UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Hoang Thi Thanh Lam DEALING WITH LOW INTRINSIC MOTIVATION OF FUNCTIONAL EMPLOYEES IN PEPSICO FOODS VIETNAM COMPANY. ID: 22140025 MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR. NGUYEN PHONG NGUYEN Ho Chi Minh City - 2016 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Executive summary Vietnam has recently been regarded as a prospective destination of foreign investment presented with its high-speed development, especially for Fast Moving Consumer Goods (FMCG). As one of the leading producers in the FMCG market, PepsiCo Foods Vietnam Co., Ltd (PepsiCo) is following towards the development of the industry and improving its execution to gain higher performance results.
However, there are potentially existing problems in the company which may reduce the competition edge of organization and harm to its culture. This research was commissioned to examine what problem in PepsiCo, the causes leading to problem are and to suggest the validated solutions to deal with problem, which are in line with company’s policy and resources. Method of the analysis is combination between theory-informed and validated data, collected through interview and survey to identify and confirm existence of the problem as well as causes and alternative solutions. From the general diagnosis of potential problem at PepsiCo, findings suggest the existence of low intrinsic motivation of functional employees as the main problem.
Problem scope to work is including Finance, Planning, Human Resources, Procurement and Legal Department. Low intrinsic motivation is analyzed in terms of its existence, antecedents, consequences, and solutions are proposed to tackle such a problem. Finally, this report indicates organization of actions to deal with problem in the lead time of one year and limited budget approved by the company. 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Recommendations discussed focus on two main causes of low intrinsic motivation of functional employees in PepsiCo, which are job characteristic and lack of verbal recognition and rewards.
The report also investigated three accordant solutions: - Re-assessing and launching detail job description - Offering functional employees extracurricular sub-task to develop their interpersonal skills - Improving verbally recognition and rewards activities. Total estimated cost to implement these 3 solutions is approximately 234mil VND, which is in line with company’s approved budget of 250 mil VND while benefit brought is 453 mil VND. Annual net saving is calculated as 219 mil VND. Since there is finiteness of time and resources constrain, limitation of the research exist such as the current company conditions data did not provide enough information and only sample of interviews are performed.
However, the report provides diversified and validated data in conjunction with theory to propose meaningful suggestion for PepsiCo to strengthen its personnel resources and organization behaviors. 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com List of tables and graphs: Table 1: PepsiCo Organization Health Survey condition (Pepsico, 2015) - page 11 Table 2: PepsiCo Organization Health Survey result 2016 (PepsiCo) - page 12 Table 3: Summary of interview result – Potential problems - page 19 Table 4: Summary of problem existence interview - page 29 Table 5: Cost – benefit of alternative solutions – page 50 Graph 1: PepsiCo new POM (PepsiCo) - page 5 Graph 2: Fast Moving Consumer Goods dynamic (Total 6 cities) (Nielsen, 2016) - page 6 Graph 3: Growth of Beverage, Food and Milk based product (Nielsen, 2016) - page 7 Graph 4: Causes – effect map - page 39 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Table of content Executive Summary. Justify problem in term of existence. Justify problem in term of importance.
Proposal of Solutions. Evaluation of solutions. Organizations of actions. 55 Appendices 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.
Company overview Established through the merger of Pepsi-Cola (1890s) and Frito-Lay (1961) in 1965, PepsiCo is a global food and beverage leader with twenty two mega brands, whose annual retail revenue is more than $1 billion for each. The group’s mission is clear that to provide consumers around the world diversified range of foods and beverages to satisfy their demand to enjoy, from healthy products to for - fun ones. PepsiCo's people are united by commitment “Performance with Purpose” to provide a wide range of products, which included both fun and healthy characteristics to consumers, respect the environment people are living in and commit to hold a great working place for associates. PepsiCo Foods Vietnam Ltd.
(PepsiCo), who has operated in Vietnam for 9 years, became one of the leading food manufacturers in the country with main brand “Poca” and 300 employees throughout the country. The local company inherited the morale and mission from PepsiCo Group to deliver sustained value by providing diversified products portfolio and taking the role to protect environment. Understanding that the success of the business also thanks to the contribution of people in the company, PepsiCo has developed its working environment based on talent sustainability criteria, clear vision and strong business ambition toward future. 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com In order to be well – prepared for globalization and localization process, PepsiCo has changed the structure to new PepsiCo Operating Model (POM).
In which, the organization has been arranged into vertical multi-layer chart rather than horizontal in the past. In that new POM, every operational department will be managed through one concept and direction from global, sector, region, commercial unit to market unit while General Manager will take the lead role as managing local operating concept. Therefore, in the new POM, the active involvement of employees in company operation is the most important factor. Graph 1: PepsiCo new POM (PepsiCo, 2016) 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.
Business overview In 2016, Vietnam has been rated as top 3 destination of investment together with China and Indonesia, where foreign investors tend to expand their operations. In addition, Vietnam is one of Top 5 Optimistic Countries in the world and our consumer confidence index (CCI) was in Top 10 globally for six consecutive quarters since quarter 4 of 2014 as report of Nielsen.1 However, drought and fish crisis recently has hurt the agriculture and thus GDP growth by achieving growth rate of 5.5% in the first half of 2016, lower by 0.8% versus 2015 as Trading Economic 20162 researched. Fast-moving consumer goods are dynamic market but it is recorded that the nominal growth rate was decreased in Quarter 1 of 2016 after the strong recovery in quarter 4 of 2015. Graph 2: Fast Moving Consumer Goods dynamic (Total 6 cities) (Nielsen, 2016) 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Even beverage was a shining star in the FMCG market with the nominal value growth of 39% in 2015, foods business was in recovering trend with positive nominal value growth rate in quarter 1 and 4 of 2015.
Graph 3: Growth of Beverage, Food and Milk based product (Nielsen, 2016) In the first half of 2016, PepsiCo has achieved volume of 3,800 tons, which is 28% higher compared with prior year. However, in order to achieve volume of 8,000 tons for full year 2016, there is much more obstacles that PepsiCo need to overcome to fulfill the target by keeping driving topline while consciously maintaining low cost structure. Symptoms Initial interviews with 5 stakeholders including Finance Director, Planning Manager, general accountant, former planning analyst and Human Resources director were performed to investigate the current symptoms in the organization. Finance team is the biggest 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com functional team in the company, including Commercial Finance, Plant Finance, Agro Finance and Finance team in Head office, located at all branches of the company.
As they take care of the most important and spread parts in business operation and have direct communication with all other functions but operating separately as back office, their idea are general and unbiased. For planning team, their activities are as similar as Finance team but in a deeper level and stressful as they will provide strategic advice to management team for their business decision. Therefore, they may have incisive judgment to the problem occurring in the company. Last but not least, HR manager will be the one standing at company’s overview to provide the information in the general and proven way.
The qualitative questions have been used to investigate the interviewees’ point of view about what the concerns exist in the organization are. The detail interview is showed as Appendix 1. According to Planning manager, recently his team faced the biggest problem of very “high turnover rate” as 80%, increased by 100% versus last year. Team members have decided to take new challenges outside of PepsiCo after average 3-year commitment.
It brought company a personnel shortage and increased workload for the remaining people. As a result, working quality was decreased during a period of time. Company was facing resource constrain since the experience employees decide to leave while the new one cannot catch the working pace and satisfy all stakeholder’s requirement perfectly. In addition, it is hard to find out the suitable candidate for the vacancy as the labor supplies for analyzing job 9 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com is not copious.
Therefore, planning team has to fulfill business core requirement and prioritize some of the requests while refusing tasks which they cannot take over all. In general, there is a gap in operation in this period of time since Planning take an important role in analyzing all company scenario before launching products, pricing set up or giving business decision. In addition, he insisted that his business partner’s awareness is not high. They are usually late for meeting or sending back inputs when being requested and have not got much preparation for appointment.
These behaviors may be known as a passive involvement in group work as employees tended to reject new task and protect their benefit. Stressful work load and long working – hours, especially in the peak season, make employees be lacking of work – life balance but there is not much effort from the employees to investigate and suppose the simplification as shared by Finance Director. Besides, there is poorly-run meeting as lack of preparation and members’ contribution. Employees intend to keep silence during the presentation and question and answer session, even the meeting outcome can directly affect to their performance and benefit.
There is not active feedback and activities of functional employees in daily work to upper lever/ line manager and they tend to do what their managers supervise them. In conjunction with the high turnover rate of finance team, efficiency and effectiveness of the business action have been decreased. Interview with former planning analyst have been performed to get the experience of an ex-employee. He mentioned about the low promotion and the unchanged benefit even he needed to work for 2 persons’ jobs when PepsiCo faced personnel shortage problem in long 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.
In addition, there is sympathy in Planning analyst’s idea compared with Planning manager when he commented about the cooperative attitude and actions of his business partner. That means people just want to maintain the current working way rather than actively improve and perform the new and better one. Another interview was performed with a general accountant. He wants to keep a stable work rather than take a new challenge to get a promotion opportunity.
Therefore, he just completed his task as acceptable level rather than taking time to investigate the new things. The commitment to the organization is low as he intended to search for another job outside of PepsiCo. The comment from HR Director gave a general view as she got the results from PepsiCo Organization Health Survey (OHS), which is a survey that company send to all PepsiCo employees to get their answers on the level of job satisfaction, job engagement, agility, commitment, alignment, jobs and career, management and group work.