LV Thạc sĩ_Retaining employees at Grant Thornton vietnam company

With desire to support the firm to find out the cause of high turnover staff andsolve this personnel problem, the author designs this thesis to research about thepractices of retaining h

SOLVAY-BRUSSELS SCHOOL OF

ECONOMICS AND MANAGEMENT

NATIONAL ECONOMICS UNIVERSITY

Vietnam – Belgium Master Programmes MASTERS IN BUSINESS MANAGEMENT

THESISRETAINING EMPLOYEES AT GRANT THORNTON VIETNAM COMPANY

LIMITED

Prepared by: Nguyen Hai Ha Supervised by: Dr Phan Thuy Chi

Hanoi 2010

ACKNOWLEDGEMENT

First of all, I would like to extend my gratitude and sincere thanks to Doctor

inspiration which are very meaningful and valuable for the completion of mythesis

A big thank to all our interviewees who took the time from their busy schedules

to take part in my thesis

Finally, I would like to thank my friends and family for their support and

encouragement during my work on this thesis and also throughout my education

Hanoi, 2010

Nguyen Hai Ha

Executive summary

Grant Thornton Vietnam Company limited is a 100% foreign invested company

It has been in Vietnam since 1993 The main business activities of the company

is auditing, consulting service The company has gained high growth rate in term

of revenue and number of clients Up to now, the company has 110 staff andpartners However, there are still matter related to high turnover rate existed Inaddition, the staff turnover are mainly experience staff with the in charge roleabove, therefore, this is the big failure for the firm

With desire to support the firm to find out the cause of high turnover staff andsolve this personnel problem, the author designs this thesis to research about thepractices of retaining high skilled employees at Grant Thornton Vietnam.Literature framework used is theory of motivation, expectancy, and retainingfactors Research questions are as follows:

1 • What are the current practices of retaining high skilled employees atGrant Thornton Vietnam?

2 • What are critical issues of Grant Thornton Vietnam regarding highskilled employee retention?

• What are solutions for Grant Thornton Vietnam to improve the retaininghigh skilled employees?

After conducting interviews and performing survey, collecting information andanalyzing data, the author identifies the main reasons of high turnover as follows:

- The working is challenging and attractive but too pressure, imbalancebetween work and life

- Not competitive salary, overtime did not settle in cash

- Lack of career development

Based on the above reasons, the thesis also proposes solution for changing in thereward system of the company (financial reward and non financial reward) andcreates the program to balance the work and life for staff

This research aims to help the management level of GT to recognize and considerthe factors of retaining high skilled employees Thus, Grant Thornton VietnamLtd can decrease their employee turnover and thereby saving both money andtime The thesis can be of assistance to the auditing industry and work as a guide

in how to work with retaining

Page

ACKNOWLEDGEMENT 2 Figure 2-1: Organization chart of Grant Thornton Vietnam Co, Ltd 25 Figure 2-2: Research process 27

List of tables

Table 1-1: Possible de-motivation consequences Error: Reference source not found

Table1-2: Retaining factors Error: Reference source not found

Table 2-1: Annual revenue from 2004 - 2009 Error: Reference source not found

Table 2-2: Client segmentation Error: Reference source not found

Table 2-3: Structure of GT’s workforce Error: Reference source not found

Table2-4: Professional salary comparison GT vs big four Error: Reference source not found

Table2-5: Professional salary comparison GT vs other industries Error: Reference source not found Table 2-6: Expectation of GT for each career path Error: Reference source not found

Table2-7: Employee motivators at GT Error: Reference source not found

Table 2-8: Reasons for leaving of formal high skilled employees Error: Reference source not found

Table 2-9: Employee demotivators at GT Error: Reference source not found

Table 1-1: Possible de-motivation consequences Error: Reference source not found

Table1-2: Retaining factors Error: Reference source not found

Table 2-1: Annual revenue from 2004 - 2009 Error: Reference source not found

Table 2-2: Client segmentation Error: Reference source not found

Table 2-3: Structure of GT’s workforce Error: Reference source not found

Table2-4: Professional salary comparison GT vs big four Error: Reference source not found

Table 2-6: Expectation of GT for each career path Error: Reference source not found

Table2-7: Employee motivators at GT Error: Reference source not found

Table 2-8: Reasons for leaving of formal high skilled employees Error: Reference source not found

Table 2-9: Employee demotivators at GT Error: Reference source not found

List of figures

Figure 1-1: The Maslow’s hierarchy of needs Error: Reference source not found Figure 1-2: Expanded model of Porter’s and Lawler’s expectancy model Error: Reference source not found

Figure 2-1: Organization chart of Grant Thornton Vietnam Co, Ltd Error: Reference source not found

Figure 2-2: Research process Error: Reference source not found Figure 2-3: Motivators at GT Error: Reference source not found Figure 2-4: Demotivators at GT Error: Reference source not found

Figure 1-1: The Maslow’s hierarchy of needs Error: Reference source not found

found

Figure 2-1: Organization chart of Grant Thornton Vietnam Co, Ltd Error: Reference source not found Figure 2-2: Research process Error: Reference source not found Figure 2-3: Motivators at GT Error: Reference source not found Figure 2-4: Demotivators at GT Error: Reference source not found

List of abbreviations

I Rationale

Today in the fast changing world, employees do not want to stay in one particularcompany for their whole life They want to expand themselves by involving theirwork in various positions of many industries, acquiring new skill sets and new workexperiences Their adaptability, which has become an essential part in any job, isshown in the way they adjust to different positions held As businesses flourish andcompetition getting fiercer than ever, the market for talents is no less competitive.Companies increasingly have recognized the importance of human resources andhence are vigorously trying to recruit talented people from other companies byproviding better compensation packages and working environment

Based on the above reason, keeping employees for longer periods is an importantchallenge for firms and retaining your high skilled staff is the real issue of the 21st

century

Grant Thornton Vietnam operates in auditing industry where retention is reallyimportant because in this field, human resources are the key success of theCompany At the first 14 years being in Vietnam, the Company grows day by day.Currently, to achieve the new vision, to become the leading auditing firm in theworld, Grant Thornton Vietnam, a part of Grant Thornton International mustsignificantly focus on development and retention of high skilled employees.However, the Company is facing with the following challenges:

- Valuable auditors have practical experience and solid background infinancial, auditing and accounting and a lot of other fields; they often changetheir careers to other fields with higher salaries and benefits Sometimes, theyleave the Company to work for other direct competitors of the Company

- A lot of employees only work in short time in auditing industry when they arevery young to get experience and then after 2 or 3 years, they resign

- Most of employees in the Company are women, however, they often leavethe job when they get married or have babies

Turnover rate at Grant Thornton Vietnam is increased as nearly 20 percent per year.Many current staff is de-motivated and looking for new opportunities In addition,

the staff turnovers are mainly semi – senior level above that is the big loss with thefirm This situation requires Grant Thornton Vietnam to review its retaining of highskilled employees for necessary adjustment in order to maintain the good growthand steadily expand its market share And that is my purpose to choose the topic

“Retaining employees at Grant Thornton Vietnam Company Limited” for this thesis

II Objectives and research questions

Objectives:

The research has 3 main objectives:

1 • Review retaining factors

2 • Understanding the practices of retaining high skilled employees at GrantThornton Vietnam (GT)

3 • Propose solutions to improve the retaining high skilled employees in GrantThornton Vietnam

Research questions

This research will answer the following questions:

3 • What are the current practices of retaining high skilled employees at GrantThornton Vietnam?

4 • What are critical issues of Grant Thornton Vietnam regarding high skilledemployee retention?

5 • What are solutions for Grant Thornton Vietnam to improve the retaininghigh skilled employees?

III Scope and Limitation

The thesis will only focus on resolving the reason of high turnover rate and motivation of professional staff (from audit and assurance division, corporatefinance division and in tax division) in Grant Thornton Vietnam

de-According to the survey and the interview of current staff and former staff in GT, forboth Hanoi office and Ho Chi Minh head office The thesis will focus on the highskilled employees who are from semi-senior level above with minimum 2 yearsexperiences

IV Methodology and theoretical background

The thesis will review some theories related to retaining as following:

The data is collected from:

Primary data:

- Interview with the HR manager in Grant Thornton Vietnam Ltd

- Surveys to some of key employees who had left the firm in the 3 past yearsand some of current professional staff

Secondary data

Secondary data is collected from GT’s regulations and documents such as standard

of operation, training policies, company brochure, audited report of GT…

V Structure outline

The thesis will be divided into 3 chapters as followings:

Introduction

Chapter I: Retaining factors

In this chapter, the thesis will review related theoretical tools, available discussionand research regarding retaining of high skilled employees

Chapter II: The practices of retaining high skilled employees in Grant ThorntonVietnam Company Limited

1 The company introduction: overview about history and fact sheet

2 Practices of retaining high skilled employees in Grant Thornton Vietnam LtdChapter III: Solutions to improve the retaining high skilled employees in GrantThornton Vietnam Company Limited

In this chapter, the thesis will go to solutions to improve the retaining high skilledemployees in Grant Thornton Vietnam It will also discuss in detail of selectedsolutions and action to implement it

Chapter I: Retaining factors

I.1 Retention, motivation and de-motivation in an organization

I.1.1 Retention

“Effective employee retention is a systematic effort by employers to create andfoster an environment that encourages current employees to remain employed byhaving policies and practices in place that address their diverse needs Also ofconcern are the costs of employee turnover (including hiring costs, training costs,productivity loss) Replacement costs usually are 2.5 times the salary of theindividual The costs associated with turnover may include lost customers,business and damaged morale In addition there are the hard costs of time spent inscreening, verifying credentials, references, interviewing, hiring, and training thenew employee just to get back to where you started.”1

Retention of key workers as the most critical factor to plan for and is viewed as the

factor that could affect organization’s effectiveness the most in the future (Frank et

al 2004; Buckingham & Vosburgh, 2001) Retention of knowledge workers is

critical to organizations survival and profitability now that the world’s economiesare becoming incorporated into the information age (Lee & Maurer, 1997)

Many factors that have led to the employee turnover such as the job or workplacewas not as expected, the mismatch between job and person, too little coaching andfeed-back, too few growth and advancement, feeling devaluated and unrecognized,stress from overwork and work-life and loss of trust and confidence in senior… Thefirms take action and work with long-term perspectives to keep their valuableresources It is also crucial for the survival and success of firms to have long termrelationships with their employees, since they are the most valuable resources thefirm has and what in the end leads to the success of the firm

I.1.2 Motivation

Motivation is the person’s unique set of needs in relation to particular situations.These needs explain what drives a person, what his or her reaction will be to variousstimuli, and the strength of behavior, its consistency and persistency based on

1 Workforce Planning for Wisconsin State Government, 2005

conscious decisions2 Motivation is linked to a specific action:　 appetite for anaction: it is NOT a general state! Satisfaction may be seen as a motivation forstaying in the company The employees' performance is determined by 3 factors:

Opportunities: if employees are given good opportunities to demonstrate their

abilities and skills, they can maximize their performance;

Abilities: if the employees lack the learned skills or innate talents to do a particular

job, their performance will be less than optimal;

Motivation: people may be motivated by different things (needs and drives) during

different periods of their lives A generalized model of motivation posits a set ofinnate drives and felt needs for each employee The employee brings these drivesand needs to the workplace and they influence the employee's workplace behaviorand productivity

In short, Performance = f (opportunity) (ability) (motivation)3

Motivation is a dynamic process, it is not something a person is born with orwithout, but rather something that can be enhanced or developed There is a generalconsensus that motivation is an internal state of condition that serves to activate orenergize behavior and give it direction4

I.1.3 De-Motivation

De-motivation can be defined as a condition of damaged or destroyed motivation.Employees’ de-motivation can be caused by either private or working problems,which an individual has while working in an organization In relation to de-motivation source, four areas of influence on de-motivation can be differentiated:personal, inter-personal, social and organizational influences In the given areasfactors of influence on de-motivation arise, so in that sense it can be spoken offactors of influence connected with personality, interpersonal relations, society, andorganization

The potential de-motivation factors have their effects or consequences ondifferent fields The effect of individual factors influence on personal,interpersonal, organizational, and social level are shown in Table as following:

Table 1-1: Possible de-motivation consequences

2 Prof Philippe Debrous’s Lecture note for Master in Business Management, intake 7 th , 2009, Hanoi

3 www.geocities.com

4 Kleinginne A.(1981a) A categorized list of motivation definition, with suggestions for a consensual

definition, Motivation and Emotion, 5, 264

Individual level Disappointment, frustration, aggression

resignation, reduction of commitment bad mood up to depression

diminishing (stunting) of knowledge and abilities increasing distance from colleagues, social isolation damage causing to involvement outside the company, as well

as to family life psychosomatic difficulties

Interpersonal

relations level

conformity, adapted behavior passivity/indifference in coordination and decision-making diminishing interaction

avoiding conflicts, pseudo-harmony

Social level decrease of innovation abilities

competitive ability worsening increased number of sick leave days, unemployment, and premature retirement

There are many theories related to retention, motivation and de-motivation.However, in this thesis I will select to use some theories which I believe that wouldhelp me to analyze, discovery and identify the current problems of Grant ThorntonVietnam

I.2 Motivation theories

The existing motivation theories can be classified into two categories: content andprocess motivation theories Content motivation theories try to explain the needs andmotives that cause people to take action, the motivators Among the most popular

content theories this thesis will mention the Maslow’s theory and Herzberg’s factor theory Process motivation theories on the other hand describe how people’sactions are started, directed, maintained and ended From the pool of processtheories we will only explain expectancy theory.

two-1.1 Maslow’s theory

Motivation theory is important for HRM because it helps understand whichindividual firms needs have to meet in order to satisfy workers Abraham Maslow,one of dominating scholars of behavioral theory while discussing the relationshipbetween individual motivational factors and job satisfaction, claim that in order forfirms to understand what motivates people and thereby increase retention rates theyshould understand basic human needs, both psychological and physical Ifemployees have needs that are not fulfilled it could be assumed that they will bedissatisfied and thereby eventually leave the organization in search of fulfillmentelsewhere Maslow identified five levels of human needs that will be presented in anorganizational context to explain their relevance in HRM

Figure 1-1: The Maslow’s hierarchy of needs

In an organizational context Maslow’s first level contains physiological needs,which can be viewed as physical comfort, pay and basic working conditions Thesecond level concerns safety and job security Social needs, in the third level, relate

to factors such as belongingness, friendship and having relationships in theworkplace The fourth level concerns esteem needs received by employees when the

organization and its members recognize a worker’s achievements and thereby reach

a certain level of status Maslow’s fifth and final level, the need for self-actualization

is reached when the worker feels that the job itself provides opportunities to pursueown goals and interests (Lindmark & Önnevik, 2005; Kempton, 1995) The logic ofMaslow’s hierarchy of needs is that when needs in the lower levels are satisfied they

trigger needs on higher levels in a sequential fashion (Flaa et al, 1998) For example,

if the worker receives satisfactory pay it immediately triggers needs on the secondlevel, namely job security When the worker then feels secure enough it triggerssocial needs such as belongingness on the third level, and so on Maslow claims that

a person who succeeds in self-fulfilling him- or herself expresses the true humannature (Israel, 1999) but states that the effort of self-fulfillment is universal andindependent of social, cultural and historical conditions Israel concludes that

Maslow’s argument for the needed effort of self-fulfillments is not justifiable, even

though many or even most people strive towards it, as it is not proven to lay inhuman nature

1.2 Herzberg’s two-factor theory

Herzberg’s two-factor theory is based on a critical incident study he made with asample of 200 accountants and engineers He asked them to describe in detail whenthey had felt especially good, respectively especially bad about their jobs Analyzingthe answers he found that the interviewees rarely categorized the same kinds offactors as having both a good and a bad influence on their job satisfaction Also,extrinsic factors like salary, working conditions or supervision were rather stated tocause dissatisfaction, whereas intrinsic factors such as achievement, recognition orresponsibility were leading to satisfaction

Thus, he rejected the previously taken for granted assumption that satisfaction is aone dimensional concept, meaning that satisfaction is on one end and dissatisfaction

at the opposite end of the continuum This is removing a satisfaction-causing factorwould lead to dissatisfaction and removing a dissatisfying factor would result insatisfaction

Herzberg argues that satisfaction is a two-dimensional concept meaning that factorsare causing either satisfaction or dissatisfaction Thus, according to Herzbergremoving a dissatisfying factor does not cause satisfaction but a neutral state ofneither being satisfied or being dissatisfied5 This state is called the zero midpoints.6

In accordance to this assumption, factors causing dissatisfaction are labelled hygiene

5Gibson et al (1991), Organizations: Behavior, Structure, Processes, Homewood : Irwin, p 109-111.

factors as their removal causes the neutral zero midpoints Satisfying factors on theother hand are called motivators as they are causing motivation.7

The main critique points of Herzberg’s theory are that his sample is, consisting of

only 200 people, relatively small and moreover only accountants and engineers wereinterviewed so that a generalization to other occupational groups is questionable.Secondly, much critique is concerned with his methodology Asking people aboutpast events is challenging their memory and presumably leads to a bias as theirmemories may not be exact.8 Also, people tend to blame failures on others or thecircumstances and are prone to credit themselves for successes Therefore, adistortion of the relation of extrinsic and intrinsic factors concerning their effect onsatisfaction and dissatisfaction is to assume.9

Despite the critique on Herzberg’s theory it is still applied today Bassett-Jones andLloyd, for example, used the two-factor theory to examine what is motivatingemployees to contribute ideas.10 They found that, according to Herzberg’s theory,intrinsic motivators are outweighing factors related to financial rewards.11 The basicconcepts of the two-factor theory were also applied in a research about what ismotivating and what is discouraging academic staff in higher education Thedistinction in motivators and hygiene factors was confirmed But it was found thatnot all employees have the same motivators and hygiene factors, so that individualreactions on different factors need to be acknowledged.12

8 Gibson et al (1991), Organizations: Behavior, Structure, Processes, Homewood : Irwin, p 111.

9 Robbins, Stephen P (2001), Organizational Behavior, Upper Saddle River, New Jersey: Prentice-Hall, p 160

10 Bassett-Jones, Nigel and Geoffrey C Lloyd “Does Herzberg's motivation theory have staying power?” Journal of Management Development, Vol 24, No 10 (January 2005), p 929.

11 Bassett-Jones & Lloyd (2005), p 941

12 Rowley, Jennifer “Motivation and academic staff in higher education.” QualityAssurance in Education,

1996, Vol 4, Issue 3, pp 11-16.

approach is a formula consisting of the three factors expectancy, instrumentality andvalence

Expectancy refers to a person’s belief that her efforts will positively influence her

performance This means that it expresses an effort _ performance expectation and

as it represents a subjective probability, it can take values between 0 and 113

Instrumentality is defined as “an individual’s beliefs regarding the likelihood of

being rewarded according to his or her own level of performance”.14 In other words,

it is an individual’s belief that he or she will be rewarded according to his or herperformance

The factor instrumentality can take values between –1 and +1 A value of +1indicates that the expected reward will only depend on the individual’s performance,

a value of 0 means that there is no relationship between expected outcome andperformance A value of –1 stands for a negative correlation between performanceand outcome, meaning that high performance decreases the chance of receiving areward15

Finally, valence expresses the value a person attaches to the expected rewards of her

performance Rewards do not only mean extrinsic, material or financial rewardssuch as pay or a company car, it can also refer to intrinsic, immaterial rewards such

as a sense of achievement or advancement.16 Valence can like instrumentality takenegative values, suggesting that the outcome is undesirable for the individual; avalue of zero, indicating indifference towards the reward; or a positive valuemeaning that the individual desires the expected outcome The exact range of valuesthat the factor valence can take is not explicitly determined It could for examplerange from –2 to +2.17

Integrating these three factors into a formula motivation is defined as:

Motivation = Expectancy * Instrumentality * Valence.

This multiplicative formula basically expresses that an individual’s motivation ishigh if all three factors, expectancy, instrumentality and valence, are high.18 The fact

13 Greenberg, Jerald and Robert, A Braron (2000), Behavior in Organizations, Upper Saddle River, New

Jersey: Prentice-Hall, p.149

14 Greenberg & Baron (2000), p 149.

15 Kreitner, Robert and Angelo Kinicki (1998), Organizational Behavior, Boston, Mass.: Irwin/McGraw-Hill,

that all factors are multiplied by each other means that if only one factor takes thevalue of zero, the motivation will be zero, non-existent That means that if forexample an individual does not belief that putting effort in a task will lead to goodperformance, the individual is not motivated at all to do this task Not believing inbeing rewarded for one’s effort or a reward that is not at all attractive for anindividual also results in no motivation

Figure 1-2: Expanded model of Porter’s and Lawler’s expectancy model 19

The figure above shows an extended model of Vroom’s original expectancy theory,which is mainly based on the work of Porter and Lawler It includes morecomponents that affect an individual’s job performance and it provides a linkagebetween effort, performance and satisfaction20 It is argued that performance is notonly determined by a person’s motivation but also by the person’s skills andabilities, her role perceptions and her opportunities That a person’s skills andabilities influence their performance is quite obvious If somebody does not speakSpanish, he can be highly motivated but still he will not be able to hold a speech inSpanish The component of role perceptions refers to the fact if a person did notknow what is expected of her, she would not be able to do a task properly althoughshe would be capable of accomplishing the task if she had a clear instruction.Finally, opportunities refer to environmental conditions such as good and sufficientequipment, availability of information or helpful co-workers If these conditions are

in favor of an individual, his or her performance will be better than the performance

of a person who is facing poor working conditions.21

19 based on the expectancy model of Porter, L W and E E Lawler “Mangerial Attitudes and

Performance” (Homewood, IL: Richard D Irwin, 1968), p 165, cited in Kreitner &Kinicki (1998), p 231

20 Porter, L W and E E Lawler “Mangerial Attitudes and Performance” (Homewood, IL: Richard D Irwin, 1968), p 165, cited in Kreitner &Kinicki (1998), p 231

21 Greenberg & Baron (2000), p 150.

Although there are not many advances of the original expectancy theory, it is stillapplied today and not only precisely in the sense it originally was developed Manystudies on the relationship between performance measures and merits are based onthe assumptions of expectancy theory It is, for example, used to examine the effect

of a mismatch in the relation of a performance rating of an employee and the raise infinancial incentives he receives

The above theories supposed to help the author to understand what motivation is,how the process of motivation works and to what triggers motivation and how thesetriggers, or motivators, can be categorized The expectancy theory, as an example ofthe process theories among the motivation theories, explains the process thathappens unconsciously inside every individual and determines, if and how strongthe individual is motivated to perform a certain activity Based on these theories, Iwill focus on some retaining factors that have influence

I.3 Retaining factors

Few employees leave their jobs without due reason, be it either work related(internal) or personal (external) or even both Personal reasons for leaving a firminclude wanting to spend more time with friends and family or having to move since

a spouse has a new job located in a different city Employers have no control oversuch reasons but can tackle internal issues such as pay systems or developmentopportunities

Concerning to above Maslow’s theory and refer to the factor to retain employees, werecognized that the first level of need of employees is pay system, the second levelrelated to the nature of work; in the third level closely to corporate culture; thefourth level when employees have career opportunities based on their achievementsand effort and the highest level equivalent to the change to develop to a higher level.According to Herzberg, the intrinsic motivators related to financial reward and theextrinsic components related to non financial rewards and fitting factors (workingconditions, recognition, responsibilities…)

Based on the expectancy theory, we recognize that people find jobs satisfactorywhen providing high pay, career opportunities, considerate and participativesupervision, and the opportunity to interact with one’s peers, varied duties and ahigh degree of control over work methods and work pace

The motivation theories show that there are numerous factors to consider whenworking with retention According to these theories, the author wants to concentrate

on 2 factors rewarding factors and fitting factors

The below table is one of various retaining factors which can be use to encourageemployee retention with 2 categories: rewarding factors and fitting factors:

Retaining factors

Financial rewards Non financial rewards Fitting factor

Bonus system Career opportunities

Table1-2: Retaining factors

1.1 Financial rewards

Salary

Refer to Maslow model; salary is one basis need of people, in the first level Salary

is a monetary compensation for an employee’s effort to the firm; the employeeperforms a service and is paid for it accordingly.22 Salary is often referred to as basepay, and can be based on two main approaches, market pricing or job evaluation.23

Using market pricing is to base salary on an industry rate for a specific job The jobevaluation approach is to base salaries by determining a value for all the jobs in afirm before comparing them to the market24 This kind of policy implies that theperson doing the job is only worth as much as the job itself is to the organization.But, in many respects it also assures that the reward cost is similar to what otherorganizations are paying people doing the same kind of job, i.e that the personnelcosts are not out of line with those of the organizations competitors (Lawler, 1983)

An alternative to base pay is performance pay including paying individuals for theskills they possess, often referred to as knowledge-based pay or skill-based pay.25.Skills pay is the method that closely matches with the nature of the job On the otherhand it can result in identifying whether or not the employee has more or less of theskills needed for the job This can be used to determine whether or not the employee

is entitled to the pay offered, such as first entrees that do not have the skills and have

to earn the right to be paid whatever the job-related skills are worth Using

skill-22 (Bratton & Gold, 2003).

23 (Bratton & Gold, 2003)

24 (Bratton & Gold, 2003)

25 (Bratton & Gold, 2003)

based pay will not dramatically change the pay situation since the skills people havegenerally match the nature of the job On the other hand it can result in identifyingwhether or not the employee has more or less of the skills needed for the job Thiscan be used to determine whether or not the employee is entitled to the pay offered,such as first entrees that do not have the skills and have to earn the right to be paidwhatever the job-related skills are worth Using skill-based pay can produce aclimate of rewarding when employees increase and develop their skills This in turncan create a knowledgeable and flexible workforce This flexibility often leads tolower staffing levels, fewer problems when turnover occurs and also a higherretention rate because employees like the opportunity to utilize and be paid for awide range of skills A skill-based pay system can evidently be an effective means ofretaining knowledge workers but is by no means a simple effort since skillassessment can be difficult to accomplish However, it can convey an absence oftrust as people are only rewarded as they perform and must be measured foreverything they do or do not do.

The determination and maintenance of a fair, equitable and effective pay systemwithin an organization is one of the most important and most difficult tasks facinghuman resource managers If employees consider the pay system to be unfair it isunlikely that they will perform their best, and in some cases leave the firm

Therefore, differences in pay within a firm may be of greater importance than those

in relation to the labor market This implies that firms can increase wages or salarieswithout considering the norms of other employers and employees usually use boththe internal pay situation and within similar jobs in the wider labor market as thepoint of reference

Pay system by its nature does not offer scopes of personal growth but it can createstatus among fellow colleagues Some might value money as a status symbol andfulfill a need for recognition among fellow workers In this case money could play

an important role for retention, because it offers some workers possibility to satisfyneeds such as recognition among organizational members Even if this in manycases is considered shallow, it does not exclude that some people use money instead

of job characteristics for satisfaction

Monetary rewards, such as salary should not be underestimated in fosteringretention but it has to be noted that in order to understand the relationship between

pay and employee commitment, which is complex, it requires knowledge of

individual context

Generally money is not viewed as an effective retention tool in the long run Moreover, in some extend, it can be counter-productive and lower employee

motivation by reducing the intrinsic rewards they receive from the job

These rewards which arise directly from task itself and awarded by peoplethemselves, such as a sense of achievement, pride and accomplishment, can only beachieved by designing jobs so that they offer employees the opportunity toexperience for example challenges, responsibility, interest and achievement

Bonus systems

A bonus system is an incentive for retention that is often based on some kind ofperformance A goal is set and if reached is often rewarded in monetary forms Adifficult aspect of bonus systems is specifying what kind of performance is desiredand how it is determined It could for example vary from being based on generatedrevenues, market share and other things that can be translated into value Poorlydesigned and administered reward systems can do more harm than good but whenperformance can be effectively related to bonus pay it can help motivate, attract andretain key contributors However, the fact that there is a weak link betweenperformance and bonuses among top management and this does more harm thangood as it drains firm’s capital by giving employees more than they give back Firmsthat apply a bonus system could improve their retention ability when structuring itwith base pay but that workers with risk-averse characteristics tend to be moreattracted to such firms

There are ways of relating pay to performance and also how the rewards areprovided, such as stock or cash Using stock options is a long-term incentive and can

be used to bind an employee to the organization but also to perform and deliverresults (Lawler, 1983) In this way both parties can gain from using bonus systems,firms by improving results and the employee by receiving monetary rewards andpersonal satisfaction for reaching targets But, using a stock-based bonus systemdoes not ensure longer commitment than the period of cash-in for the stocks options

Benefits

Benefits are often considered to be an indirect monetary compensation Even if theyare not rewards given in cash they constitute an economic value to the recipient bysatisfying employee demands and expectations of firms Benefits should matchindividual employee demands brought forth by documenting their needs This canalso add value to the recipient as it makes the employee participative and therefore

more understanding of the value being offered If firms can consider the diverseneeds among workers when providing benefits they can enhance their value becausethey match the individual need.

In summary, remuneration plays a major part in an organization’s ability to recruitand retain top performing people Most managers usually offer more money whenfaced with losing a valuable employee or not being able to entice a potential recruit.But, it is important to recognize that remuneration is only one aspect of theemployment equation and can be viewed as a short-term solution when faced withlosing an employee The other aspects include non-financial factors such as; chances

to contribute and to make a difference, autonomy, a positive collegial atmosphere,personal development, growth opportunities and challenging work

1.2 Non - financial rewards

Challenging work

For several reasons it is expected of workers with high levels of ability andexperience to seek challenging work than other less knowledgeable workers Inorder to increase an individual’s level of competence after having attained a highdegree of achievement the environment must provide additional challenges Highachievers may also prefer challenging situations because they provide them with theopportunity to differentiate and test themselves against their peers

Providing challenges other than the work itself together with opportunities such asfurther training and career paths can be a way to stimulate high achievers Promotion is not only a way to provide employees with more challenging work butalso a means to recognize them publicly which often motives those who wish to bedifferentiated and are driven by competition There are recent trends among theyounger employees that they put less emphasize on job security and more emphasize

on having challenging work that provides them with a possibility to learn Securitythat loyalty contracts represent is not attractive any more and they want jobs thatgive them the chance to develop skills and learn because this keeps them attractive

in the market, should they want to change firms Developing employees as aretention strategy can seem contradictive in this sense, but at the same time firmsmust adapt to the changes of relevant knowledge in the market

Development and Careers opportunities

One way of evoking retention is to provide opportunities to advance within theorganization, enabling employees the chance to pursue a career Any activity that

changes an employee’s performance, adaptability, attitude or identity is considered adevelopment, be it job experience, assignments, feedback, socialization or training(ibid.) so development is not only bound to task-related activities but rather anychange that enhances an employee’s career outcome.

A step in providing career opportunities is the development of human resources Inorder to provide advancement within a firm there needs to exist empty positions to

be filled An issue that arises when discussing promotion-based reward systems isthat organizational growth is required to provide carrier possibilities for employees

A system like that can be adopted in growing firms, but may not be applicable infirms that are shrinking or growing at a slow pace Employees want good trainingopportunities in order to keep themselves up-to-date and survive in the labor market

if needed A usual logic applied in the discussion of development is that increasingemployee’s attractiveness on the market through training is that they will leave whenthe opportunity presents itself However, employees are more willing to stay withinfirms that provide training and that turnover commences when those opportunitiescease to exist

There are evident problems with using promotion for commitment in order to retainemployees, but it is also evident that firms must address the problem in some way

1.3 Fitting factors

Corporate culture

Organizational culture is defined as the shared set of beliefs about how things work;values that indicate what are worth doing, and norms about how people shouldbehave (Trice & Beyer, 1993) Culture may assist firms in heeding the threat ofturnover because once employees acclimate themselves within the firm it may bedifficult to leave and find a suitable fit within another firm so fit between employeeand organizational values has a great impact on retention

It is unavoidable that employees will leave an organization at some time or anotherbut there are ways, strategies that can be used to encourage employees to staylonger, organizational culture is a good method Organizational culture influenceshuman resource strategies such as employee development reward systems and thesestrategies in turn create psychological climates that influence the commitment leveland retention of employees regardless of position or performance As a result,organizations with cultures that value teamwork, respect and security foster loyalty,commitment and thereby ensure a higher rate of retention Other organizations

which value personal initiative and base rewards on performance, often do not offeremployees long-term job security In such organizations those who do not performwell will presumably leave and those who do will stay on to make use of therewards, at least until they can be found elsewhere Therefore, the retention rate may

be equally high regardless of employee’s performance level in some organizationalcultures but in others differ due to performance

Generally it is more expensive to replace key contributors than weak performers,which suggests that a cost-effective HRM strategy should strive to retain those whodrive the company forward Completely avoiding employee replacement costs isunavoidable but increasing the retention rate can delay them and there is fact thatorganizations that emphasize interpersonal relationships were more successful inminimizing employee turnover than those that emphasize work task values

Employee turnover is commonly considered to be a negative issue that firms shouldstrive to avoid However, this might not always be the case In the following section

we shall describe the other side of retention where the potential benefits of employeeturnover are discussed

Chapter II: The practices of retaining high skilled employees in Grant

Firstly, this chapter presents some basic information about Grant ThorntonInternational and in Vietnam, its vision and values Secondly, this chapter alsoanalyzes and discovers the reason of high turnover rate in GT

II.1 The company introduction: overview about history and fact sheet

II.1.1 Grant Thornton International

Grant Thornton International is one of the world’s leading organizations ofindependently owned and managed accounting and consulting firm providingassurance, tax and specialist advisory services to private held business and publicinterest entities

Over the years, Grant Thornton International has established a solid reputation in itsfield of business with operation of many of its member firms spreading in more than

100 countries On the global scale, it has put down its business foundation withoffices in over 500 locations and 30 international business centers To serve itsexpanding business, it employs over 30,000 personnel worldwide with 2,600partners working actively in the interests of Grant Thornton’s and its clients’interests Its annual international business survey now covers 7,000 business owners

in 30 countries, a proof that Grant Thornton has and will be engaged more in itsbusiness development In 2008, Grant Thornton reported remarkable global revenue

of US$2.4 billion

Global strategy

Grant Thornton understands that in a highly competitive market, it needs todifferentiate itself from other accounting and consulting firms Success of the firm isdependent to what extent its clients are satisfied with its service Thus, it lies notonly in providing distinctive client service but also to strive towards becoming amore cohesive global organization Only by then its ultimate aim to be recognized asthe leader in its profession and in the chosen market is realized The three strategies;

distinctive client service provision, cohesive global organization and recognizedleader in its profession and in the chosen market, are all interlinked.

Business objective

Grant Thornton targets to double its global market share by 2012 Grant Thornton

understands that an increase in global market share will ultimately transform into anincrease in revenue and better future perspective for its business

Unite through global Collaboration: Living the value, they commit to providedistinctive client service to all Grant Thornton clients regardless of origin; shareknowledge, opportunity and best practices for the benefit of their clients and thedevelopment of their people; bring a global perspective to their advice and theiractions; cooperate with others to get things done and achieve results; work together

to bring resources and expertise to serve all clients; take pride in their globalidentity, and make it part of their everyday language

Demonstrate leadership in all GT does: Living the value employees commit to

represent Grant Thornton in a way that enhances its reputation and distinguishes thefirm and the people in the marketplace; take a leadership position on issues ofimportance to their profession, the firm and the public interest; lead andcommunicate with clarity and confidence; exercise initiatives to make a positivedifference; have the courage to live their values without compromise in world andaction; commit to doing what is right; challenge themselves to be the best it can be,and inspire others to reach their full potential

Promote a consistent culture of excellence: Living the value employees commit to

be better tomorrow than it are today, individually and collectively; continueinvestment in their own and others’ development; attain the highest level ofcompetence in their areas of expertise; develop leading edge solutions that set the

benchmark in their profession; achieve the highest standard of quality andinnovation in everything they do.

Act with Agility: Living the value employees commit to understand the world in

which they live and work and anticipate how changes might affect their variousstakeholders; create and communicate clear expectations, define roles andresponsibilities and empowerment each member of the team; ensure that the rightperson are doing the right work; thrive in change, understand the “why” and helpothers to do so; react positively and respond quickly to changes in direction; makeobjective, timely decisions, and act on them promptly

Ensure deep respect for people: Living the value employees commit to seek first to

understand and then be understood; treat others as they would like to be treated;consider, with an open mind, the perspective and option of others; give and seekregular, open and honest feedback so that they improve and grow at all levels;acknowledge and promote the mindset that the work is only part of life; expressgenuine appreciate for others’ contributions; resolve differences promptly withcomparison and understanding

Take responsibility for their actions: Living the value employees commit to act as

steward to pass on a more value organization to the next generation; make decisionsthat look to the long term and consider wider impacts, in addition to their immediateobjectives; act with integrity, be transparent in carrying out their duties, acceptaccountability for their results and use their influence wisely; honor theircommitments; do what they say they will do, when they say they will do it; speak up

if something “feels wrong”; acknowledge their contribution to mistake; act promptly

to rectify them, and, in so doing, gain new insights and awareness

II.1.2 Grant Thornton Vietnam Company Limited

In Vietnam Grant Thornton considers foreign invested companies, multinationals,NGOs, donor funded projects and individuals selling financial, investment and taxadvice as its clients It has been in Vietnam since 1993 and it is a professionalorganization with about 110 staff and partners

Services in Vietnam

In Vietnam it has full service offices in Hanoi and Ho Chi Minh City

Its two offices have 3 different service divisions:

- Audit and Assurance: The Audit and Assurance division develops and providesaudit and other assurance services that follow Vietnamese and/or internationalstandards on auditing Other assurance services include limited review, attestation,reporting accountant (for listed companies), value for money audit, special audit andinternal audits A&A Division also provides, in co-ordination with the CorporateFinance Division, financial due diligence services.

- Corporate Finance: The Corporate Finance division is based in HCMC andprovides business advisory and strategic planning for businesses already operating

in Vietnam and for foreign companies looking for market entry The services in thisarea include contractual, legal and negotiation support in obtaining an investmentlicense, market and business entry research and analysis and strategic advice andplanning This division also provides structured finance consultancy, which consists

of assistance to clients on capital markets and consulting in connection withequalization and public floatation including coordination of the equalization processand initial public offering Corporate Finance Division also provides a large number

of due diligence services for domestic and international investors

- Tax: The Tax division is based in HCM Tax services are provided to organizationsand individuals, both in relation to audits and projects as well as on a stand alonebasis Depending on particular requirements and needs the services offered includetax planning, preparation, handling and dealing with tax authorities

And to make the world go around is the administrative division

Grant Thornton Vietnam – Milestones

1993 – Established as a joint venture with Concetti

1997 – Converted to a 100% foreign owned enterprise, branch opened in Ho ChiMinh City

1998 - Become a full member of Grant Thornton International

1999 – Name changed to Grant Thornton

2003 – Establish Grant Thornton Law and Associates in Cambodia

Clients

At present, GT has been providing services to hundreds of clients and the annualgrowth rates in terms of revenues are as following:

Table 2-1: Annual revenue from 2004 - 2009

GT’s clients are from various forms: foreign invested company (FDI), Non profitorganization, joint stock and limited liability companies (JSC, LLC), privatebusiness, and international financial programs These clients operate in variouseconomic sectors and use its audit services for various purposes

Clients (kind of company) Percentage

Foreign invested companies 71%

Small and medium size enterprises 4%

Non profit organizations 25%

Table 2-2: Client segmentation

Competitors

Direct competitors: Big 4 (Deloitle, E&Y, KPMG and Price Waterhouse Cooper)

and some international audit firms account for the majority of the market share.These four firms with high Prestige offer high service quality and at the same timehigh auditing fee The majority of their clients are foreign invested companies andnon profit organizations

Indirect competitors: Vietnamese auditing companies offering reasonable fee and

local brand-name whose clients are mainly local enterprises and small and mediumsized companies (SMEs)

Comments: It is hard for GT in the market segment because it is difficult for thecompany to compete with BIG4 in terms of brand name, reputation; especially somebig customers require high auditing quality and prestige of the auditing companies

Mission, vision, strategy and values

GT’s Mission Statement: “To be the leading service provider in the Great Mekong

region providing distinctive client service and bold leadership through empowered

people.”

The vision, strategy and values are in consistent with the GT international as

mentioned above

Organization chart of GT

Figure 2-1: Organization chart of Grant Thornton Vietnam Co, Ltd

Comments on the organization structure

a Advantages

Organization structure is simple and effective in stable working environment The

firm’s customer base is not too big

b Disadvantages

When the number of customers is higher and scope of company is larger, branch

managers will be overloaded because of directly taking care of customers and

handling all relevant tasks

General Director

Deputy GD/Hanoi office

Managing partner Assistant

Audit

manager

Audit partner CF Director

Audit manager

Tax Director

HR manager

Finance manager

Training

manager

Operating manager

CF

Tax manager

CF manager

Audit Manager is greatly important because he/she knows all information related tocustomers If Audit Manager is off from work, this will directly affect decision-making and process and work of customers As this is the information and contactpoint of customers, this presents a real challenge to the firm when Audit managerdecides to leave the company and start his/her own business in GT’s field ofbusiness It is unavoidable that some of GT’s existing customers will abandon GT’soffer for service and start working with the Audit Manager’s new company GrantThornton will lose a considerable number of customers and revenue goes down asthe result

II.2 The practices of retaining high skilled employees in Grant Thornton Vietnam Company Limited

II.2.1 Research methodology

Survey has been carefully drafted and conducted with 30 employees, of which

20 people are currently working at GT, the other 10 people left GT duringthe years 2007, 2008, and 2009 Both former and current employees aretaken into consideration as they give the best picture of the currentsituation and the reasons why former employees decide to quit GT Theinterview guide and questionnaires can be found in Appendix 1

Figure 2-2: Research process 26

26 Adapted from Alan M.Saks, Research, Measurement and Evaluation of HR, Nelson Edition 2000