Factors affecting employee commitment in banking industry in ho chi minh

We also have many theories and study for employee retention or commitment in many fields but there is not any closed research for vietnamese banking industry in Ho Chi Minh city, especia

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Nguyễn Thị Minh Thuyên

FACTORS AFFECTING

EMPLOYEE COMMITMENT IN BANKING INDUSTRY IN HO CHI

MINH CITY

MASTER OF BUSINESS (Honours)

Ho Chi Minh City – Year 2014

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Nguyễn Thị Minh Thuyên

FACTORS AFFECTING EMPLOYEE COMMITMENT IN BANKING INDUSTRY IN HO CHI

Acknowledgements

The time of studying MBus program in International School of Business (ISB) and the time of doing this master thesis, I had chances to work with many great professors and be supported from ISB staff Finishing this program, I not only learn more knowledge, skills and experience of the economy and management, but also provide many aspects of social life such as very nice friendship with many new interesting members of the program who work in many other fields

Therefore, I would like to express my sincere gratitude and deepest appreciation

to my supervisor, Dr Nguyen Dong Phong, for his continuous support of my thesis And I would like to thank all professors, leaders and members of ISB for their enthusiastic supporting me during whole program

Last at all, I would like to thank my friends and colleagues not only for their

enthusiastic supporting, participation and launching to help me finish research survey, but also take the best advantages during all my studying period

Ho Chi Minh City, April, 2014

Nguyen Thi Minh Thuyen

Abstract

Employee retention is one of the most important practices of human resources management It contributes to achieve the target and it’s also an important factor to identify the sustainable development of an organization Especially in recent crisis stage, the banking sector is going down, employee’s turnover is a serious problem of some vietnamese banks Because employee’s turnover is an human resource organizational threat, so it’s worth to research We also have many theories and study for employee retention or commitment in many fields but there is not any closed research for vietnamese banking industry in Ho Chi Minh city, especially in this crisis period

Purpose – This study analyzes the impact of the five variables based on reliable

previous research are training, leadership, working environment, remuneration and policy to the employee commitment in banking industry in Ho Chi Minh city The result may help bankers have suitable HR practices to motivate, encourage and retain their employees

Design/ methodology/ approach – A five-point Likert survey was conducted

involving 170 banking employees in Ho Chi Minh city Scale reliability (Cronbach’s Anpha), Factor Analysis and Regression were performed to test and analyze the relationship between independents variables and dependent variable

Findings – This study prove the significant impact of Effectiveness of Leadership

practices, Employee’s Utility, Elements of Career Development to the Employee Commitment Basing on this research, bankers will have more alternative suitable HR practices depending on their conditions and their strategies

Keywords – Human resource practices, employee, commitment, retention, leadership,

working environment, remuneration

Table of Contents

CHAPTER 1: INTRODUCTION 1

1.1 Research background 1

1.2 Research problems 2

1.3 Research objectives and questions 5

1.4 Research scope 5

1.5 Research methodology 5

1.6 Structure of the Thesis 6

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESIS 8

2.1 Original theories 8

2.2 Previous researches and conceptualization 11

2.3 The conceptual model and hypotheses of the research 21

CHAPTER 3: RESEARCH METHODOLOGY 23

3.1 Research design 23

3.1.1 Qualitative research 23

3.1.2 Quantitative research 26

3.2 Data analysis method 27

3.3 Research process 31

CHAPTER 4: RESEARCH RESULT 32

4.1 Demographic Sampling 32

4.2 Testing of reliability by Cronbach's alpha coefficient 34

4.3 Exploratory factor analysis (EFA) 36

4.3.1 Scale of employee commitment 36

4.3.2 Scale of research factors 37

4.4 Regression analysis 39

CHAPTER 5: IMPLICATION AND CONCLUSION 46

5.1 Discussion of finding 46

5.2 Practical implication 48

5.3 Limitation and suggestion for further research 54

REFERENCE 56

APPENDIX 1 Group discussion outline 61

APPENDIX 2 Questionaire 64

APPENDIX 3 Descriptive Statistics 68

APPENDIX 4 Testing reliability by Cronbach’s Alpha 72

APPENDIX 5 Exploratory Factor Analysis (EFA) 73

APPENDIX 6 Regression Analysis 76

List of Figures

Figure 1.1 Components of operating costs of Vietnamese banks in 2012 4

Figure 2.1 Maslow’s original hierachy of needs five-stage pyramid 9

Figure 2.2 Research model 22

Figure 3.1 Research design process 31

Figure 4.1.1 Gender structure 32

Figure 4.1.2 Marital status 32

Figure 4.1.3 Age group structure 33

Figure 4.1.4 Education structure 33

Figure 4.1.5 Type of Bank structure 33

Figure 4.4.1 Final research model 45

List of Tables

Table 3.1 Adjusted measurement scale and scale encoding 25

Table 4.2.1 Cronbach’s Alpha reliability coefficient of employee commitment 34

Table 4.2.2 Cronbach’s Alpha reliability coefficient of research factors 35

Table 4.3.1 KMO and Bartlett’s Test for employee commitment 36

Table 4.3.2 EFA result of employee commitment 36

Table 4.3.3 KMO and Bartlett’s Test for research factors 38

Table 4.3.4 EFA result of research factors 38

Table 4.4.1 Pearson Correlation model 41

Table 4.4.2 ANOVA Testing result 42

Table 4.4.3 Model Summary 42

Table 4.4.4 Regression Coefficients 43

Table 4.4.5 Testing hypotheses 44

Table 5.2.1 Descriptive statistics of COM 49

Table 5.2.2 Descriptive statistics of EUTI 49

Table 5.2.3 Descriptive statistics of ELEA 51

Table 5.2.4 Descriptive statistics of ECAR 52

List of Abbreviations

HR Human resource HRM Human resource management SPSS Statistical Package for the Social Sciences – a statistic software EFA Exploratory Factor Analysis

CHAPTER 1: INTRODUCTION

1.1 Research background

In the context of intense competition, with the goal of growth and development business, most of organizations already recognize the importance of human resources Especially in the economic sectors like banking and finance, the workforce has professional characteristics They also trained and practice in certain standard processes

So this workforce represents for the technical tools of each bank Futhermore, most of banks recognize that employee commitment is a major contributing factor toward sustaining long-term success and creating value An engaged employee is involved and excited about their work and acts in a manner that will forward the organization‟s interest An engaged workforce helps optimize and retain talent for the long-term because the employees choose to stay, even when other employment alternatives exist

Facing to the recently global financial crisis and the heavy downfall of banking and finance sector in Viet Nam, most of banks adjust HR policies and did personnel restructuring The main cause is cost of capital or fund is in pressure Bankers began to reduce labor and tighten compensation benefits The result is the turnover rate in many banks are increasing While bankers face to difficulties as recruiting and training costs, as well as destabilizing for business, the employees also have unstable career because they

do not ensure the conditions for their long-term commitment Turnover is a symptom of a larger systemic problem such as ineffective retention management, companies ought to understand what causes people to commit themselves to being productive and loyal So it‟s worth to know what is the cause of this employee turnover and how to make

employees have long-term commitment or engagement to the work place The author aims to determine the effect of HR practice factors to the employee commitment in banking industry in Ho Chi Minh city Thereby, some suggestions are given to help organizations maintain their precious human resources

1.2 Research problems

According to the KPMG‟s survey in the end of 2012, 46% asked banks said that they would not increase the number of employees in 2013 The financial statements of almost local big banks also show the number of employees no longer continue the uptrend The most severely affected from the recession in August 2012 maybe is Asia Commercial Bank (ACB), in the end of 2012, ACB has stopped re-signing with more than 100 new employees, and the first 6 months of 2013, the number of employees quit job is more than 600 employees, by the end of 2013, this figure is over 1000 employees One of the local banks have mass layoffs is Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) with 79 employees for the first quarter of 2013 and 110 employees for the second quarter of 2013 Bank for Investment and Development of Vietnam (BIDV), in the first 4 months of 2013, were down 285 employees Vietnam Export Import Bank (Eximbank) were down 29 positions in the first quarter of 2013 and

36 positions in the second quarter of 2013 Along with that, salary and allowances for employees of Eximbank in 2013 decreased by 6.5% compared to the same period of last year, nearly 319 billions Vietnam dong Ranked first in the list of banks have the highest average income in the banking industry, Military Bank (MBBank) has cut almost 225 staff in the first quarter of 2013 At a recent shareholders meeting in 2013, Maritime

Bank announced that they expected to reduce wage bill compared to 2012, number down

to 731 billions Vietnam dong, corresponding to cut more 679 people, as 13.9% total staff

The reason is local banks current both lack and redundant, redundant weakness staff and lack of high quality staff In fact, the dismissal is appropriate if the employee does not do well good job they assigned Especially in this difficult period, the bank will also focus on the quality rather than quantity, so many banks willing to cut poor staff and hunt qualified one This causes current strong movements in Vietnamese local banks The thirst of the quality and experience employees has made “The water flows around”, banking staff jump to another bank or hunted by foreign banks Almost bank promote recruit quality and experience positions, even frankly experience in similar positions That‟s why currently the favorite source of recruitment is personnel of other banks This

is not too difficult to understand because they want to take advantage of experience, reduce training time, cost of training, especially to take advantage of the relationship, and the customers have formed This is especially true for manager, senior or junior level positions

Despite doing personnel restructuring and layoff, wage bill and related benefits to employees still account for the largest component of operating expenses in almost Vietnamese banks According to statistics from the financial statements of 33 banks made

by KPMG, an reputation audit firm, salary bills are more than half of the total operating costs in 2012 Not only in 2012, statistics from the 2013 semi-annual report showed by VnExpress.net, in the first 6 months of 2013, both state-owned banks and commercial banks still spend half of operating expenses on salary although most of them were efforts

to decrease this rate For example, in the Bank for Foreign Trade of Vietnam (Vietcombank), BIDV and MB Bank, salary and bonuses to employees in the first 6 months of 2013 were 54% of total operating expenses Vietinbank and Sacombank spend 49% of operating costs to pay to employees

Statistic from the financial statements of 33 banks made by KPMG in 2012

But according to KPMG, reducing employee is the current trend of global banks, the average proportion of spending on human resources accounting for 40% of operating costs As well as spending too much on staff salaries, increasing number of staff of the Vietnamese banking sector continues to go against the general trend of the world In fact, the banks of the world are focused on developing products and services combined with techniques such as Internet Banking, Mobile Banking and they do not require developing

Figure 1.1 Components of Operating Costs of Vietnamese Banks in 2012

branch network Therefore, the important and essential thing are developing business strategies in collaborated with adjusting HR policies under pressure of limited funds to increase competitive advantage and retain core talent employees

1.3 Research objectives and questions

Basing on previous reliable theories, this research aims to determine the major factors impact to employee commitment Therefore the author analyzse and gives some implicated suggestions for banking managers or bankers to retain and maintain their precious human resources The specific research questions are:

- What are the main factors in HRM that affect to employee commitment in banking industry in Ho Chi Minh city?

- What should bankers do to maintain their employees?

1.4 Research scope

The object of this study is the employees of banks in Ho Chi Minh city, one of the biggest economic centers of Viet Nam The author attempts to conduct the study in all four groups of banks in Ho Chi Minh city (typed by the ownership of bank: State - Owned Bank, Joint - Stock Commercial Bank, Joint - Venture Bank, Wholly Foreign - Owned Bank/ Foreign Bank‟s Branch) The survey will be carried out randomly, not giving a specific number for each group of banks

1.5 Research methodology

The study is carried out within two steps relating to two different methods:

Qualitative research: using group discussion method to amend the translated

questionnaire suitable with the purposes of the author adjust the observed variables

Quantitative research: basing on collected data from questionnaire, the author

implement to test the scale and verify the theoretical model Data analyse tool (SPSS version 21) will be used for this research The preliminary scale is tested the reliability by Cronbach‟s Anpha, then by exploratory factor analysis (EFA) After that the adjusted scale will be run by Linear Regression to test the proposed model and the hypotheses The research only approaches into the mentioned factors, it means other factors (if have) will be out of the topic of this research

1.6 Structure of the Thesis

The structure of this study consists five chapters:

Chapter 1: Introduction

This chapter presents research background of the study, as well as, research problems, research objectives, research methodology and scopes

Chapter 2: Literature Review and Hypotheses

Some relative concept and definition of the study will be explained in this chapter as well

as review of previous study Proposal research hypotheses also will be introduced

Chapter 3: Research Methodology

Based on the research objectives and scopes, research methodology concerning, literature review and empirical model presented in previous chapters, this chapter particularly presents the research design, methodology and reports the processes of doing research

Chapter 4: Research Results

This chapter presents the characteristics of research samples and presents the result of the research after analyzing data Based on the results, the author will make deep analysis about each factor that impact on employee commitment

Chapter 5: Implications and Conclusions

This is the result of the study distribution of study for theory and applied, the limitation

of the study and suggest to later study also presented

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESES

Introduction

There are some realiable previous reasearchs about employee commitment or engagement, organizational commitment or retention in many fields all over the word In this chapter, I present some previous correlative basic theories which are foundation of this study, and mention to definitions of some basic concepts, also hypotheses and proposal scales are presented

2.1 Original theories

The encouragement and the preferential treatment makes the satisfaction of employees to have long time retention is an attracted and pay attention of administrators and researchers One of the classical theory of motivation is of F W Taylor (1915) ensured that to encourage staff, administrators have to find out the best way to teach them

to work, and use the economic stimulus such as salaries and bonuses to motivate their employees Abraham Maslow (1943) argued to motivate employees, managers need to understand the needs of employees and find out the right ways to satisfy those demands

He believed that individuals possess a set of motivation systems unrelated

to rewards orunconscious desires Maslow stated that people are motivated to achieve certain needs When one need is fulfilled a person seeks to fullfil the next one, and so on The earliest and most widespread version of Maslow's (1943, 1954) hierarchy of

needs includes five motivational needs, often depicted as hierarchical levels within a

pyramid The original hierarchy of needs five-stage model includes:

- Biological and Physiological needs - air, food, drink, shelter, warmth, sex, sleep

- Safety needs - protection from elements, security, order, law, limits, stability, freedom from fear

- Social Needs - belongingness, affection and love, - from work group, family, friends, romantic relationships

- Esteem needs - achievement, mastery, independence, status, dominance, prestige, self-respect, respect from others

- Self-Actualization needs - realizing personal potential, self-fulfillment, seeking personal growth and peak experiences

Figure 2.1 Maslow’s original hierarchy of needs five-stage pyramid

The theory of human nature of Douglas Mc Gregor (1956) alos pointed out, that depending on the X nature (who does not like to work , lazy at work ) or the Y nature (who are keen to work with high self-consciousness ) of the employees to have motivate measure For the X nature, managers should emphasize elements by physical stimulation, specific tasks assigned and to regularly inspect and supervise them In contrast, with the

Y nature, administrators should let them take decisions on their jobs, respect their initiatives, and create conditions for their proven ability rather than supervise them

Unlike Maslow and Mc Gregor who build theories on the basis of psychology theory, Herzberg's theory (1976) was built on the basis of actual knowledge of employees

by survey or direct interview The two-factor theory (also known as Herzberg's motivation-hygiene theory and dual-factor theory) states that there are certain factors in the workplace that cause job satisfaction, while a separate set of factors cause dissatisfaction Herzberg divided into two levels: The first level - normally work if the measures are not maintained factors are satisfied, and dissatisfied employees will work less aggressive picking These factors maintain for satisfying lower needs and called hygiene factors The second level - working energetically when not motivated by the factors referred to as measures of encouragement: if there is not, they still work normally These factors motivate for satisfaction demand and called motivators

- Hygiene factors (e.g status, job security, salary, fringe benefits, work conditions)

that do not give positive satisfaction, though dissatisfaction results from their absence These are extrinsic to the work itself, and include aspects such as company policies, supervisory practices, or wages/salary

- Motivators (e.g challenging work, recognition, responsibility) that give positive

satisfaction, arising from intrinsic conditions of the job itself, such as recognition, achievement, or personal growth

It‟s required to satisfactorily resolve both groups of hygiene factors and motivators This theory suggests that to improve job attitudes and productivity, administrators must

recognize and attend to both sets of characteristics and not assume that an increase in satisfaction leads to decrease in unpleasurable dissatisfaction And it‟s considered a fundamental research given general factors in HRM and new practical method to research human behavior in HRM Basing on this, later studies are going to research specific element in specific field

2.2 Previous research and conceptualization

Over the last ten years, the study of commitment has advanced in many different

directions A variety of disciplines have adopted the topic as a theme in their research and

these have offered fresh and significant insights These recent advances include new

approaches to both the conceptualization of employee commitment and the particular

human resource practices intended to increase it Current research concerning employee

commitment highlights the pitfalls of viewing commitment as a one-dimensional

construct that can be enhanced by a particular human resource policy This assumes that a

particular practice, for example offering flexible working arrangements or more training,

will have a significant and beneficial effect on employee commitment Unfortunately, in

practice it is not that simple because there is no single solution All employees‟ wants and needs cannot be addressed by a single policy The effective functioning of an

organization highly depends on the commitment of its employees In fact, the

commitment of employees may be a key factor that determines the success of a company

in the modern world since, in the situation of the growing competition and the constant

implementation of new technologies a company needs to have well-qualified and reliable

personnel to maintain its position in the market At the same time, the effectiveness and

productivity of work of employees still remain the major factors that can contribute to the

progress of the company On the other hand, nowadays it is obvious that financial stimuli

solely can hardly motivate employees to work more effectively and productively In such

a situation, employees commitment turns to be of a paramount importance since it is due

to the high commitment of employees they can perform positive results of their work,

increase its effectiveness and productivity, while low commitment leads, as a rule, to

poor results of the functioning of the entire organization

Commitment

Meyer & Allen (2001) define commitment as is a stabilizing force that acts to

maintain behavioural direction when expectancy/equity conditions are not met and do not

function An obliging force which requires that the person honor the commitment even in

the face of fluctuating attitudes and whims (Brown, 1996) The relative strength of an

individual‟s identification with and involvement in a particular organization (Mowday et

al, 1979) According to Salancik (1977) commitment is a state of being in which an

individual becomes bound by his action to beliefs that sustain his activities and his own

involvement Allen & Meyer (1990), commitment is a psychological state that binds the

individual to the organization

Employee commitment

It is the psychological bond of an employee to an organization, the strength of

which depends on the degree of employee involvement, employee loyalty and belief in

the values of the organization As defined by Poter (1974), employee commitment is the

relative strength of the individual's identification with and involvement in a particular

organization It consists of three factors: A strong desire to remain a member of the

organization; A strong belief in, and acceptance of, the values and goals of the

organization; A readiness to exert considerable effort on behalf of the organization

Employee mentiond here are permanent employees comprising the central and foundational group that provides the skills essential to the survival and growth of an

organization, also called core employee Core employee are supported in their work by

contingent or peripheral employees (Business Dictionary) Critical job functions will be retained by small group, relatively permanent "core" of employees with board skill allowing them to tackle a variety of jobs (Janet, 2004) As definition from Renee (2012) a core employee is a full-time attendance Core employee usually are required to work at least 40 hours per week Core employees are necessary for a business to function A contingent worker is usually a temporary worker Common core are person who works full time (Renee, 2012), they are the persons who respond multi job and affect on other person (Janet, 2004) and work for organization more than 6 months

Conceptualization of organization commitment

The concept of organizational commitment has attracted considerable attention over recent years and has become a central objective of human resource management As Guest (1987) indicated, HRM policies are designed to maximize organizational integration, employee commitment, flexibility and quality of work For the topic in question our focal interest refers to “Commitment ” which can be described as attachment and loyalty Individuals can display this attachment and loyalty at a variety of levels: their job, profession, department, boss or organization More specifically, organizational

commitment has been defined by Mowdray (1992) as consisting of three components: an identification with the goal‟s and values of the organization, a desire to belong to the organization and a willingness to display effort on behalf of the organization

Organizational commitment measures the feedback of employees for the company's affection, it founded from Meyer & Allen (1997); Porter at al., (1974) with 5 items and Janet (2004) According to the model was developed by Meyer & Allen (1997),

organizational commitment reflects at least three general themes:

- Affective commitment to the organization: It‟s the employees emotional attachment to,

identification with and involvement in the organization Employees with a strong

affective commitment continue employment with the organization because they want to

- Continuance commitment – The perceived cost associated with leaving it: The

individual commits to the organization because he/she perceives high costs of losing

organizational membership including economic costs (such as pension accruals) and

social costs (friendship ties with co-workers) that could be incurred The employee

remains with the organization because he/she “has to” It refers to an awareness of the costs associated with leaving the organization The potential cost of leaving an

organization include the threat of wasting the time and effort spent acquiring non

transferable skills, losing attractive benefits, giving up seniority – based privileges or

having to uproot family and disrupt personal relationships It also develops as a result of

lack of alternative employment opportunities Employees in this category remain because

they need to

- Normative commitment – The obligation to remain with it: Refers to a feeling of

obligation to continue employment Employees in this category remain in the

organization because they feel they ought to Organization can develop normative

commitment by providing reward in advance e.g paying college tuition Normative

pressures may also make an individual feel that they ought to remain within the

organization Acknowledging these investments makes employees feel a sense of

obligation to reciprocate by committing themselves to the organization until the debt has

been paid One important point is that not all forms of employee commitment are

positively associated with superior performance (Meyer & Allen, 1997) For example, an

employee who has low affective and normative commitment, but who has high

continuance commitment is unlikely to yield performance benefits The main reason such

an employee remains with an organisation is for the negative reason that the costs

associated with leaving are too great

In 2004, Dr Janet Cheng Lian Chew from Murdoch University tested and disclosured component scale of organizational commitment in her published research This research presented not only specific factors in HRM but also research methodology that can be applied in later research in other fields According to this, the research scale consists five components of commitment are training, leadership, working environment, remunetion and policy:

- Training: That definition is called by different way by the authors: Learning, training

opportunities (Bhavna & Swati., 2012; Waleed., 2011) training and career development (Muhammad, 2011), coaching (Liette, 2010), training and development, (Mohammad A

& Mohd H.R J., 2009), learning and development (Andy et al., 2003), amount of training

available, training methods (Karen, 2001), training and career develop (Janet, 2004) As

Dawn R Mc K (2012) Career development, a major aspect of human development, is the process through which an individual's work identity is formed It spans one's entire lifetime Career development begins with a person's earliest awareness of the ways in which people make a living, continues as he or she explores occupations and ultimately decides what career to pursue, prepares for it, applies for and gets a job and advances in

it It may, and probably will include, changing careers and jobs If the organizational

leaders help core employee set their career path, that is weapon to retain them because they feel ensuring their jobs in the future Career path is a system which is organized, formalized and it‟s a planned effort of achieving a balance between the individual career

needs and the organization‟s workforce requirements (Leiboiwitz et al, 1986) Training

and Career Development consists of training adequacy, job design, job control This measurement was developed by Blau (1989), Cammann at al., (1979), Hausknecht at al.,

(2002), Jones et al (2001), Warr at al., (1979) and Janet (2004)

The extent that a job is structured to provide regular feedback and autonomy as well as a sense of task completion in an emplyee‟s career An increase in perceived control strengthens emotional bonds with an organization A heightened sense of personal control has a positive consequence for employee‟s attitudes and behaviors‟ at work When training are certainly meeting of organizational needs and personal needs, tasks are intrinsically satisfying, employees tend to be more committed Commitment is low when employees are given repetitive routine tasks to complete or no development way in their

career path Employees will be active and dynamic at work when they are fully qualified, capable and well-trained, it‟s also increases commitment Basing on following argument, the first hypothesis is:

H 1: Training and career development has positive impact on employee commitment.

- Leadership: That was defined by different words as Workplace leadership (Bhavna &

Swati, 2012) Management style and lack of opportunities (Waleed, 2011), good leadership (Petra, 2011), supervision (Kazi & Sisi, 2011), a sense of ownership and identity (Bhavna & Swati, 2012), leadership behavior (Mohammad & Mohd, 2009), trust

in supervisor (Fleischlin, 2008), having a say (Agarwal & Gupta , 2012), supervisor

support (Muhammad, 2011), leadership (Janet, 2004) Leadership is definite as behavior

of an individual that result in none-coercive influent when that person in directing and cooperating the activities of a group towards the accomplishment of the shared goal

(Bryman, 1992) That affect directly to retain core employees One of the most important

factors that have impact on commitment is the relationship between a core employee and

a supervisor Leaders are the “human face” (Eisenberger, 1990), leader interact as a link

to practice applications among stated goals and expectations By harmonizing the competing demands, they support in managing both inside and outside the work environment If the relationship does not exceed then employee will seek to any other opportunity for new employment and vice versa The leader support is so essential to retention that it can be said that employees leave bosses, not jobs (Ontario, 2004) If the leader focuses towards the employee‟s progress, other than the formal evaluation process; this improves the employee‟s retention and commitment towards the VBs (Freyermuth,

2007) Leadership consists of transformational leadership effectiveness, performance and

satisfaction those factors are including organization leader and team leader from Metcalfe & Alban Metcalfe (2001), Bass & Avolio (1995), Podsakoff at al.(1996), Singh

Alimo-at al., (2000), Yammariono Alimo-at al., (1990), Bass & Avolio (1995), Bishop Alimo-at al., (1997)

Leader interpersonal relationship behavior include sharing appropriate information, allowing mutuality of influence, recognizing and rewarding good performance and not abusing the vulnerability of others So the extent to which the supervisor displays these behaviors will thus largely determine subordinate commitment level So the author hypothesizes that:

H 2: Leadership has possitive impact on employee commitment

- Working environment: There are many alternative names with the same meaning: The

quality of working relationships, the built environment, work place environment (Bhavna

& Swati, 2012), work place culture (Waleed, 2011), work environment, working environment (Muhammad, 2011), being safe (Bhavna & Swati, 2012), positive and negative situations (Waleed, 2011), internal communications (Andy et al, 2003), Social atmosphere (Ans et al., 2003), work environment (Janet, 2004) The purpose of the study

by Nadeem et al., (2011) was to determine what relationships between working environment and organizational commitment That is support of the organization for flexible time working, working stress

Working environment is one of the factors that affect employee‟s decision to stay with company It‟s very important to recognize the emerging needs of individuals to keep them committed and provide the work environment as necessitate People reported that

employees enjoy working, and strive to work in those banks that provide positive work environment where they feel they are making difference and where most people in the organization are proficient and pulling together to move the organization forward Workspace designs have a profound impact on employees and tend to live with job as long as satisfied Author therefore hypothesizes that:

H 3: Working environment has positive impact on employee commitment.

- Remuneration and reward: That is defined by some researchers by different words:

compensation and rewards is more popular and was called by Waleed (2011) Muhammad (2011) Kazi & Sisi (2011), Mohammad & Mohd (2009) and Elizabeth et al.(2008); Waleed (2011) called it is pay and conditions, Muhammad (2011) called it is salary and

wages rewards, Janet (2004) called it is remuneration and rewards The term „reward‟ is

discussed frequently in the literature as something that the organization gives to the employees in response of their contributions and performance and also something which

is desired by the employees (Agarwal, 1998) A reward can be extrinsic or intrinsic it can

be a cash reward such as bounces or it can be recognition such as naming a worker employee of the month, and at other times a reward refers to a tangible incentive, reward

is the thing that an organization gives to the employee in response of their contribution or performance so that the employees become motivated for future positive behavior In a corporate environment rewards can take several forms It includes, cash bonuses, recognition awards, free merchandise and free trips Remuneration and Rewards consists

of job characteristics, intrinsic and extrinsic, rewards, that is founded and developed by Broadfoot & Ashkanasy (1994), Cammann at al., (1979), Hackman & Oldham (1975),

Idaszak & Drasgow (1987), Rhoades at al., ( 2001), Seashore at al., (1982), Warr & Wall

(1979) and Janet (2004)

It is very important that the rewards have a lasting impression on the employee and it will continue to substantiate the employee‟s perception that they are valued Competitive factors and the living standard are also part of labor value That income is correlation between compensation and employee's performance And thus forming decision will continue to stick with current organization or thoughts to another organization For this reason, the author hypothesizes that:

H 4: Remuneration and Rewards has positive impact on employee commitment

- Organizational culture and policies: It has been defined by the words: organization

justice (Muhammad, 2011), Culture (Kazi & Sisi, 2011), autonomy and uniqueness (Bhavna & Swati, 2012), organizational culture and policy (Mohammad & Mohd, 2009), culture (Andy et al., 2003), organizational culture (Karen, 2001), organizational culture

and policies (Janet, 2004) Organizational culture and policies: Culture is invisible that

are management philosophy and type, communication protocol, ritual and taboo to create the uniqueness of each company (Furnham, 2002) The complement of organizational culture is structure: job design and work pattern That is including control, reporting

relationship That expresses how work to be done and business conduct Organizational

culture and policies measure the degree the organizational structure limits the action of employees, testing the focus on the influence of policies and procedures, the organizational goal clarity and planning by Broadfoot & Ashkanasy (1994), Kabanoff (2000), O‟Reilly at al (1991), Morita at al., (1989), Sheridan (1992), Janet (2005)

If employees believe that their organization values quality products, they will

engage in behaviors that will contribute to high quality If employees are convinced that

their organization values participation, they will be more likely to feel as though their

participation will make a difference They will thus be motivated and be more willing to

seek solutions and make suggestions to contribute to the organization success The

appropriateness about culture, perspective can make a long-term cooperation This means

that if the employee agrees with the organizational policy, organizational culture, they

can stick with that organization So I supported this following hypothesis:

2.3 The conceptual model and hypotheses of the research

Basing on following argument and presented opinion, the research hypotheses were aggregated with five elements:

H 1: Training and career development has positive impact on employee commitment

H 2: Leadership is has positive impact on employee commitment

H 3: Working environment has positive impact on employee commitment

H 4: Remuneration and rewards has positive impact on employee commitment

H 5: Organizational culture and policies has positive impact on employee commitment

Figure 2.2 Research model

Conclusion

Basing on scale of commitment of Janet (2004) we will adjust to build this model for banking industry in Viet Nam The model consists of five components: (1) Training and career development, (2) Leadership, (3) Working environment, (4) Remuneration and rewards, (5) Organizional culture and policies And all these components have positive impact on employee commitment In this chapter I also poited out few original basic theories which were the foundation for later actual researches, and this study was conformed to these literature

Training and career development

Leadership

Working environment

Remuneration and rewards

Organizational culture and policies

CHAPTER 3: RESEARCH METHODOLOGY

Introduction

This chapter presents the research methodology used to build and test the theoretical model and the hypotheses I also highlight how the research problems will be determined, how the participants take part in this research and how the measuring instruments will be used This chapter consists of two sections, research design and analysis method

3.1 Research design

The objective of the study was to investigate factors that impact on the employee commitment in banking industry in Ho Chi Minh city so that the banking employee was the unit of observation The employee worked at different departments for different kinds

of banks in Ho Chi Minh city such as: state – owned bank, joint Stock Commercial Bank, joint – venture bank, wholly foreign – owned bank, or foreign bank‟s branch in Ho Chi Minh city The research was carried out through two steps: (1) qualitative research and (2) quantitative research

3.1.1 Qualitative research

Based on previous researches, I established the research model with five components have positively affecting to employee commitment The questions for measeurement scale also borrowed from Janet (2004) This preliminary scale was in Appendix 1 – Group discussion outline The qualitative reasearch used group discussion and playing role method It aimed to amend the translated questionnaire suitable with the purposes of the author and adjust the observed variables used for formal research

I made deeply converse with the participation of ten banking employees in Ho Chi Minh city to investigate whether they understand clearly about the translated questionnaire or not This group discussion had one HR manager from Asia Commercial Bank (ACB), one branch manager from Orient Commercial Joint Stock Bank (OCB) and eight employees who my friends working in Asia Commercial Bank (ACB), Orient Commercial Joint Stock Bank (OCB), Vietnam Export Import Bank (Eximbank), Bank for Foreign Trade of Vietnam (Vietcombank), Agricultural Development Bank of Vietnam (Agribank), Sacombank, Standard Chartered Bank Vietnam, Shinhan Bank Vietnam And myself is also a banking employee During the interview, I wanted to explore the suitability of the scale for conducting the research in Ho Chi Minh city Besides, I expected to receive some suggestions from the interviewees to make the improvement for the scale

Finally, the group discussion gave the useful feedback Therefore, the respondents agreed that five given factors concerning with their commitment in banking career They‟re quite adequate and were main representative HRM factors I also recieved comments that the scale‟s having some items aren‟t clear, duplicated and unnecessary So the item scale after qualitative research is adjusted the wording and simplify some items, e.g in Training and Career development factor, two items “thường xuyên tạo cơ hội để phát triển bản thân cũng như nghề nghiệp” and “có những hoạt động phát triển để tôi hiểu hơn về khả năng, mục tiêu cũng như điểm mạnh, điểm yếu của mình” was responsed that lengthy expression and duplicated, it could just clearly as “chương trình phát triển nghề nghiệp cho nhân viên” With expression “Tôi vẫn có thể làm tốt vị trí công việc này ở

một doanh nghiệp khác”, most interviewer was misunderstanding of the purpose of the author The author would like to know if the current bank was the best advantage environment for employee to achieve good performance or not But the interviewers assessed their capacities So I decided to remove this item, it wasn‟t in the formal questionnaire

Specifically, measurement scale of employee commitment were adjusted from 9 items to 5 items, measurement scale of five research components were reduced from 24 items to 19 items, and some statements also were expressed in different words to better understanding The preliminary scale was presented in Appendix 1 – Group discussion outline It was designed both in English as I borrowed from Janet (2004) and translated into Vietnamese Finally I had adjusted measurement scale was used for questionnaire in formal research And I also encoded the scale items for data entrying and processing

Table 3.1 Adjusted measurement scale and scale encoding Measurement of employee commitment (COM)

Com1 I feel a strong sense of belonging to this bank

Com2 This bank really inspires me best to my job performance

Com3 My values and this bank's values are very similar

Com4 I will stick with this bank indefinitely

Com5 I am proud that I am a member of this bank

Measurement of training and career development (TRA)

Tra1 I am properly orientated and trained upon joining this bank

Tra2 This bank has career development activities for employees

Measurement of leadership (LED)

Led1 Leadership practices help me to become a high performing employee

Led2 Leadership practices enhance my job satisfaction

Led3 Leadership practices make a positive contribution to the overall effectiveness

Led4 Employees are well informed on matters important to them

Led5 This bank has sufficient effort to determine the thought and responses of employees Led6 Organisational structure encourages horizontal & vertical communication

Measurement of working environment (ENV)

Env1 My working life balances with my family life

Env2 Overall this bank is a harmonious place to work

Env3 The physical working conditions are pleasant

Measurement of remuneration and reward (REM)

Rem1 Employees are given positive recognition when they have high performance

Rem2 This bank pays well

Rem3 This bank offers a good benefits package compared to other organizations

Rem4 This bank offers good opportunities for promotion

Measurement of company policies (POL)

Pol1 Policies and procedures are helpful, well understood and up to date

Pol2 Progress towards meeting planned objectives is periodically reviewed

Pol3 The organizational structure facilitates the way we do things

Pol4 This bank has a defined vision/mission to meet its goals

3.1.2 Quantitative research

Questionare design

Questionnaire was designed in English, after that the author translated it into Vietnamese for researching purposes And then, the result was translated back to English The questionnaire was designed to allow the researcher to collect the relevant information

to test proposed model So the questions were incorporated into the questionnaire for the

purpose of this study and divided into two parts presented in Appendix 2 - Questionaire:

Part A - Invidual information: There were eight questions in this section about

interviewer‟s demographic profile That data help the author understand about their interviewee and know deeply research objective That data also help the author in SPSS

regression to deeply research the factors influencing to employee such as age, gender, education, salary, job position, organization, experience time

Part B - Main survey content: This part was base on designed Likert scales and show the

action and attitude of banking employee about their bank such as training, leadership, working environment, remuneration and policies also I used 5 level Likert scale with level 1 for strongly disagree to level 5 for strongly agree And the main survey content was the adjusted measurement scale obtained from this past preliminary research

Sample method

It were convenience sampling, this method were chosen because it‟s advantage is low cost, quick responsibility Interviewees was banking employees working in Ho Chi Minh city, if one of question in part A rejected (as company owner, working part time, working less 6 months or not support the organizational culture and vision), this interview were not recorded So that my data satisfied with my purpose

Sample size

Samples were selected by convenient method Given that the minimum sample size is 5 sample for 1 estimated parameters (Bollen, 1989) The study sample standard 5:1 Theoretical model in this study has 34 parameters to be estimated, so the minimum sample size is 34 * 5 = 170 samples The sample size was estimated, had been emitted is

170 So the remaining 170 questionnaires were used for the study

3.2 Data analysis method

Data was analyzed by the SPSS 21 (Statistical Package for the Social Sciences) Some main tools of SPSS such as: Discriptive Statistics, Graphs were used for sample

description After that, using the tool to test the scale reliability (Cronbach‟s Anpha), Factor Analysis, using Regression to test the relationship between independents variables and dependent variable

Descriptive analysis was used to identify the characteristic of the sample of the study Exploratory Factor Analysis (EFA) was used to identify factors that affect to employee commitment in banking industry in Ho Chi Minh city The scale factors is assessed through Cronbach‟s alpha coefficient reliability, factor analysis exploring EFA (Exploratory Factor Analysis)

Regression was used to test the given hypotheses Whether all factors of the research model have impact on employee commitment and and all of them are positive correlations

Because studied scale were learned and tested in other fields and other countries

so the scale must be calibrated to suit the situation in Vietnam in general and in particular for banking industry Firstly, I tested the scale by Cronbach‟s alpha coefficient to assess the convergence properties of the observed variables measuring a certain element in the research environment and to remove the garbage Thus, the variables are correlated variables - total (item - total correlation) is less than 3 will be disqualified and criteria factors (scale) when it has reliability Cronbach‟s Alpha of 6 or higher (Nunnally & Burnstein, 1994)1

1

According to Nunnally & Burnstein (1994), Cronbach's Alpha is too high (> 95), it appears likely successor observed variables (Redundant items) in thought the scale Turn excess is observed variables measuring a concept almost coincides with other measurement variables, similar to the case of collinear

Next, I tested the value of this scale differentiated by factor analysis EFA The weighted variables (factor loading) is less than 5 in the EFA analysis will continue to be deleted2 Factor extraction method used was Principal axis factoring with Promax3rotations, stops rips factors eigenvalue is 1 Scale is acceptable when the total variance extracted greater than or equal to 50% (Gerbing & Anderson 1988) And finally KMO coefficient ≥ 5, the Bartlett test had a statistically significant (Sig < 05)4

The last step is Hypotheses testing by using Multiple Regression Analysis The purpose of stepwise regression analysis was to develop a group of independent variables that are useful in predicting the dependent variables and to eliminate those independent variables that do not provide any additional prediction to the independent variables already in the equation In this study, the stepwise regression analysis was conducted to test the relationship between the five independent variables of the study: working environment, remuneration and rewards, training and career development, leadership, organizational culture and policies and one dependent variables: employee commitment

2

According to Hair & CTG (1998, page 111), Factor loading is the norm to ensure the practical significance of EFA (Ensuring Practical Significance) Factor loading > 3 is the minimum requirement, factor loading > 4 is important, factor loading ≥ 5 is practical significance And the suggestion is if using factor loading > 3, the minimum sample size is 350, if the sample size is about 100, should using factor loading > 55, with the sample size is about 50, should using factor loading > 75

3

According to Gerbing & Anderson (1988), quoted Principal Axis Factoring Method with Promax rotation (oblique) structure will reflect more accurate data for multi-scale navigation Meanwhile Principal Components extraction method with Varimax rotation (orthogonal) was used for uni-directional scales

4

KMO is an indicator used to examine the appropriateness of EFA, KMO 5 ≤ 1, the factor analysis is appropriate Testing the hypothesis of Bartlett reviewed the correlation between the observed variables in the overall zero If this inspection was statistically significant (Sig < 05), the observed variables are correlated with each other in the overall (Hoang Trong & Chu Nguyen Mong Ngoc, 2008)

Significant is less than 05 to assure this correlation matrix is significant different from an identify matrix (Nancy et al., 2005)

Means and standard deviations and correlations Correlation coefficients were calculated for initial exploration of the relationships between variables Correlation is used to measure the size and direction of the relationship between two variables (Tabachnick & Fidell, 2001) In this study, a correlation analysis was carried out to measure the inter-relationship between independent variables (working environment, remuneration and rewards, training and career development, leadership, organizational culture and policies), dependent variables (employee commitment) On completion of the correlation analysis, a regression analysis was conducted in order to further evaluate and understand the relationships between the dependent and independent variables of the study, and to test the hypotheses of interest