fastest crash The crisis occurs in practice is certainly a very bad thing, because there are no banks to withstand the crisis and went bankrupt, insolvent But with the banks to overcome difficulties and to restore the crisis as an opportunity to test their stamina practical difficulties, as well as the lessons learned in order to pass the next crisis One of the core issues to overcome crisis is reorganized, in which, only maintain sufficient workforce, reducing operation costs, streamlined operational procedures, emphasizing the importance of work efficiency

In the context of near the end of 2012, many banks in Vietnam falls into the difficult situation, in order to survive it must restructure and cut operating costs One immediate solution is often used by organizations such as salary cuts and

layoffs Many weaknesses are eliminated first, this makes the job productivity per capita increased, leading to downward pressure on the rest Additionally wage cuts, leading to the willpower, motivation decreases This is the time when the rate

jumped employee's banking sector is quite high, suggesting that the loyalty of

employees in the organization dropped at an alarming rate Surviving employees perceive that the organization is not loyal to its own employees, reducing the

survivors' motivation to remain loyal to the organization and dealing a crushing blow to employee citizenship and other support behaviors (Chambel & Alcover, 2011; Xuan & Park, 2012) Given that the employer has invested time and money significantly to the recruitment and training of staff and management need to be

considered in developing strategies to protect protection of their investment

(Leghari, Suleman, Leghari, & Aslam, 2014; Yamamoto, 2013)

In general, the problem to maintain the loyalty of employees is a matter of survival of an organization, especially in difficult contexts, when an organization has undergone a process of restructuring the organization Maintaining and

promoting the loyalty of a workforce survived the filtering and sizing is a difficult issue for many businesses Therefore, the task of these organizations is how to promote the loyalty of the individual remaining after the process of restructuring the corporate structure

1.2 The Research Problem

In the last year, when the economic sector in general and the banking sector

in particular are faced with many difficulties, such as bad debt, credit growth is difficult, higher operating costs, while profits decline even losses Not only cut dividends, which previously sluggish credit situation, shrunken profits, banks have aggressively cut wage costs and staff layoffs to reduce costs Previously, many commercial banks aggressive expansion and network operation, including major banks now forced to cut staff at most Specifically related to Tran Duc Kien

arrested, this has directly affected the operation of the banking sector in Vietnam, not only Asia Commercial Bank Asia Commercial Bank is severely one of the first banks affected most, the leaders of this bank has aggressively cut jobs Thus, in

2013, the bank's employees have been laid off 1271 people, accounting for 11.1 percent compared to 2012, this is a significant concern for those who are doing

work in the banking sector Along with the layoffs, many banks also cut salaries and bonuses Compared with the end of 2012, while salaries and allowances for each employee average 15.28 million VND / month, wages and allowances in the past 6 months has fallen 29.8% (Anh, 2013)

ACB is not the only case to aggressively cut jobs amid the economic

downturn Techcombank has fallen by more than 1,000 workers in 2012 and

continued restructuring of personnel towards streamlining, by profit fell by 83.9% compared with FY2012 While Eximbank also restructure staffing and reduce

payroll by 30%, in difficult situation, the results fail to achieve business and

restructuring, restructuring personnel, plans to reduce 1,000 employees in the

department to direct to indirect boost retail strategy, aimed at increasing fund

salaries for the sales department directly Eximbank to terminate the contract with

48 people and more than 300 employees transferred from the departments of the Head Office to branches to strengthen the sales team in order to promote retail operations, generate revenue (Anh & Dang, 2013) Once the market is difficult to screening personnel is difficult to avoid Recognizing the wave of layoffs, wage cuts in the banking sector, many experts say, the difficulties and the cost reduction

is essential for enterprises, and as needed for the banking sector, while rising bad debt, credit growth, reduced profits

Since the crisis in August 2012, many banks have repeatedly reduced

workforce The reason given by the bank's profit fell sharply before the difficult situation, the economic downturn, plans to expand its branch network was tightened

and banks themselves must restructure apparatus, so the layoffs are unavoidable However, according to experts, the staff has gone out of the banking sector in recent years not all have the same reasons as banks cut jobs, but also due to other causes

In particular, there is an income source of bank employees are no longer as

attractive as before, many employees resigned to seek other employment

opportunities better

So far, the study by Ugboro (2006) examined the influence of empowerment and job redesign on affective commitment - the survivors in the organizations that happened downsizing and restructuring is one of the research was done in a given market in a context of previous However, no studies to indicate the influence of empowerment and job enrichment on the employee loyalty of survivors in

downsizing and reducing salary environment, particularly in Vietnam transition market Therefore, there is an urge to study is done, however, only a review of the research object is the bank’s employee in Vietnam This study fills the gap in

research on empowerment and job enrichment on the survivors of Vietnam banking

sector at the moment

1.3 Research Objectives and Research Questions

The purpose of the study is to investigate the effects of empowerment and job enrichment on the loyalty of surviving employees of the Vietnam banking sector

in reducing salary and downsizing background Because survivors play an

important role in the future success of the downsized-organization, it is important to more fully understand the strategy can improve their loyalty and commitment This

study conducts to check the specific contributions if managers can offset the decline

in the ability loyal employees after downsizing if they simultaneously empower and enrich their works

Especially in a study by S S Lee (2008) suggests that empowering impact

on the increase of employee loyalty and an easy thing to notice is that the

employees have enriched the response to the news this concept through operations

in the future to prove their loyalty However, it is clear that downsizing has been found to have a negative impact on the loyalty of the survivors (Datta et al., 2010; Kiran, Noor, & Khan, 2014; Ng, Feldman, & Butts, 2014; Wagar, 2001) So, some question whether empowerment influences affecting promote loyalty in the context

of organizations – banks in Vietnam - that was sizing and reducing wages or not? Besides, the impact of empowerment to employee loyalty is a direct relationship or indirect through job enrichment? In order to further understand how the objectives

of this study will be achieved, two following research questions are introduced:

1 Empowering really affect promote employee loyalty in the context of downsizing and reduce wages or not?

2 The impact of empowerment to employee loyalty has influenced more strongly by the case through job enrichment at work

1.4 Research methodology

White (2002) stated that research methodology is a philosophical framework for any research (p.20) It contains the data and techniques used to collect research data For this thesis, primary data was collected by the researchers through both

qualitative methods and quantitative An in-depth interview was conducted in the branch offices to gain insight about the working spirit, the will to stick with the organization A question was also designed and delivered to all of them to learn more about the characteristics and practices of respondents

1.5 Scope of the study

In the current study, the sample used had a skew towards a south banking staff, especially in Ho Chi Minh City and some province in the south area rather than Ha Noi City and other big city like Da Nang, Hai Phong in the north area; the sample also has the bias of Internet These findings therefore may not be construed representative of the entire population of banking staffs

In summary, except for the limited sample size, no generalizations are whole groups of all Vietnamese banks that have large fluctuations in staffing and the dynamics of the restructuring, regional differences, limited the time and cost of research, in addition to mention, the ability to exclude those additional factors such

as the impact of leadership competencies, management mechanism and operation of the apparatus of individual banks, capacity of each employee is empowered, fair factors and some other factors

scope and objective of research, research methodology and the structure of the subject

Chapter 2: Review of Literature

Chapter 2 follows with an emphasis on the theories supporting this thesis and give hypotheses, including present the theoretical issues empowerment and loyalty, the effects of the empowerment and job enrichment on employee loyalty in a

downsizing and reducing salary environment

Chapter 3: Methodology

Chapter three presents research process in which is the way to conduct

research will be presented; after that measurement scales which are presented to develop questionnaire; then the results of in-depth qualitative research interviews which are discussed to contribute for measurement scales; and sampling methods and introduces the methods to analyze data The purpose of this chapter is to

identify the research process, methods using in research, sampling design and data collection method

Chapter 4: Results and Discussion

This chapter presents and analyzes the results of studies on the impact of empowerment and job enrichment on employee loyalty in a dowsizing and reducing salary environment

Chapter 5: Summary and Conclusions

Chapter 5 presents the results and the limitations of the thesis, as well as recommendations for further research directions of the authors

CHAPTER 2: REVIEW OF LITERATURE

2 This chapter mainly introduces theoretical background and research model This section is going to cover definitions of several key words that will certainly be repeated many times throughout this paper First the readers will have a chance to get themselves familiar with empowerment concept, job enrichment and employee loyalty in section 2.1 Then, the next section will show some experimental studies

on the relationship of the concepts in section 2.2 Finally, research model, its

constructs and relationship hypothesized among the constructs are discussed

2.1 Empowerment, Job Enrichment and Employment Loyalty

2.1.1 Employee Empowerment

The original meaning of empowerment has been referred to as to "authorise, give power to" by Tulloch (1993) as cited by Greasley et al (2005) The use of the term "power" appears to be common throughout the definitions of empowerment; for example, Legge (1995) argued that empowerment should be seen in terms of a redistributive model whereby power equalisation is promoted for trust and

collaboration One of the most frequently referenced definitions of employee

empowerment is that offered by Conger and Kanungo (1988) Conger and Kanungo (1988) focused on power as the central point of empowerment, "either to strengthen this belief or to weaken belief in personal powerlessness" They define

empowerment as a process of enhancing feelings of self-efficacy among

organizational members through the identification of conditions that foster

powerlessness, and through their removal by both formal organizational practices

and informal techniques of proving efficacy information This definition implies strengthening the effort-to-performance expectancy or increasing employee feeling

of self-efficacy According to Conger and Kanungo (1988), the effect of

empowerment is the initiation and persistence of behavior by empowered

employees to accomplish task objectives This definition is rooted in management theory of power and authority delegation that gives an employee the right to control and use organizational resources to bring about desired organizational outcomes

The work of Conger and Kanungo (1988) is often used as a starting point in literature on psychological empowerment, for they claimed that empowerment involves a motivational concept of self-efficacy However, Thomas and Velthouse (1990) argued that the concept of empowerment is much more complex and could not be fully explained in a one dimensional construct such as self-efficacy This notion was further refined by Thomas and Velthouse (1990) who developed a

cognitive model of empowerment They therefore define empowerment as an

intrinsic task motivation that manifests itself in four cognitions (meaningfulness,

competence, impact and choice or self-determination), reflecting an individual’s

orientation to his or her work roles By intrinsic task motivation, they mean, a

positively valued experiences that an individual derives directly from a task that produces motivation and satisfaction A very similar definition of empowerment was outlined by M Lee and Koh (2001) - who described these four dimensions (listed below) as describing the psychological state of the subordinate - stated that:

Meaningfullness: the meaning of a value of a task goal or purpose judged in

relation to an individual’s own ideals or standards Competetence: competence is

an individual’s belief in his/her capability to perform task activities skillfully

Self-determination (or choice): autonomy in the indivitation and continuation of work

behaviours and processes Impact: the perception of the degree to wich an

individual can influence certain outcomes at work (p 687)

A practical and process oriented definition of empowerment was offered by (Bowen & Lawler, 1994) They define employee empowerment as sharing with front-line employees, information about an organization’s performance, information about rewards based on the organization’s performance, knowledge that enables employees to understand and contribute to organizational performance, and giving employees the power to make decisions that influence organizational direction and performance Employee empowerment means turning the front-line loose, and encouraging and rewarding employees to exercise initiative and imagination

Empowerment is similar to participative decision making but is also very distinct from it Empowerment is not simply sharing power but distributing power (Hollander & Offermann, 1990), whereby employees may be given power or

control over some or all aspects of the task, from scheduling jobs to making

decisions to implementing ideas (Robbins & Judge, 2012; Schermerhorn, Hunt, & Osborn, 1998) Empowerment strengthens employees, providing them with a sense

of ownership and control over their jobs (Bass, 1995; Kouzes & Posner, 2006)

The other explanation of empowerment takes the viewpoint of the follower- empowerment is the perception of being empowered (Hardy & Leiba-O'Sullivan, 1998; Honold, 1997) Theorists (Laschinger, Finegan, Shamian, & Wilk, 2004; M Lee & Koh, 2001; Spreitzer, 1995; Thomas & Velthouse, 1990) have identified perceived empowerment to include four components: (a) the work has personal meaning for the employee, (b) the employee feels competent in the ability to

perform the task, (c) the employee has a degree of self-determination in his or her ability to choose and regulate task action, and (d) the employee feels the work has impact beyond the immediate job

In summary, theorists and practitioners discuss the concept of empowerment from two different perspectives First, some consider empowerment a set of

activities and practices of managers that give power, control, and authority to

subordinates (Cattaneo & Chapman, 2010; Conger, 1989; Dubrin, 2012; Ford & Fottler, 1995) The measurement of empowering practices focuses on managerial behaviors that act to empower employees Such behaviors include providing a positive emotional atmosphere, rewarding and encouraging in visible and personal ways, expressing confidence, fostering initiative and responsibility, and building on success (Conger, 1989; Dubrin, 2012) The second interpretation of empowerment takes the viewpoint of the follower-empowerment is the perception of being

empowered Because the purposes of the present study were concerned with how management can influence the loyalty of followers, we used the both of view of

empowerment, focusing our attention on the leadership activities that empower employees and perceived empowerment

2.1.2 Job enrichment

Job enrichment is a tool that enables innovation in the organization It’s based on expectation of every people Job enrichment is one of main tools of

manager beside with praise, recognition, approval etc It allows people in

organization to grow up, to organise, to take responsibility, to give suggestions and

to be important Job enrichment refers to expansion in vertical side of job that provides responsibility of workers be increased (Kamery, 2004; Robbins & Judge, 2012) It and empowerment should be combined to have overview of whole process

of a task The job should be arranged in order that worker can do a complete

activity, increasing responsibility as well as freedom and independence of worker Hence they can review their performance and improve it

Job enrichment give opportunities for changes, utilizing personnel,

encourage staff in work, services can be improved Drucker and Drucker (2001) points out that experiment in job enrichment seem particularly applicable to

knowledgeable work positions (p 84) Job enrichment makes complexity in works, increasing responsibility of employee, do not need the role of supervisor (Mullins, 2010) This has more recently been linked to the related concept of employee

engagement, employee empowerment and high performance working system

(Zhang & Bartol, 2010) When employees take responsibility for their own action, they always put in their mind such thinking on each action Then employee

becomes a better judge of its own actions brings active engagement as well as

creative thinking Having more control over a task the employee is more disposed and more open to innovativeness (Dodd & Ganster, 1996; Saavedra & Kwun,

2000)

There are many ways of job enrichment According to Mohr and Zoghi (2008), that should be rotation, sharing information, teamwork and training

Robbins and Judge (2012) opinion that should be combining task, building

relationship with big partners, expanding job vertically ang giving more feedback (p.177) McShane (2003) also has same opinion about combining task and buidling relationship Focusing on self-teams; engagement; and feedback is opinion of

Dauda (2009) Kehinde, Abiodun, and Osibanjo (2012) points out that no need control subordinate, assign to do a whole process of work, giving feedback to

employees directly etc They use of techniques to enrich the following: remove the control of a subordinate; specify a complete unit of work that can be done by a subordinate, but not in work processes; provide feedback directly to employees by monitoring; assign new tasks or subjects; rotational assignments or work schedules; implementation of participatory management; remove the hard part of the exercise; adjusted performance targets; reduced control of a subordinate; provide more power

to subordinates; increase the level of decision making of the subordinate; encourage increased use of the technique; increase the amount recognized for a job well done; the participation of employees in identifying and addressing issues that affect them and the organization; provide employees with feelings of dependent; and the

combination and / or rearrange the task more difficult Or simply job enrichment stresses the humanizing and self-fulfilling potential of an expanded organizational role, as stated by Prester and Bozac (2012) including: scheduling (when you do what during the day); decision making (meaningful involvement in the decisions that affect your tasks, your job, and your role); meaning (who does your work help and how important does it seem to you); and feedback (the information that you receive on how your efforts contribute to the goals of your unit, users, etc.) But Robbins and Judge (2012) suggest that the best ways is have to be supported by job dimension as skill variety, task identity, task significance, autonomy and feedback (p.177)

According to this theory, the organization encourages increased quality of works by enhancing the size of the task in particular: (a) skill variety, the degree to which a job requires the use of different skills, abilities and talents of a person, (b) task identity, the extent to which a job requires completion of a "full" part of the job, such as after a task or from beginning to end with tangible results, (c) task significance, the degree to which a job and its duties have "a significant impact on the lives of people, even those in the organization immediately immediately or in the world at large" (Hackman & Oldham, 1976; p 79), (d) autonomy, the degree to which a job for freedom, independence, or as decided to arrange the work, decision,

or select the method used to perform the job duties, and (e) feedback, the degree to which a job offer clear information on how a being done

In summary, the objective of this study was to establish the role of job

enrichment as an impact to change to improve the work experience and jurisdiction

of the staff and its impact on employee loyalty to the organization function

However, it should be noted that this study be considered in the context of Vietnam banks are in the process of restructuring and downsizing Since the syndrome of survivors entail different effects to workers' perceptions, attitudes and behavior, this study because it is done in a restructuring and narrow environmental organizations Accordingly, in this study, the survivors are defined as employees who remain in the organization, ie the employee is not fired during the company cut staff, as well

as the members who survived and exist in the organization after the reduce wages

and staffing

2.1.3 Employee loyalty

Many organizations recognize that employees are valuable assets of the business; and for the business, the loyalty of customers or employees has become one of the critical issues The firm has tried to take the opportunity and support given to their employees, but they still face difficulties in keeping staffs in the organization (Voyles, 1999)

The term "loyalty" and "employee loyalty" has special relevance Ewin (1993) explained loyalty is "an emotional attachment and an emotional reaction to its objects" (p.389) Morrall (1999) said that the concept of loyalty is "a

commitment to something or someone" (p.95) Hajdin (2005) describes that "the concept of loyalty analogously creates a need for a theory that explains how doing

something other than what should otherwise be done can be a good thing when it is

a manifestation of loyalty"(p.261) Loyalty is as devotion and an emotional

attachment of a person to specific things, which may be related to a person, a group

or purpose (Powers, 2000) According to Allen and Grisaffe (2001), loyalty is a psychological state and it characterizes the relationship of an employee with the organization for which they work and that has implications for their decision to remain with the organization

In contrast, the "employee loyalty" has been identified related to work,

coworkers, supervision and organization Employee loyalty has been identified by many researchers (Drizin & Schneider, 2004; Ewin, 1993; Hajdin, 2005; Meyer, Irving, & Allen, 1998; Powers, 2000; Solomon, 1992; Voyles, 1999) (Powers, 2000) identified the loyalty of employees such as actions and specific behavior (participation in the activities of their superiors, willing to stay late to finish the project or organizational goals, or helping colleagues) (Drizin & Schneider, 2004) reported that loyal employees tend to show commitment and stay in the

organization and willing to help organizations overcome difficulties regardless of their assigned work outside described work

Naus, van Iterson, and Roe (2007) provided another view of loyalty with an exit - voice - loyalty - cynicism - neglect construct which is model of responses to dissatisfaction Naus et al (2007) propose that there are five ways in which

employees may respond to adverse organizational circumstances: exit (some

members leave the organization - this is the exit option - quitting the job or leaving

the organization voluntarily, searching for a different job and thinking about

quitting), voice (actively and organization constructively trying to improve

conditions for changing the status of the opposition by discussing the issue with all involved such as management or higher authorities), loyalty (passively but

optimistically waiting for conditions to improve, by giving public and private

support to the organization, waiting and hoping for improvement), organizational cynicism (a negative attitude toward one’s employing organization), and neglect (reducing efforts, lax behaviors, demonstrated through lateness, absenteeism, error rates and using company time for personal business) They found that the higher the satisfaction with the problem, the more likely the employee will choose either voice

or loyalty reactions (Leck & Saunders, 1992)

Loyalty to the organization of two active and passive forms (Withey &

Cooper, 1992) Graham and Keeley (1992) suggested that there are three aspects of loyalty in situations where there is dissatisfaction occurs: the unconscious, passive, and reform To deal with the problem of work, employees may remain silent

without receiving a proposal for another answer (loyalty - unconscious), trying to keep silent to see what happens (loyalty - passive), or actively protects

organizations by offering a positive alternative solutions and dissect the problem (loyalty - reform)

For the purposes of this study, loyalty is defined as behavior to demonstrate pride and support for the organization Protecting organizations against criticism, emphasizing the positive aspects of the organization, and limited complained about

the organization as an example These behaviors have been identified by the loyalty

of employees in the literature on organizational citizenship behavior (Blakely, Andrews, & Moorman, 2005; Tepper, Duffy, Hoobler, & Ensley, 2004)

2.2 Literature review and Empirical studies

2.2.1 The relationships between empowerment and loyalty

Because empowerment is a process based on trust, its impact on employee loyalty can be viewed from the perspective of social exchange (Dubrin, 2012; Erlich

et al., 2014) When employees feel supported by the organization, trust is built Over time, the employee reciprocates by demonstrating a higher level of attachment

to the organization Recent research shows that when employees feel supported by the organization, they are more likely to feel committed to the organization,

supervision and demonstrate their commitment by engaging in organizational

citizenship behaviors (Eisenberger, Fasolo, & Davis-LaMastro, 1990; Shore &

Wayne, 1993; Wayne, Shore, & Liden, 1997)

Many empirical studies have supported a positive relationship between

empowerment and loyalty Hammuda and Dulaimi (1997) found that empowerment

is perceived to have increased loyalty, motivation, satisfaction and creativity of employees Fulford and Enz (1995) found that perceived empowerment had an effect on satisfaction, loyalty, performance, and concern for others; and it has a greater impact on perceptions of work attitudes, such as job satisfaction and loyalty Empowerment has also been found to be positively associated with commitment of teacher to schools (Gaziel, 2009) and negatively associated with propensity to leave

the organization in a health care environment (Koberg, Boss, Senjem, & Goodman,

1999; Larrabee et al., 2003)

Based on the aforementioned review, the following hypothesis was tested in

an organization - wherein a downsizing and reducing salary environment

Hypothesis 1: There is a direct and significant relationship between

empowering managerial practices and loyalty behaviors among surviving

employees

2.2.2 The relationships between empowerment, job enrichment and loyalty

However, empowerment is a process of replacing the internal work,

empowering employees means the content or context of work has changed (Ford & Fottler, 1995) Hackman and Oldham (1976) hypothesize that job enrichment is one that has more variety, identity, significance, autonomy, and feedback Job

enrichment affect the psychological state of the importance of meaning, feeling of responsibility, and knowledge of results and hypothesize leads to higher job

satisfaction, intrinsic motivation, and the quality of work and lower turnover and absence of feedback (Hackman & Oldham, 1976) In a longitudinal field study, Cordery, Mueller, and Smith (1991) found that although autonomous work groups' commitment to the organization decreased somewhat over the time of the study, they still displayed higher levels of organizational commitment than traditional work groups Allowing employees freedom to make decisions about both job

content and context is the ultimate form of trust (Ford & Fottler, 1995) Employees

with enriched jobs reciprocate this trust through future actions that demonstrate their loyalty

Moreover, the study of Ugboro (2006) and Chen and Chen (2008) show statistically significant positive relationships between job redesign as the same meaning with job enrichment and empowerment about affective commitment Therefore, the empirical question is raised as to whether empowerment influences loyalty directly or through its effect on job enrichment In other words, is it the empowering style of a manager that brings about employee loyalty or the actual enrichment of the employees' jobs? The answer to this question has ramifications to managers as to what extent they need to go to maximize the potential for employee

loyalty Based on the above assessment, the following hypotheses were tested

Hypothesis 2: There is an indirect relationship between empowering

managerial practices and employee loyalty as mediated by job enrichment

2.2.3 The relationships in a downsizing and reducing salary environment

Environment after restructuring and downsizing is characterized by

uncertainty, workload (the extent to which performance of work required), the role

of overcrowding load (the extent to which employees lack the skills necessary to deal with job requirements) and stress level as the survivors struggle to take on job duties and responsibilities of those fired (Kiran et al., 2014) Emotional reactions to all include: fear, anger, insecurity of employment, feeling hatred for the

organization and sense of loss of friendly colleagues

Downsizing ang reducing salary is often associated with programs have an important role in the whole process of restructuring This has affected many

organizations Most businesses are at present cutting down their workforce and salary/ bonus of their staff due to several reasons including overstaffing and

reducing operation cost of organiztion For employees, the main source of income is their salary and bonus, which is one of the indispensable criteria related to their loyalty in the organization This has been tested in previuos several studies (Ineson, Benke, & László, 2013; S.-Y Lee & Whitford, 2008; Li & Wang, 2011; Neeley & Boyd, 2010) Although most companies are trying their best to avoid situations such

as forced to resign and cut the salary of their employee because this lost the loyalty and commitment of staff; and they tend to excrete and regeneration of human

resources in a natural way They found that the result of job loss situation caused pain and difficulty for workers, disrupted production and labor relations have been stressful for the company The staff also saw the threat of job loss and the situation

is extremely worrying There are a number of reasons related to job cuts: the overall level of business activities may require less in number of employees, number of employees available for a particular job can be more when compared with the

volume of work, the work itself may not be necessary, there may be a significant change in the content of a job or a change in working methods (Armstrong &

Murlis, 2004)

Theory and empirical evidence suggests that empowerment and job

enrichment should both be positively associated with employee loyalty, but the

question of interest in this study is whether the relationship holds in a downsizing and reducing salary environment It is expected to narrow the cause to reduce

loyalty because layoffs are considered a violation of the psychological contract, thereby damaging the trust between employees and management (Turnley &

Feldman, 1999) Trust in management is the key to staff willing to show loyalty Although this argument is understood, researchers have found that the application

of management procedures and fair interaction before and during layoffs can

maintain the level of trust than if little attention has been paid to fair (Brockner, DeWitt, Grover, & Reed, 1990; Brockner, Grover, Reed, DeWitt, & O'Malley, 1987) Research has also found that the extent to which the work was enriched after downsizing is an important predictor of survival commitment to the organization (Brockner, Wiesenfeld, Reed, Grover, & Martin, 1993)

The issue is that other activities build trust beside of downsizing and

reducing salary case (i.e., empowerment and job enrichment) can also maintain trust within these cases? It is a difficult to answer when not all staffs answer to

downsizing and reducing salary in the same way (Mishra & Spreitzer, 1998) To better response suitably, it is a necessary to consider how empowerment and job enrichment could affect loyalty across the different possible responses of each employee The survivors may response to downsizing issue according to two

dimensions constructive-destructive and active-passive

First, there are the constructive/ active survivor responses, categorized as hopeful and optimistic These employees are seeking direction from upper

management (O'Neill & Lenn, 1995) and have the ability to view empowerment and enrichment opportunities to expand their circle of influence and help the

organization move ahead for their mission When managers empower for

employees, they encourage employees to take responsibility, providing support for staff, and expressed confidence in the ability of the staff Such empowerment to increase feelings of self-determination and employee competence, giving them the confidence they need to deal with more expectations (Mishra & Spreitzer, 1998)

Second, there are the constructive/passive employee responses, characterized

as obliging and faithful Employees in this category are loyal by definition but choose to remain quiet and attend to their work Empowering practices of

management as well as job enrichment should reinforce their feelings of loyalty

Third, there were employees react passively or vandalism, characterized by fear, anxiety and helplessness in the downsizing and reducing salary environment The rest of the staff should to seek safety in the context of ambiguity and

uncertainty in downsizing efforts Empowerment and job enrichment should give them a sense of control and ownership of environmental work ahead of them When such control in their work environment, fear and insecurity of workers is reduced (Cameron, Freeman, & Mishra, 1991; Greenhalgh & Rosenblatt, 1984) Without such fears, employees can maintain their trust in management or work to rebuild it

in time

Finally, there are the destructive/active responses, categorized as anger, cynicism, and moral outrage Employees with this response are unlikely to move

quickly toward rebuilding trust, neither are they likely to sit quietly in the process Theory would predict that exit (i.e., quit the job), voice, or possibly neglect (i.e., sabotage) would emerge over any form of loyalty For these employees, loyalty is likely to diminish despite the implementation of empowerment practices or job enrichment Over time, however, some of these employees may begin to rebuild trust in management, depending on future actions Therefore, using the Mishra and Spreitzer (1998) framework, one can see that unless all survivors fall into the

cynical category, the use of empowerment or job enrichment strategies should not diminish the positive relationships found between empowerment, job enrichment, and loyalty among the survivors

2.3 The Research Model and Hypotheses

This study has been interested in examining the relationship between

empowerment, job enrichment, and employee loyalty in a downsing environment and reducing salalry Based on previous studies, it is clear that empowerment and job enrichment should both positively related to loyalty, but no one checked the direct and indirect impact in the context of restructure of Vietnam commercial banks More importantly, the relationship has not been adequately studied in the context of reducing salary of bank’s staffs Empirical evidence and theory show that empowerment and job enrichment can help to maintain the loyalty of the survivors

of a downsizing environment (Brockner et al., 1993; Mishra, Mishra, & Spreitzer, 2009; Mishra & Spreitzer, 1998)

Based on the aforementioned review, the hypotheses were tested in the

organization wherein a downsizing and reducing salary as following

Hypothesis 1: There is a direct and significant relationship between

empowering managerial practices and loyalty behaviors among surviving

employees

Hypothesis 2: There is an indirect relationship between empowering

managerial practices and employee loyalty as mediated by job enrichment

Above mechanism, we draw-out the model for this research

Figure 2.1: Proposed Research Model

In summary, this chapter presented theoretical background of empowerment, job enrichment and employee loyalty based on the past studies and the theoretical concepts The conceptual framework was constructed with independent factor including employee empowerment positive impact on the dependent factor of

employee loyalty and through intermediate variable by job enrichment The

following chapters will present how we develop measurement scales for each

constructs in the research model, the research methodology and data analysis

procedure before having conclusion for the results of each hypothesis with

empirical data

CHAPTER 3: METHODOLOGY

3 Chapter three includes four parts: the first part is research process in which

is the way to conduct research will be presented; the second part is measurement scales which are presented to develop questionnaire; the third part is the results of in-depth qualitative research interviews which are discussed to contribute for

measurement scales; and the last part is sampling methods and introduces the

methods to analyze data This chapter described how to collect the survey data and the way to carry out a research analysis of the findings to see how the empowerment and job enrichment effecting on employee loyalty in a downsizing and reducing salary environment The questionnaire was designed and delivered to the

respondents by mid-July The data is organized using multiple choice questions with Likert seven – point scale to access each response of the participants

Quantitative methodology was used to analyze the collected numeric data The questions were grouped and mapped to each of the identified factor groups The average core for each issue has been worked out based on this grouping AMOS was used as a main tool to analysis the data.This chapter aims at explicating the research approach choice and presenting the reasons for its use

3.1 Research process

This study adopted the descriptive survey research design Descriptive

research portrays an accurate profile of persons, events, or situations Surveys allow the collection of large amount of data from a sizable population in a highly

economical way It allows one to collect quantitative data which can be analyzed

quantitatively using descriptive and inferential statistics Therefore, the descriptive survey was deemed the best strategy to fulfill the objectives of this study

The study was implemented through the combination of qualitative research and quantitative research for achieving the purpose of the study In particular,

quantitative research approach is based on the development of testable hypotheses and theory To collect the quantitative data, the survey method has been used and eventually the data has been analyzed by using statistical techniques

Firstly, research problem was defined, and then research objective and

research questions were identified to be the target of solving defined research

problem After that, this study conducted a literature review to review some relevant theories and built the hypotheses for this study From this, a preliminary

questionnaire was developed basing on questions used in some previous studies Next step is research design with 2 sub-steps:

- Pilot study: a study was conducted by interviewing around 9 bank's staffs face to face about the content, the number and the structure of questions

in preliminary survey to test the survey and measure before launching the main survey The results of the pilot study show that there is a

relationship between empowerment and enrichment of the impact of employee loyalty The main survey was built based on the pilot study

- Main survey: was conducted in many methods such as sending online survey through mail, social network, or sending the hard copy of survey

directly to research subjects Data collection was done more than one month later

After that, collected data was cleaned and used to test reliability of scale and validity of questionnaire through confirmatory factor analysis (CFA) was used to assess measurement scales The structural equation model (SEM) had been used as the main method for analyzing the research model by testing the assumed causation among a set of dependent and independent variables The research process of this study is described in Figure 3.1

DATA ANALYSIS SEM

 Test the structural model and

hypotheses

CFA

 Confirmatory Factor Analysis test

 Composite reliability, variance extracted, Unidimensionality test

 Convergent validity and disciminant validity test

Research problem Research objective Research scope

Refine measure &

measurement scale

Refine questionnaire

Main survey

Questionnaire development

Figure 3.1: The research process

3.2 Measurement scales

Measurement scales were defined from research hypotheses and model

There are three research concepts in this research which empowerment, job

enrichment and employee loyalty The measurement scales used to measure the concepts are the existing measurement scales in the world In questionnaire design, there are three parts in the questionnaire

Part 1 – Clarifying questions: consists of 5 questions – effective

identification and refinement of respondents

Part 2 – Specific questions (the main part): consists of 40 questions – effects clarify research needs - were designed to see the effects of empowerment on

employee loyalty by job enrichment, the questions of this part using seven – point Likert scale questions with value 1 denote for the opinion “Strongly disagree” to value 7 denote for the opinion “Strongly agree”

Part 3 – four questions were used to collect respondent demographic profile

of gender, age, education and work experience

Scale measurements include the following:

Firstly, the empowerment scale consists of 15 items that includes a range of behaviors that a manager will exhibit in an empowering situation (Ugboro, 2006)

Table 3.1: The Empowerment Measurement Scale

1 Meaningfulness 1 Inspires me to do more than I thought I could

2 Meaningfulness 2 Helps me set meaningful goals

3 Meaningfulness 3 Encourages a long-run, patient, disciplined approach versus

a “flash in the pan” approach

4 Meaningfulness 4 Conveys ownership by talking in terms of our customer, our

budget, our business

5 Competence 1 Encourages me to believe in myself

6 Competence 2 Helps remove roadblocks

7 Competence 3 Encourages me to focus on what can be done rather than

what has always been done

8 Competence 4 Encourages improvement through analysis of every process

and action within my control

9 Self.determination 1 Is willing to give his or her time when I need it

10 Self.determination 2 Wants me to get involved when I see a need and not wait to

be told or given permission

11 Self.determination 3 Gives me the freedom and flexibility to experiment

12 Self.determination 4 Encourages me to openly express my feelings and concerns

13 Impact 1 Establishes trust and credibility when relating to me

14 Impact 2 Develops a trusting relationship by sharing information

15 Impact 3 Recognizes what the betterment of the team is as valuable as

the results achieved

Secondly, the Job Enrichment scale were measured using the job Diagnostic

Survey developed by (Hackman & Oldham, 1976; Ugboro, 2006) The 20-item

measure of the five core dimensions of skill variety, task identity, task significance, autonomy, and feedback from the job were included here

Table 3.2: The Job Enrichment Measurement Scale

1 Skill.Variety 1 The opportunity to do a number of different things

2 Skill.Variety 2 How repetitious are your duties

3 Skill.Variety 3 The amount of variety in my job

4 Skill.Variety 4 How similar are the tasks you perform in a typical work day?

5 Skill.Variety 5 How much variety is there in your job?

6 Task.Identity 1 Opportunity to complete an entire task that I can call my

own