UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Do Thi Tuyet Nhung PERFORMANCE APPRAISAL FAIRNESS, WORK ENGAGEMENT, AND INTENT TO LEAVE: THE STUDY OF EMPLOYEES IN THE PRIVATE SECTOR MASTER OF BUSINESS (Honours) Ho Chi Minh City - Year 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ DO THI TUYET NHUNG PERFORMANCE APPRAISAL FAIRNESS, WORK ENGAGEMENT, AND INTENT TO LEAVE: THE STUDY OF EMPLOYEES IN THE PRIVATE SECTOR ID: 21110013 MASTER OF BUSINESS (Honours) SUPERVISOR: Nguyen Huu Lam, Dr. Ho Chi Minh City – Year 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGE I would like to express my gratitude to supervisor Dr. Nguyen Huu Lam for his guidance, support, motivation, and understanding in all the time of my research. Besides my supervisor, I would like to thank ISB committee for their encouragement, and insightful comments.
I would like to thank managers in HR Share and Care group and my classmates at ISB.3 for their sharing honestly in item generation and other phases. They have provided important comments for my questionnaire as well as data analysis methods. Especially, I am debted to my classmate Thai Van Trung Hieu for his supporting and sharing about SEM analysis. In addition, I would like to thank participants in my investigation without charge.
In my daily work, I have been blessed with my chiefs and staffs at the Joton JSC for all their supports. Especially, I am obliged to my direct chief Mr. Hoang Minh Anh for his support and my subordinate Ms Nguyen Thi Hoang Anh for her assistant at work for me to finish thesis conveniently. Finally, I would like to give my special thanks to my family whose love helped me to complete this work.
i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT While Vietnam builds the Socio-Economic Development Strategy 2011-2020 with paying attention to human resource management and development, many organizations concern performance management and talent management in which performance appraisal, work engagement, and intent to leave are important concepts. The study is conducted to identify whether perceived performance appraisal fairness can help employees to enhance their engagement at work as well as whether engaged employees can reduce their intent to leave organizations. A sample of 170 employees from 15 organizations in the private sector was used to test hypotheses relating to these three concepts. The results indicated that perceived performance appraisal fairness affected positively on work engagement and work engagement influenced negatively to intent to leave in Vietnam context.
Generally, the present study suggests important guidelines for private organizations to ensure fairness of performance appraisal system; thereby, it can help to enhance work engagement and manage employee turnover by controlling intent to leave. Key words: performance appraisal fairness, work engagement, intent to leave ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS AKNOWLEDGE. ii TABLE OF CONTENTS. iii LIST OF TABLES.
v LIST OF FIRGURES. vi LIST OF ABBREVIATIONS. vii Chapter 1: INTRODUCTION. Scope and Contribution of the Study.
7 Chapter 2: LITERATURE REVIEW. Perception of Performance Appraisal Fairness. Performance Appraisal Overall. Fairness of Performance Appraisal System.
Intent to Leave. Perceived Performance Appraisal Fairness and Work Engagement. Work Engagement and Intent to Leave. The conceptual model and hypotheses of the research.
20 Chapter 3: RESEARCH METHODOLOGY. Population and Sampling Method. 27 iii LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Data Analysis Method.
36 Chapter 4: RESULTS AND DISCUSSIONS. Assessment of Scales. Assessment of Scale by Cronbach’s Alpha Cofficient. Assessment of Scale by Exploratory Factor Analysis.
Assessment of Scale by Confirmatory Factor Analysis. Saturated Measurement Model. Maximum Likelihood Method. Testing the Hypotheses.
Discussions for Findings. 52 Chapter 5: FINDINGS AND IMPLICATIONS. Limitations and Directions for Further Researches. 57 REFERENCES APPENDICES iv LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 4.1: Characteristics of the participants .2: Correlation between constructs of perceived performance appraisal fairness 44 Table 4.3: Correlation between research concepts .4: Results of reliability and average variance extracted .5: Result of regression weights.6: Regression weights by maximum likelihood and bootstrap .7: Results of testing hypotheses.
52 v LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 2.1: Performance appraisal process .2: Greenberg's Taxonomy of Justice Perceptions Applied to Performance Appraisal .3: The conceptual model .1: CFA for perceived performance appraisal fairness scale .2: CFA for work engagement and intent to leave scale .3: CFA for saturated measurement model .4: Result of structural equation modeling. 49 vi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF ABBREVIATIONS AMOS : Analysis of Moment Structures AVE : Average variance extracted value CFA : Confirmatory Factor Analysis CR : Critical ratio value EFA : Exploratory Factor Analysis HRM : Human resource management KMO : Kaiser-Meyer-Olkin measure of sampling adequacy ML : Maximum Likelihood exploratory program PAF : Principal Axis Factoring PCA : Principal Component Analysis SEDS : The Socio-Economic Development Strategy SEM : Structural Equation Modeling SPSS : Statistical Packed of Social Sciences UWES : Utrecht Work Engagement Scale vii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 1 INTRODUCTION 1. Research Background The fact that Viet Nam has been a member of the World Trade Organization since January 11, 2007 is a successful step in the efforts to integrate into the global marketplace. The current economic development is believed to be attributable to the political and economic reforms (Doi Moi), which was launched in 1986 (Nghiep & Quy, 2000).
The new policies have prompted Vietnamese economy from a closed system into a multi-sector, globally integrated market economy with socialist characteristics. The World Bank reports that Vietnam has developed from one of the poorest countries in the world, with per capita income below 100 dollars, to a lower middle-income country within a quarter of a century with per capita income of 1,130 dollars by the end of 2010 (Vietnam overview, n. One of the most remarkable achievements of Vietnam’s economic transition is the emergence of more dynamic and stronger private sector (Hakkala & Kokko, 2007). Asian Development Bank defines the private sector as all individuals or groups of individuals who invest or use private capital to produce or trade goods or services.
Therefore, in Vietnam, this definition includes formal and informal enterprises and collectives, domestic and foreign (ADB, 2005). Bartram, Stanton, and Thomas (2009) states that the Vietnamese government encourages a multi-sector economy and actively promotes the growth of private enterprises as crucial factors shaping the development of the economy. 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com As some other emerging economies seeking to compete in globalised markets, Vietnam is facing many challenges (Truong, Van der Heijden, & Rowley, 2010). Vietnam’s ability to succeed with low cost strategy is under threat and needs to change due involving a downward spiral around low cost competition is dangerous and harmful for long term and with impacts on key human resource management (HRM) policies and practices (Truong et al.
Vietnam government builds the Socio-Economic Development Strategy (SEDS) 2011-2020 with paying attention to structural reforms, environmental sustainability, social equity, and emerging issues of macroeconomic stability. Three main issues in SEDS include: (i) promoting human resources/skills development (particularly skills for modern industry and innovation), (ii) improving market institutions, and (iii) infrastructure development (Vietnam Overview, n. In the SEDS, the human resource development is placed first indicates that Vietnamese government has concern on the importance of this resource in the integration process. Obviously, when entering the international arena, the competition among companies has become unprecedented level by the pressure of globalization, which is known as the increasingly close international integration of markets for goods, services and factors of production, labor and capital (Bordo, 2002).
More globalization means more competition “to lower costs, to make employees more productive, and to do things better and less expensively” (Dessler, 2011, p. Therefore, to face the pressure of competition, an effective human resources management has been seen as a critical factor in creating competitive advantage (Pfeffer, 1999). 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Under the growing pressure of globalization and integration, HRM in Vietnam is becoming pragmatic in practices, particularly in relation to the widespread use of training and development as well as the use of performance appraisal and incentive payments (Bartram et al. Private companies in Vietnam are making efforts to formalize their human resource policies to meet foreign requirements, remain competition, attract good candidates, and keep talent employees (Bartram et al, 2009).
While many Vietnamese companies apply difficultly foreign HRM theories and practices to enhance competitiveness, foreign invested companies face the fundamental question of the transferability of HRM practices into local settings (Thang, Rowley, Quang & Warner, 2007). Research Problem In an era of expanding globalization and increasing competition, organizations worldwide have recognized that the knowledge, skills, and abilities of their employees represent a major source of competitive advantage (Lewis & Heckman, 2006). Since the private sector grows and competes openly for experienced and skilled staff, HRM is assumed as an important function to manage talents (Bartram et al, 2009). In Vietnam, although many managers in domestic private companies are extremely interested in experimenting with innovations in HRM (Bartram et al., 2009), the majority of these applications are still in the first phase of development and generally lack a strategic HRM focus and positioning (Truong et al.
Whereas, foreign invested companies need to concern the adoptability of some Western HRM practices into the Vietnamese context because the import of foreign HRM practices demands a careful consideration of their compatibility with Vietnamese contexts and cultural 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com values (Thang et al. In addition, Thang et al. (2007) suggest that the foreign practices that tend to offer compromise with the norms, beliefs, and assumptions of the existing Vietnamese culture have the best chance to be transferred to improving the rigid system in managing and motivating people. Von Glinow and Clarke (as cited in Thang et al., 2007) also indicate that the attempts to seek confrontation or to impose ethnocentric practices of HRM will fail, as an early warning for the prospective American companies aiming to Vietnam.
Thang et al. (2007) implicate that performance management need to take a long-term view and gradually cultivate among its people a trusting, open and frank environment, as well as provide sufficient training to bring these knowledge into practice. When organizations talk about the performance management, they frequently mention the practice of formal performance appraisal as a primary vehicle for management change (Longenecker, 1997). Performance appraisal is one of the most important HRM practices in organizations as it yields critical decisions integral to various human resource actions and outcomes (Gupta & Kumar, 2013).
However, performance appraisal systems in private companies face many disadvantages in Vietnam. Long (2007) considers that some Vietnamese companies have allowed superior to assess performance and attitude of subordinate at the end of the year while others have used voting method relying on the results of emulation, commendation, and punishment for ranking employees in each department, and then proposed to the board of directors for approval. By any manner, performance appraisal in Vietnamese companies often create controversy, discontent and disunity in the organizations because the assessment methods are not scientific, not transparent, unfair and results 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com of assessment had often based on comments by emotions, bias of the supervisor (Long, 2007). Tan (2011) presents that probably more than 80 percent of staff asked about performance management system will think that this system is unfair, meaningless, and a waste of time; whereas, many human resource managers are aware of this issue but ignore and still proceed with their system knowing the actual consequences and results.