Solution to improve working motivation at fragrance team in luxasia vietnam

There have been outstanding results of departments like Sales & Marketing Department, Channel Department, Cosmetic team,… However, Fragrance team which contributes nearly 40% of the comp

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

SOLUTION TO IMPROVE WORKING MOTIVATION AT

FRAGRANCE TEAM

IN LUXASIA VIETNAM

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2020

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

SOLUTION TO IMPROVE WORKING MOTIVATION AT

FRAGRANCE TEAM

IN LUXASIA VIETNAM

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: LE THI THANH XUAN

Ho Chi Minh City – Year 2020

Master of Business

Luxasia Vietnam

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SOLUTION TO IMPROVE WORKING MOTIVATION AT

FRAGRANCE TEAM IN LUXASIA VIETNAM

May 29th, 2020

Professor: Dr Le Thi Thanh Xuan

Contents

Chapter 0: Executive Summary 1

Chapter 1: Introduction/ Company Overview 2

1 Luxasia Group 2

1.1 General Information 2

1.2 Vision, Mission and Development Goals in 2020 2

2 Luxasia Vietnam 3

2.1 Organization of Luxasia Vietnam 3

2.2 Development Goals in 2020 4

Chapter 2: Problem Context 5

1 Structure of Retail & Operations Department 5

2 Fragrance Team 6

3 Business Performance In 2019 6

Chapter 3: Problem Identification 7

1 Symptoms Analysis 7

Sales Revenue Decrease 7

2 Potential Problems 9

2.1 Competition Between Channels 9

2.2 Ineffective Marketing Strategy/ Brand Development 10

2.3 High Turnover Rate 11

2.4 Poor Management (Literature) 13

2.5 Store Traffic (Literature) 14

3 Diagram Of Symptom And Potential Problems 14

4 Problem Validation 15

5 Problem Consequences 17

Chapter 4: Cause Validation 19

1 Potential Causes 19

1.1 High Sales Target 21

1.2 Salary & Benefits (Work Motivation) 22

1.3 Family Reason 25

1.4 Unsatisfactory Work Performance 25

1.5 End of Contract 25

1.6 Poor Supervisor (Direct Manager) 26

1.7 No Process/ Manual (Working Process) 27

2 Initial Cause & Effect Map 28

3 Cause Validation 28

4 Final Causes & Effect Map 31

Chapter 5: Solution 32

1 Alternative Solutions 32

Add more Insurance for Beauty Advisor – Bao Viet Insurance: Healthcare 33

Develop Training Program 35

2 Solution Validation 37

3 Solution Implementation 38

3.1 Training Needs Assessment 38

3.2 Objective of application 39

3.3 Cost 40

3.4 Action Plan 40

Conclusion 41

Chapter 6: Supporting Documents 42

1 Literature Review 42

2 Research Methodology 42

2.1 Research Approach 42

2.2 Interview 42

3 Transcript 43

4 List of Figures / Graphs / Tables 53

5 Appendix 54

Resignation Form 54

Exit Interview 55

6 Reference 59

Chapter 0: Executive Summary

Luxasia Vietnam achieved remarkable achievements in 2019 by the contribution of the whole employees There have been outstanding results of departments like Sales & Marketing Department, Channel Department, Cosmetic team,… However, Fragrance team which contributes nearly 40% of the company's revenue caused a disappointment of a loss of sales revenue and a growth sales decrease within the last 3 years Due to the importance of the performance and also the business growth of Fragrance team as well as the organization, the aim

of this research is to search out what the central factor and reason caused the present issues; then

to propose solution to resolve the difficulties of Fragrance team

The research almost focuses on qualitative approach by in-depth interview with specific employees for analysis Besides, the primary and secondary data were also collected to illustrate for the thesis Based on the information and the in-depth interviews with related employees and managers, the analysis is done with the aim to search out the deeper reasons There are several problems resulting in sales growth decrease at Fragrance team It is defined that High turnover rate is the central problem causing the symptom Moreover, the problem is the result of decrease

on work motivation of employees at Fragrance team In many the studies, work motivation is indicated as one of the most important factors which impact on the efficiency of employee performance As a result, work motivation features a direct influence in a proportion way on the result of individual performance and organization business as well as the development of business Therefore, based on the theory, literature review, interviews with managers and self-experiences, the advice and proposal are proposed with the aim to resolve the present issue and improve the business results of Fragrance team

The proposal is raised to apply on Fragrance team which has significant contribution to the sales revenue of the organization Because of characteristic of Retail & Operations Department, there may well be an additional consideration for applying on Cosmetic team with the aim to possess a connection, synchronization and fairness for whole Beauty Advisors

Chapter 1: Introduction/ Company Overview

Luxasia Group was founded since 1986 and has been the leading omni-channel corporation of luxury product and brands in Asia Pacific market The object is to provide brands access to the largest retail market and e-commerce network in the beauty industry Group has made an effort to form a difference to consumers by bringing them the best brands from luxury, prestige to masstige categories

Luxasia’s head quarter is founded in Singapore and the group has line-regional representatives of 15 offices like Singapore, Malaysia, Taiwan, Hong Kong, China, India, Indonesia, Philippines, Thailand, Vietnam and Myanmar, Australia … and a team of quite 2,500 talented staffs Luxasia Group is holding distribution rights for over 150 brands including Bvlgari, Guerlain, Hermès, La Prairie, Peter Thomas Roth, Prada, Salvatore Ferragamo, SK-II Additionally, Luxasia Group has successful joint ventures with Elizabeth Arden, LVMH Group, PUIG, and Yves Rocher

During operations years, Luxasia has achieved the success in developing and growing new brands as well as expanding into world markets Entering a new integration period, the group has taken off general vision and mission forward to the success of business

 “Vision: Making a difference in every woman's life

 Mission: Asia Pacific’s beauty omni-leader”

Source: https://www.luxasia.com/about/

Luxasia has 15 representatives in all over the world and hold the unique distribution of

150 brands including Perfume and Cosmetic With the fast development of market and also the trend of lifestyle, the vision and mission are targeted to attain the share market and to be beauty omni-leader, leading in Asia Pacific market

Furthermore, Luxasia Group well knows that Human Resources are the key to drive the organization to the success So, among the overall development goals in 2020, the target is to focus and invest on talented employees The goal shows the board management’s orientation, foresight and attention to key human resources

2 Luxasia Vietnam

Phuoc My International (called Luxasia Vietnam) was founded in 2009 and has been one

of the leading companies in beauty market in Vietnam So far, Luxasia Vietnam has been the unique distributor of more than 20 well-known brands including fragrance and cosmetic All brands come from masstige to luxury, such as Guerlain, Calvin Klein, Mac Jacobs, Kora, Wet n Wild Products are arranged and distributed at counters and boutiques in most of the shopping malls: Diamond Plaza, Vincom, Takashimaya, Waston,

Luxasia Vietnam located at Vincom Dong Khoi, 72 Le Thanh Ton, District 1, Ho Chi Minh City The location is at the center which helps for easily visiting stores and boutiques, controlling and solving problems in a fast way

Below is an organization chart of Luxasia Vietnam The chart shows the operations and the scale of business

Figure 1.1: Organization structure of Luxasia Vietnam (Internal report of Luxasia Vietnam, 2019)

Luxasia Vietnam is being operated by coordinating seven functional departments with more than 120 talents All activities and strategies are forward to the development goals of the company and Group There is a transformation between Luxasia Group and Luxasia Vietnam in running the business Head of Departments will directly report to Country Manager and dotted

report to Regional Head all activities in Vietnam The operational model brings engagement and connection between local company and regional

For the development of Luxasia Vietnam in the year 2020, strategy and target are transferred from Luxasia Group and following as general goals of Group However, there is an adjustment to correspond to Vietnam retail market and business activities of the company

In 2020, Luxasia Vietnam sets targets for the growing There is an expansion in beauty market; some new brands belonging to fragrance and cosmetic will be launched Especially, as one of development goal of Group in 2020, Human Resource is the key objective to focus and develop It is recognized that human plays an important role for the development of business and common goal and Group also builds strategy for talents development and retention To drive the Group target, Luxasia Vietnam also builds the strategy which is suitable for employees and for the development of the company in 2020, especially to retailers So, in parallel with economic development, talents development and retention are main goals of the company's this year

Chapter 2: Problem Context

1 Structure of Retail & Operations Department

Retail & Operations Department (R&O Dept) is a department in charge of all activities at counters, boutiques and stores at Shopping Mall and Beauty Advisor management activities Retailer (called Beauty Advisor – BA) is a key resource which brings huge sales revenue to the growth of Luxasia Vietnam There are two teams in R&O Dept including Fragrance Team and Cosmetic Team in which Fragrance Team contributes nearly 40% of the company's revenue

Below is the organization chart of Retail & Operations Department

Figure 2.1: Retail & Operations Department structure of Luxasia Vietnam (Internal report of Luxasia Vietnam, 2019)

Retail Operations Manager (Retail Manager) will be responsible for strategy, operations and programs related to Beauty Advisors Under Retail Manager, there are two Retail Operations Executive positions (Retail Executive) in charge each Team: Retail Executive (Fragrance) and Retail Executive (Cosmetic) and Sales administration (admin) Each Executive position not only manages Beauty Advisors in Team but also takes the role of coordinator between Beauty

Advisor and Brand Team Sales Admin is responsible for collecting all data of Counters and doing reports for Retail & Operations Team and related functional departments Besides, Sales Admin supports some admin tasks for the whole team

2 Fragrance Team

As initial identify about structure of Retail & Operations Department, Fragrance Team is the key team which contributes around 40% of the company's revenue So, the research only focuses on Fragrance retail Team with the aim to identify present issues and find solutions to improve Team performance and build Team stronger

Retail Executive (Fragrance) takes the main role of managing Fragrance team Retail Executive will ensure all activities at Counters running smoothly and timely update the business also problems of Team to Retail Manager

Main activity of Beauty Advisors is to achieve sales target Target is set up for the whole year and divided into twelve months Specifically, each counter will receive the target which accords with the current business of Counter Then, counter’s target is divided up for employees Retail Executive and Counter Manager go hand in managing all activities at Counter and ensure individual performance to achieve the sales target This requires careful management and close contact with Beauty Advisors

3 Business Performance In 2019

Luxasia Vietnam finished the year 2019 with outstanding achievements The company reached out of the sales target and achieved net profits This is the achievements deserved by the relentless efforts and great contributions of all employees Through the kick-off meeting of 2019, all activities, launchings and programs was reviewed and consolidated From the premise strides

of 2019, the company sets strategy and development goals for 2020

In details, Channel Department and Sales & Marketing Department (Brand Team) had outstanding performance in the last year Unfortunately, Retail & Operations Department had a difficult and challenging working year This is one of the most important parts which contribute

to the success of Luxasia Vietnam in the beauty market So the performance of department was carefully analyzed and focused to identify current issues While cosmetic Team has been showing a stable and on track performance, Fragrance Team has had concerned issues

Chapter 3: Problem Identification

Sales Revenue Decrease

In monthly cycle meeting, each department will show the business situation and raise the present issues to search out solutions Through the monthly cycle meeting, Office employees will have a summary to the issues and maintain the entire business of company Finally, the kick-off meeting will be summarized and evaluated by the corporate performance

As report in kick-off meeting of the year 2019, Fragrance Team was confirmed that they did not achieve the sales target The result of Fragrance Team was mentioned as not good result

as the year 2019 Based on development goal of 2019, the sales of Fragrance did not meet expectations As report of Fragrance Team, the extent of growth of Fragrance Team is the lowest within the last 3 years The outcome is shown as below chart:

Figure 3.1: Sales contribution by year of Fragrance Team (Internal report of Luxasia Vietnam, 2016-2019)

It is easily to determine there has been a decrease in sales revenue of Fragrance team in

2019 while a sales increase was achieved in last 3 years Failing to achieve the sales target in

2019 caused a decrease in the extent of growth of Fragrance Team Moreover, just in case there are not any changes or performance improvement, the development is going to be down

Although Cosmetic team completed by achieving target of 2019, Fragrance team failed to reach the target sales Although the sales of Cosmetic is over to the target but not cover for the sales of Fragrance Team Based on the collected data from Retail & Operations Department, sales revenue of Fragrance Team in months were not achieved which cause a consequence of not reaching the sales target in 2019

Figure 3.2: Total sales of Fragrance Team compared to target by months in 2019 (Internal report

“We did not reach the sales target for months The sales number needed to cover was high so although we try our best, the sales target was not achieved” (Ms Van – Retail Manager

of Luxasia Vietnam)

Besides, Ms Thuy – Retail Executive – Fragrance mentioned the issue:

“Yes, sales target of Fragrance Team was not achieved We tried our best but the result was not good We have to focus and work well for the target in 2020” (Ms Thuy – Retail Executive – Fragrance of Luxasia Vietnam)

For the development goals of Fragrance Team, one of the important targets is achieving the sales target in 2020 Therefore, this issue is necessary to be carefully analyzed and to search out problems resulting in the symptom with aim to possess solutions to improve Team performance

As the business results of Luxasia Vietnam in 2019, sales growth decrease was the important symptom which the organization has been facing To dig deeper into the possible problems leading in the symptoms, many interviews with head of department and executive employees were conducted and recorded to collect more information Finally, there are potential problems which were received agreements by all interviewees

2.1 Competition Between Channels

At the present, Luxasia Vietnam is distributing products by two key channels like retail and wholesale Retail system is understood as selling products at counters and boutiques at shopping malls while wholesale specialize in perfumeries with much discount compared to retail The competition causes the conflict between both channels: wholesale and retail sales and as a consequence, there is a loss in retail sales revenue

Indeed, matters happened at Shiseido Company which is one of the beauty companies in the market Sakuraki(1) described about the business of Shiseido when operating two channels: chain stores and drug stores at the identical period With the looks of drug stores, customers could buy the identical products with lower cost than in chain stores As a result, the competitive

of chain stores was weakened and there was a sales decrease to chain stores

For realistic, an interview with related employee and head of department was conducted

to clarify this situation of Team

Ms Hien talked about conflict channels as a reason causing sales decrease at shopping malls Product distribution in chain stores or perfumeries with much discount causes competitive

to retail channel in internal Many shoppers also switch to shopping at chain stores rather than coming to the counters of Luxasia Vietnam:

“When wholesales channel is developed, customer will not interest in shopping centers They can buy products at many sources with lower price” (Ms Hien – Counter Manager of Luxasia Vietnam)

Moreover, Ms Van gives an agreement to the problem:

“Because of wholesales development, there is competitive between wholesale and retail Customer an approach and buy products at Vstyle, Perfume World without coming to shopping mall” (Ms Van – Retail Manager of Luxasia Vietnam)

However, Ms Van Anh thinks that this might be not a big problem to lead to a reduction

in sales revenue because each channel contains a unique strategy to run the business:

“Wholesales market is taken into account to expand the fragrance market However we have strategy and policy for wholesales market Portfolio for this market is particular and detail

to avoid conflict to brand and retail market.” (Ms Van Anh – Business Manager - Fragrance of Luxasia Vietnam)

Based on the interview with Ms Van Anh, the matter does not come from the wholesale channel Brand Department tries to decrease and limit the conflicts between two channels by building appropriate strategies and portfolio for every channel

2.2 Ineffective Marketing Strategy/ Brand Development

During a brief interview with Ms Hien, she mentioned that no excited promotions and brand activities were reasons causing sales decrease:

“Promotion and brand activities are not appealed to customer The program is not as interesting as the program of competitors likes Dior, Dolce & Gabbana, Hermes ” (Ms Hien – Counter Manager of Luxasia Vietnam)

Besides, Ms Van also mentioned that ineffective marketing and brand development strategies were reasons causing sales decrease:

“Poor marketing and brand development strategies are reasons for sales decrease” (Ms Van – Retail Manager of Luxasia Vietnam)

Infrequently launching and marketing activities will not attract and appeal customers to come and return to counters and boutiques at shopping malls While competitors have many launchings and activities to appeal customer to their stores, Luxasia Vietnam lacks of creating attractive and appealing programs and activities

However, the problem is not caused by office staffs, it’s is determined by dependent on decision of brand principals Luxasia Vietnam is running the business as distributor model It has many differences compared to principal model Principles model is operated by brand owner, they will have freedom and own rights to brand strategies While the distribution model is be subjected by the strict management from the principal who owns brands All published information need approvals from the principals from image, color, activities, place… Brand Department and Marketing Department always work well with principles to update and transfer information to Retail Department in the fastest way

Thus, Ms Van Anh showed the differences between two models and mentioned the operational model of Luxasia Vietnam:

“Luxasia is operating as distributor model, not principle So marketing strategies and branding activities are dependent on brand principals We receive strategies and implement activities as regional guidelines” (Ms Van Anh – Business Manager - Fragrance of Luxasia Vietnam)

Therefore, all marketing and brand development strategies of the whole year must be proposed within budget and gotten the approval from principal at the beginning of the year Because of operating as distributor model, using expenses for marketing and product launchings are going to be limited, not as principle model

Because of difference countries, principals do not know and understand about trend of market So decision on marketing is going to be not appropriate to the retail market in Vietnam

Furthermore, Leonidou et al(2) showed that marketing strategy contains a significant impact on the expansion of sales but not effect on market share and profitability The author recommend about standardization marketing strategy to adapt with company and as well as the trend of market Besides, Havlicek(3) also studied about the combination of marketing and sales controlling When marketing did not adapt, it would cause a bad impact on sales plan and sales goals A failure in marketing in customer relationship would be the first step to lose market share The result was the decline in sales due to the failure of sales goals

2.3 High Turnover Rate

According to the report from Talent & Excitement (T&E) Department, the employee turnover rate of Fragrance Team is so high As Ware showed that turnover rate is the percentage

of permanent employees who leave job and organization The rate is measured during a fiscal

year So the turnover rate of Fragrance Team means the percentage of Beauty Advisors of Fragrance Team who resign from their positions

Ms Van talked about the problems leading to sales decrease, one of key reasons

mentioned was high turnover rate of Fragrance Team To explain the problem, she shared about the difference between experienced and new employee While permanent staffs have knowledge

of products and sales experiences, new employee must start by learning knowledge, building relationship with partners and finding customers Of course, the situations will take at least three

to four months to train a new employee as experienced staff

“In the meeting of Team Leaders (HOD), we have defined that the turnover rate of Fragrance Team is the top concern As the report from T&E Department, turnover rate of Fragrance Team is higher than the rate of last year Moreover, the rate is also higher than the rate of industry” (Ms Van – Retail Manager of Luxasia Vietnam)

“High turnover rate is one of reasons leading sales decrease at Fragrance Counters New employee will not have much as experience as old staffs also top sellers” (Ms Van – Retail Manager of Luxasia Vietnam)

Thus, Ms Thuy who takes main responsible in managing and operating Fragrance team

is strongly agreed about the problem of high turnover rate causing sales decrease:

“Experienced staffs leaved company while new employees have not trained and sale smoothly as experienced employee Team performance is not productivity as before” (Ms Thuy – Retail Executive – Fragrance of Luxasia Vietnam)

Furthermore, a short interview with Ms Hien – Counter Manager of Takashimaya counter was conducted to deeper understands, opinions and realistic at counters:

“Sales target of team is not achieved in many months because experienced employees leaved company such as Tra My, Ngoc Nu This makes team productivity decrease” (Ms Hien – Counter Manager of Luxasia Vietnam)

By the interview with Ms Hien, some examples were listed to further discern about the cause and effect relationships When an employee leaves the job, a new employee will take time

to catch up with Team So, during that time, team performance will be affected and not productivity as before This is realistic and happening at counters of almost counter including Cosmetic Team

Richardson(4) conducted and concluded research there was a loss of sales when an employee leaved Besides, the research accounted the total sales decline from the resignation

until a replacement with full experienced skill Moreover, the research proposed a solution by replacement for the resigned employee immediately by a qualified candidate

For Vietnam retail market, the beauty industry is one of the industries with fierce competition Overall, there are just around twenty-three companies in the beauty industry Detailed, for Fragrance retail, there are just ten companies which have distribution right to perfume including Luxasia Vietnam So, it is arduous to fill the vacancy with leaver with qualified candidate by narrow human resource market The lack of sales staffs will cause unproductivity performance

Also, as the report of Talent & Excitement Department in the kick-off meeting, Fragrance team has high turnover rate by 53.45% The goal is to decrease the rate and improve retention Fragrance Beauty Advisor These are the priority issue and development strategy which related departments need to focus on the year 2020

2.4 Poor Management (Literature)

In addition to above factors affecting the decline in sales, other factors were mentioned in academic research as reasons leading to sales decrease Wu(5) showed that a failure in business

of company was initialed from poor management, ineffective marketing, and lack of ability to compete with other companies Poor management is known as ineffective human resources management As Milkovich & Boudreau(6) mentioned that Human resources management is the set of activities related to human resources management that react toward the organization in order to achieve competitive advantage in the business Management skills show the ability of managers or leaders operating a team or group The inefficient skills could be lack of insight, fairness, inflexibility, training skills, fairness, etc Thus, poor management would lead to be unsatisfied and not respect to manager from staffs

Besides, an interview with Ms Van to clarify whether the problem could be the main factor causing team performance’s failure

“All counter managers have had long-term working at Luxasia Vietnam and they are experienced The trainer always organizes training class for counter manager to improve needed skills” (Ms Van – Retail Manager of Luxasia Vietnam)

Based on the interview with Ms Van, it is confirmed that although poor management is mentioned as a factor leading to the failure of business in some research but it is not main problem in realistic situation at Fragrance Team

2.5 Store Traffic (Literature)

Also in an exceedingly studying of Perdikaki(7), sales volume decrease is a result of bad store traffic The business performance of counters at shopping mall is dependent on the power

of attracting customers and converting store traffic into sales It is showed that store traffic has contributed a part to sales revenue of Team However, realistic is also dependent on sales skills and consultant skills of Beauty Advisor

Ms Thuy shared that the location has played an important role in competitive to competitors and appeal to customers Sometime there would not be many customers round the counters, but it is general situation of stores or counters in seasons In case of loss of store traffic, representatives of Retail & Operations Department will have a particular plan and closely work with Key Account of shopping mall to possess solutions

“At the current, store traffic is not problem to sales decrease of Fragrance Team” (Ms Thuy – Retail Executive – Fragrance of Luxasia Vietnam)

According to the issues mentioned in the Kick-off Meeting, sales growth decrease was defined as the symptom of Fragrance team Based on the secondary data from company and literature review to modify and deeper dig all potential problems, an initial diagram of symptoms and potential problems is formed as below:

Graph 3.3: Diagram of symptom and potential problems

Moreover, competition between channels is the reason which leading to sales decrease at Fragrance Team Although Ms Van told that this was one of problems, Ms Anh showed that the competition between channels is not main problem which caused the symptom Each channel has appropriate strategies and portfolio to limit the competition both channels Also, as literature, a case study mentioned the situation of Shiseido when expanding chain store market, a solution was raised to solve the problem Shiseido had set strategies and distributed specific products

Ineffective Marketing strategy/ brand development (Practical/Literature)

Competition between channels (Practical/Literature)

Sales Revenue Decrease Store traffic (Literature)

Poor management (Literature)

High Turnover Rate (Practical/Literature)

flow for each channel, and then the sales had been improved So, it is defined that competition between wholesale and retail channel is not central to focus on analyzing

As Ms Van sharing, the high turnover rate of Fragrance Team is the top objective which should be focused on One of the objectives of Fragrance Team besides achieving sales target is

to reduce the employee turnover rate of the Team This is also the development strategy of Retail

& Operations Department in 2020

“In the meeting of Team Leaders (HOD), we have defined that the turnover rate of Fragrance Team is the top concern… As a development strategy of company in 2020, it will be focused and invested on people and Team needs a stainable resource to achieve the business target in 2020” (Ms Van – Retail Manager of Luxasia Vietnam)

Moreover, this is not issue which Retail & Operations Department is facing alone As

Ms Thuong confirmed that decrease turnover rate of Fragrance Team was a top priority of both Departments

“As strategy in 2020, decreasing turnover rate of Retail Team, especially Fragrance Retail Team is top priority of Retail Team and HR Dept” (Ms Thuong – Talent & Excitement Manager of Luxasia Vietnam)

As strategy development of Luxasia Vietnam in 2020, the human resources are the key and invested and focused on with the aim to maintain and retain the talents So, objective of the research is directed to the strategy of the business

Therefore, high turnover rate is defined as the central problem and the research will focus

on the problem to find the best solution

Graph 3.4: Diagram of symptoms and problems (updated)

High turnover rates cause a considerable and negative impact on employee management and business results for Team and organization When an employee has a plan to resign, productivity and quality of work are intend to decrease because of less commitment and bad performance in the duration of service Moreover, replacements must be carefully selected, oriented, and trained by Trainer, leaders and colleagues to catch up and follow-up the job and

quality of performance of Team Overall performance is likely to decline during the process

Workforce instability can have a major negative impact upon important outcomes sought by health care organizations(8)

In addition, high employee turnover is a key and difficult issue for the management and the organization When the employee turnover rate is higher, cost will be affected Direct costs include fee for recruitment and training of new people Indirect costs are such things as over workloads and overtime expenses for employees(9)

Ineffective Marketing strategy/ brand development (Practical/Literature)

Competition between channels(Practical)

Poor management (Literature)

High Turnover Rate (Practical/Literature)

Thus, high employee turnover is one of top priority issue which the management should focus and have a strategies and policies to improve the figure Improving employee retention could result in decreasing the employee turnover rate and making the outcome of the business better The quality of work, performance and productivity will be improved and advanced because experienced employees know their jobs well and require less the needs in training and development

Chapter 4: Cause Validation

In the kick-off meeting, Talent & Excitement Manager mentioned to high turnover rate of Fragrance Team This is an important and challenging issue with Talent & Excitement Department and Fragrance Team

Ms Thuong shared information and raised the issue in the kick-off meeting:

“Problems about high turnover rate have been focusing As HR data and reports, the number of resigned employees is increasing and the percentage is higher than the same period last year And it is have an uptrend” (Ms Thuong – Talent & Excitement Manager of Luxasia Vietnam)

As Mercer Survey in 2019, turnover rate of Retail industry is 31.50% while the rate of Fragrance Team is 53.45%

Figure 4.1: Voluntary staff turnover at MNC – Top 3 & Bottom 3 Industries (Vietnam Salary Survey 2019)

Based on data from report of Talent & Excitement Department and information of industry, there is a big gap between employee turnover of Fragrance Team Furthermore, the turnover rate in 2019 is higher than the last three years The figures are displayed as following chart:

Figure 4.2: Turnover rate of Fragrance Team compared to Retail industry (Internal report of Luxasia Vietnam, 2017 - 2019)

It is clearly showed that many permanent employees of Fragrance Team leave your positions; the percentage is higher than previous years This is an alarming issue and top priority

of Fragrance Team and Talent & Excitement Department

With the aim to follow and get exactly data for human resources reports, Talent & Excitement Department uses the report extracted from SAP system Each resignation case would

be recorded on the system with specific data The information would be arranged and clearly indicated in an effective way to help users having a resulted report Based on the final report by the SAP system, potential causes are listed and carefully analysis to clarify their influence on the central problem

-Figure 4.3: Reasons for termination of Fragrance employees (Internal report of Luxasia Vietnam, 2019)

According to the report in 2019, there were many reasons for the leaving of employees It

is specified analyzed the relationship between high turnover rate and reasons leading to the problem and literature for supporting The causes were formed based on the report and the opinions of the head of departments and related employees According to the report of resignation from Talent & Excitement Department, there were other reasons causing high turnover rate In addition to the reasons mentioned, there are several reasons shown in the report

1.1 High Sales Target

High sales target is considered as one of key reasons leading to low motivation of employees which cause high turnover rate at Fragrance Team As above mentioned, sales target

is set and built based on the performance of the last year and the growth expansion of the whole business of Luxasia Vietnam The sales target is set for whole counters and divided into twelve months at the beginning Especially, sales target of counter will be set for each individual of each counter based on her/his ability Retail Operations Executive has main responsible for following and giving support to individual and counters to achieve the target The sales target is set higher year by year

End of contract

Direct Manager

Working Process

Reasons for Termination of Fragrance Employees

Number of employees

In a quick interview with Ms Thuy, she mentioned factor leading to the high turnover was high sales target:

“Almost employees leaved job due to not achieving sales target An employee does not achieve sales target in 2-3 months, we will consider to individual train and follow the results” (Ms Thuy – Retail Executive – Fragrance of Luxasia Vietnam)

Hence, because of fierce competition in the beauty industry, employee performance significant contributes to the growth of Fragrance Team and whole organization The sales employee performance of each employee will be followed and controlled by daily, weekly and monthly to ensure achieve sales target In case there are any problems and issues, Counter managers and Retail Operations Executive will support for individual Once employees could not keep up their performance leading to down motivation to work; they will not achieve sales target All things cause their low-income due to no incentives as a result Therefore, it is concluded there is a relationship between high sale targets leading to employee turnover Sales target is set quite high which is going to create a pressure on Beauty advisors They could not maintain their performance to achieve the target so the results in no incentives in their income Besides, Ms Thuy showed her agreement to the cause and told about the situation happening in realistic Thus, as the report, high sales target is one of key reasons making higher the figure of high turnover rate

1.2 Salary & Benefits (Work Motivation)

Employee motivation plays an important role for retaining the talented and also makes an influence on employee performance and the business development Thus, according toSihag(10), the investment on workforce was essential to achieve a long-term agreement with worker and many essays also showed the link between motivation and employee achievement and the business development Also, Hunjet(11) mentioned the motivational elements were also considered as well-affecting factors to improve worker productivity

Besides, motivation was divided into two different types such as extrinsic motivation and intrinsic motivation(12) Especially, as Vallerand RJ(13) mentioned that extrinsically motivations are factors bringing satisfaction and meeting the desire of employee based on financial rewards or beneficial policy while intrinsic motivations are personally encouragement

or support, especially in human spirit by learning, working, discovering or completing the new things in their job

With the current issue of Fragrance Team, there are two elements to deeper dig and analysis: recognition and salary

 Unrecognition / No Promotion

Recognition is considered as a physical motivation to encourage employees with outstanding performance and as well as creating job satisfaction to them that is the most major factor for employee motivation(11) Appreciation and recognition to staffs would inspire and encourage them for better task performance

In a short interview with Ms Thuong, she gave an opinion that recognition was one of reason causing down employee motivation

“In my opinion, no recognition and no opportunity to develop level of Beauty Advisor make their working motivation decreased This leads to high turnover rate” (Ms Thuong – Talent & Excitement Manager of Luxasia Vietnam)

However, Ms Hien showed opposite opinion about this problem In her opinion, turnover rate does not result in any unrecognition or no promotion Also, she talked about the link between title and corresponding responsibility Higher title requires higher skills and knowledge

to manage and drive a team

“No development opportunity is not main problem leading to resign employees However, it could be affect to the decision of employees in case there is no promotion and development in their job” (Ms Hien – Counter Manager of Luxasia Vietnam)

By two opposite thoughts, confusion happened to the reason for recognition / promotion

leading to high turnover rate To exactly analysis, an interview with Mr Tung was conducted

He showed the same opinion with Ms Thuong

“At Luxasia Vietnam, there are no programs of promotion and recognition to Beauty Advisor Many Beauty Advisors worked for over 3 years at the same level, then, they leaved and moved to competitors with the higher level” (Mr Tung – Beauty Advisor at Fragrance Diamond)

Based on opinions of employees and Talent & Excitement Manager, it is concluded that

no promotion and recognition are potential reasons causing high turnover rate It takes significant effect on employee decision to leave the organization

 Uncompetitive Salary

Employees intend to choose to leave the current job for getting high-paid job to achieve a better quality of life When the satisfaction of salary is high, the impact of working pressure is low, the satisfaction of salary is low; the impact of working pressure is high(14) Thus, salary satisfaction and turnover trend is negative correlations(15)

In realistic of Luxasia Vietnam, the situation of uncompetitive salary is considered as the main problem causing high turnover rate in Fragrance Team Non-competitive salary create competitive disadvantage to competitors in the beauty industry Ms Hien raised the problem in

an interview:

“Salary is lower than other company in industry and benefits are not good Some employees are attracted by salary and benefits of competitors so they leaved job Incentives scheme for employ is fine” (Ms Hien – Counter Manager of Luxasia Vietnam)

The problem is an alarming issue which Head of Retail & Operations Manager is focusing Ms Van knows clearly the issue and collects more information from competitors in industry Fortunately, she shared detailed information in a short interview:

“When an employee doesn't achieve the sales target, they will not get the incentives and just get the base salary However, base salary of employee is lower than employee of competitors such as Loreal (6.500.000 VND); Dior (5.500.000 VND); Phuong Phat (5.500.000 VND), while the base salary of Luxasia employee is 4.729.400 VND” (Ms Van – Retail Manager

Therefore, Retail & Operations Manager and Talent & Excitement Manager should consider on the demand of Beauty Advisor and organizational which related to salary and benefits to achieve the working interests and motivation of employees for ensuring quality standards and work as productivity

1.3 Family Reason

Family reason is one of the many reasons causing high turnover rate as the report from T&E Dept In 2019, Fragrance Team had many resignation cases of employee due to family reason It could be recorded such as move to hometown, take care family or marriage, etc Although many cases happened in 2019, the situation was considered as unexpected and

uncontrollable circumstances

1.4 Unsatisfactory Work Performance

Fragrance Team is the key team which has significant contribution to sales revenue of the company So, KPI and many guidelines are ensured to done correctly and followed by daily, weekly and monthly Especially, achieving sales target is always the most goals of all Beauty Advisors and Counter Managers

In 2019, Fragrance Team had many resigned cases due to unsatisfactory work performance As Ms Thuy sharing about the cause:

“In case employees have bad performance, show a bad working behavior and also do not follow as guidelines, we will have solutions to improve individual If they do not improve, we must say sorry” (Ms Thuy – Retail Executive – Fragrance of Luxasia Vietnam)

Also, Ms Thuong showed her agreement about the cause:

“In case employees could not show better performance, a case of employee turnover happens” (Ms Thuong – Talent & Excitement Manager of Luxasia Vietnam)

1.5 End of Contract

In 2019, there were cases of end of contract with some employees Some employees work

as temporary staff to replace maternity employees or working on high seasons Because of temporary period, the replacement just had fixed term to catch up and follow the job Of course,

a new employee will need time to connect and engage with Team However, Retail Team tries to find the best candidates to replace the employees When the employee is back, the temporary staff would be considered to fill another empty position otherwise the company would end the labor contract in case of the bad performance

In realistic at Fragrance Team, there were some cases related to the cause so that’s why end of contract was showed on the report However, the percentage that indicated about the cause was not much to consider as the main reason leading to high turnover rate

1.6 Poor Supervisor (Direct Manager)

According to McCleskey(16), leadership is the professional ability to convince colleagues to work together as a team under the leader management to attain targets Many researchers indicated that poor supervision is one among the key elements which impact on high employee turnover, low performance which decreases the overall success of the business(17) It

is likely that employees are going to leave their jobs due to the lack of support from direct supervisor

With the current business of Fragrance Team, poor supervisor is considered as one of potential factors leading to employee turnover rate Indeed, there is a case that employee quit her job due to a conflict with her supervisor Ms Thuong showed her thoughts about the problem:

“Managing skill of Counter Manager is important A manager will lead Team to success

or fail By a case happened at Fragrance Plaza Hung Vuong, Counter Manager had conflict with teammates and could not solve problems or conflict in a Team” (Ms Thuong – Talent & Excitement Manager of Luxasia Vietnam)

She also gave opinion that it is necessary to coach for counter managers to improve their organizational and leadership skills Moreover, recruitment conditions are required to consider, candidates should be carefully chosen to be suitable with the culture of company, also characteristic of industry

However, Ms Thuy said that poor supervisor is not the main problem leading to employee turnover of Fragrance Team

“Counter manager of Team plays an important role for Team engagement and connection between staffs However, it is not main problem to high turnover rate As my management, there is just a case which has conflict between employees in a Team” (Ms Thuy – Retail Executive – Fragrance of Luxasia Vietnam)

As an overview, almost counter managers have experiences in operating and leading Team in many years Besides, Trainers frequently organize coaching class not only to update knowledge about new products, but also to improve and enhance skills for each level of retailer Hence, poor supervisor is just considered as potential problems to the issue of Fragrance Team and it could be considered to be invested more by Retail & Operations Department and Trainer

1.7 No Process/ Manual (Working Process)

One of mentioned reason causing turnover rate of Fragrance Team is no process and manual job Although Beauty advisor has main responsible in sales, they also do some assigned task related to bills, payments, sales reports to counter manager, … According to Ms Thuong sharing, no process and manual tasks require them to take more times to complete, sometime this makes motivation down This is the reason causes leaving of employee

“No process and do everything by manual taking more time of employees These make job running slowly” (Ms Thuong – Talent & Excitement Manager of Luxasia Vietnam)

However, Ms Hien gave a contract opinion to Ms Thuong sharing She said that the problem did not cause the high turnover rate of team Instead of using new technique, they were used to doing as a routine job Although it took more time, they feel satisfied with the current

situation

“Report sales numbers and bills and update sales on system by manual is fine Sometimes high seasons, we need much time to do it Although it takes much time, we are fine because we are not familiar to use new technique” (Ms Hien – Counter Manager of Luxasia Vietnam)

Many researches had revealed that an adverse working environment and the culture of an organization will affect to employee’s intention to leave the job Working environment is defined that the environment and all surroundings of the employees which can influence the work It could be including a workplace, stationaries, tools and facilities and etc(18) Moreover, working environment is not only physical things but it includes many elements influence spirit such as quiescence, cleanliness, and spiritual(19) So if employees work in a low-grade environment, lack of basic tools and facilities, workers will face to difficulties in working for a long time which causes negative influence on employee’s decision to leave their job

However, this is not the problem causing the current issue In a short interview with Ms Hien and Mr Tung who are working at counters at shopping mall gave opinion about the problem:

“Working environment of Luxasia is good The company provides full facilities for our jobs” (Ms Hien – Counter Manager of Luxasia Vietnam)

“We are supported from the company All stationaries are provided in full” (Mr Tung – Beauty Advisor at Fragrance Diamond)

Indeed, Beauty Advisor is workforce who has low education (from high school and college), so, it is hard to familiar with a new technique applied on process and jobs