(Luận văn thạc sĩ) distributive injustice in donga join stock commercial bank (donga bank)

With the main aim is to explore the insight problem of human resource management of DongA Bank that make the shortage of human resource becoming a burden and can lead to a human resource

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

TABLE OF CONTENT

Executive summary 4

CHAPTER 1 PROBLEM IDENTIFICATION 1 Industry overview and company background 6

1.1 Industry overview 6

1.2 Company overview 6

2 Problem mess 7

2.1 Symptom .7

2.2 Situation analysis .10

2.3 Initial cause-effect map .15

2.4 Updated cause-effect map .22

3 Problem identification .24

3.1 Possible problem 24

3.2 Main problem .25

3.3 Consequences .28

CHAPTER 2 ALTERNATIVE SOLUTIONS 1 Cause validation .30

2 Alternative solutions 35

2.1 Key Performance Indicators .36

2.2 Behaviorally anchored rating scale (BARS) 42

3 Solution for main cause of distributive injustice of DongA Bank 45

4 Action plan in organization 46

4.1 Define production goal and objectives 46

4.2 Preparing stage 47

4.3 Identify potential indicators 48

4.4 Select indicators and set target for implementation 49

4.5 Implement indicators .50

4.6 Monitor and communicate results 50

4.7 Act on results and Review indicators, policies and goals 51

CHAPTER 3 SUPPORTING INFORMATION 1 Methodology 53

1.1 Initial cause - effect map (qualitative research) 53

1.3 Initial cause - effect map (quantitative research) 54

1.4 Updated cause - effect map (qualitative research) 54

1.5 Alternative solution (qualitative research) 54

2 Research tool 55

2.1 Employer’s interview guide 55

2.2 Employee’s interview guide 55

2.3 Questionnaire 56

2.4 Interview guide for focus group 58

3 Transcript 58

References 66

Appendix .71

List of Abbreviations

DongA Bank DongA joint stock commercial bank

KPIs Key performance indicators BARS Behaviorally anchored rating scale

List of table

Figure 1 The main abnormal signs of human resource in DongA Bank 10

Figure 2 Dividing the number of employees leaving the jobs into organization structure .12

Figure 3 Dividing the number of employees leaving the jobs into generation .11

Figure 4 Dividing the shortage of employees leaving the jobs into position and geographical area .14

Figure 5 Employer perspective diagram .17

Figure 6 Employee perspective diagram .18

Figure 7 Evaluating the unsatisfied level of internal workplace elements 19

Figure 8 Initial cause – effect map .20

Figure 9 Updated cause – effect map .23

Figure 10 Comparing average salary and benefit packages with same scale banks 27

Figure 11 Distributive injustice proof .27

Figure 12 Price calculation per deal 28

Figure 13 Recruitment cost and training and development cost from 2015 to 2016 29

Figure 14 Statistic data about customer complaint from 2015 to 2017 30

Figure 15 Statistic data about deposit of DongA Bank from 2015 to 2017 30

Figure 16 The salary bracket of Sale staff and Administrator in DongA Bank 31

Figure 17 The reconsideration of labor contract sample 33

Figure 18 Fishbone diagram 34

Figure 19 Final map 35

Figure 20 Closed-loop model for key performance indicators 38

Figure 21 Balance score card 39

Figure 22 Scaling of incidents on a particular dimension of BARS 43

Figure 23 The average net profit of each employee .47

Executive summary

The commercial banks in Vietnam play a vital role as the main suppliers of funding for the economic with the compound average annual growth rate reaches 14.2% in 2011 to 2016 period (1) In parallel with the fast-growing rate, banking

industry has to face with multiple challenges tied to the legacy system of Vietnam such

as the customer satisfaction, technologies, human resource management and risk (2) Especially, the banking sector is actual a service industry and human resource is the core value and the biggest challenge of each organization in order to get the

competitive advantage in a fast-growing industry like Vietnam banking sector

With the main aim is to explore the insight problem of human resource

management of DongA Bank that make the shortage of human resource becoming a burden and can lead to a human resource crisis, the qualitative research was conducted for both employers and employees in order to has the general images about the real existing weakness and the unexpected indicators of two side of human resource – the user and the maker Additionally, the quantitative research has also accomplished for a month in order to revise the commonly level of many collected information throughout the employees and employers perspective Last but not least, aside from these

researches, the context problem of DongA Bank with the evidences from the separate financial statement, the yearly human resource management report and in some

conferences of chairman with most of management level is also the important

information to make the result of study and the potential solution be suitable with the real initial phenomena of DongA Bank

Combining whole of the collected information, it defined that the main problem

of the high turnover rate and the significant shortages human resource at DongA Bank comes from the imbalance between productivity with salary and benefit packages Beyond the main problem exploration, the interviews are continued to manipulate with high-top managers level to recheck the emerging main problem and investigate the causes validation Indeed, the high-top management level illustrated that the

distributive injustice in DongA Bank cause form many side such as the fogy salary regulation, the lack of suitable rewards and benefit policy and the lack of an effective performance appraisal Thus, with the organization instability status of DongA Bank,

the alternative solutions are proposed to take initiative control the turnover rate, maintain the experience labor and limit the increase labor cost

CHAPTER 1: PROBLEM IDENTIFICATION

1 Industry overview and company background

1.1 Industry overview

Throughout the last three years, Vietnam’s real GDP grows slightly over 6% that creates the stable conditions for banks’ asset quality (3) Additionally, the Vietnam government concerns more about the legal framework by issuing many documents such as the circular No 39/2016/TT-NHNN, the law No 17/2017/QH14 which is amendment to some articles of the law in credit institutions and the resolution No 42/2017/QH14 in order to provide the legally solution for handling with non-

performance loans Therefore, banks have the right to take over the collaterals that help reducing the operations cost and the bad debt rates (4) Subsequently, the International Monetary Fund (5) illustrated that Vietnam banking sector has the rapid credit growth expressing the increasing in funding demand of customer, almost three times faster than the real GDP In generally, with the rapid economic growth rate, Vietnam banking sector will have a bright prospect with the stable growth rate in the next period from

2018

1.2 Company overview

DongA Bank is a joint stock commercial bank established from 1992 with the head office in Ho Chi Minh City With over 25 years experience in financial market, DongA Bank is always tended to become a leading Vietnamese banking group with the main customer segment that are personal customer, small and medium enterprise The mission that DongA Bank chases throughout the last decade is expanding

international operation, winning clients respect by the high quality of service,

engaging the trust and recommendation According to the statistic about banking

equity of CafeF website (6), it can be defined that with the equity reaches 5,000

billion dong, DongA Bank belongs to the group of medium banking with the main competitors are OCB, ABBank, VIB, TPBank and the other ones have same equity and customer segment Additionally, DongA Bank is a retail banking which reminds customers about the pioneer in ATM card and auto banking system and achieves the highest rank of customer satisfaction Furthermore, along with the long term goal, it has a broad transaction channel with 213 transaction points in over 50 provinces and the big city of Vietnam such as Ho Chi Minh city, Ha Noi, Da Nang, Can Tho

Additionally, after the organizational structure is revised many times from the past to now, DongA Bank is organized with the fundamental structure of a normal joint stock company consisting of shareholders, board of directors, control board, board of

directors and nine divisions (Appendix 1)

2 Problem mess

2.1 Symptom

According to the annual business report from 2015 to the first 6 months of 2018,

it illustrated that DongA Bank has had to face many issues for a long period such as increase in non-performing loans, low growth rate, out of date information technology system and the human resource crisis Because of the vital role and the rapid growth rate of banking sector, it cannot be doubted that this industry has to bare the highest competitive pressure from external environment such as competitors, new entrants which is the international financial group and the bargain of customer Indeed, the weight of debts of DongA Bank went down sharply and yearly average at 3,000 billion dong throughout the last three years, 43,098, 40,058 and 37,904 billion dong

respectively Moreover, the portion of the personal debts accounts for 65% of the weight of debts, and the main credit which is also the credit strength of DongA Bank is non-collateral credit Therefore, it is difficult to enhance the weight of debt in the short period as the others competitors concentrating on developing enterprise customers Additionally, from 2015 to 2017, DongA Bank is negatively impacted by much bad information and direct influence on the brand equity Inadvertently, it creates the

barriers to approach and conquer the potential customers Especially, with the high turnover rate on sales workforce, the ability to engage customers becomes a hard goal

Aside from the abnormal sign of the weight of debt, non-performance loans are actual the issue influencing on many aspects in financial statement To specific, the non-performance loans (NPLs) of DongA Bank grew up dramatically year by year, 3,580, 5,165 and 5,667 billion dong respectively However, it could surely that NPLs are always survival parallel with banking industry as the fundamental risk indicator of the financial system Alatabani – Lead financial sector specialist at the World Bank in Vietnam (7) - debated that NPL volumes in Vietnam remain high over the past few years, despite the releasing of many legal instruments in order to tackle and control an

acceptable NPL rate Therefore, it can be seen clearly that increasing in NPLs is the common tendency of Vietnam financial market In other words, NPLs will be the

biggest problem of every banks with the direct impact on profitability, but depend on the flexibility abilities of each banks, they can use many tactics to reduce the volume of NPLs such as selling bad debt for VAMC, taking over the collateralized assets, suing for damages or many other solutions which human resources play a crucial position

Aside from out of date information technology rooting from lack of investing information technology budget, the human resource crisis becomes the hardest burden

of DongA Bank because of the negative influence on entire business aspects In fact, the shortage of human resource jumps up significantly from 2015 up to now In 2015, the shortage labor comparing with human resource planning is only 230 people,

account for 5.69% In 2016, the shortage one is double with the previous year, get 438 people on December, 2016; account for 10.43% and reach a peak at 643 people in

2017 The shortage of human resource makes the business operation of DongA Bank become much more risky and weaker than the other ones in the service field as the banking industry

In the annual meeting of DongA Bank holding on January 27th 2018, the

chairman analyzed that although DongA Bank is in a stand of restructuring stage with three big problems as bad loans, growth rate and human resources, DongA Bank still have a chance to become to a member of top ten of the Vietnam retail banking group if most of employees unite together and strictly obey the internal regulations and the existing Vietnam Law Particularly, when DongA Bank has enough human resource to run the business operation, coordinating with the law system, the non-performing loan rate will have a chance to decline and the growth rate will be improved by the high service quality Similarly, Josh (8) argued that the nature of banking industry is mainly service fundamental, so that efficient and skilled manpower could help banks control the financial risks, beyond the potent challenges and get competitive advantage Also in the annual meeting, manager of the customer banking division proposed that the human resource management division has to quickly recruit employees for sale and credit development department at branch and transaction because the shortage of manpower makes these business units cannot sale basic product, so it leads them to bare a high cost from deposit and negative impact on the business result Thus, lack of manpower

is also the most important phenomena that DongA Bank has to solve as soon as

possible

To be more precise, human resource management report analyzed that the

shortage of human resource cause not only in staff turnover rate but also in not

responding the recruitment needs Undoubtedly, the statistic data from 2015 to the first

6 months of 2018 shows the alarming situation as the following table:

The first

6 months

of 2018 Total manpower people 4,183 3,810 3,762 3,592 3,556

(Source: the annual HRM report)

Figure 1 The main abnormal signs of human resource in DongA Bank

It can be seen clearly from the table that the turnover rate of DongA Bank jumps

up dramatically in 2017 To specific, the turnover rate in 2016 decreases slightly

comparing with the previous one, but similarly maintaining at 16% Subsequently, the turnover rate in 2018 is higher 5% than the previous year, and reaching the peak at 22.41% A long with the high turnover rate, the table also illustrate that the number of leaving employees stands a high volume throughout the last decade and this situation

does not have the decrease tendency Indeed, the number of quitting job state is 348 people, equivalent to 19.47% in the first 6 months of 2018

The issue of human resource in DongA Bank becomes much more urgent when

it is compared with the Vietnam banking sector Specifically, Talentnet (9) recently released the report about the human resources of Vietnam banking industry in 2017 demonstrated that banking is one of the top industries with the high average wages and benefit package but have to face the challenge of recruitment and maintain the loyalty, talent manpower Illustrating for this argument, the research shows that the average turnover rate in the last 3 years is 15% Furthermore, according to Department of

forecast and statistic in 2018 (10), 70% banks need to recruit more employees up to the third quarter in 2018 because they need human resources to adapt the increase demand

of creditor and the improved business conditions of the financial Vietnamese market

In conclusion, from the below context, it can be seen clearly that the turnover rate of DongA Bank from 2015 up to now grew up dramatically and much higher than benchmark, so that it is actual a burden and an urgent term that DongA Bank have to focus on controlling this rate in order to restrict the direct and indirect impact on entire business operation Obviously, as many previous arguments from studies and the

analyzed of the high-top managers, solving the high turnover rate is not only make DongA Bank improve service quality, recover bad debt but also positive influence on profitability

2.2 Situation analysis

Thanks to the statistic data from Human Resource Division, the total number of vacant positions comparing with human resource planning is 679 people With the main aim to explore the real reasons that significantly force employees intend to quit the job, the number of employees who leave the job are divided into organization

structure as the following table:

Content Unit 2015 2016 2017 6 months

2018

1 The number of labor

who quit the job people 677 621 801 348

Content Unit 2015 2016 2017 6 months

2018

1.2 Branch &Transaction people 616 565 729 317

2 Total manpower people 3,810 3,762 3,592 3,556

(Source: the annual HRM report)

Figure 2 Dividing the number of employees leaving the jobs into organization

structure The employees quitting jobs grew up year by year reflects the difficulties status

of DongA Bank’s human resource management Based on the detail data about

employees leaving the jobs, it illustrated that both volume and the proportion of leaving employees over total employees of business units are also higher than Head office’s one, equivalent to two or three times in each period To specific, only in a short period from January to June in 2018, there have 317 quitting job cases, account for 10.92% the total employees of branches and transactions, equivalent to double of the turnover rate in head office In addition, branches and transactions are the directs business point and influence on the business result of DongA Bank, while major of the role of head office is support business unit and transport general policy of bank Thus, it cannot be

doubted that the turnover rate issue at branch and transaction is much more serious than

the existing condition of head office and has to be explored and solved as soon as possible

In term of generation, the number of employees quitting job in the first 6 months

of 2018 is narrowed down as the following table:

Content The number of

(Source: the annual HRM report)

Figure 3 Dividing the number of employees leaving the jobs into generation

It can be seen clearly form the table that in 348 employees quitting jobs, it has 64% employees from 23 to 29 years old Additionally, both generations X and baby boomers only account for 36% of the total one According to Becker (11) about the reasons workers of every generation quit the jobs, it indicators that although whole generation leaves their job with a bit common reasons, the ranks of concern indicators

is also quite different Indeed, while generation X and baby boomer ranks benefit and salary within the top three reason of quitting job, generation Y care highly about the assessment of employers and the work assignment, beside the same reason about

salary Similarly, divided the number of labor leaving job in the first 6 months of 2018

at DongA Bank into generation relatively prove the voluntary leaving reason

accounting for most of turnover rate

Thanks to the context of turnover rate and the shortage of human resource analyzed in generation and organization structure, it indicators that the turnover rate much focus on branch and transaction, so that the number of shortage human resource comparing with human resource planning is continuously analyzed into position and geographical area as the following table:

Sum/

HR plan- ning

HCM city

Southern region

Northern region

Central region

Southwest region Highlands

A Management

Position

Geographical area

Sum

HR plan- ning

Sum/

HR plan- ning

HCM city

Southern region

Northern region

Central region

Southwest region Highlands

(Source: the annual HRM report)

Figure 4 Dividing the shortage of employees leaving the jobs into position and

geographical area

The table figure 4 is the detail information about the lack of manpower in whole position of business unit In particular, according to the organization structure of

branch and transaction (Appendix 2), it has 16 job titles for total position at business unit with 8 job titles belonging to management level and the rest of job title being staff position The shortage of human resource in DongA Bank reaches a peak at 679 people and cut down into two side of DongA Bank such as head office and business units Therefore, the detail data in the table figure 4 has the total number at 484 people

Subsequently, in term of job position, the proportion of the shortage people in human resource planning shows significance issues of each position, so that it can be seen clearly that the labor workforce in business development department such as sale

department and credit department is the most heavy burden of DongA Bank’s human resource management In the first six months of 2018, the lack of credit development expert and staff takes the highest volume, reaches 142 labor and equivalent to 33.33% Similarly to credit development position, appraisal and sale position respectively miss

90 people and 71 people, account for 42.25% and 11.77% Aside from job position, the shortage of manpower is shared out by geographical area in order to narrow down the scope of study Based on the area business controlling of DongA Bank, the shortage human resource is allocated into six areas as Ho Chi Minh City, Southern region,

Northern region, Central region, Southwest region and Highlands The data illustrates that Ho Chi Minh City is the region which has the highest volume of vacant position Thus, the labor in business development department in Branches and Transactions at

Ho Chi Minh City is the central point that researches have to be conducted to define the problem making the turnover rate increase sharply and create the fundamental

condition for alternative solutions

2.3 Initial cause-effect map

As previous studies about human resources management, it cannot be doubted that human resource is the core value and the competitive advantage of every

corporate, especially in banking industry Human resource management (HRM) term practices have a long history from the mid-1980s Zhang et al (12) summarized that human resource management has a set general criteria such as recruiting and staffing, compensation and benefit, training and learning, labor and employee relation,

organization development Therefore, based on five basic areas of HRM, the

interviewer analyzes unusual phenomena of each field Furthermore, because of the wide range of organization structure, interviewees are separated into two groups,

employers and employees to conduct the in-depth interview From the information conducted throughout the qualitative research and quantitative research, the initial cause-effect map is synchronized from the common perspective of both employers and employees to estimate the possible problem making turnover rate jump up throughout the last three years

Firstly, in term of employer perspective, the potential interviewees were defined

as the whole manager level from Human Resource Division and managers of branches and transaction The main question board of employer only concentrated on the

turnover rate phenomena at DongA Bank as following:

- What do you think about the high turnover rate at DongA Bank? Why do you think so? Probe: what are the main elements that direct impact on the psychology of the employees? Would you mind showing me the proof of your argument?

- Which is the most difficult thing for human resource management doing their task in the existing context of DongA Bank? Why do you think so?

- If you have authority to change an internal regulation or policy, what will you do and please explain why you do this thing?

The interviewees join the below interview include Mr.Vo Tan Bao Hung,

Human resource manager; Mrs Le Thi Thuy Hang, Deputy Director of Staffing

management department; Mrs Phan Thi Mai Chi, Deputy Branch Manager of Ho Chi Minh branch – the biggest branch in business system in DongA Bank Specifically, Mrs Hang is the very first mindset that researcher approach With 11 years experience

in general HRM field and 7 years experiences working at DongA Bank HRM, Mrs Hang is the direct employer who listens the aspiration of employees, handles with the employers’ requirements and struggles with the HRM crisis throughout the last three years Mrs Hang argued that the turnover rate issue much more significant year by year coming from both external and internal environment Indeed, the shortage of human resource and the increase human resource demand in financial statement in order to expand their network around Vietnam make experience employees at DongA Bank are

pulled by many rivals bank with many interesting wages and benefit package and make the human resource issues become a burden at DongA Bank Aside from the

competition of other banks, the internal environment also emerges a lot of unsatisfied elements such as unsuitable paying policy, unstable business operation and the threat of risk information Having a much deeply analysis, Mr Hung justified that besides

competitive rivalry, internal reason is the dramatic reasons that negative impact on the employees, such as imbalance between productivity and salary package, employee

misalignment, lack of coaching and mentoring path Especially, via some short

conversations with employees quitting job, Mr Hung also pointed out that the number

of young employees occupy the majority of leaving job situations because of the bleak environment at DongA Bank

Far away from two managers of human resource management division, Mrs Chi Mai, deputy director of Ho Chi Minh Branch, who is both employer and employee

position in DongA Bank, stated that employees quitting job is the inevitable result of the unclear salary and benefit policy For instance, in Ho Chi Minh Branch, there are many cases that employees have a long period (over 3 years) working at branch but the salary is lower than new comers while they do not have a chance to revise their salary

Synchronizing the argument of the below managers, it can be summarized the employer perspective as the following preliminary cause- effect diagram:

Figure 5 Employer perspective diagram

Secondly, in term of employee perspective, the potential interviewees defined as whole the employees who have submitted the resignation letter, working in branch or transaction in Ho Chi Minh City and belonging to credit department or sale department Therefore, the employees has invited including Ms Phung Thi Yen Bao, sale expert in

Ho Chi Minh branch; Mrs Truong Thi Tuyet, credit development expert in District 1

branch and Mr Vo Minh Dang, appraisal expert in Dinh Tien Hoang branch Main

question board for staff concentrate on identifying the real evaluation of employees

who quit the job about whole business operations of the branches and understanding the real reason that make employee decide to quit the job As the result, the opinion of three interviewees is quite different Specifically, Ms.Yen Bao and Mrs.Tuyet argued that

they lose the business motivation as the low salary, lack of benefit, lack of the job

evaluation and receiving unsuitable job assignment Additionally, Ms Yen Bao and

Mrs.Tuyet stated that they are willing to accept a huge work if the salary and benefit

customize with their effort Aside from salary problem, Mr Dang has more dissatisfied issues belonging to the internal workplace such as the poor collaboration between HO and business unit leading to prolong the time of accomplishment working task and poor monitoring program causing of low solving problem capability

Synchronizing the argument of the below staff, it can be summarized the

employee perspective as the following preliminary cause- effect diagram:

Figure 6 Employee perspective diagram

On the other hand, because of the large scale of study, a small survey is continuously conducted in order to recheck the main factor affecting to high turnover

rate in DongA Bank that things repeat throughout the qualitative research The questionnaire was conducted via email and spark (internal chat program of DongA Bank) with the convenience sampling tactics Thequestionnaire was sent to participants who work at DongA Bank’s branch and transaction in Ho Chi Minh City Additionally, the participants have to answer the filter question which is about the quitting job retention before continuing to do the questionnaire In 255 sent survey, it takes 154 respondents, account for 60.39% To specific, the result is expressed as the following table:

Content

The number of participants are unsatisfied (including unsatisfied and extremely unsatisfied)

Percentage

Coaching and monitoring

Collaboration between Head

(Source: the owned survey result)

Figure 7 Evaluating the unsatisfied level of internal workplace elements

According to the survey result, although Mr Dang illustrated that the

collaboration between head office and branch is the biggest unhappiness indicator make him has the leaving intention, the number of unsatisfied respondent still accounts for 3.9%, being the one of the two lowest percentage of the total respondent Therefore,

it could be the subjective reasons that need to exclude to avoid wrong solution and waste the general resources of DongA Bank

Last, but not least, by quoting technique, the internal variables problems are expressed as the following initial cause-effect map:

Figure 8 Initial cause – effect map

External factors

Generally, the very first starting point of the initial cause – effect map is the symptom of DongA Bank including high turnover rate and difficult at recruiting From the qualitative and quantitative research result, there are five main direct causes leading

to both increase turnover rate and difficult at recruiting such as competitive rivalry, threat of risk information, low salary and benefit package, lack of business motivation and poor promotion chance To specific, the competitive rivalry is expressed for the information about the competition of other banks which are not only making the

recruitment become be difficult to adapt the needs of vacant positions, but also

conquering the talent and experience employees by many interesting salary policy and guarantee career path Moreover, the negative information about the risk of banking industry emerges much more day by day in internet that negative impact on the ability

of convincing the graduated candidate to joint bank environment Especially, it also creates the weary feeling about the restructuring stage and lay-off decision, so they take the initiative quitting job In the other side, the low salary and benefit package is the effect of many unusual factors including unsuitable paying policy, low concern about the feedback Undoubtedly, because of the unsuitable paying policy, the labor cost is similarly aligned for every employee in each position while the productivity is not concerned As a consequence, the labor cost is always high leading to decrease the revised salary opportunity Additionally, aside from salary, when manpower loose motivation, they will try to find a new environment to development owned goal

According to Mr Hung, most of employee quitting job respond the reason of lacking motivation rooting from the bleak environment in business unit and lack of promotion chance Although DongA Bank has many medium manager level positions, the existing human resource is not adapted management level cause lack of coaching and

monitoring path Lastly, it can be seen clearly from the map that the whole variable problem related to salary and benefit comes from the imbalance between productivity with salary and benefit package

Through the initial cause-effect map, it can be seen that there are many complex problems are the reasons make the turnover rate grow up dramatically such as

imbalance between productivity with salary and benefit package, lack of coaching and mentoring program, competitive rivalry and threat of risk information

2.4 Updated cause-effect map

Besides the result of qualitative and quantitative research, it is important for DongA Bank to find out entire effect of the management problem by interview high-top manager level in order to fully assess the impact of this problem to business operational and propose a suitable solution, make excessive level of turnover rate in DongA Bank become the normal turnover rate For this objective, the in-depth interview is conducted with Mr Vo Minh Tuan, chairman of DongA Bank Using the same interview guide of employer used in the last interviews, because of the shortage of time, it takes only fifteen minutes to talk about high turnover rate status in DongA Bank and sharing Mr Tuan’s view about the real reason of the problem As the respondent, the chairman shared that the high turnover rate is the conspicuous result of the circle influence starting from poor performance appraisal Indeed, when DongA Bank does not have the fundamental tool for appraising employees, the career path could not be clear and make employees lose the chance to receive the recognition, so that they lose work motivation and bare disaffected feeling

Similarly, according to Smith and Quality (13), there are huge of complex

reasons for employee turnover but the real root of them is the poor management in human resource field Obviously, the journal argued that weak HRM can cause this rate

to become the crisis of shortage human resource and the imbalance between

productivity and salary benefit is the enormous trouble that is negatively impact on employee morale and result in a domino effect Additionally, when the managers do not value employee contributions and recognize their achievement, it can leads to the

resentment and reducing productive organization because of unfair evaluation (14) Especially, Lipman (15) illustrate that lack of employee recognition indirectly impact

on growth opportunity and create the disaffected mix issues and enhance the staff

turnover rate

Combining the initial cause-effect map and the chairman perspective, the

updated cause effect map is expressed the following map:

Figure 9 Updated cause – effect map

Unclear career path

Lack of recognition

3 Problem identification

3.1 Possible problem

Throughout the problems finding process, it noted that the high turnover rate and many related human resource symptom in DongA Bank from 2015 up to now cause from both internal and external indicators In term of external environment, the

interviewees including medium and top managers illustrated that the competition of rival not only other banks but also financial enterprises is the biggest barrier leading to

be hard to attract potential resources Additionally, the negative information about the high risk level of banking industry is often posted in social media, especially

information about the restructuring stage of DongA Bank make existing employee have worry feeling and leave the job to find another stable environment Nevertheless, the restructuring banking system in Vietnam is a long-term planning of the State Bank of Vietnam for the last three years and also continuous improvement in the next few years,

so that the risk information in this field is the objective influence element that DongA Bank has never controlled Furthermore, as the previous analysis, within the past

decade, the banking system in Vietnam developed gradually not only the number of bank but also the size of equity (16) Parallel with the development of banking industry, the competition in banking human resource surely becomes a fierce battle Thus,

instead trying to control the external environment factors, DongA Bank should

concentrate on fixing the internal problems

On the other hands, in term of the internal environment, there are three main possible problems namely imbalance between productivity with salary and benefit packages; poor coaching and mentoring program; unclear career path Firstly, Járdán (17) clarified that coaching program is used for preparing for talent employee in new position by giving feedback on observed performance through assigned task Similarly, Webster (18) argued that mentoring program often uses to build the employees skill in order to encourage them achieve the career goal However, the fundamental condition for coaching and mentoring program can implement effectively depending on the salary policy that fairness paying with employees’ effort Secondly, career path problem is also called career advancement term as many previous studies Besides the empirical

study in a multinational bank in Taiwan of Zhao and Zhou (19), career advancement is

an important factor in the employee turnover process The finding of this research illustrated that career advancement actually cause by the promotion opportunities and salary growth Therefore, the core issue solving the unclear career path problem is also salary and performance evaluation system that create the fundamental rule for

developing staff position Finally, imbalance between productivity with salary and benefit program is the main problem that must be solve as soon as possible in order to create the condition for related solution of improve human resource as coaching and mentoring program, and make career path be clear

3.2 Main problem

Imbalance between productivity with salary and benefit packages nearly means

of distributive justice phrase in theory Indeed, Distributive justice is previously focused

on many fundamental studies from 1950s and 1960s with the common point in theory is characterized as the fairness between the resource and the outcomes According to Adams (1995), the theory was researched and built in a principle was called “Equity” (20) Adams created the foundation knowledge for many early researches belonging to distributive justice field with the theory inclined towards the fair outcomes allocation such as tangible or intangible assets thanks to inputs which descried all resources

invested into job The research on equity theory has been re-examined many times with research of Vercchio in 1984 or McFarlin and Sweeney in 1992 Typically, these

previous studies demonstrated that employees compare their own outcomes and inputs with the other ones, so that distributive justice appear and create many negative

employees attitudes to pay that impact on working results Additionally, Walster

showed that distributive justice is the theory defining the reaction to pay injustices and

it exist when the expectation returns are suitable with the inputs such as experience, ability and effort throughout the commitment duration (21) Furthermore, not only organization environment not also social exchange also seeks to distributive justice because of the conspicuous influence on the favorable result in outcomes Besides, the empirical working on distributive justice rule illustrates that the outcomes in the

receivers’ mind is similar fair when the outcomes are larger than the inputs themselves

In some modern re-examined studies from 2000s, the equity rule is proved nearly with the real scenario with linking to the balance between performance and perceived pay

With the similar fundamental literature about the distributive justice theory, if equity-based justice is recognized as the root of distributed resources fairness, equality theory could be the counterbalance to equity theory in human resources management

On the contrary, the equality rule establishes a new standpoint about distributive justice with the equal outcomes for all objectives (22) To specific, based on equality

principles, individuals receive equivalent outcomes without compliant with inputs Although equality theory is opposite with equity theory, it still be a superior basis for achieving distributive justice when its goals are creating a well working environment or getting social integration Thus, depend on overarching goal of organization,

distributive justice with many element theories could be suitably applied with the existing business organizations to balance between outcomes and incomes

Thanks to the previous studies related to justice in workplace such as Indian banks, Taneja et al (23) conducted a survey with 196 professionals from a state public service agency to evaluate the employees’ perception of three types of organizational comparing with five outcomes such as performance appraisal system, satisfaction with supervisor, organization citizenship behavior, supervisor citizenship behavior and the satisfaction with current appraisal These findings indicated that distributive justice is measured by pay satisfaction, performance appraisal system satisfaction and

satisfaction with feedback Teneja’s study also emphasized that the consequences of distributive justice perception is the intention to quit, and it is also the key element of rater satisfaction Moreover, the issue of justice of workplace is continuously reviewed

by Ghosh et al.(24) in 2014 The study showed the evaluation about the relationship between distributive justice with many related elements of work and organization engagement throughout three factors such as promotion decision, assignment of tasks and allocation of rewards Beside the mediate position of distributive justice between task identify and turnover intention, study also proposed that the innovation of pay structure will enhanced the perspective of distributive justice among employees and positive impact on organization engagement Also recognizing the impact of

organizational justice on employees’ workplace and personal outcomes as many previous studies, the study of Indian insurance sector is conducted by Choudhary et al (25) implied that distributive justice has a close relationship with organizational

commitment, job and pay satisfaction

The main problem of DongA Bank makes the turnover rate be sensitive is actually exist in many aspects Comparing the average salary and benefit package with the rival banks having same scale with DongA Bank, it can be seen clearly that DongA Bank has the lowest salary among the same scale rivals as the following table:

Name of Banks

Total labor cost in

2017 (according to separate financial statement of fiscal year 2017) (unit: VND)

The number of employees

Average salary and benefit packages (unit: VND)

(source: Published financial statement report of each bank)

Figure 10 Comparing average salary and benefit packages with same scale banks Especially, with the fixed salary for each position in existing salary policy of DongA Bank, the distributive injustice can observe easily as the following data:

result

Income/per month

Nguyen

Branch director District 1

+7,5 billon dong

VND 36,600,000

2 Mrs Phuong

Tran

Branch director

Phu Nhuan District

+11,7 billion dong

VND 36,600,000

(source: annual business report)

Figure 11 Distributive injustice proof Table figure 10 illustrates that two same scale branch directors in Ho Chi Minh City have the same income per month However, the business result in Phu Nhuan

branch is higher than District 1 branch, so that it creates unfairness in outcomes

allocation

Continuously, conducting a simple calculation about the price of each deal to show that the distributive injustice actually endure with a long period at DongA Bank and is not strictly concerned by managers Although the experience employees has higher salary but they accomplish the deal faster so that the number of daily deal is much more than the graduated employees and lead to the price of each deal is

imbalance as the following picture:

(source: annual business report)

Figure 12 Price calculation per deal With only a simple comparison, it can be seen clearly that A Bank waste

money while the performance is not suitable with the labor cost

3.3 Consequences

In term of distributive justice theory, Mowday (20) conducted the re-assessment research to explore the workers attitude to pay satisfaction and found that underpaid feeling is the first negative reaction to distributive justice issues and it make the quality and quantity of works decline Especially, the outcome allocation always be compared among the working environment and when the rewards are under the entitlement, it could lead to destroy work effort and indirect influence on volunteer retirement issues (26) Subsequent studies of fairness explore the negatively collaboration of distributive injustice with dysfunctional attitude and behavior (27) It illustrated that the behavioral consequences would be decreasing trust or breaking out the organizational commitment

or reverse effect on the resources such as job satisfaction or productivity In other

management context, Sholihin (27) found that distributive justice is also the vital

connection between performance evaluation and job satisfaction so that when the bridge

is breakdown or imbalance, it could make one or both factors have many abnormal signals such as low job satisfaction or incorrect performance evaluation Aside from emotional domination, distributive justice also impacts on employee-manager

relationships in many aspects as respect, loyalty and contribution In the worst case, it could cost of leaving the organizations

Using the knowledge above on the context of DongA Bank, it realized that the distributive injustice negatively impacts on the general business operational Firstly, according to annually financial statement report, the selling and administrative expenses illustrated the sharply increase of recruitment cost and training and development cost as the following table:

Unit: Billion Dong

DongA Bank is burnout and they call this period is the crisis stage Parallel with the increase turnover rate in DongA Bank system, the number of customer complaint jump

up and make the works of central being always overloads, statistic as the following table:

(Source: CSC’s yearly report)

Figure 14 Statistic data about customer complaint from 2015 to 2017 The table figure 12 gives a picture about the crisis status of DongA Bank’s

customer service central (CSC) Besides the jump up of customer complaint, the

shortage of human resource in this central makes the rate of receiving and handling customer complaint calls went down year by year and upper 50%, negatively affects to the customer service and quality

Last, but not least, far away from psychological influences, the negative

consequences are also reflected through the financial data such as profit, mobilized capital, credit growth rate, revenue from service product For instance, the mobilized capital of DongA Bank declines from 2015 to 2017, whereas the mobilized capital growth rate of Vietnam banking industry is positive increase:

Mobilized capital Billion dong 75,218 69,478 67,394

(Source: annually business result report)

Figure 15 Statistic data about deposit of DongA Bank from 2015 to 2017

CHAPTER 2: ALTERNATIVE SOLUTIONS

1 Cause validation

Based on the mindset of the high-top manger to define the central causes of distributive injustice in DongA joint stock commercial bank, two in-depth interviews with Chairman and Human Resource Manager indicated that the distributive injustice can come from the existing salary policy and the performance appraisal tool

Specifically, Mr Hung stated that the salary and benefit policy is reflected many

negative issues because of not be revised for a long period Exploring insight the

existing salary policy in DongA Bank in order to prove the opinion of Human resource manager, the existing salary and benefit policy actually release many problems Indeed, the monthly basic salary at DongA Bank is defined based on the absolute value at the salary bracket Additionally, the fundamental salary has two components which are the basic salary and the basic allowance with the portion 70% and 30% respectively For instance, the monthly basic salary of sale workforce and back office workforce in salary bracket is expressed as the following table:

Unit: dong The highest salary

(Source: Salary policy of DongA Bank)

Figure 16 The salary bracket of Sale staff and Administrator in DongA Bank The existing salary policy has the very first weakness which is the little different between sale workforce and the back office workforce, while the mission of two

workforces has much more different, so it could lead to the decrease of work

motivation Moreover, the salary does not regulate both condition to increase the rate of salary for each job and the allocated authority of each management level in deciding the

rate of salary The last weakness point as the evaluate of researcher is the out of date indicators of salary bracket such as not stick the job description, experience and

productivity with each rate of salary, not concern the geographical element and the scale of each business unit

Subsequently, Mr Hung also argued that although DongA Bank still has some irregular bonus in some events such as the foundation anniversary day or the Vietnam National day, it is not much effect on the productivity of workforce However,

throughout the last three years, DongA Bank does not maintain this program because of the instability business result and the decrease cost policy Thus, the imbalance between productivity with salary and benefit packaged also comes from the lack of suitable rewards and benefit policy

Agreeing with the human resource manager’s arguments, Mr Tung – Chairman

of DongA Bank supplemented that the distributive injustice of DongA Bank could cause by the lack of an effective performance appraisal so that it has not the association between the work motivation and the allocated business goal To be more precise, DongA Bank still has the performance appraisal, but only for some special case such as promotion evaluation, reassignment evaluation, reconsider labor contract Therefore, major of the existing performance appraisal program is used for management level Subsequently, the performance appraisal in term of promotion evaluation, reassignment evaluation situation has six components including the evaluation opinion of members of board of manager who manage this business unit, the evaluation opinion of the Credit Division Manager, the evaluation opinion of the Consumer Banking Division Manager, the evaluation opinion of the Corporate Banking Division Manager, the evaluation opinion of the Risk Management Division Manager and the business result of branch or transaction The weakness of the existing performance appraisal is most of indicators belonging to qualitative assessment Especially, the performance appraisal in term of reconsideration of labor contract is very simple and much based on qualitative tactics as the following picture:

(Source: Evaluation form)

Translating the evaluation form

Evaluation criteria

Regularly non meet requirements

Sometimes non meet requirements

Regularly meet requirements

Sometimes meet requirements

Regularly exceed requirements

Evaluation about

Ability to solve the

problems and routine

Figure 18 Fishbone diagram Aside from fishbone diagram, there are three main causes of distributive injustice

in DongA Bank such as unsuitable rewards and benefit, unsuitable salary bracket and

ineffective performance appraisal These main causes of distributive injustice in DongA

Bank are not the new reason for fairness related human resource management issues

Indeed, Afzali et al (29) stated that discrimination in payments is one of key factor in

injustice Furthermore, this study also illustrated that the rest of categories factors

influence on distributive justice such as unfair work division, unfair interaction and

injustice in judgment and evaluation are the main reason for the perceived distributive

injustice, lead to the decrease of work moral and reduction of productivity

Subsequently, Bilal et al (30) used multiple techniques to conduct the study about the

detrimental causes of organizational injustice in workplace and found that distributive

injustice and organizational performance has a negative relationship, so that an unfair in

performance appraisal could make the perceived of distributive injustice to be much

more negative Additionally, the tight relation between pay satisfaction, performance

assessment tool and distributive justice is also proved by Swiercz et al (31) in 2012 with

230 professional employees in state public service agency The study demonstrated that

despite releasing suitable outcome, performance appraisal tool still is more concerned by

employees Hence, thanks to many previous studies and because of the shortage of time and the capability to approach the salary data, this project only focused on the

ineffective performance appraisal solution

Last, but not least, whole information beginning with the symptom and ending with cases is drawn as the following final cause-effect map:

2 Alternative solutions

Rooting from the distributive injustice problem, by combining the primary data from qualitative research with high-top management level and the secondary data, there are three main causes which DongA Bank has to handle with care to prevent the human resource crisis However, because of the existing instability of business operation, the difficult at improving the salary budget and the capability to approach the salary data, the project only focus on the ineffective performance appraisal To specific, the

ineffective element of the DongA Bank’s existing performance appraisal is evaluated

by chairman perspective and rechecked with secondary data belonging to two aspects, the frequency assessment and performance appraisal tactic

In term of the frequency assessment, it only has performance appraisal in some special cases as promotion evaluation, reassignment evaluation, reconsider labor

contract Nevertheless, performance measurement plays a vital role in innovating

High turnover rate

Difficult at recruiting

Distributive injustice

Increase S&A expenses

Increase customer complaint

Decrease service quality

Low profitability