UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Duong Bao Thinh ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM – SOUTH SAIGON BRANCH MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – 2017 123doc UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Duong Bao Thinh ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM – SOUTH SAIGON BRANCH ID: 22140046 MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR. NGUYEN PHONG NGUYEN Ho Chi Minh City – 2017 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 1 Executive Summary Frontline employees play a very important role in the performance of bank as they directly work with customers and produce incomes. Despite having a very good start, recently, Bank for Investment and Development of Vietnam – South Saigon Branch has to deal with poor performance, negative behaviors as well as high employee turnover rate. Organizational injustice in frontline employees is identified as the central problem to this undesired situation.
Four elements are considered to be the antecedents of this organizational injustice, they include poor performance rating system, lack of employees’ participation, low communication quality and poor implementation. However, after considering the applicable ability at the branch, one cause is taken into investigation which is poor performance rating system. The set of four possible solutions is evaluated, three of them (redesigning the performance appraisal system, raters training and cross-department appraisal) are selected to solve the central problem. This project is estimated to gain a net saving of approximately 400,000,000 VND over 3 months of testing and 6 months of officially applying with the initial investment of 100,000,000 VND.
123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 2 Table of Contents Executive Summary .1 Table of Contents .2 List of Tables .4 List of Figures. BIDV – South Saigon Branch Overview .14 CHAPTER 2: PROBLEM JUSTIFICATION .24 CHAPTER 3: CAUSES VALIDATION AND SOLUTIONS. Performance Rating System .37 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 3 3. Evaluation of Solutions .60 Transcript 1: Thao – Retail Banking Officer .60 Transcript 2: Thoa – Teller (Ex-MHB Employee) .61 Transcript 3: Vinh – Corporate Banking Officer (Resigned) .62 Transcript 4: Quoc – Retail Banking Officer (Resigned) .63 Transcript 5: Tran – Human Resources Manager .69 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 4 List of Tables Table 1.
BIDV South Saigon Branch SWOT Analysis. Change in Fixed Deposit Balance of Retail Sector. 10 Branches with Worst Retail Credit Net Interest Margin. 10 Branches with Worst Retail Credit Outstanding Growth.
BIDV Capital Mobilization Per Retail Employee in Ho Chi Minh City 2016. BIDV South Saigon Retail Indexes as of 31/08/2016. Highlight Opinions from Informants. Summary of Interviewees’ Sentiments and Potential Causes.
Estimated Cost and Benefit of Solutions .50 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 5 List of Figures Figure 1. BIDV – South Saigon Branch structure. Organizational Justice Tree. Components of Organizational Justice Theory.
Updated Cause and Effect Tree. Final Cause and Effect Tree. Proposed Cross-Department Appraisal Model for Corporate Marketing Department.44 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 6 CHAPTER 1: BACKGROUND 1. BIDV Overview The Joint Stock Commercial Bank for Investment and Development of Vietnam (hereinafter shortly referred to as BIDV) – the longest established bank in Vietnam – was founded on 26 April 1957 as the Bank for Construction of Vietnam.
It operated under that name until 24 June 1981. In 1981, it changed its name to the Bank for Investment and Construction of Vietnam. It adopted the present name on 14 November 19901. In January 2007, the Vietnamese government announced that it would sell stakes in four state-owned banks, including BIDV – one of the biggest lenders.
However, the government continues to hold a majority stake in these banks. In December 2011, BIDV achieved a significant transformation in the development process with a successful IPO, officially becoming a joint stock commercial bank in May 2012. On 24 January 2014, BIDV successfully listed all of its 2,811,202,644 shares on the Ho Chi Minh City Stock Exchange. The bank’s shares ranked sixth in capitalization value among listed companies on the VN-Index2.
From a single owner, single-function bank, BIDV has risen strongly and overcome many difficulties to grow and affirm its position in the economic market. BIDV has made great contributions to both the development of Vietnam and the relations between Vietnam and countries around the world. The bank’s efforts were recognized not only by leaders of the Vietnamese government but also by international leaders. In 2015, BIDV celebrated its 20th anniversary 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 7 operating as a fully commercial bank, as well as international integration into the economic market3.
BIDV is among the largest banks in Vietnam with about 23,000 employees. It has grown to become one of the leading commercial banks in Vietnam. BIDV offers full banking products and services including deposits, loans, e-banking, guarantees, trade finance… The bank boasts subsidiaries in finance, banking, securities and insurance. BIDV has expanded its business to the international markets including Lao PDR, Cambodia, Myanmar, Czech Republic, Russia Federation and Taiwan.
As well as leading the way in terms of links with foreign countries, the bank joined hands with local governments to hold conferences and forums with the aim of promoting their potential for a more prosperous Vietnam. On 25 May 2015, Mekong Housing Bank (MHB) officially merged with BIDV. As of the end of 2015, BIDV’s total assets were VND 857 trillion (USD 38. As of 30 September 2016, total assets reached VND 956 trillion (USD 42.5 percent year-to-date, making BIDV the largest bank in Vietnam by total assets3.
In 2016, BIDV has also received prestigious awards from several organizations. These included highest taxpayer in Vietnam; TOP global 2,000 largest public companies as voted by Forbes; 11 fixed income poll awards from Asiamoney; Best Retail Bank in Vietnam 2016 as voted by The Asian Banker; highly commended award: Excellence in social media – customer relations & brand engagement as voted by Retail Banker International and the Vietnam excellent brand awarded by Vietnam Economic Times3. 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 8 1. BIDV – South Saigon Branch Overview BIDV – South Saigon Branch was established in November 2010 with more than 110 employees.
It has one head office and four transaction offices located in district 4 and district 7. The branch’s customers widely spread from millions of individuals to enterprises and large corporations. BIDV – South Saigon Branch Front office Back office Individual Corporate Retail Corporate Transactions customer customer marketing banking offices services services District 7 Khanh Hoi Dan Sinh Nguyen Van Linh transaction transaction transaction transaction office office office office Figure 1. BIDV – South Saigon Branch structure.
In 2015, BIDV – South Saigon Branch received the award for Excellent Branch in Southern Area. As of the end of 2016, the branch’s deposits were VND 5,500 billion while total loans were over VND 12,000 billion. Services net income in 2016 reached about VND 28.5 billion, accounted for 21% total net income. 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 9 In 5 years, BIDV – South Saigon branch has recorded a significant development in loans, deposits and services… Its financial performance has outrun many long-established branches.
The branch’s mission is to provide the highest standard of modern financial banking services to customers; to create a professional and friendly working environment with ample career opportunities and benefits for all employees, and to be pioneering in community development activities2. BIDV South Saigon Branch SWOT Analysis • One of the largest and well-known banks in Vietnam. • Large customer base. Strengths • Wide branches network all over the country.
• High quality employees (in term of academic standard). • Profit sources are not diversified, mostly from credit services. • Deposits is decreasing, especially from individuals. Weaknesses • Slow adapt to market changes.
• Support from the government/ministry of finance. • Credit/new banking service needs are increasing. Opportunities • Low competition in some market/services: investment banking, asset management, derivatives… • High competition from other rivals. Threats • Uncomprehensive legal/regulatory.
123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 10 2. Symptoms Although BIDV – South Saigon Branch was doing quite well in the past years, since 2016, based on the reports done by headquarters and branch’s financial performance as well as staff feedbacks on internal website and via meetings, there are five salient issues that have badly affected the branch performance: (1) Slow change in interest rate which makes our interest rates less competitive to other rivals, (2) Complex process of derivatives services, (3) Employees’ attitudes with customers, (4) Employee frustration, (5) High employee turnover. As issues (1) Slow change in interest rate and (2) Complex process of derivatives services are related to headquarters policy and administration, we cannot impact on these issues from the stand point of a branch. Moreover, the frequency of customers’ complaints as well as faulty operations is more often lately.
Hence, this paper is going to focus on the issue of employees’ attitude, frustration and turnover, especially those who are directly interacting with customers. Recently, more and more customers complain about poor quality of service and attitude of the frontline employees. Some customers switch to another branch or even leave for other banks. This situation has led to a dramatically drop on deposit balance and credit profits, especially in retail banking sector.
Change in Fixed Deposit Balance of Retail Sector Q3/2015 Q1/2016 Change Fixed deposit (in billions VND) 2,430 2,389 -41 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 11 Table 3. 10 Branches with Worst Retail Credit Net Interest Margin Rank Branch Retail credit net interest margin as of Q1/2017 1 Quang Trung -3.29% 5 Hiep Phu Saigon 0. Adapted from BIDV internal report 2017 Table 4. 10 Branches with Worst Retail Credit Outstanding Growth Retail credit outstanding (in billions VND) Rank Branch Q4/2016 Q1/2017 Change 1 South Saigon 638 556 -82 2 Gia Dinh 1,078 1,006 -72 3 Quang Trung 1,837 1,768 -69 4 Ha Long 794 731 -63 5 Hoan Kiem 999 958 -41 6 Ben Tre 1,066 1,030 -36 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 12 Retail credit outstanding (in billions VND) Rank Branch Q4/2016 Q1/2017 Change 7 Nam Ky Khoi Nghia 601 567 -34 8 Thai Binh 860 829 -32 9 Bao Loc 2,299 2,268 -31 10 Ho Chi Minh City 1,394 1,362 -31 Note.
Adapted from BIDV internal report 2017 As an indispensable result, the branch net profit has gone bad (below target) from the beginning of 2016 and receive a low rank in comparison with other branches especially in retail banking area. BIDV Capital Mobilization Per Retail Employee in Ho Chi Minh City 2016 Rank Branch Capital mobilization per retail employee (in billions VND) 1 West Saigon 335 2 Saigon 140 3 No. 2 Center Transaction 139 4 Cho Lon 139 5 Ho Chi Minh City 128 6 East Saigon 112 7 Gia Dinh 98 8 Ba Thang Hai 98 9 Phu Nhuan 95 10 Nam Saigon 87 11 Tan Binh 87 12 Ben Thanh 83 123doc ORGANIZATIONAL INJUSTICE IN FRONTLINE EMPLOYEES 13 Rank Branch Capital mobilization per retail employee (in billions VND) 13 Nam Ky Khoi Nghia 76 14 North Saigon 72 15 Ben Nghe 62 Note. Adapted from BIDV internal report Beside poor performance, many frontline employees often express frustration with customers and colleagues.
They tend to give back answers, talk improperly to others and refuse to do assigned tasks (information collected from reports by secret customers program and feedbacks from other departments). In addition, increasing employee turnover has filled our managers with concern. In less than 12 months, there were up to twelve resignations, nine of them are from frontline employees while as of the previous year, this figure was just three. In-depth interviews were conducted with employees to find out the reasons why they were not satisfied or left the bank.