Improving the performance management in techcombank

A case study of Techcombank will be examined inorder to gain a Clear understanding about the process of appraising performance inTechcombank then find out the exist issues in the process

vietnam national university, HANOI hanoi school of business

vietnam national university, HANOI

hanoi school of business

TABBLE OF CONTENTS

ACKNOWLEDGEMENTS

ABSTRACT

TÓM TẮT

LIST OF FIGURES

INTRODUCTION

1 Objectives and aims

2 Research questions

3 Scope of work

4 Data source and processing

5 Methods

6 Significance

7 Limitations

8 Expected results

9 Outline of thesis

CHAPTER 1: THEORETICAL FOUNDATION .

1.2 Benefits of performance appraisal

1.2.1 Benefits to the organization:

1.2.2 Benefits to supervisors

1.2.3 Benefits to employees

1.3 Performance appraisal system:

1.4 Performance measures criteria

1.5 Errors should be avoided in performance evaluation:

1.6 Performance appraisal methods

1.6.1 Attribute approaches

1.6.2 The behavioral approach

1.6.3 The results approach

CHAPTER 2: FINDINGS

2.1 Macro analysis

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2.2 Techcombank introduction 25

Figure 2-1: Some Main Figures of Techcombank 26

2.3 SWOT Analysis 29

2.3.1 Strengths 29

2.3.2 Weaknesses 31

2.3.3 Opportunities 32

2.3.4 Threats 33

2.4 Survey analysis 33

2.4.1 The model of the survey 33

2.4.2 The survey’s content 34

CHAPTER 3: RECOMMENDATIONS 68

3.1 Bank's defined target of work performance appraising 68

3 2 Completion of job descriptions 68

3.2.1 Job descriptions: 68

3.2.2 Set up a performance appraisal criteria system: 70

3.3 Selection of appraisal methods 70

3.4 Build-up of multi-way appraisal system 71

3.5 Complete the interview of performance appraisal 72

3.6 Training provided to those who take charge of performance appraisal 73

3.7 Strengthening use of performance appraisal results to operations of human resource work of the Bank 74

3.8 Researching and strengthening deployment of personnel rotation 75

3.9 Build-up of business' atmosphere and culture 76

3.10 Action plans 78

CONCLUSION 81

REFERENCE 82

APPENDIX A: Questionnaire 84

APPENDIX B: Job description of an accountant and requirements 88

APPENDIX C: Method of giving mark to employees’ performance appraisal 93

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LIST OF FIGURES

Figure 2 – 1: Some Main Figures of Techcombank 26

Figure 2 – 2: Number of seniority in Techcombank 34

Figure 2 – 3: Percent of seniority in Techcombank 35

Figure 2 – 4: Number of current title 35

Figure 2 – 7: Percent of education level 37

Figure 2 – 8: Number and percent of Reasonableness of salary in TCB 38

Figure 2 – 9: Number and percent of Fair in compensation policy 39

Figure 2 – 10: Number and percent of reward based on results of performance 39 Figure 2 – 11: Number and percent of timely praised when perform well 39

Figure 2 – 12: Number of participate in short courses 40

Figure 2 – 13: Percentage of participate in short courses 41

Figure 2 – 14: Number of participate in long courses 42

Figure 2 – 15: Percentage of participate in long courses 42

Figure 2 – 16: Number of satisfaction level with compensation policy 43

Figure 2 – 17: Percentage of satisfaction level with compensation policy 43

Figure 2 – 18: Number and percentage of clearness for making plan and announcing to staffs 44

Figure 2 – 19: Number and percentage of work suits with capacity 45

Figure 2 – 20: Number and percentage of employees’ strengths are used and developed 45

Figure 2 – 21: Number and percentage of encouraged and oriented to develop career 45

Figure 2 – 22: Number and percentage of rotation through other positions 46

Figure 2 – 23: Number and percentage of challenging with higher positions 46

Figure 2 – 24: Number and percentage of sufficiently informed about human policies 46

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Figure 2 – 25: Number of complain with colleagues 47

Figure 2 – 26: Percentage of complain with colleagues 48

Figure 2 – 27: Number of complain with managers 48

Figure 2 – 28: Percentage of complain with managers 49

Figure 2 – 29: Number of administration’s reaction 50

Figure 2 – 30: Percentage of administration’s reactions 50

Figure 2 – 31: Number and percentage of people like working atmosphere 51

Figure 2 – 32: Number and percentage of employees’ ideas are listened 52

Figure 2 – 33: Number and percentage of employees’ creativeness is encouraged 52

Figure 2 – 34: Number and percentage of people feel their job is challenging, interesting 52

Figure 2 – 35: Number of the relationship with Techcombank 53

Figure 2 – 36: Percentage of the relationship with Techcombank 54

Figure 2 – 37: Number of satisfaction with current job 54

Figure 2 – 38: Percentage of satisfaction with current job 55

Figure 2 – 39: Number of motivation to perform assignments 55

Figure 2 – 40: Percentage of motivation to perform assignments 56

Figure 2 – 41: Number of employees’ expectations 57

Figure 2 – 42: Percentage of employees’ expectations 57

Figure 2 – 43: Number of managers’ reactions 58

Figure 2 – 44: Percentage of managers’ reactions 59

Figure 2 – 45: Number of employees’ trend 60

Figure 2 – 46: Percentage of employees’ trend 60

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1 Objectives and aims

There are three objectives of this thesis when mentioning to performanceappraisal activities, include gathering theories related to appraising performance(both concepts and models) A case study of Techcombank will be examined inorder to gain a Clear understanding about the process of appraising performance inTechcombank then find out the exist issues in the process of appraising performance

in Techcombank

Finding out all the problems in the process of performance appraisal inTechcombank, the student has some aims include: Suggest some solutions toimprove the process of appraising performance, human resource policies If theseissues are improved, they will contribute to increase the effects of employees’working and reinforce the loyalty of employees

2 Research questions

Two research questions are applied when examining the Techcombank’s casestudy are: How does the process of appraising performance in Techcombankdeploy? And Is the process of appraising performance in Techcombank effective?

3 Scope of work

Scope of work is from 2005 to 2006 and the conducted area is departments inhead office of Techcombank

4 Data source and processing

The data is collected from two sources: Primary (information is conducteddirectly from interview and survey to find out the employees’ opinion on the currentperformance appraisal of Techcombank) and Secondary (study documents related toappraising performance activities of banking sector; evaluation reports)

5 Methods

The method will be based on researching real case study of Techcombank anduse questionnaire (Questionnaire is built based on theory, From the result ofquestionnaire the student then turn back to the reality of appraising the employees’

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performance to improve the process of Techcombank) Interview or focus groupwill also be used when necessary.

6 Significance

The student hopes that, the thesis will contribute significant meanings: (i)Study deeply about the process of appraising performance activities inTechcombank and improve the process; (ii) Assessing the employees’ performanceactivities at their true worth; (iii) Encourage and strengthen the loyalty and therelationship between the employees and Techcombank

7 Limitations

Because the time limitation, the thesis can not avoid mistakes Case study isonly conducted in Head Office so it cannot reflect all the opinions ofTechcombank’s employees The survey’s results are provided by Human resourcedepartment, therefore some sensitive information are biased, so the accuracy ofquestionnaire is not absolutely accurate

The thesis includes three chapters:

 Chapter 1 - Theoretical foundation: This section will summarize the

theories of performance appraisal It will give the readers an overview of

performance activities from clearly definition to the benefits of usingperformance management, the criteria used in performance appraisal as well asthe performance appraisal models and their advantages, disadvantages of usingthem

 Chapter 2 - Findings: After analyzing the current position of

Techcombank

(SWOT analysis), the survey’s results and the data collected form secondary

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source, the thesis will point out the findings about the existing problems inTechcombank from policies to practice of deploying performance appraisal.All the problems of Techcombank will be analyzed in the aspect ofperformance management.

 Chapter 3 - Recommendations: Continue to the analyzed findings from

chapter 2, this section will suggest some solutions and how to apply theperformance appraisal methods in Techcombank The student hopes that, allthe recommendations will be useful and effective for not only Techcombankbut also for other commercial joint stock banks which have the same issueslike Techcombank

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CHAPTER 1: THEORETICAL FOUNDATION

Organizations that seek to gain competitive advantage through their workersmust be able to manage the behavior and results of all employees One of the mostimportant challenges managers face is managing the performance of those overwhom they have authority (1)

Performance management is defined as the means through which mangersensure that employees’ activities and outputs are congruent with the organization’sgoals Performance management is central to gaining competitive advantage (2)Performance management system has three parts: defining performance,measuring performance, and feeding back performance information

A performance management system specifies which aspects of performanceare relevant to the organization, primarily through job analysis It measures those

aspects of performance through performance appraisal, which is only one method

for managing employee performance It provides feedback to employees throughperformance feedback sessions so that they can adjust their performance to theorganization’s goals

Every employee works in an organization has different background,knowledge, attitude, motives, personal characteristics, skills, and so on which affecttheir performance at work

In order to facilitate excellence in the performance of the employees in theorganization, organization is required to identify right person for right job andensure their contribution to the organization’s objectives

Giving performance feedback and providing remuneration and reward based

on contribution are two methods for facilitating better performance of theemployees Employee performance appraisal provides a basis for providing

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feedback and for deciding remuneration and reward for contribution andperformance

1.1 Definition of performance appraisal

Performance appraisal is a process that involves communicating to anemployee how well the employee is performing the job and involves establishing aplan for improvement (1)

Performance appraisals are used for many purposes are wage and salaryadministration, promotions or demotions, transfers, layoffs, discharges, counselingwith employees, and human resources planning

Performance appraisal systems have three principal purposes: To improveemployee performance in the present job; to prepare employees for futureopportunities that may arise in the organization and to provide a record of employeeperformance that can be used as a basis for future management decisions (2)

Performance appraisals are handled in most organizations in one of two ways:Informal appraisal and formal appraisal

 Informal appraisal occurs in all organizations Under such a system

no formal procedures, methods, or times are established for conductingperformance appraisals For example, when a supervisor conductsappraisals informally, the employee will be given a general impression ofhow the supervisor feels about their performance In many cases, whenemployee make a mistake, such appraisals are conducted As a result,employee often develop negative feelings about this type of performanceappraisal

 The other way of handling performance appraisals is to have aformal appraisal system Under such a system, procedures, methods, andtimes are established for conducting appraisals

(2) Leslie W Rue and Lloyd L.Byars, “Supervision: key link to productivity”, Fifth edition

1996, p.205

(3) Leslie W Rue and Lloyd L.Byars, “Supervision: key link to productivity”, Fifth edition

1996, p.208

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 It is important to note that, formal appraisal systems contain aninformal element For example, general comments that a supervisor makesabout an employee’s performance are a type of informal performanceappraisal Supervisors must realize that any comment made by a supervisorabout an employee’s performance is viewed by the employee as a form ofperformance appraisal Thus, the supervisor must use informal reviews toreinforce good performance and discourage poor performance.

1.2 Benefits of performance appraisal

A sound performance appraisal systems does not only bring benefits for the organization, but also for the managers and employees

1.2.1 Benefits to the organization:

 Provides an evaluation of the organization’s human resources: In

an organization’s performance appraisal system, the managers can evaluate

the performance of employees and supervisors Thus, the managers canknow the capacity of human resources through the results of theperformance appraisal system

 Gives the organization a basis for making future human resources decisions: Based on the results of performance appraisal, the

managers can give out appropriate decisions about human resources such

as training, promoting, developing, compensating, so on More over, theresults of performance appraisal reflect the success of functional activities

of human resource department in recruiting, selecting, orienting, promotingand other activities Then the managers will set up plan for adjusting anddeveloping in future

 Increases the potential of the organization’s present human resources for meeting the present and future needs of the organization:

the capacity of employees and even supervisors are reflected in the results

of performance appraisals Therefore, the human resource department can

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easily make decisions on human resource plans like applying rotationpolicy, doing training programs to enhance the skills for employees,promoting people in higher position, carrying out special recruiting actions

to select qualified employees for meeting the needs of the organization’sdevelopment

 Improves employees morale: The rationality and accuracy of using

appraisal tools and feedback information have the effect to the employees

in building and developing their morale, their atmosphere of workingenvironment and their attitude When the employees feel that they areappropriately evaluated, they will try their best to work more effectivelyand contribute much to the organization

There is a widespread belief that the purpose of employee performance

appraisal is deciding salary increments and promotions However,performance appraisal can serve variety of organizational needs veryeffectively like developing employees who are effective at their jobs.When employees are not performing as well as they should, performancemanagement seeks to improve their performance The feedback givenduring a performance

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evaluation process often pinpoints the employee’s weaknesses Ideally, theperformance management system identifies not only the aspects of theemployee’s performance that are deficient but also the causes of thesedeficiencies Then the supervisor can help the employee make anappropriate development plan.

 Improves the productivity of morale of the supervisor’s employees: When the performance appraisal is conducted in fair and

transparent manner, employee will feel satisfied They know that if theywork morally, the supervisor will evaluate them appropriately through afair assessment

The accuracy of employee’s performance appraisal is reflected in the resulthelp them to identify opportunities for improvement and it motivate theproductivity of employees’ morale

 Helps the supervisor identify capable replacements for level jobs within the supervisor’s work unit: When conducting

higher-performance appraisal, the supervisors’ duties of supervisor are not only

assess the employees but also assess other supervisors The results can beused in the supervisors’ s work unit for replacements for higher level jobs

1.2.3 Benefits to employees

 Allows the employee to present ideas for improvement: The

performance appraisal is conducted in fair and transparent manner willprovide a bilateral communication between the supervisor (appraisor) andthe employee (appraisee) The feedback given during a performanceevaluation process often pinpoints the employee’s weaknesses, the level ofreasonability of supervisor’s remark It makes the people in differentposition in an organization become closer The bilateral communicationduring the performance appraisal makes everything clearer so employeewill actively find out the ideas to improve both the system and themselves

 Provides the employees with an opportunity to change his or her behavior: The performance appraisal helps employees themselves evaluate

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their capacity, realize their importance level in organization, identifyopportunities for improvement To achieve higher promotions, theperformance appraisal helps employees find what requirements they need

to improve such as: knowledge and experience, skills and morale, workingattitude and contribution to the organization, so on A fair and transparentappraisal with the advice of supervisors will motivate employees try theirbest to reach the future opportunities

her performance: During the performance appraisal, the employee will

have chance to discuss with the supervisor and may recognize the feeling

of the supervisor about employee’s work At the end of appraisal process,the supervisor will give the result to the employee includes the supervisor’comments and advice The feeling of the supervisor about employee’swork makes the employee feel that their contribution is acknowledged, thefairness in evaluating performance between members in organization isequal (Each employee will receive different comment from the supervisor)

so employee will be encouraged to perform better in their work

1.3 Performance appraisal system:

In order to do appraising work, the organization need to set up a performance appraisal system includes three fundamental elements:

appraisor use several evaluating methods to measure the employees’performance by comparing the result with the expected result; Therequirements to do the job is a criteria system to perform the work includesboth qualitative and quantitative requirements; The requirements need tobuilt based on objectivity, reasonability and they can reflect whichbehaviors are necessary to perform the work well

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 Measure the employee’s performance based on standard

criteria: It is

a process and in this step, the manager need to have administrativeevaluations whether the employee’s performance is good or not Theprocess of employee appraisal begins with formal commnunication ofappraisal framework and program to the employees Deciding operatinggoals for each of the employee is also a step in the process of appraisal asthe appraisal is conducted with respect to set operating goals The process

of performance appraisal includes 4 steps:

(i) Pre interview preparation: Appraiser should collect the

information

for the appraisal period in respect of the appraisee: assigned jobresponsibilities; specific assignments; programs participated;projects handled; events participated; nature of relationshipsestablished with seniors, colleagues, juniors, partners andcustomers; nature of interactions with seniors, colleagues, juniors,partners and customers; achievements and recognitions; failures andpunishments; issues arisen or handled; complaints received

(ii) Familiarization with operating situation and environment: Inthe beginning of the appraisal interview, the appraiser should clearlyand formally state the objectives of the appraisal and explain theprocess The appraiser initiate the conversation to create confidence

in the mind of the appraisee Before beginning of the actualappraisal the appraiser ask the questions to understand the workingconditions and environment being encountered by the appraisee forexample: What is the most difficult operating problem you havefaced? Which clients/ customers/ business partner/ executives youfind most difficult to handle? Where do you think organizationshould concentrate for improvements? Answers to these and similarquestions reflect the information on the working environment of the

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employees This information is useful to weigh the gathered evidence

(iii) Evidence gathering: After the appraiser has clear idea of theappraisee’s operating environment, appraiser shall begin the formalappraisal by gathering the evidence needed for evaluating theemployee’s performance

(iv) Evidence grading: Comparing the performance of employee

in the fact with the expected result based on the requirements andstandard criteria, the appraiser will conclude how well the employeehas done in their working performance

Measure the performance is the centre of performance appraisal

 Personal feedback and reporting: appraisers discuss the appraisal

ratings and reasons for the rating with individual employees Appraisers

also record views of the employees in respect of the appraisal Theappraiser should also discuss the steps that an individual employee cantake to improve their performance Then the organization establishesproper reporting on the outcome of appraisal exercise for the purpose offuture analysis and improvements in the system

1.4 Performance measures criteria

 Strategic congruence: Strategic congruence: is the extent to which the

performance management system elicits job performance that is congruentwith the organization’s strategy, goals, and culture (1) Strategic congruenceemphasizes the need for the performance management system to provide

guidance so that employees can contribute to the organization’s success Most

companies’ appraisal systems remain constant over a long period of time andthrough a variety of strategic emphases However, when a company’s strategychanges, its employees’ behavior needs to change, too

(1), Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.200

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 Validity: Validity is the extent to which the performance measure

assesses all the relevant and only the relevant aspects of performance This

is often referred to as content validity For a performance measure to bevalid, it must not be deficient or contaminated (1) Validity is concernedwith maximizing the overlap between actual job performance and themeasure of job performance A performance measure is deficient if it doesnot measure all aspects of performance A contaminated measure evaluatesirrelevant aspects of performance or aspects that are not job related Theperformance measure should seek to minimize contamination, but itscomplete elimination is seldom possible

 Reliability: Reliability refers to the consistency of the performance

measure One important type of reliability is interrater reliability - the

consistency among the individuals who evaluate the employee’sperformance (2) A performance measure has interrater reliability if twoindividuals give the same evaluations of a person’s job performance.Evidence seems to indicate that most subjective supervisory measures ofjob performance exhibit low reliability With some measures, the extent towhich all the items rated are internally consistent is important (internal

consistency reliability) In addition, the measure should be reliable over

time (test-retest reliability) A measure that results in drastically differentratings depending on the time at which the measures are taken lacks test-retest reliability

 Acceptability: Acceptability refers to whether the people who use

the performance measure accept it (3) Many elaborate performancemeasures are extremely valid and reliable, but they consume so much ofmanagers’ time that they refuse to use it A system that is not accepted isalmost worse than no measure at all This points to the need to involve both

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managers and employees in the development of performance measures.Research has found that this increases the acceptability of the system.

 Specificity: is the extent to which the performance measure gives specific guidance to employees about what is expected of them and how they

can meet these expectations Specificity is relevant to both the strategic anddevelopmental purposes of performance management (1) If a measure doesnot specify what an employee must do to help the company achieve itsstrategic goals, it becomes difficult for it to achieve its strategic purpose.Additionally, if the measure fails to point out an employee’s performanceproblems, it is almost impossible for the employee to correct his or herperformance

1.5 Errors should be avoided in performance evaluation:

 Error of favoritism: This happens when the supervisor favor some

body than others It will make the result of the performance evaluation

incorrect

 Error of average tendency: The rater does not want to take offence

or displease others then he has tendency to evaluate employees a little

higher than average level

 Error of extreme: The supervisor prove to be so strict (manager

gives low ratings to all employees) or so easy (rater assigns high ratings to

all employees) in the process of performance evaluation These error makedifficult to distinguish among employees rated by the same rater and createproblem in comparing the performance of individuals rated by differentraters

 Error of preconception caused by culture customs: The

supervisor’s opinion may be erroneous because of the supervisor’s culture

habits

(2) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.201

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 Error of prejudice: The supervisor may dislike a group or a

working class then the evaluation about their performance can be

subjective and incorrect

 Error of the latest event’s influence: The supervisor’s opinion can

be affected by employees’ behaviors, attitudes have just occurred This

occurs when one positive performance aspect causes the rater to rate allother aspects of performance positively and in contrast, one negativeaspect results in the rater assigning low ratings to all the other aspects

1.6 Performance appraisal methods

1.6.1 Attribute approaches

The attribute approach to performance management focuses on the extend towhich individuals have certain attributes (characteristics or traits) believed to bedesirable for the company’s success The attribute approaches are used to mainlymeasure characteristics an employee has which are important for evaluatingperformance The techniques that use this approach tend to define a set of traits such

as initiative, leadership, and competitiveness and evaluate individuals on them

 Graphic rating scales: The most common form that the attribute

approach to performance management takes is the graphic rating scale.

Graphic rating scales can provide the rater with a number of differentpoints or with a continuum along with the rater simply places a checkmark To use this method, there are two important steps includes choosingthe traits and measuring the traits The chosen traits are typically in twotypes: directly related to job and indirectly related to job With the graphicrating scale, the supervisor is asked to evaluate an individual on suchfactors as quantity, quality, initiative, dependability, cooperativeness andquality of work Using this approach, judgments about performance arerecorded on a scale The scale is divided into categories

Using graphic rating scales have some advantages such as:

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(i) Easy to understand

(ii) Comparatively simple to establish

(iii) Simple to use

(iv) Relatively inexpensive to develop

(v) Give the same information on all employees

(vi) Quantify the number of employee’ performanceHowever, this method contains some disadvantages like:

(i) The specific characteristics of each job may be ignored

(ii) This method is easily impacted by subjective errors They canlead to incorrect performance evaluation (bias opinion, prejudice,preconception, average tendency, leniency, so on)

(iii) Graphic rating scale method can generate problems if choosen criteria are not suitable

(iv) Standards are may be unclear

(v) One of the biggest problems with graphic rating scale is thatmany supervisors have a tendency to evaluate everyone a littleabove average (1)

 Essay method: This method requires the supervisor to write a series

of statements about an employee’s performance, strengths and weaknesses,

potential for promotion as well as the rater’s suggestions,recommendations for employee’s work The essay can be written according

to different subjects such as: behavior on employee’s work, the demand fortraining, opportunities for development

The advantages of this method include:

(i) Simple to use

(ii) Help to provide opportunity to point out the characteristics ofemployee

(1) Leslie W Rue and Lloyd L.Byars, “Supervision: key link to productivity”, Fifth edition 1996, p.210

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(iii) This method provide detail and useful feedback for employee(point out strengths, weaknesses)

(iv) The employees can gain the right working orientation from the suggestion and recommendation of their supervisor

The disadvantages of this method include:

(i) It is difficult to use narrative information in human resource decision

(ii) The accuracy of narrative information much depends on the rater’s writing ability

(iii) The length and the content of the of the written statement can vary considerably from supervisor to supervisor (1)

(iv) It is difficult to compare essay appraisals made by different supervisors

(v) Comparing essay evaluations might be difficult because no common criteria exist

 Check list: This method requires the supervisor design a list of

statement which describes about the employees’ behavior, attitude can

occur during their work With the check list, the supervisor does notactually evaluate but merely records performance The supervisor checksyes or no responses on a series of questions concerning the employee’sperformance

There are some advantages of check list method:

(i) It is easy to use

(ii) The scoring key for the check list is usually kept by thehuman resources department, which computes the relative rating ofthe employee

(iii) Individuals with high scores are rated as better employees than those with low scores

(iv) This method avoid average tendency or leniency(1) Leslie W Rue and Lloyd L.Byars, “Supervision: key link to productivity”, Fifth edition 1996, p.210

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The disadvantages exist in this method are:

(i) Supervisor are generally not aware of the values associated with each question

(ii) The questions can be figured out the positive and negative aspects, so bias can be introduced into the answers

(iii) Assembling the question is a difficult job

(iv) A different set of questions must be assembled for most job categories

(v) General narrative statement can not reflect specific characteristics of each job

Here is an example illustrated for check list method:

Managers need to be aware that attribute based performance methods are themost popular methods in organizations They are quite easy to develop and aregeneralizable across a variety of jobs, strategies, and organizations In addition, if

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much attention is devoted to identifying those attributes relevant to job performanceand carefully defining them on the rating instrument, they can be as reliable andvalid as more elaborate measurement techniques (1).

These techniques fall short on several of the criteria for effective performancemanagement There is usually little strategic congruence between the techniques andthe company’s strategy These methods usually have very vague performancestandards that are open to different interpretations by different raters

Virtually none of these techniques provides any specific guidance on how anemployee can support the company’s goals or on what to do to correct performancedeficiencies In addition, when the raters give feedback, these techniques tend toelicit defensiveness from employees

1.6.2 The behavioral approach

The behavioral approach to performance management attempts to define thebehaviors an employee must exhibit to be effective in the job The varioustechniques define those behaviors then require managers to assess the extent towhich employees exhibit them (2) Behavioral approaches are excellent source ofinformation for employee development There are some common methods includes:

 Critical incident method: The critical incident approach requires

managers to keep a record of specific examples of effective and ineffectiveperformance on the part of each employee.When these actions significantlyaffects the department’s effectively both positive and negative, themanagers will record it The employee is then evaluated based on actualbehavior

The principal advantages of this method are:

(i) Provides the employee with an opportunity to establish an understanding of the behavior that the superior is seeking

(1) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.207

(2) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.209

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(ii) The incidents are used to give specific feedback to employeesabout what they do well and what they do poorly, and they can betied to the company’s strategy by focusing on incidents that bestsupport that strategy.

(iii) Forces supervisor to evaluate subordinates on an ongoing basis

The disadvantages which this method used to meet are:

(i) The supervisor must record pertinent incidents as they occur This can be time consuming and burdensome

(ii) The strong tendency to record or stress primary negative incidents

(iii) Many managers resist having to keep a daily or weekly log oftheir employees’ behavior

(iv) It is also often difficult to make comparisons among

employees, since each incident is specific to that individual

(v) The employees may feel unsatisfactory when knowing the supervisor record their bad behavior

 Behaviorally anchored rating scales (BARS): This method is

combined the tradition rating scale and critical incident method To

develop BARS, one first gathers a large number of critical incidents thatrepresent effective and ineffective performance on the job These incidentsare classified into performance dimensions, and the ones that experts agreeclearly represent a particular level of performance are used as behavioralexamples to guide the rater

The advantages include:

(i) More accurate than other traditional rating scale

(ii) The traits are chosen more carefully

(iii) Create the unity and consistency between supervisorsbecause this method evaluates observable behavior rather thanraters’ subjective perception

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(iv) Increase interrater reliability by more specifically defining the performance dimension

The disadvantages contain:

(i) This method can bias information recall, behavior that closelyapproximates the anchor is more easily recalled than other behavior

(ii) Develop a BARS is more time consuming and costly than develop

other methodsHere is an example of rating employees’ performance by applying this method

 Evaluation of the behavioral approach:

(i) The behavioral approach can be very effective It can link thecompany’s strategy to the specific types of behavior necessary forimplementing that strategy It provides specific guidance andfeedback for employees about the performance expected of them (1)

(ii) The major weaknesses have to do with the organizationalcontext of the system Although the behavioral approach can beclosely tied to a company’s strategy, the behaviors and measuresmust be constantly monitored and revised to ensure that they are stilllinked to strategic focus (2)

1.6.3 The results approach

The results approach focuses on managing the objective, measurable results of

a job or work group This approach assumes that subjectivity can be eliminatedfrom the measurement process and that results are the closest indicator of one’scontribution to organizational effectiveness (3)

Performance management systems that use results is management by objectives

public organizations It is the process consisted of having all the

subordinate managers write a letter to their superiors, detailing what theirperformance goals were for the coming year and how they planned toachieve them (4)

With MBO, the supervisor and the employee jointly agree on what theemployee’s work objectives will be and how they will be accomplished.The employee is then allowed considerable freedom in accomplishing the

(3) T Patten, Jr., A Manager’s Guide to Performance Appraisal (New York: Free Press) 1982

(4) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.212

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work objectives The employee’s performance appraisal is based on thedegree to which the work objectives are accomplished.

MBO systems have three common components: They require specific,difficult, objective goals; The goals are not usually set unilaterally bymanagement but with the managers’ and subordinates’ participation; Themanager gives objective feedback throughout the rating period to monitorprogress toward the goals

MBO can have a very positive effect on an organization’s performance.Considering the process through which goals are set, it is also likely thatMBO systems effectively link individual employee performance with thefirm’s strategic goals

One major advantage of using MBO is that it makes the performanceappraisal process more objective

One of the most difficult aspects of an MBO system is deciding in whatareas to set objectives

For an MBO system to be successful, three minimum requirements must

be met:

(i) Individual objectives must be jointly set by the supervisor and the employee

(ii) Employees must be periodically and regularly evaluated

(iii) Employees must be rewarded based on objective attainment

 Productivity measurement and evaluation system (ProMES):

The main goal of ProMES is to motivating employees to higher levels of

productivity It is a means of measuring and feeding back productivityinformation to personnel ProMES consists of four steps:

(i) People in an organization identify the products, or the set of activities or objectives, the organization expects to accomplish (1)

(1) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.214

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(ii) The staff defines indicators of the products Indicators aremeasures of how well the products are being generated by theorganization (1)2)

(iii) The staff establishes the contingencies between the amount ofthe indicators and the level of evaluation associated with that amount(2)

(iv) A feedback system is developed that provides employees andwork groups with information about their specific level ofperformance on each of the indicators (3)

 Evaluation of the results approach:

(i) One advantage of the results approach is that it minimizesubjectivity, relying on objective, quantifiable indicators ofperformance It is usually highly acceptable to both managers andemployees

(ii) Another advantage is that it links an individual’s results with the organization’s strategies and goals

(iii) A disadvantage is that objective measurement can be bothcontaminated and deficient – contaminated because they are affected

by things that are not under the employee’s control, such aseconomic recessions, and deficient because not all the importantaspects of job performance are amenable to objective measurement

(iv) Another disadvantage of the results approach is thatindividuals may focus only on aspects of their performance that aremeasured, neglecting those that are not

(v) A final disadvantage is that, though results measures provideobjective feedback, the feedback may not help employees learn howthey need to change their behavior to increase their performance

(1), (2), (3) Noe Hollenbeck Gerhart Wright “Human resource management”, Second edition 1996, p.214

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CHAPTER 2: FINDINGS

2.1 Macro analysis

Changing from the planed-oriented policy to market-oriented economy at theend of the 80s decades, Viet Nam has achieved many notable growth in economy.During 90s decades to now, the average growth rate of Viet Nam was around 8percent It is the high growth rate Together with the growth in GDP, the income percapita also increased From 2000 to 2006, the income per capita has sharplyincreased from USD 390 to USD 730 All economic sectors of the nationexperienced a faster growth rate than tn the pervious years Industrial outputachieved a high increase The service sector has improved considerably Thefinancial sector also expanded sharply, promising to improve capital use efficiency.Inflation issue has affected directly and immediately to the economy as well asthe living standard of people Recently, Inflation can be controlled Foreignexchange rates and interest have been stable

With the trend of globalization, especially after open-door policy (known asDoi Moi), Viet Nam has participated in many international organizations likeASEAN, AFTA and joining WTO in the late of 2006 can be seen as the momentousturning point of Viet Nam’s negotiation history This success leads to the significantincrease of foreign investment in Viet Nam recently Foreign direct investment is theremarkable point In 2006, total FDI in Viet Nam reached over USD 10.2 billionSome advantages that foreign investors are interested in joining Viet Namincluded high growth rate of GDP, strong consumption demand, stablemacroeconomic and socio political environment, etc., Viet Nam is known as one ofthe safest countries in the world More over, the population of Viet Nam is youngand labor is skillful and cheap Intellectual standard of people also has beenimproved With the percentage of more than 92 percent of population are able toread and write, Viet Nam is considered as a very high literacy country This willencourage Viet Nam rapidly approach international high technology, knowledge

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2006 was a prosperous year for the Vietnamese banking system High growthrate combined with financial market reforms and commitments to free capital flow(Draft Ordinance on Foreign Exchange and Decree on Anti-money Laundering) areillustrative of the progress of Viet Nam’s financial and banking market.

Thanks to the favorable policies of the government and the State Bank of VietNam, the domestic banking system has taken its first steps to open up and the legalframework for the industry is being gradually changed to meet internationalstandards The banking system supplied 30% of the total capital for the economyand met 40% of the capital need of businesses In 2006, total loans outstanding inthe banking system made up 60% of GDP with the average return on equityreaching 30% Domestic banks, especially joint stock ones, have not only invested

in new banking technology, personnel and financial products, but also looked forforeign partners to enhance their competitiveness and to prepare for the economicintegration process

Overall, the economic and social conditions of Vietnam represent an active,fast growing young country These are fundamental factors that guarantee a long-term growth of the financial sector in Vietnam in the future

2.2 Techcombank introduction

After “Doi Moi” period, the Government has loosened the regulations ofestablishment and operation of credit institutions outside the state owned system.These policies have encouraged commercial joint stock banks trongly developed.Commercial joint stock banks are now broadly boosting various aspects of theirbusinesses, from capital, human resources, technology, distribution network andinternational cooperation Many banks cooperate with foreign strategic partners formutual benefits

Techcombank is the abbreviated name of Viet Nam Technological andCommercial Joint Stock Bank The establishment of Techcombank was immediateafter the Government relaxed the regulations about banking establishment and

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operation Till now, Techcombank has sucessfully operated in 14 years In recentyears, Techcombank has reached significant landmark in such aspects as registeredcapital, profit, risk management, banking technology, network and new productdevelopment With its registered capital of over VND 1,500 billion and total assets

of VND 18,000 billion, Techcombank became one of the five largest joint stockbanks Techcombank also belonged among the most successful joint stock banks in

2006 by achieving profit after provision and before tax of VND 356 billion (is thethird highest profit bank in commercial joint stock bank system) Return on equity(ROE) was 16% This result has enabled the bank to significantly raise its dividendratio These results are greatly encouraging for the Bank’s shareholders, staff, andpartners, have created much prestige for the bank, and were a major factor inmaking the bank’s recent share issue such a success The number of new brancesopened during the year reached a record, bringing the total number of branches andsub-branches to nearly in twenty provinces and cities The network expansion was

in line with Techcombank’s retail banking development strategy and allowed theBank to timely and effectively meet customer demand The quantity and quality ofstaff also increased At the end of 2006 There are 1,584 staffs have been working inTechcombank

Figure 2-1: Some Main Figures of Techcombank

[Source: Techcombank, Annual Reports]

Techcombank has strongly committed to maintain its leading position in banking technology by successfully upgrading it core banking system to the newest

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version T24 R5 of Temenos Holding (Switzerland) supporting 24/7 transactions Inaddition, Switching and Card Management system software by Compass Plus wasalso officially deployed, enabling the bank to issue credit and debit cards and tomanage its payment operation.

Thanks to its advanced banking technology, Techcombank has introducedmany convenient and modern financial products to businesses and consumers Thebank has provided a full range of high quality products to customers bothindividuals and businesses

In the line with the Bank’s strategy, market segmentation of individualcustomers has been given special attention in recent years Thanks to efforts inexpanding the bank’s network, innovating banking operation processes, trainingcustomer relationship officers as well as continuously improving and diversifyingretail banking products, Techcombank’s retail banking operations prospered morestrongly Customers have been provided with advanced technology-basaed,favorable, diversified and value-added financial products

Business banking activities at Techcombank included all services for small andmedium enterprises and corporations In addition to traditional products,Techcombank always introduces a range of new products Efforts to diversifybusiness banking products and to improve service quality have resulted in manynew services being provided to the bank’s business customers This can beconsidered to be one of the bank’s most successful areas of operation, marked bysubstantial increases in the quantity of products and services provided, as well as therange and quality of services offered Business customers have many choices andconveniences to select This has create a competitive advantage in the industry forTechcombank

In the Treasury market, Techcombank provides a comprehensive a range ofproducts consisting of foreign exchange, money market and security trading,hedging and derivative products for many domestic and international customers

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Whilst concentrating on providing a wide range of financial products andservices to meet domestic customers’ diverse demands, Techcombank has also beenstriving for expansion of cooperation with both international and regional financialinstitutions to satisfy customers demands and prepare for the economic integrationprocess.

Key achievements:

 Improvement of service quality and corporate governance by engineering business processes and management information systems, aswell as risk monitoring and management systems

re- Launch of many new products with advanced features andfunctions, increase in productivity and the increasing public image of thebank, all thanks to modern and up to date IT systems and applications

 The volume of mobilized funds, outstanding loans and

international

settlements increased considerably compared with last year Manyimportant marketing and business support programs in key areas such ascorporate identity, quality management, market research, staff recruitmentand training have been successfully implemented

Priority business directions for the period of 2005 to 2010: Techcombank has been implementing strategies for the 2005 – 2010 period, focusing on:

 Expansion of retail banking customer base with emphasis on supply

of diversified, qualitative and highly competitive financial products andservices to all urban residents in Viet Nam, and in particular to the youngand successful customers with medium to high incomes

 Fast implementation of card switching and management systems,and development of card services as the core for developing large scaleretail banking services

 Quick expansion of the network in the key high potential economicareas in order to further broaden our individual and small – mediumenterprises