Relationships between leadership styles and employee turnover intertion in the vietnamese hightech industry

Keywords: Leadership; Employee turnover intention; Transformation; Transactional; Laissez-faire; Idealized Influence; Inspirational Motivation; Intellectual Stimulation; Individualized C

RELATIONSHIPS BETWEEN LEADERSHIP STYLES AND EMPLOYEE TURNOVER

INTENTION IN THE VIETNAMESE HIGHTECH INDUSTRY

Huỳnh Anh Nhy MBUS 2.4

2011 huynhanhnhy@yahoo.com

At University of Economics Ho Chi Minh City– International School Business

Dr Nguyen Thi Nguyet Que

ACKNOWLEDGEMENT

Frist and foremost I offer my sincerest gratitude to my supervisor, Dr Nguyen Thi Nguyet Que, who has supported me through my thesis with her patience and knowledge Without her support, this study would not been completed

I would like to express appreciations to my friends who support me in discussing initial

questionnaire and sending the final ones to survey target

Last but not least, I would like to thank my parents, and family members for their profound supporting, love and caring about me throughout my studies

Huynh Anh Nhy

2013, November 15

Keywords: Leadership; Employee turnover intention; Transformation; Transactional;

Laissez-faire; Idealized Influence; Inspirational Motivation; Intellectual Stimulation; Individualized

Consideration; Contingent Reward; Management by Exception; Relationship

TABLE OF CONTENTS

ACKNOWLEDGEMENT i

ABSTRACT ii

TABLE OF CONTENTS iii

LIST OF TABLES vii

LIST OF FIGURES ix

CHAPTER 1: INTRODUCTION 1

1.1 Introduction 1

1.2 Background of study and problem statement 1

1.3 Research objective and question 5

1.4 Scope and Significant of this study 6

1.5 Structure of this study 7

CHAPTER 2: LITERATURE REVIEW 8

2.1 Introduction 8

2.2 Leadership overall 8

2.3 Transformational leadership 10

2.3.1 Idealized influence (I.I): 11

2.3.2 Inspirational motivation (I.M) 12

2.3.3 Intellectual stimulation (I.S) 12

2.3.4 Individualized consideration (I.C) 13

2.4 Transactional leadership 13

2.4.1 Contingent rewards (C.R) 14

2.4.2 Management by exception (M.E) 15

2.5 Laissez-faire leadership 15

2.6 Employee turnover intention (T.I): 16

2.7 Relationship between leadership styles and turnover intention 17

2.7.1 Transformational leadership and employee turnover intention 17

2.7.1.1 Idealized influence and employee turnover intention 18

2.7.1.2 Inspirational motivation and employee turnover intention 18

2.7.1.3 Intellectual stimulation and employee turnover intention 19

2.7.2 Transactional leadership and employee turnover intention 20

2.7.2.1 Contingent rewards and employee turnover intention 21

2.7.2.2 Management by exception and employee turnover intention 22

2.7.3 Laissez-faire leadership and employee turnover intention 22

2.8 Research model 23

2.9 Conclusion 23

CHAPTER 3: RESEARCH METHODOLOGY 25

3.1 Introduction 25

3.2 Research Design 25

3.3 Research sample size and description 26

3.3.1 Research sampling 26

3.3.2 Sample description 27

3.4 Initial Questionnaire 28

3.5 Pilot test 31

3.6 Final questionnaire 31

3.7 Data analysis techniques 32

3.7.1 Data coding and entering to SPSS software 32

3.7.2 Test reliability of measurement scales with Cronbanch’s alpha analysis 32

3.7.3 Test relationship among factors with Exploratory Factor Analysis 33

3.7.4 Regression analysis to see the impact of independent variables to dependent variables 34

3.8 Summary 35

CHAPTER 4: DATA ANALYSIS 36

4.1 Introduction 36

4.2 Descriptive Analysis 36

4.3 Reliability (Cronbach’s alpha) 37

4.3.1 Reliability of transformational leadership style subscales 38

4.3.1.1 Reliability of Idealized Influence 38

4.3.1.2 Reliability of Inspirational Motivation 39

4.3.1.3 Reliability of Intellectual Stimulation 39

4.3.1.4 Reliability of Individualized Consideration 40

4.3.2 Reliability of Transactional Leadership style sub-variance 40

4.3.2.1 Reliability of Contingent Reward 40

4.3.2.2 Reliability of Managing Exception – Active 41

4.3.2.3 Reliability of Managing Exception – Passive 41

4.3.3 Reliability of Laissez-Faire Leadership 42

4.3.4 Reliability of Employee Turnover Intention 42

4.4 Exploratory Factor Analysis (EFA) 43

4.4.1 EFA for independence factors: Leadership Styles 43

4.4.2 EFA for dependence factor: Employee Turnover Intention 46

4.5 The Correlation Analysis (Hypothesis testing) 47

4.5.1 Assumptions Testing 48

4.5.2 Hypothesis testing 50

4.5.2.1 Hypothesis 1 testing 51

4.5.2.2 Hypothesis 2 testing 51

4.5.2.3 Hypothesis 3 testing 52

4.6 Conclusion 53

CHAPTER 5: DISCUSSION, RECOMMENDATION AND CONCLUSION 54

5.1 Introduction 54

5.2 Research finding discussion 54

5.3 Implication for practice and recommendations for further research 57

5.3.1 Implication for practice 57

5.3.1.1 Reducing employee turnover intention through negative relationship with Individual Consideration and Contingent Reward 58

5.3.1.2 Reducing employee turnover intention through reducing the positive related with Management by Exception 59

5.3.2 Recommendations for further research 59

5.4 Research limition 60

5.5 Conclusion 60

REFFERENCE 61

APPENDIX A - SURVEY QUESTIONNAIRE 67

APPENDIX B – DESCRIPTIONS OF SAMPLE 71

APPENDIX C – RESEARCH RESULTS 72

LIST OF TABLES

Table 1 – Vietnam Merchandise Export 2

Table 2 – Leadership theories 9

Table 3 – Demographic Information 28

Table 4 – Initial questionnaire and its coding in data analysis of transformational leadership 29

Table 5 – Initial questionnaire and its coding in data analysis of transactional leadership 30

Table 6 – Initial questionnaire and its coding in data analysis of laissez-faire leadership and employee turnover intention 30

Table 7 – Sample sizes, mean scores, standard deviations of leadership style and employee turnover intention 36

Table 8 – Cronbach’s alpha of Idealized Influence 38

Table 9 – Reliability of Inspirational Motivation 39

Table 10 – Reliability of Intellectual Stimulation 40

Table 11 – Reliability of Individualized Consideration 40

Table 12 – Reliability of Contingent Reward 41

Table 13 – Reliability of ME Active 41

Table 14 – Reliability of ME Passive 42

Table 15 – Reliability of Laissez-Fair 42

Table 16 – Reliability of Employee Turnover Intention 43

Table 17 – KMO and Bartlett’s Test 43

Table 18 – EFA of 31 measurement items 45

Table 19 – EFA of 30 items 46

Table 20 – Principal Axis Factoring of Employee Turnover Intention 47

Table 21 – Factor Matrix of Turnover Intention 47

Table 22 – Model Summary 49

Table 23 – ANOVA Result 49

Table 24 – Coefficients Result 50

Table 25 – Hypotheses results 52

Table 25 – Descriptive of transformational leadership 72

Table 26 – Descriptive of transactional leadership 73

Table 27 – Descriptive of laissez-faire 73

Table 28 – Descriptive of turnover intention 74

Table 29 – Total variances explained in first EFA test 74

Table 30 – Total variances explained in final EFA test 75

Table 31 - Correlations 76

LIST OF FIGURES

Figure 1 - Industry Has Highest Employee Turnover Rate 3

Figure 2 – Research Model 23

Figure 3 – Research Process 26

Figure 4 – Age of respondents 71

Figure 5 – Experiences of respondents 71

Figure 6 – Position of respondents 71

CHAPTER 1: INTRODUCTION

1.1 Introduction

During two last decades, Vietnam is improving his quality in business environment and workforce also One of Vietnam attractiveness to Foreign Investors is cheap labor costs Various studies have conducted in order to analysis Vietnam competitiveness advantages by international organizations, such as United State Industrial Development Organization (UNIDO), World Bank It is interesting that, between the “two conflicting location factors of low labor cost on the one hand and the skill level workforce on other hand, investors continue attach relatively higher importance to the cost than to the skills dimension”, according to UNIDO report ( 2011, p 137) Beside of opportunities from labor costly, investors nowadays are dealing with the extra cost when employee turnover happens.Employee turnover has become a contentious issue, especially

in case companies lose critical talent in times when they most need to retain their knowledge capital Identifying the root causes of employee’s turnover in this industry, thus, is important in this respect

1.2 Background of study and problem statement

Vietnamese high-tech industry has attracted highest investment fund from foreigners since Renovation Policy in 1986 efficiency The investment fund is continuing grown year by year The foreign direct investment fund in 2012 to high-tech industry exceeds US Dollar 10 billion, take 50 percent of total investment fund to Vietnam industries (Vietnam General Statistics Office, 2013)

As FDI is the important part of Vietnam economic, take 66 percent of total export, contributes 18.6 percent to GDP, high-tech industry becomes major part of the Vietnamese economic achievements High-tech products become the largest export item (US Dollar 9.9 billion) in the first 6 month of 2013, surpassing traditional export such as crude oil, garment and footwear (World Bank report, 2013) Despite the decrease in recent year due to commodity price boom, high-tech export continues to dominate world trade, accounting for 61.3 percent Vietnam total manufactured export (UNIDO, 2011).The world market-share for High-Tech exports of Vietnam

increases from 0.06 percent to 0.22 percent in 2000 – 2009 periods (Vietnam Manufacturing Competiveness Reports, 2012)

Overall, high-tech industry is becoming an important part of Vietnam economic due to its contributions to Vietnam GDP as well as export shared in world As potential growth, Vietnam government decides to improve the contribution of high-tech industry to 45% of GDP in the next ten years socio-economic development strategy 2011 – 2020 (Sai Gon Giai Phong, 2011)

Table 1 – Vietnam Merchandise Export

(Source: World Bank Report, 2013)

The most important influence of FDI into High-Tech Industry, besides GDP contribution, is jobs opportunities Number of employees working in this industry has increased year by year Unfortunately, the more job opportunities are created, the more employees decide to leave company when have a good chance Employees are easy to leave company once new changes come or they do not satisfy with company Whilst low labor cost is advance competitive, employee turnover is harmful to organizations’ productivity Therefore, employee turnover becomes serious problem that all organizations are facing

In order to catch the trends of Vietnamese employee trends, surveys have been done by Human

Vietnam The studies found that the highest turnover rate of employees was belonging to Tech industry in 2008 – 2012 periods The voluntary rate increases year to year In 2008 the employee turnover rate of High-Tech is 16.7%, 2010 is 17,9%, 2011 is 19,3% and first half of

High-2012 is 9.8% (Amchamvietnam, High-2012, p.22)

Figure 1 - Industry Has Highest Employee Turnover Rate

(Source: Towers Watson Vietnam, 2012, P 28)

Employee turnover is very expensive factor When employee decide to leave an organization, it has become important for specific organization to make costly replacement as soon as possible The identification of direct and indirect costs of voluntary turnover is as replacement, recruitment, selection, temporary staff, management time, morale, pressure on remaining staff, product or service quality and so on (Morell et al, 2004, Dess & Shaw, 2001) The labor investment budget which organization spends for is a large amount, in order to support their labors quickly assess job-descriptions as quick as possible Bureau of Labor Statistics (2008) when accounting for costs of labor turnover organization has estimated the cost of employee turnover to for-profit to be up 150 percent of employee remuneration package Managers at all costs must minimize employee’s turnover (Henry Ongori, 2007)

As indicated above, high employee turnover costly impacts to business performance of companies Identifying the root causes of employee’s turnover, thus, is important in this respect Much of the empirical research on employee turnover is based on actual turnover, although some studies are based on employee intentions to quit Actually, there are strong link between intention to quit and actual turnover The relationship between intentions and actual turnover is generally stronger than job satisfaction and turnover relationship, even this consistent relationship is accounted for less variability (Mobley et al, 1979) Much of the research on perceived opportunities has been found to be associated with intentions to leave but not actual turnover (Kirschenbaum & Mano-Negrin, 1999)

To define the factor influence to employee turnover intention, various authors (Long et al, 2012, Pradeep & Prabdu, 2011, Gerstnen & Day, 1997, and Avolio & Bass, 1995) had been found the influence of leadership style to employee decision to quit their jobs Leadership is not solely factors, but is the fundamental one impacting to work-place and employee satisfaction (Kennerly, 1989)

One of manager’s duties is dealing with conflict or its aftermath as Schermerbon, Hunt & Osborn (1998) and Thomas & Smidth (1976) state If the conflict between managers and employees is not managed well, or poor managed, the morale of employees will down Once employees un-satisfy with their leaders, the decision to quit a job is considered Manager who do not use their influence to build employees trust may face with the high turnover rate, because of their less effort into retain employee

This brings the assumption that leadership practices have strong implications in the decisions to leave of employees

As indicated earlier, there are explored studies about the relationship between leadership styles and employee turnover intention in two last decades by various authors, such as Hamstra et al (2011), Gerstner and Day (1997), Avolio and Bass (1995) Some studies have been focused on Asia where economy is developing and competitive advantage is about work-force cost and loyalty, Malik, Damish and Murir (2011), Long et al (2012), We et al (2006) for example

However, there is little evidence in the literature on the relationship styles and employee turnover intention in Vietnamcase, specific in high-tech industry that faces with highest turnover rate in last 5 years.Because of negative effects of turnover to high-tech achievement and the influences of leadership style to employee turnover intention, specific in voluntary turnover, this paper will rely on questionnaires survey to discuss how leadership styles are influencing to employees turn-over in Vietnam High-Tech Industry and this raises the issue of which leadership style is best used in for this purpose

1.3 Research objective and question

As indicated earlier, leadership styles is concerned as influent factor to employee turnover and employee turnover negative impacts to business performance and competiveness advantage This study aims to explore the relationships between leadership styles, namely transformational leadership, transactional leadership and laissez-faire leadership includes with their sub-variances and employee turnover intention in the Vietnamesehigh-tech indsutry, thatfaces with highest turnover rate from 2008 – 2012.Relied on theoretical literature and empirical studies related to leadership styles and employee turnover, author will focus on how leadership style’s sub-variables considered in this study influence to employee turnover intention

The objective of this study, therefore, is to determine relationships between each leadership style, namely transformationsal leadership (includes 4 sub-variances: idealized influence, inspirational motivation, intellectual stimulation and individualized consideration), transactional leadership (contents 3 sub-variances: contingent reward, management by exception (active) and management by exception (passive)) and laissez-faire leadership and employee turnover intention in Vietnam high tech industry Besides that, this research studies the direct influence of each leadership styles on employee turnover intention

In order to focus on the purpose of research, author is developing follow research questions for the quantitative study of employee turnover intention in the Vietnamese high tech industry:

- Is there any relationship between 4 dimensions of transformational leadership (idealized influence, inspirational motivation, intellectual stimulation and individualized consideration) and employee turnover intention?

- Is there any relationship between 3 aspects of transactional leadership (contingent reward, management by exception (active) and management by exception (passive)) and employee turnover intention?

- Is there any relationship between laissez-faire leadership and employee turnover intention?

- How doeseach of leadership influence to employee turnover?

1.4 Scope and Significant of this study

The focus of this research is to determine the relationships between leadership styles and employee turnover intention in Vietnamese high tech industry Much of studies about these relationships are explored in the world, but there is little evidence on literature in Vietnam, specifics in high tech industry Target population of this study is staff and supervisor level who are working in High Teck Park, Ho Chi Minh City However, author focuses on 4 targeted companies (Jabil, Sonion, Intel and Nidec) in total 45 companies in Ho Chi Minh City High Tech Park to collect data.The findings may support leaders in Vietnamese high tech industry to reduce the problems of intention to leave of employee

There are two steps in this study, qualitative study in pilot test and quantitative research in main survey Pilot test is conducted to refine questionnaire for readability, understandability and culture accuracy of its content The main methodology for pilot test is face-to-face interviewing The main survey is conducted by quantitative research and is sent to respondents via email, online to gather data

Statistical Software of Social Science (SPSS) is used to analysis data gathered The process of data analysis includes reliability-testing, relationship among factors with Exploratory Factors Analysis and testing hypothesis through regression analysis

As indicated earlier, retaining employee is important to the success of business, because the skills and acknowledge that employee accumulate whilst working is a part of business Once facing with high employee turnover rate, organizations have to deal with the difficult of recruitment process, training new comers and the extra cost belongs to related process; whilst

should first identify the turnover roots causes.According to Frank and Taylor (2004), the most important element in retention is the leader When leadership styles are using to motivate employees and recognize their contributions, leaders can help to fix the issue of employee turnover Besides that, leaders can influence on employee decision to stay or leave by their role and behavior in working (Hedberg and Helenius, 2007; Ware, 2008)

Due to the influence of leader on employee decision, many studies have been done to identify the role that leadership plays in reducing employee turnover intention (Griffith, 2004; Hedberg et al , 2007; Avey, Hughes, Norman and Luthans, 2008) Therefore this study will based on these studies to find out the influence of leadership styles on Vietnamese High-Tech Industry; in order

to recommend solutions which business organization in related industry may apply to reduce the serious factors in their business

1.5 Structure of this study

This study includes five chapters that provide following context:

Chapter 1 provides the background of this study, as well as research objective and question This chapter also provides the scope and significant of current study

Chapter 2 provides the comprehensive review of literature on the construct of leadership styles, turnover intention and develops the hypothesized conceptual model

Chapter 3 provides the conceptual regarding research design, sample and sampling The research methodology is also defined in this chapter

Chapter 4 reveals data analysis, results of this study and all hypotheses testing

Chapter 5 is providing the conclusions of study as well as recommendations

CHAPTER 2: LITERATURE REVIEW

Traditionally, the term “leadership” is using to describe what align each member in group/ team with standards in condition of change Jong and Hartog (2007) describe that leadership influence people in order to get defined goal Besides that, leadership is one of critical and important factors in enhance companies’ achievements (Riaz and Haider, 2010) It continues to be known

as major elements that can help business organizations to maintain and improve their competitive advantage (Zhu et al, 2005; Rowe, 2001; Riaz and Haider, 2010)

Another definition of leadership by Bennis and Nanus (1985) and Hamidiar (2010) is an influence on the relationship between leaders and followers to perform to reach all set goals When leaders interact with followers, they usually combine all traits, skills and behaviors that described as leadership style (Lussier, 2004) Therefore, it is important to recognize the role of leadership in the success of an organization

As indicated before, there are explored theories about leadership that developed by various authors in last few decades Below table is the summary of leadership theories

Table 2 – Leadership theories

Leadership

Great Man The original leadership approach of leaders being born

not made Those certain individuals have exceptional qualities and are destined to lead The situation brings out the leader

Cawthon, 1996 Callan, 2003

Trait People have certain natural traits which are more suited

to leadership Leadership traits can be listed It is the combination of the right traits which makes a leader

Stodgill, 1974

Behavioural Leaders are made and not born Leadership can be

defined into certain behaviours which can be learned and developed

Skinner, 1967 Bandura, 1982

Fiedler, 1964 House, 1974 Hersey,

Blanchard, 1972

Path-Goal Theory The successful leaders create structural paths which help

followers attain their work goals House, 1971 Charismatic The personal charisma of an individual creates an

intense emotional attachment for their followers

Weber, 1947, House, 1977

Conger, Kanungo, 1994 Transactional Emphasis is placed on the leader-follower relation It is

the transactions (reward, punishment) which are the best way for leaders to motivate the performance of their followers

Burns, 1978 Bass, 1985 Bass and Avolio,

1995, 1997 Transformational Leadership is based on the sharing of a vision which

motivates and directs the followers

Burns, 1978 Bass, 1985 Bass and Avolio,

1995, 1997 Cognitive Leaders who by word or personal example influence the

behaviour, thoughts or feelings of their followers

Gardner 1996

Servant The leadership role is most successful if they serve those

Authentic That the root of any leadership theory is the need for a

leader to be authentic, to be self-aware Avolio, Gardner, 2005 Complexity Leadership takes place in a system of complex

interactive dynamics has three entangled roles (adaptive, administrative, enabling) which reflect the dynamic relationship between organisational functions and context

Uhl-Bien et la

2007

The classes of leadership style are researched through few current dedicates by differences authors Avolio and Bass (1995) have developed new theory about leader styles, called full range leadership theory Nowadays, this theory is probably the most discussed and validated model in use world-wide (Kirkbride, 2006) The conceptual of full range leadership theory is improved and now this full range leadership includes five factors of transformational leadership; three factors of transactional leadership and one factor concerned laissez-faire leadership

According to Avolio (1999) the full range leadership does not mean that all dimensions of leadership are covered inside itself, but it is a model of passive/ avoidant leadership.Three typologies of leadership in this model discussed nextaretransformational leadership, transactional leadership and laissez-fare leadership

2.3 Transformational leadership

Transformational leadership was researched by Downton (1973) and number of authors such as Vinger and Cilliers, (2006); Northouse (2010) quoted again Transformational leadership is the leadership style that “inspires followers to transcend followers’self-interests for the good of the organization and capable of having a profound and extra ordinary effect on the followers concern” (Robbins, Judge, & Sanghi, 2009, p.456)

Transformational leadership is probably best described about the effect from leaders to his/her followers, where follower can feel trust, respect toward and are motivated to achieve his/her goals or business management team’s expectations (Bass and Avolio, 1992) The major characteristics of this kind leadership is the leader’s ability to motivate follower to accomplish more than what they can do by their own (Krishnan, 2005)

Transformation Leaderships involve into followers’ job performance by providing a vision and send of mission, same with inspire pride, gain respect and trust (Bass, 1990).Daft (2010) states this leadership convinces followers to create a better expectation for the organization strategies

by belief in their own potential

Generally, leaders who perform transformational leadership usually ensure employee to understand about how important their roles and their contribution are in organization into

leader motivates their follower through their coherence (Northouse 2010) Career path of employees is drawn clearly and transform to them (Daft, 2010) Company strategy are performed through managers working styles/ leadership style (Dessler and Starke, 2004)

The weakness of this leadership is focused on the leaders and followers relationship Furthermore, transformational leader is focusing on how they can support employees to improve themselves in the long term and develop over in the short term

Dimensions of Transformational leadership were discussed with in few decades, such as Bass (1990) and Jung (1997) These are (1) idealized influence, (2) inspirational motivation, (3) intellectual stimulation and (4) individualized consideration

2.3.1 Idealized influence (I.I):

Idealized influence is the behavior “that reflected by leaders showing charismatic personality” (Shibru et al, 2011, p 688) Idealized influence is providing a role of model for high ethical behavior, instilling pride, gaining trust and respect Therefore, idealized influence is indicated when leaders react in moral and suitable way and are evaluated as dependable by followers (Kelloway et al., 2003) In other words, idealized influence is known as the degree to which leader behaves in the admirable way that caused the identification about leaderscharacteristics by followers

Additional aspects of Idealized Influence are noted by Bass (1997) when he states:

Leaders display conviction; emphasize trust; take stands on different issues; present their most important values; emphasize the importance of purpose, commitment and ethical consequences of decision making Such leaders are admired as role models in generating pride, loyalty, confidence, and alignment around a shared purpose (p 133)

In conclusion, Idealized leadership is “at its core represents the highest levels of moral reasoning and perspective-taking capacity” (Shibru et al, 2011) Building trust and seeing the good in other first are main characteristics of this type of leadership

2.3.2 Inspirational motivation (I.M)

This behavior has to do with the leader’s effort to motivate his/her followers to achieve the ambitious target by arousing their interesting, ability and beliefs Inspirational motivation leaders usually communicate with followers in order to share and challenging goals, build and raise team spirits and optimism by modeling the behaviors that are deemed appropriated (Yammarino and Dubnisky, 1994) Bass and Riggio (2006) state that “Transformational leaders get followers involved in envisioning attractive future states; they create clearly communicated expect ations that followers want to meet and also demonstrate commitment to goals and the shared vision” Therefore, Inspirational Motivation dimension is contributed through behaviors that facilitate sense of optimism and a commitment to companies’ goals and vision (Downton, 1973; Yulk et

al, 1981, Bass, 1985)

2.3.3 Intellectual stimulation (I.S)

This behavior refers leaders to challenge and evaluate their followers’ ideas and solving problem skills Intellectual stimulation leaders usually teach their subordinators to looking for a different way with their current thinking when dealing with traditional problems Strongest point of this behavior is listening to followers even if different from the leader’s ideas

Northouse (2001) states that:

This is leadershipthat stimulates followers to be creative and innovative, and to challenge their own beliefs and values as well as those of the leader and the organization This type

of leadership supports followers as they try new approaches and develop innovative ways

of dealing with organizational issues It promotes followers’ thinking things out on their own and engaging in careful problem solving (p.179)

Overall, this type of leadership involves behavior by leaders that encourages new ways of problem solving, improving follower skills by challenging the belief and values of the followers,

as well as their leaders and companies

2.3.4 Individualized consideration (I.C)

Individualized consideration is the degree to which the leader pays attention to each individual follower’s needs, acts as an advisor or coach to the follower, and listens to the follower’s concerns and needs

Northouse (2001) states:

This factor is representative of leader who provides a supportive climate in which they listen carefully to the individual needs of followers Leaders act as coaches and advisors while trying to assist individuals in becoming fully actualized These leaders may use delegation as a means to help followers grow though personal challenges (p 179)

A leader modeling individualized consideration will recognize the individual needs and provide the support, encouragement and coaching for personal development Such leaders also try to match each followers needs to that of the organization to enable opportunities for growth and self-actualization

2.4 Transactional leadership

The transactional style of leadership was first described by Max Weber in 1947 and then by Bernard Bass in 1981 Transactional leadership focuses on the exchanges between leader and follower This type of leadership, also known as managerial leadership, focuses on the role of supervision, organization, and group performance It is a style of leadership that leader promotes compliance of his followers through both rewards and punishments Leader usually communicates with their subordinates to ensure tasks are completed in the better way and rewards systems are applied when jobs had been done well (Avolio et al., 1991) Therefore, employee performance and motivation is evaluated by rewards systems through staffs’ achievements in their daily tasks (Dessler and Starke, 2004 and Hamidifar, 2010)

In contrast with transformational leadership, transactional leaders are not looking to a new future, but looking to merely keep everything the same Leadersuses transactional leadership as a model attend to followers' tasks in order to find faults and deviations Transactional leaders promote compliance of their followers through both rewards and punishment He/she will decide punishment such as punitive and penalized actions applied in case the followers or subordinates

fail to perform as per the instruction Positive rewards are such as complimentary comments, praise and recognition upon successful compliance with instruction from the leaders and achievement of objectives (Riaz and Haider, 2010).This type of leadership is working in crisis and emergency scenarios, as well as when projects need to be carried out in a specific situation Generally, main characteristics of transactional leaderships are focusing on management and supervising their followers as well as group performance As focus closely on followers’ tasks, this type of leader is carefully access any deviations from organizational standard.Contingent rewards and negative reinforcement are tools of transactional leadership in order to evaluate their subordinator’s achievements.Transactional leaders work in organization structures alignments These kinds of leaders use negotiation to attain their management goals that are in sync with the organization's goals

This kind of leadership uses extrinsic motivation to increase productivity Dimensions of this leadership are (1) contingent rewards (subordinates receive rewards for good performance), (2) management by exception (active: monitoring and correcting subordinates to align job achievements with standard) and (3) management by exception (passive: receiving contingent punishment in response obvious difference from standard)

2.4.1 Contingent rewards (C.R)

According to Bass & Avolio (1994), transactional leadership emphasizes the transaction or exchange that takes place among leaders, colleagues and followers This exchange is based on the leader discussing with others what is required and specifying the conditions and rewards these others will receive if they fulfill those requirements Therefore, Contingent Reward is an exchange process between leaders and followers in which effort by followers exchanged for specific rewards The leader tries to obtain agreements from followers on what must be done and what the payoffs will be for the people doing it

Transactional leaders link the goal to rewards, clarify expectations, provide necessary resources, set mutually agreed upon goals, and provide various kinds of rewards for successful performance

Bass(1998) explains thatcontingent reward has been found to be reasonably effective to achieve higher levels of development and performance With this method, the leader assigns or gets agreement on what needs to be done and promises rewards or actually rewards others in exchange for satisfactorily carrying out the assignment

2.4.2 Management by exception (M.E)

Management-by-Exception is one of tools of transactional leadership, but is less effective than contingent reward (Avolio and Bass, 1995) When applying management by exception, leader only takes actions when things go wrong and standards are not met (Avolio and Bass, 1989, 1995 and 1997) Leader avoids giving directions if the old ways work and allow followers to continue doing their jobs as always if performance goals are met (Hater and Bass, 1988) There is two kinds of management by exception: active and passive

When applying management by exception active (M.E Active), the leader need to arrange to

actively monitor deviances, mistakes, and errors in the followers’ jobs and to take corrective

action if necessary (Gill, Levine and Pitt, 1998, Hater and Bass, 1988) In contrast, management

by exception passive (M.E Passive) implies waiting passively for deviances, mistakes, and

errors to occur and then taking corrective action (Gill, Levine and Pitt, 1998) Once management

by exception passive is used, it may be required and effective in some situations such as when safety is paramount in importance Leaders sometimes must practice it when it is necessary to supervise a large number of subordinates who report directly to the leaders Hartog, Muijen and Koopman (1997, p 24) state, “the difference between two kinds of management by exception is that the active form the leader searches for the deviations, whereas in the passive form the leader waits for problems to materialize”

2.5 Laissez-faire leadership

Laissez-Faire(L.F) leadership is known as passive kind of leadership style (Long and Thean,

2011) This type of leader is refers to “hands-off” and allow his or her followers or employees to make decisions or to complete a task in whichever way they decide (Robbins et al., 2010) This type of leader is usually let his subordinators to work under their own-rule, and do not consider

on issues arises in organization environment (Hamidifar, 2010)

Laissez-faire leader usually avoids making decisions or giving little guidance to followers (Northouse, 2010) He/she supports staffs with resources and advice, but decides not involve into job process It effects when each member of a team is highly skilled, motivated on their own Overall, laissez-faire leadership is characterized by very little guidance from leaders and followers are completely freedom to make their own decisions Besides that, leaders will provide sources and tools when needed, but not involve in problems solving (Avolio and Bass, 1995, 1997)

2.6 Employee turnover intention (T.I):

Price (1977) defines turnover as the ratio of the number of organizational members who have left during the period being considered divided by the average number of people in that organization during the period Employee turnover occurs when employees voluntarily leave their jobs and must be replaced (Samuel & Chipunza, 2009), but some researchers considered turnover include voluntary and involuntary Managers refer to turnover as the entire process associated with filling a vacancy: either each time a position is vacated, voluntarily or involuntarily, a new employee may be hired and trained (Zheng et.al, 2010) So the simply understand turnover is the rate of employees who left the organization

Voluntary turnover happens when the employees initiate the termination of employment regardless the reasons, while involuntary turnover happens when the employers initiate a termination (Im, 2011).This means voluntary turnover comes from employees and involuntary turnover comes from employers

As intention to leave of employee strongly link with actual turnover (Mobley et al, 1979), the information about employee intention to leave maybe used as indicator for actual turnover Turnover intention is defined as an employee’s personal estimated probability that he or she has

a deliberate intent to leave the organization permanently in near future (Kerlinger, 1973) Employee intention to quit is the main determination of actual leaving from the job behavior According to Chiu and Francesco (2003), such intention is a good explanation for employee actual turnover The turnover intention comprises of a sequence of process, thinking of leaving, intentions to search and to quit (Mobley 1982; Mobley et al 1978)

Intention to quit researchers, such as Mobley (1977, 1982), Arnold and Feldman (1982), Pienaar and Bester (2008) indicate that an employee’s decision to leave an organization starts with an evaluation by the individual of his/ her current situation and experience of work A review of related literature has presented various antecedents for intention to quit, such as individual’s demographic, job factors, organization factors and more (Houkes et al, 2001; Rusconi 2005…) There is also known in literature of the impact of leadership styles on intention to quit (Long and Thean; 2010; Dewettinck and Amejide; 2007; Lee 2000…)

2.7 Relationship between leadership styles and turnover intention

The relationship between leadership styles and turnover intention has been interested by a number of authors during two last decades The way employees react to their leaders are relied

on what are the characteristics of the leaders The more satisfy employees feel about their leader co-operation and support, the higher their commitment to organization are (Yulk 1971; Keashly, Trott and MacLean 1994) The higher commitment is, the lower rate employee turnover is

2.7.1 Transformational leadership and employee turnover intention

Transformational leadership is probably best choice in relation to the leader’s effect on his/her followers, where followers feel trust, loyalty and respect toward the leader and are motivated to achieve beyond expectations (Bass, Avolio, 1992; and Vinger, Cilliers, 2006).The transformational leader fully co-operates with employees and satisfies employee’ needs right along the organization's needs The employees are feeling a corporate fit and commit to stay with the company longer when they report to a transformational leader (Cox, 2001) Dimaculangan and Aguiling (2012) stated that “transformational leaders create a positive work climate” in which followers “feel a stronger sense of shared organizational values resulting to enhanced fit with the organization, become more dedicated to the firm, and thus articulate a more passionate desire to stay” (p.203)

Besides that, various studies completed in a related field indicates that executive who performs a transformational leadership style have training his/her staffs with increased job satisfaction, a greater sense of teaching efficacy, demonstrate higher levels of organizational commitment, and have less staff turnover (Griffith, 2004; Yu, Leithwood, & Jantzi, 2002; Ross & Gray, 2006).High levels of satisfaction and commitment have a negative relationship with employee

turnover Therefore, transformational leadership is the key factor in reducing and mitigating turnover intentions Bycio et al (1995) states that the higher degrees of transformational leadership were associated with lower intention to leave

In order to get clearly pictures about the influence’s direction of each dimension of this kind leadership to employee turnover, the relationships of each variance is discussed as follow

2.7.1.1 Idealized influence and employee turnover intention

Bass (1985) states that the most general and important component of this leadership style is idealized influence Empirical findings support related statement that idealized influence is most strongly associated with measures of effectiveness such as satisfaction with the leader (Lowe, Kroeck & Sivasubramaniam, 1996) As indicated earlier, leader who acts idealized influence usually emphasizes trust, takes stands on a different issue Followers are convinced to believe that their leader is linked to transcendent powers and validation of the leader’s extraordinary gifts through repeated success (Bass, 1997; Weber, 1968) In other words, idealized leader supports staff to see the good in other and gains the truth from their followers (Shibru et all, 2011) Therefore, the satisfaction with the leaders is improved and intention to quit of employees reduces once this kind of leadership dimensions is applied.This brings the assumption that idealized influence negative relates with employee turnover intention

Hypothesis 1a: There is a negative influence of idealized influences to employee’s turnover intention

2.7.1.2 Inspirational motivation and employee turnover intention

Inspirational motivation is displayed when leader envisions a desirable future, articulates how it can be achieved, set an examples to be followed and shows determination and confidence (Bass, 1985) Leaders who display this charismatic leadership are able “to use expressive language that

is emotionally appealing and communicate a clear vision that is related to the need and values of the followers” (Kelloway et al., 2003, p.163) Followers are willing to invest more effort, ability

in their tasks when they are motivated and encouraged about better future as well as believe in their ability As result, follower may reduce their intention to quit from their current jobs when

they are satisfying with statements that build motivation and confidence This assumes that inspirational motivation negative influences to employee turnover intention

Hypothesis 1b: There is a negative influence of inspirational motivation to employee’s turnover intention

2.7.1.3 Intellectual stimulation and employee turnover intention

This leader factor encompasses behaviors that increase follower’s interest in and awareness of problem, and that develop their ability and propensity to think about problem in new way (Bass, 1985) The effects of intellectual stimulation are increasing in follower’s abilities to conceptualize, comprehend and analyze problems and the quality of solving problems improvement that they generate (Bass and Avolio, 1990)

Bass (1999) states that:

Determining the conditions under which intellectual stimulation has negative vs positive consequences for employees could enrich our understanding of its meaning and implications Under conditions of low stress, stimulating intellectually one’s employees can result in more creativity and innovative behavior In contrast, under high stress, intellectual stimulation may be a source of role overload (p.29)

Various authors in both Western and East cultures have studied the direction of intellectual stimulation to employee turnover intention, such as Wells et al (2010) in Taiwan, Long et al (2012) in Malaysia and Northouse (2001) These findings presents that intellectual stimulation negative relates to employee turnover intention and that is weak relationship.This brings assumptions that intellectual stimulation negative influence to employee turnover intention

Hypothesis 1c: There is a negative influence of intellectual stimulation to employee’s turnover intention

2.7.1.4 Individualized consideration and employee turnover intention

As indicated earlier, individualized consideration involves giving personal intentions to followers who seem neglected, treating each other individually and helping follower get what he

or she needs (Bass, 1998) Individualized consideration is in part coaching and mentoring,it

provides for continuous feedback and links the individual's current needs to the organization's mission (Bass, 1985; Bass & Avolio, 1990)

Individualized consideration may be related to individual’s need for support and personal growth (Bass, 1999).Antonakis et al (2003) states “individualized consideration refers to leader behavior that contributes to followersatisfaction by advising, supporting, and paying attention to the individual needs offollowers, and thus allowing them to develop and self-actualize” (p 265) Once follower satisfy with their leader support and fair-treatment, their intention to leave is reducing positive with the satisfaction.Thus, it may assumes that indivual consideration negative related to employee’ turnover intention

Hypothesis 1d: There is a negative influence of individualized consideration to employee’s turnover intention

2.7.2 Transactional leadership and employee turnover intention

Asindicated before, transactional leader bases on reward/ punishment to evaluate employee’s effort and compliance This style of leader only focuses on follower’s job in order to find mistakes and deviations He/she merely pays attention on keeping everything in current standard, not to change the future strategies

Since transactional leadership is working on reward systems, “it does not offer much in terms of inspiration, to motivate people to go beyond the basics”, according to Pradhan (2013, p.128) Although this might sound controlling and paternalistic, transactional leadership offers some benefits For one, this leadership style clarifies everyone's roles and responsibilities Another benefit is that, because transactional leadership judges team members on performance, people who are ambitious or who are motivated by external rewards – including compensation – often thrive

The transactional leader presumes that the employee will not do anything except for a transaction

in which the payment for service is large enough to motivate the employee to perform In transactional leadership style, the employee does nothing out of a sense of loyalty and selflessness toward the organization but only acts as a means of gaining payment

Therefore, the downside of this leadership style is that team members can do little to improve their job satisfaction It can feel stifling, and it can lead to high staff turnover

2.7.2.1 Contingent rewards and employee turnover intention

Contingent rewards is one of dimensions of transactional leadership, that leaders uses reward systems to attaining specificied performance levels Bass (1985) suggests that praise for work well done, recommendations for pay increases and promotions and commendations for excellent effort are all examples of contingent rewards

In order to understand the effects of contingent rewards to employees, many studies have been done which presents two different results Den Hartog, Van Muijen, & Koopman(1997) and Tepper & Percy (1994) studies that contingent rewards are positive correlations with transactional leadership and displays a similar pattern of relationships to the outcomes as transactional leadership effects to staff turnover intention In other words, contingent rewards may lead to high staff turnover In contrast, Goodwin et al (2001), Long et al (2012) and Wells

et al (2011) finds that contingent rewards have negative relationships with employee turnover intention when studing the relationship between leaderships style and employee turnover intention in Asia

Employees who work in high tech industry usually has high skills as well as high knowledge about this industry They may want to build up their career to higher position as quick as possible through their contribution to organization and their own achievements Therefore, if the effective rewards are applied in order to convince them to maintain or reach new performance, their intention to leave may reduce and commitment to organization may increase

Therefore, this study assumes that contingent rewards negative influences to employee turnover intention due to the similar cultures with Asia and if the effective rewards system is applied to set up new higher performance target

Hypothesis 2a: There is a negative influence of contingent rewardsto employee’s turnover intention

2.7.2.2 Management by exception and employee turnover intention

As mentioned before, leaders, who only take action when things go wrong and standards are not met, practise the managment by exception styles (Bass and Avolio, 1989) Lowe, Kroeck, & Sivasubramaniam (1996) state that managment by exception is less effective than contingent rewards Active management by exception leader focuses on monitoring task execution for any problems that might arise and correcting those problems to maintain performance standards Whilst passive managment by exception leader tends to react after the problems become serious

to take action This means managment by exception exchanges are designed to encourage followers to actively avoid committing any mistakes The leader operates as monitor of the process and will intervene to correct when absolutely needed

Avolio (1999) and Bass (1998) agure that two types of management by exception are positive with transactional leadership outcomes Besides that, if the leaders are not use their influences to evaluate achievements of followers, and their focusing on the mistakes or deviances from standard may face with high turnover intention, because the followers may feel stressful to avoid mistakes and correct the problems whilst no contributions are recognized That means these kinds of leaderships may bring higher un-satisfactions of staffs with their leadership behavior in supporting before problem become seriously

Hypothesis 2b: There is a positive influence management by exception (active) to employee’s

turnover intention

Hypothesis 2c: There is a positive influence management by exception (passive) to employee’s

turnover intention

2.7.3 Laissez-faire leadership and employee turnover intention

Laissez-faire leaders are as passive/ avoiding leadership style (Yulk, 2008), hence they do not use their authority and avoids making decisions As Bass study in 1990, this style is found out as one of least effective and satisfying style of leadership Avoiding making decisions, abdicating responsibility and missing of authority are man characteristics of this leadership style

Therefore, employees will not get any support from this leader when they face with issues to

Because of these reasons, employees will decide to leave when the satisfaction of job reduces It assumes that there is positive relationship between Laissez-faire Leadership and employee turnover intention

Hypothesis 3: There is a positive influence of laissez-fair leadership style to employee’s turnover intention

2.8 Research model

According to research objective and questions, research model has been established through literature review and the relationship between each variance of leadership styles and employee turnover intention

Figure 2 – Research Model

Management by Exception (Active)

Management by Exception (Passive)

Laissez-Faire

2.9 Conclusion

Various studieshave been indicated to be shared between the constructs of three styles of leadership and employee turnover intention This chapter explored these constructs and their related variables in more details to identify shared patterns in the relationship between them The primary focus of this chapter was to present specific evidence of deducible relationship between each of the constructs It also presents literature that alludes to the possibility that the nature of relationship between each leadership style and employee turnover intention Understanding these

natures is helpful in identify possible leadership intervention that could meliorate organization’ employee turnover intention

CHAPTER 3: RESEARCH METHODOLOGY

3.1 Introduction

In order to explore the purpose of this study - the strength and direction of relationships between indicated constructs, this chapter is to describe the methodology used in this studyand also offers

an explanation and justification the research design chosen

The theoretical research provides the foundation from which the conceptual models and related hypotheses were formulated, and this chapter, besides that, outlines the research design, sampling, measuring instruments, and data collection and analysis procedure that were deployed

to test the conceptual model

3.2 Research Design

According on Singleton & Straits (2005), there are various research methods available such as survey research, experimental research, qualitative research and historical research and so on Depending on purpose of studies, researchers may choose one or more methods to design their research For this study, survey research method is adopted to examine the leadership styles and its consequences about employee turnover intention According to Ary, Jacobs, Razavieh, and Sorensen (2006), survey research belongs to quantitative research

Quantitative research can be divided into two parts, descriptive and experimental research Descriptive study is one in which information is collected without changing the environment In human research, a descriptive study provides information about the naturally occurring health status, behavior, attitudes or other characteristics of a particular group Therefore, this study investigates the influence of leadership styles on employee turnover intention by means of descriptive and analytical methodology

Survey research is implemented to examine the characteristics, attitudes, behavior or opinions of specific population, according to Fraenkel and Wallen (2003); Salant and Dillman (1994) Moreover, survey research advantage is possible gather a broad range of information from a large population and directly collecting data from actual scenarios (Ary et al., 2006; Singleton & Straits, 2005) Singleton and Straits (2005) also stated, survey research offer “the most effective means of social description” and they can provide “Among all approaches to social research, in

fact, surveys offer the most effective means of social description; they can provide

“extraordinarily detailed and precise information about large heterogeneous populations” (p.524) Hence, the survey method using a structured questionnaire is utilized to obtain the primary data from participants

However there are disadvantages of survey research, that impact to the outcome of research Singleton and Straits (2005, p) states, “The major disadvantage of surveys relates to their use in explanatory research Beyond association between variables, the criteria for inferring cause-and-effect relationships cannot be established as easily in surveys as in experiments.” (p 244) The research design, therefore, may pose limitations that are important to consider about interpretation of the outcome That was the reason why the specific hypotheses had been formulated and field study was conducted to investigate the relationships between these constructs of leadership styles and employee turnover intention

Research process is below in figure 3:

Figure 3 – Research Process

Main Survey (n = 200)

3.3 Research sample size and description

3.3.1 Research sampling

Ho Chi Minh City and Binh Duong are location gathering all most of high-tech companies in Vietnam The workforce of high-tech industry is over 25,000 operation workers that turnover rate highest than other levels as stated in the introduction The sample description specifies the characteristics of the participant in a study The target population was employees – staffs level and supervisor level in Ho Chi Minh High-Tech Industrial Zone, District 9, Ho Chi Minh City to evaluate the leadership style of their direct leaders Therefore, the sample is convenience sample The sample description determines the characteristics of the participants in a study (Creswell,

techniques chosen to analyses data, as the extent to which observations could be generalized to the target population This research needs to ensure the sample size for generate enough statistical power and generalizability (Hair et al, 2010).Babbie and Mouton (2011) recommended that for validation purpose that the survey be administered to relatively large sample It is approximately 50 subjects, depending on the number of assessments used

For the purpose of this study, a specific sample of convenience was selected from Foreign Investment Company in High Tech Industry in Ho Chi Minh City.The ratio between subjects and variables in this study was 5:1 This study focused on 36 items of leadership styles and 3 items of employee turnover intention, along with 6 items concerned demographic information Total 39 items were researched through survey Therefore, sample size was at 39 x 5 = 195 as minimum Therefore, the convenience sample size was set at 195 – 200 employees, both males and females Sample size of this study, finally, was 202 for 8 independent variables and 1 dependent variable related in the research model This indicates that each regression model was able to generate R2

at significant 0.05% was between 0.12 and 0.15 Besides that, sample size ratio was 6.12:1 (202/ 33) was satisfied the minimum condition (5:1) Therefore, the sample size assumption was

satisfied

3.3.2 Sample description

As indicated above, sample size of this study was 202.Demographic data was collected in five (5) aspects and table 3 presents the summary of the results These statistics revealed that 50.5% (102/202) of participants were male and 60.9% were from 25 to 35 year olds and 72.3% were staff level 61.9% of responses presented the education level of participants were as bachelor More information related sample description is presented in figure 4, 5 and 6 in Appendix C

Table 3 – Demographic Information

No Demographic Description Frequency Percent

Details of each variance and initial questionnaire developed for this study is presented in below table

Table 4 – Initial questionnaire and its coding in data analysis of transformational

leadership

II1 My manager/ leader talks about his/her most

My manager/ leader emphasize the importance

of having a collective sense of mission

Individualized Consideration 4

Transformational

Inspirational motivation 2

Table 5 – Initial questionnaire and its coding in data analysis of transactional leadership

Seq Leadership Sub-variance Coding Measurement Scale Model

CR3

My manager/ leader makes clear what one can expect to receive when performance goals are achieved

ME Active 2

My manager/ leader concentrates his/her full attention on dealing with mistakes, complaints and failures

The Multifactor Leadership Questionnaire (MLQ) (Avolio and Bass, 1995)

7 Management by Exception

Transcational

5 Contingent Reward

Management by Exception 6

Table 6 – Initial questionnaire and its coding in data analysis of laissez-faire leadership and employee turnover intention

Seq Leadership Sub-variance Coding Measurement Scale Model

My manager/ leader delays responding urgent questions.

TI1 I think a lot about leaving my present job TI2

I will probably look for a new job in the next year, and

As soon as possible, I will leave the organization

9 Employee

Turnover IntentionTurnover Intention Mobley (1982)

The Multifactor Leadership Questionnaire (MLQ) (Avolio and Bass, 1995)

8 Laissez-faire Laissez-faire