Turnover rate and unfair paying salary and benefit at tin nghia petrol joint stock company

UNIVERSITY OF ECONOMICS HO CHI MINH CITYInternational School of Business ---LE ĐOAN NHAN TURNOVER RATE AND UNFAIR PAYING SALARY AND BENEFIT AT TIN NGHIA PETROL JOINT STOCK COMPANY

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-LE ĐOAN NHAN

TURNOVER RATE AND UNFAIR

PAYING SALARY AND BENEFIT AT TIN

NGHIA PETROL JOINT STOCK

COMPANY

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2018

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-LE ĐOAN NHAN

TURNOVER RATE AND UNFAIR

PAYING SALARY AND BENEFIT AT TIN

NGHIA PETROL JOINT STOCK

COMPANY

ID: 22140032

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: PHAN THI MINH THU

Ho Chi Minh City – Year 2018

Executive summary

There are potentially existing problems in Tin Nghia Petrol Company which may reduce the competition edge of organization and harm to its culture This research was commissioned to examine what problem in the company, the causes leading to problem are and to suggest the validated solutions to deal with problem, which are in line with company’s policy and resources

The main purpose of this thesis is to explore the causes of high turnover rate through the current problems with staffs at Tin Nghia Petrol Company

Method of analysis is combined between validated data and theory-informed which collected through in-depth interview and company survey to explore the causes

of problem

The findings of the study revealed that unfair paying salary and benefit tend to play a significant role in turnover intention of staffs The findings are discussed in details in the research along with some recommendations for the company and management board to increase the level of employee satisfaction and reduce the turnover intention in Tin Nghia Petrol Company The solutions focus on main cause of unfair paying salary and benefit:

- Setting up paying salary and benefit based on performance

- Build the performance appraisal logic and fairly combine setting up KPIs system with clear job description

Total cost to implement above solutions is approximately 250milion VND In currently, this cost is really high but it will be strategic objective to 2030, the company aim for investing in human resource

Table of content

1 INTRODUCTION 1

1.1 The company background 1

1.2 Company structure and mission 3

2 PROBLEM CONTEXT 4

2.1 The turnover rate status in the Tin Nghia Company 4

2.2 Background of the symptom 7

3 PROBLEM INDENTIFICATION 11

3.1.1 Unfair assigned workload to staff of supervisor 11

3.1.2 Unfair paying and benefit 12

3.1.3 Promotion appraisal bias 13

3.1.4 Repeated and boring working 14

3.2 Justify problem in term of importance 15

3.3 Final Causes and effect map 16

3.4 Cause validation 17

4 ALTERNATIVE SOLUTIONS 20

4.1 The first alternative solution: Setting up salary and benefit policy based on performance 4.2 The second alternative solution: build the performance appraisal logic and fairly combine setting up KPIs system with clear job description 4.3 The third alternative solution: Proving some training programs to low performance staffs 5 EVALUATION OF SOLUTIONS AND ORGANIZATION OF ACTION 5.1 Evaluation of solutions 22

5.2 Organization of actions 23

6 SUPPORTING INFORMATION 25

Appendices 25 References

LIST OF FIGURES

Figure 1 Staff of age at Company in 2016

Figure 2 Quantity of staffs leaving in each age period from 2013-2016 Figure 3 Result of evaluated performance of staff position in detail each group of age

Figure 4 Ratio of staff with high performance in detail each group of age period from 2013 to 2016

LIST OF TABLE

Table 1 The number of employees left period from 2013-2016

Table 2 Table salary scale period 2015 to 2017

1 INTRODUCTION

1.1 THE COMPANY BACKGROUND

General information: Tin Nghia Petrol Joint Stock Company officially operated

as a Joint Stock Company on January 1st, 2009 based on the conversion from Tin Nghia Petrol One Member Company Limited (established in 1999 – a subsidiary company of Tin Nghia Corparation)

With two petrol stations from the beginning stage, the output was only some of million liters per year; up to now, the company has a wide distribution network in Dong Nai Province with sale volume of hundreds million liters per year turnover reached trillions of VND per year and many consecutive years have been name in Top 500 largest enterprises in Vietnam Apart from company’s retail system, also distribute many agencies and industrial customers in and out of Dong Nai province

Petroleum trading is the main business with turnover more than 90% of total revenue and continuous development over many years

Foundation and development process: Through nearly 20 years of foundation

and development, with over 350 employees, Tin Nghia’s brand name gradually affirms

in Dong Nai market as well as Southeast region, and attracts more and more customers

Distribution system includes 44 locations in Bien Hoa and some towns as Vinh Cuu, Cam My, Xuan Loc, Long Thanh, and so on In addition, the company has 30 petroleum agencies, nearly 200 industrial customers (including factories, companies using petroleum oil as fuel) and more than 1,000 other customers (such as garages, transportation units…) Annual output increased from 7% to 10% sale reached over 3,000 billion VND

With 16 tankers and 2 trucks, we provide transportation service for all trading activities such as gasoline, lubricant and gas tanks to internal petrol station and company’s suppliers Annual transportation volume increase from 10% to 15% and reaches 200 million liters of gasoline and over 2,000 tons of gas tanks

1.2 Company structure and mission

Finance and Accounting Department

Technology Investment Department

The first

petrol

stations area

The second petrol stations area

The third petrol stations area

The fourth petrol stations area

The fifth petrol stations area

The eleventh petrol stations area

2 PROBLEM CONTEXT

2.1 The turnover rate status in the Tin Nghia Company

According to the statistics shown in the company’s reports, the number of employees leave at Tin Nghia Petrol has been increasing in the past 4 years (2013-2016) Especially in staff position, this number of staffs quitted their jobs are even more surprising This problem poses a threat to the company’s mission to grow in next time

Table1.The number of employees left period from 2013-2016

(Source: Human Resource Department) Based on the number of employees at Company period 2013-2016, the number of staffs leaving continued to increase during this period (form 10 to 35 people) while other position nearly keep unchanged

It can be seen that the number of workers left is also very high but they are nearly the same in period from 2013 to 2015 while staff leaving have being increased Worker position is easy to recruit with simple requirements to have high school diploma

or equivalent (not required to graduate at colleges or university), physical strength and dexterity Addition, the time is short for them to train so that the number of quitted workers is not problem in the company

According to Price et al.1 with Causal Model of Turnover (voluntary leaving from an organization), turnover is defined as the ratio of the number of organizational members who have left and divided by the average number of people in that organization during the period The model shows that intent to stay has a direct negative impact on turnover, when job satisfaction increases, intent to stay with the organization will be increased

Micheal et al.2 indicated that employee turnover is one of the persisting problems in organizations Arie et al.3 showed that high employee turnover is related to lower organization performance

The manager is caring the number of staff leaving because of its excessive growth in the period from 2013 to 2015 (from 10 to 35 people, from 24% to 53%) Staff position has various function in the company, including commercial finance, accounting, marketing, project appraisal, recruitment, compensation & benefit in Head

office, located at all branches of the company They are accountants, sale man, project staff, recruitment staff and C&B staff They play an important role in business operation and have direct communication with each other functions Staff position is required graduate at colleges or university, good at English and computer skill for recruitment

Figure 1.Staff of age at Company in 2016

Based on the report of Human Resources Department shown the number of staffs in 2016 were 66 people (account for 20.06%/ total employees) Regarding to the average age as shown in Figure 1, about 29% (equivalent 19 staffs) were 22 to 28 years old, 35 % staffs (equivalent 23 staffs) were 29 to 35 years old and 36% (equivalent 24 staffs) has the age range more than 35 year of age It can be seen that number of staffs in group upper 35 years old is the most

Figure 2.Quantity of staffs leaving in each age period from 2013-2016 (Source: Human Resource Department)

Regarding to the age of staffs left as shown in Figure 2, the most of these staffs were 23 to 28 years old, the next one were 29 to 35 years old while upper 35 years old is nearly zero

Year 2013 Year 2014

Year 2015 Year 2016 Figure 3.Result of evaluated performance of staff position in detail each group of age

period from 2013 to 2016

(Source: Human Resource Department) According to the result of evaluated performance of staff position in period from 2013 to 2016 with three groups different age, it can be seen that the number of staffs are appraised with the highest performance were group 29-35 of age, next group 23-28 of age, last group upper 35 of age with the lowest performance

The staffs in group from 23 to 28 years old were young therefore almost lack experiences Despite lack experiences in major field of working, they are very vivacious and full of energy in their mission Addition, it is easy for them to keep up the trend of high technology because of their dynamic and youth Sometimes, they give creative ideas like using technical software in their work so that they solve their work quickly and effective The manager often has a good evaluation about staffs in this group

The staffs in group from 29 to 35 years old who be evaluated as having the highest performance in staffs position by their experience in major subject and flexibility in solving complex work Moreover, they are not too old to catch the trend developing economic They have both experience and dynamic

Next, the staffs in group upper 35 years old have worked at the company for a long time and they are accustomed to their job They also have experience in major subject Some of them are evaluated with high performance but these are not more The most of them are lack of dynamic and spirit in their work They may not be motivated to strive to work more efficiently and their capacity depends on requirement of managers

or supervisors

Figure 4 Ratio of staff with high performance in detail each group of age

period from 2013 to 2016

(Source: Human Resource Department)

“According to this statistical number is posing a threat to company, the staffs leaving focus on the high performance staffs It’s necessary to understand the causes of

turnover rate of the staff position, why the staffs want to leave the company”, Mrs Phan

Thi Loi – Human Resource Supervisor shared

According to Bluedorn 4 turnover is defined as process did not only mean an individual left the company It meant the individual stopped playing a role in the company and left the relevant areas of the company

2.2 Background of the symptom

An interview was performed with different groups of respondent, such as: staffs, leaders who are currently working for the company, staffs who already left, who intend to leave company but then decided to stay Last but not least, HR manager will be the one standing at company’s overview to provide the information in the general The

23-28 age 29-35 age

>35 age

The staffs with high performance

qualitative questions have been used to investigate the interviewees’ point of view about what the concerns exist in the organization are

Mr Nguyen The Anh-IT staff, 28years old, who had left company 1 year ago, shared that:

“The unclear job description, I always was assigned a lot of work by supervisor and he explanted to that because I did work very well and finished quickly I felt unfair about this Addition, I spent 2 years in the company, I did not have more opportunities

to improve my skill I need a working environment more dynamic, creative and fairer”

Mr Nguyen Hoai Nam, an electrical engineer, 26 years old said that:

“I worked at the company for 2 years I did not have more opportunities to improve

my skill I am still young and I want to take more challenge to improve myself Therefore, I need a working environment more dynamic and creative”

Another interview was promotion with Mr Duy- a sale man, 32 years old, who had left company for 3 year

He had worked at company for 7 years He always tried his best in work and take new challenges, taking time to improve his marketing skill for finding a promotion opportunity He was a staff in the top best staffs of company with high performance However, he has no any opportunities to get a high position during the time he had worked at the company Therefore, he quitted his job at company to find another company where he can get supervisor position easier

According to Mrs Tran Thi Ngoc Ngan, a general accountant, 35 years old, shared that:

“Despite having all necessary requirement for getting vice manager position in Finance and Accounting Department, I still was not appointed This position was given

by another person, Mrs Linh, who has good relationship with General Director Even, she was not enough necessary factors for this position I think that it is a very difficult for me to get high position because promotion appraisal bias and I unsatisfied about this”

As a general expression, if staffs know that their opportunity for a promotion does not easily come by bias factor, they will not satisfy in their work That is also the reason why they intended to search for another job outside of company

Another cause for turnover rate of staff position is compensation and benefit Salary paying bases position, educational level and seniority (employee has spent time

at the company more or less) Therefore, the staffs have short seniority is paid lower although they are evaluated higher performance It is seen that why the high performance staffs often compare their salary with other staffs who get salary higher but low performance because of their long seniority They feel unfair for this

Mr Nguyen The Anh-IT staff, 28 years old, who had left company 1 year ago, shared that:

I had worked at company for 2 years, my salary is lower than 3 other staffs in

my functional Department, these staffs spent more 6 years at the company although my work is more than theirs and my performance is also higher very much

Mrs Luong Thi My Chi, accountant, 50 years old, has worked at company for

25 years said that:

She wants to keep a stable work rather than take a new challenge to get a promotion opportunity She knows certainly that she has no opportunity for her promotion because of company’s policy She is too old to find another job better easily Moreover, she has worked at the company for 25 years, so she can get high salary because company’s salary paying base on the time working for the company more or less She is satisfied with her current job Therefore, she just completed her task as acceptable level rather than taking time to investigate the new things.”

Addition, another cause about benefit, the staffs nearly have no any an opportunity for their promotion because of promotion appraisal bias while salary and benefit policy have very large interval between staff position and supervisor position

According to Mrs Tran Thi Ngoc Ngan, a general accountant, 35 years old, shared that:

“Salary paying bases position is necessary because of supervisor’s responsibility but interval is so large between staffs and supervisors, 5 times higher that should be care Addition, benefit is also, supervisor position with company`s welfare state is annual traveling abroad (Japan, Korea, Australia) while staff position

is traveling domestic (Dalat, Mui Ne, Vung Tau)”

Mr Trung – quit the job, said “Beside the paper work at company, I must go out

to with the customer until the night, go for a drink with them I drank every day, felt very tired and had no time to care for my family I realized that I need to change my job to protect my health and care for my family.”

Mrs Tran Quynh Tam, chief accountant said that:

“Company was facing resource the high performance staffs decide to leave

with high turnover rate while current staffs are not high performance and passive attitude work, they just want to maintain the current working way rather than actively improve and perform the new and better one They are satisfied with their current jobs and behaviors, or in another way, they tends to maintain their current working style without any significant improvement This problem poses a threat to the company’s mission to grow in next time”

Mr Tran Thanh Tung Planning and Development Department, Manager shared concerns exist in his functional team:

Recently his team faced the biggest problem is three staffs of his team had left while the current staffs cannot catch the working pace and response requirement

perfectly They feel embarrassed when they are assigned more tasks, these behaviors may be known as a passive involvement in group work as they tended to reject new task and protect their benefit Addition, it is hard to find out the suitable candidate to replace for the staffs left As a result, working quality of P&D functional team was decreased during a period of time

In conclusion, from statistical number above of company and result of interview, there are some general symptoms that are happening in currently Company

3 PROBLEM INDENTIFICATION

Since the symptoms indicated that in recent several years, increasing number of staff left the company It is very necessary and urgent to figure out reason for this The in-depth interview session are conducted from 3 main groups, first group: managers/supervisors; second group: staffs who had left the company and third group current staffs There are some key reasons leading to the high turnover rate of staffs at including: unfair assigned workload by supervisors, unfair paying salary and benefit, promotion appraisal bias and repeated and boring work

3.1.1 Unfair assigned workload to staff of supervisor

The high performance staffs often claimed is that they are assigned workload so much by supervisor They had covered multiple tasks but the benefit received is unchanged It means that other staffs of functional teams cannot meet the required work effectiveness ability, from that, the existing the high performance staffs have to cover for the workload of the team This is one of the main key reason lead to the team spirit issue and the staffs are dissatisfaction about this They also complain that supervisor is unfair assigned task for them Addition, they also think that supervisor seem like them

as a tool to help him complete his work than as a staff

Addition, giving the staff high workload, the manager just assigned to those whom they think that they can solve the job quickly and show their talent However, even talents would complete the huge workload with their efforts, but if the situation lasted long, their spirit would be down and they would feel the unfairness, then they would decide to leave the company

Mr Nguyen The Anh, IT staffs, 30 years old, he left the company one year ago share that

He had worked at the company for 3 years, during this period of time, he always had covered multiple tasks than others staffs of team because he could had finished supervisor’s requirement quickly an exactly He had to surf his work’s challenges himself without any help of supervisor or other staffs of team The more he did well, the more tasks he got but the benefit received was unchanged He also expected his effort was recognized and salary is paid worthily with his performance but he did not get anything

Mr Tran Duc Tuan-supervisor of Technology Department share that

Technology Department has five staffs, only two of all are evaluated high performance These two staffs are young and very active, they are easy to approach tasks with high requirement and often have good ideas to improve their job while other staffs of team is do their work follow to supervisor’s instruction Therefore, I have to assign tasks to the high performance staffs more than the other staffs I always evaluate them very good but I cannot decide their salary

According to Min et al.5, lack of close personal interaction leads to lack of emotional attachment and loyalty to the organizations, thereby increasing employee turnover Supervisors need to have more objective assessment on assign task process and interact with their staffs more frequently

According to Hackman & Oldham’s Job Characteristics Model6

, the reasons that they leave the jobs are they lack of internal work motivation, job satisfaction and low work effectiveness Internal work motivation may come from coworkers, managers, global team, and regional team If employees can feel the motivation throughout their works every day, it should be the big motivation for them to continue contributing to the company When they lose the motivation, they would not satisfy with their current tasks and jobs, leading to the low work effectiveness At the stage of performing not well, they actively ask to leave the company or they will be fired passively

3.1.2 Unfair paying salary and benefit

Jackson et al.7 stated that the role of pay in attracting and retaining people at work has been recognized for many decades and is increasingly important in today’s competitive, economic environment where strategic compensation planning is needed

 The first cause related to unfair paying salary and benefit is lack of recognition to talent staffs and paying not based on performance is reason why talent staffs decided to leave

Mr Nguyen Van Thanh- technology staff, 30 years old, who had left company 1 year ago, shared that:

“I had worked at company for 2 years, my salary is lower than 3 other staffs,

we at the same functional team, the same position, the same educational level but they have spent more 10 years at the company while I spent for 2 year Despite of my work

is more than theirs and my performance is also higher very much I think that I did not recognize and unfair paying”

 The second cause related to unfair paying salary and benefit is salary & benefits issue was led by comparing paying between talent staffs with each other Specially, the staffs in group from 23-28 ages, they thought that their performance is higher than the other staffs while their salary is lower because currently salary paying policy not based on performance otherwise seniority related pay

Interview with 4 current staffs who have worked for more than 15 years, all of them are more 40 years old They are confessions that they did not feel interested in work and decreased their enthusiasm with current work They think that they are old to get new challenge and they have also lost motivation Although they just complete their task as acceptable level, they still keep stable salary paying Addition, every after

3 years they will be increased salary level This is a key reason create comparison between staffs who have short seniority and long seniority

Mrs Luong Thi My Chi, accountant, 48 years old, has worked at company for

20 years said that “She is too old to find another job better easily Moreover, she has

worked at the company for 20 years, so she can get high salary because company’s salary paying base on the time working for the company more or less She satisfied with her current job Therefore, she just completed her task as acceptable level rather than taking time to investigate the new things

On the other hand, the talent staffs also tend to compare with other companies paying, especial is the staffs in group from lower 35 age because they think that with their ability, they can earn more than the current one Therefore, when they received the offer with better compensation and benefits from other companies, they already left the company

If employees feel that they are not valued for their contributions or rewarded, their commitment may be threatened Carraher8provided that there is a relationship between pay satisfaction and turnover

3.1.3 Promotion appraisal bias

There are some common reasons that the talent staffs left the company Promotion appraisal favoritism is one of factors that affect to the intention to quit the job of staff position, especial to the high performance staffs They always strive for excellent in their work to looking for a promotion opportunity because they think that a high performance evaluation is a potential factor for promotion opportunity However, in some cases, promotion appraisal ignore high performance factor, only taking care one factor is who are appointed to high position how they have good relationship with General Director or who has position in the company

Getting promotion in job is the most important of every over-achieved employee Job promotion shows the achievement of success in career life of employee When an over-achieved staff is promoted, they feel proud of themself and feel that the company acknowledge and thank you for their contribution and performance

Mr Duy- a sale man, 32 years old, who has work at the company for 7 years He intends to leave company, share that:

He had worked at company for 7 years He always tried his best in work and take new challenges, taking time to improve his marketing skill for finding a promotion opportunity He was a staff at the top best staffs of company with very high performance However, his promotion opportunity will never come to him because this supervisor position is donated for another one HR manager explained to that this supervisor position is more suitable for who have good relationship with general Director and he should wait for another opportunity Therefore, he quitted his job at company to find another company where he can get supervisor position easier

Khan9 also showed the same result that employees' satisfaction and commitment are affected by the bias and feelings of some managers, which then causes to increase employee turnover rate