1 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Le Uyen Phuong SOLUTIONS TO IMPROVE ORGANIZATIONAL COMMITMENT IN SAIGON CO.OP ID: 22130058 MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Dr. Nguyen Thi Nguyet Que Dr. Tran Ha Minh Quan Ho Chi Minh City - 2016 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2 TABLE OF CONTENTS ACKNOWLEDGEMENTS. 6 LIST OF FIGURES.
6 LIST OF TABLES. 6 CHAPTER 1: PROBLEM IDENTIFICATION .2 Background of the business problem .3 Business problem identification .5 Cause and effect map. 19 CHAPTER 2: ALTERNATIVE SOLUTIONS. 25 CHAPTER 3: SELECTED SOLUTION.
31 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.2 Designing the change strategy. 33 CHAPTER 4: SUPPORTING INFORMATION .1 Supporting information of business problem background justification .2 Supporting information of problem existence justification .3 Supporting information of problem consequences .4 Supporting information of potential causes justification. 55 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 4 LIST OF FIGURES Figure 1.1: Cause-and-effect map. 19 LIST OF TABLES Table 1.1: The recruitment and training cost in 2013 -2015 .2: The turnover rate of Saigon Co.1: Cost – benefits analysis for solution one .2: Cost – benefits analysis for solution two .3: Cost – benefits analysis for solution three.
30 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 5 ACKNOWLEDGEMENTS First at all, I would like to express my sincere gratitude to my supervisors, Dr. Nguyen Thi Nguyet Que and Dr Tran Ha Minh Quan for their continuous support of my thesis. My sincere thanks also goes to my dear colleagues, friends and classmates for their invaluable advice, help, encouragement and support during the time I was doing this thesis. Last at all, I would like to express my great thanks to my family for their support, assistance and encouragement for my study and thesis fulfillment.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 6 EXECUTIVE SUMMARY Organizational commitment is an issue of prime importance, especially to the management and owners of the organizations. Organizational commitment and job satisfaction are directly related to an organization’s profitability and competitive position in the market. Organizational commitment directly affects employees’ performance and is therefore treated as an issue of great importance. Commitment is a sort of bond between an employee and the organization he is working for (Jaramillo et al.
The strength of this bond is dependent on various factors. This study will try to find the relation of some of these factors with organizational commitment. Organizational commitment has a strong relation with the employee behavior. If an employee is committed to an organization, it would reduce the chances or occurrences of absenteeism and turnover (Igbaria & Greenhaus, 1992).
Commitment refers to an employee’s willingness to work positively in an organization and his continuance to work for it (Mowday et al. The dissertation concludes by endeavoring to unravel the causes behind the decreasing organizational commitment in employees of Saigon Co.op and gives suggestions as to what organizations might do to lower the problem. The researcher recommends to managers to consider training and development as influencers of organizational commitment. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 7 CHAPTER 1: PROBLEM IDENTIFICATION This chapter includes three sections.
The first section introduces the background of the company. The second introduces the background of the business problem while the third section introduces more details about the business problem of the company.1 Company introduction Saigon Co.op established in 1989 after the dissolution of Ho Chi Minh City Trade Cooperation. Its two main functions were directly operating the business and organizing the business for cooperatives in the city. In the trend of market opening and economic development, the living standard of the people in Ho Chi Minh City at that time was rising and need for modern shopping centers emerged.
Some of the supermarkets were opened at small scale and high prices. In this situation, Saigon Co.op decided to change the strategy from importation/exportation to wholesaling and retailing. The first supermarket store of Saigon Co.op opened in 1996 under the brand Co.opmart with the supports from Japanese, Singaporean and Swiss cooperatives (Co. After 18 years, Co.opmart is one of the biggest retailers in Vietnam.
There are 320 employees under seven department, including: Human Resources, Purchasing, Financial, Accounting, IT, Marketing, Development and Planning. This thesis mainly focus on headquarter of Saigon Co. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.2 Background of the business problem In two quarter company meeting with all of employee and board of director, one of issues rising to be by the Chairman of the board is rising many cost in the company, especially recruitment and training cost. The table below explain more detail.1: The recruitment and training cost in 2013 -2015 Year 2013 2014 2015 Recruitment and training cost 269 332 371 (million VND) (Human Resource Report 2013, 2014, 2015) To define the problem, personal interview with the Vice-Director of Human Resources and the Director of Human Resources to get more details about the issues.
Questions are used in discussion “What is your opinion about the rising cost? What cause of this problem?” There is an increasing turnover rate from 18. Comparing with the rate in retail industry, it was around 15 – 20% (Sources from General Statistics Office of Viet Nam 2015). The table below show more information.2: The turnover rate of Saigon Co.op in 2013 – 2015 Year 2013 2014 2015 Turnover rate (%) 18.7 (Human Resource Report 2013, 2014, 2015) LUAN VAN CHAT LUONG download : add luanvanchat@agmail.7% this rate is considered high, it reflects a lot of employees leave job and significantly affect the financial performance of an organization. Direct costs include recruitment, selection and training of new people, with a phenomenal cost of time and expense.
Indirect costs include increased workloads and overtime expenses for coworkers and reduced productivity associated with low employee morale. The organization need to hire new employees to replace and train them to be suitable of the vacancy. And this is the main reason in increasing the cost of recruitment and training. To justify the reason why many employees quit their job.
The author conduct an interview with the Director and Vice-Director of Human Resources, current and former employees who are under different departments. The interview result listed as below First, Saigon Co.op faces tough competitors. Mergers and acquisitions are churning the Vietnamese retail market, with large domestic players buying out rivals and massive investment by foreign retailers. For example, giant conglomerate Vingroup acquired supermarket chain Maximark, a popular retailer in the southern and south- central regions.
Aeon - Japanese retail giant and Citimart completed a deal for business collaboration with the name of the local supermarket chain will be changed to AeonCitimart. Korean largest retailer E-mart just open its first hypermarket. While facing fierce competition from several new foreign players, the employees are easily to be approached by rival companies. More than 50 percent of employees left jobs because of better job offers from competitors (AEON and Vin Mart) for higher position or higher salary.
This means the employees are less committed to the organization. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 10 Secondly, few opportunities for career development within the company. About 40 percent of employees feel that it is difficult to get promoted to the next level. Because they have to work hard, spend most of time at office to meet targets without failing to meet deadlines, so they do not have time to learn new skills to match with the requirement of the next level.
Besides, the organization does not provide a clear picture of career advancement for employees. There are not any programs to help employees get a promotion. Compare with AEON, they pay close attention to employees’ career development, and provide a targeted cultivation and development platform to realize the growth of both the Company and our employees. Employees getting more development opportunities have less intention to leave organization.
So, lack of career development, is prompting a fair share of employees to feel disengaged, less productive and in many instances, leaving their jobs. Lastly, lack of skills training and development as the main reasons 30 percent of employees chose to voluntarily leave their positions. The organization does not offer any training programs to improve the skill levels of employees such as advanced job-specific training and skill competitions. This made employee do not have enough abilities knowledge and skills to helps them perform better on their jobs.
They feel that they are not involved in activities that promote their professional development. They are not allowed to involve in decision making process for some important projects or operation process, so they can not help managers execute difficult projects or implement the LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Employee starts to feel like their efforts are going unnoticed, they may become less productive or move on to another company. The result showed that all of interviewees agreed that they did not feel committed to the company so they are not satisfied or quit their job (details about interviewees ‘answers in chapter four).
Combining the information from HR Department and interview result, a concern was raised about the level of organizational commitment and the problem was identified as “the level of organizational commitment in Saigon Co.op is low and it needs to be improved".3 Business problem identification 1.1 Problem definition Boles, James, et al (2007) define organizational commitment are concerned with feelings of attachment to the goals and values of the organization, one’s role in relation to this, and attachment to the organization for its own sake rather than for strictly instrumental values. Meyer and Allen’s (1993) developed a three- component model of organizational commitment which has been the dominant framework for organizational commitment. This three-component model is based on a more comprehensive understanding of organizational commitment. The three-component model consists of: Affective commitment is based on how much individual ‘want’ to stay in the organization.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 12 Continuance commitment refers to an awareness of the costs associated with leaving the organization. Continuance commitment based on individual having to remain with the organization lost their previous investment before gone. Normative commitment is the attachment that is based on motivation to conform to social norms regarding attachment reflects a feeling of obligation to continue employment. Employees with a high level of normative commitment feel that they ought to remain with the organization.2 Problem existence To identify the level of organizational commitment in Saigon Co.op, a questionnaire survey based on the Three-Component Model (TCM) of commitment (Meyer & Allen, 1997), measures three forms of employee commitment to an organization: desire-based (affective commitment), obligation-based (normative commitment) and cost-based (continuance commitment).
Each is scored separately and, together, they can be used to identify the “commitment profile” of employees within an organization (more detail in chapter four) with 30 employees from all department has been conducted and the results are illustrated in chapter four. Results showed that there is a low level of commitment in the organization. More specifically, over 40% respondents do not “want” to remain or maintain a link with the organization and have low sense of obligation to stay, want to pursue better opportunities. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.3 Problem consequences The impact of low level of commitment on organizational performance can be manifest through employee turnover and employee productivity.
These factors are discussed in depth below. First, High Turnover Rate, can be defined as the process in which employees leave the organization and have to be replaced by others, turnover is related to employee commitment (Warsi, 2009). Employees with high organizational commitment are those who are emotionally attached to and identify with their workplace (Li, Frenkel & Sanders, 2011). Organizational commitment is important to examine because high commitment is associated with low turnover intentions (Meyer et al.
2002) and because the cost of replacing an employee has been estimated to be twice their annual salary.