MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY ------------ HUYNH NGOC DUY THE ROLE OF TRANSFORMATIONAL LEADERSHIP BEHAVIORS IN AFFECTIVE EMPLOYEE ENGAGEMENT: AN EMPIRICAL STUDY IN THE TWO INDUSTRIES OF RETAIL AND FINANCIAL SERVICES IN HCM CITY Subject: Master of Business Administration Code: 60.02 MASTER THESIS OF BUSINESS ADMINISTRATION SUPERVISOR: TS. NGUYEN HUU LAM HO CHI MINH CITY – 2012 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1 The Role of Transformational Leadership Behaviors in Affective Employee Engagement: An empirical study in the two industries of retail and financial services in Ho Chi Minh City ABSTRACT According to many previous studies, the effective leaders are one of the most important factors in engaging the employees to the organization; leveraging the human capital to create sustainable competitive advantage for the organization efficacy and leading to organizational benefits. The purpose of this study was to investigate the relationship between transformational leadership behaviors and affective employee engagement and to examine their impact on employees’ level of affective engagement in private and foreign-owned companies in Ho Chi Minh City. Total participants in the research were 320 full-time employees from the industry of retailing and financial services in Ho Chi Minh City.
The majority of employees have worked in private organizations (55.3%) and followed by foreign- owned companies (44.7%); in financial services (53.4%) and in retail industry (46. The findings of the study indicated that transformational leadership behaviors including intellectual stimulation, idealized influence behaviors and individual consideration have significant and positive correlations with affective employee engagement. Among the independent variables, individual consideration is found to be the most important factor in driving affective employee engagement. The research results have contributed to the literature and provided more evidences for the managers in their decisions of their workforce planning.
However, the sample for the research is still limited due to the application of convenient sampling method and surveyed only in Ho Chi Minh City. Therefore, the generalization is not LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2 so high; the study might have not covered all the demographic factors; and also some other important variables were not considered all due to the scope of the study. All the restrictions will motivate the next researchers in this interesting topic. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3 ACKNOWLEDGEMENTS I am deeply grateful to my advisors, Dr.
Nguyen Huu Lam and Dr. Nguyen Dinh Tho for the guidance and comments through the process of completing this thesis. Without the support and encouragement from Dr. Lam and Dr.
Tho, the thesis might not be possible in meeting the requirements and expectations of the research. I also extend my thanks my classmates in sharing with me the ideas; store managers in Crescent Mall in district 7 and MBA students at the University of HCMC Economics in filling in the questionnaires. I would like to acknowledge the support and encouragement of my family in the concession of time, money and effort to complete the program. Most of all, I would like to be grateful to my Buddha for giving me good health, optimism and strength to finish the study.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 4 TABLE OF CONTENTS ABSTRACT .3 TABLE OF CONTENTS .4 CHAPTER ONE: INTRODUCTION .1 BACKGROUND OF THE STUDY .2 STATEMENT OF THE PROBLEM .3 OBJECTIVES OF THE STUDY .5 SIGNIFICANCE OF THE STUDY .6 SCOPE OF THE STUDY .7 STRUCTURE OF THE STUDY .13 CHAPTER TWO: LITERATURE REVIEW .2 THE CONCEPT OF LEADERSHIP .3 THE EVOLUTION OF LEADERSHIP THEORIES .5 FIVE DIMENSIONS OF TRANSFORMATIONAL LEADERSHIP BEHAVIORS .1 Idealized influence (Attributes) (IIA): leaders instill pride and build trust .2 Idealized influence (Behaviors) (IIB): leaders emphasize collective sense of mission, talk about values and beliefs .3 Inspirational motivation (IM): leaders communicate and express enthusiasm, optimism, confidence, and emotional appeals.4 Intellectual stimulation (IS): leaders stimulate followers to view the world from new perspectives; encourages problem solving, critical thinking and creativity.5 Individual consideration (IC): leaders develop, coach, and teach each follower to grow individually by paying attention to individual needs, desires and assigning projects.6 THE CONCEPT OF EMPLOYEE ENGAGEMENT .7 THE EVOLUTION OF EMPLOYEE ENGAGEMENT .8 TWO DIMENSIONS OF AFFECTIVE EMPLOYEE ENGAGEMENT .9 THE RELATIONSHIP BETWEEN TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND EMPLOYEE ENGAGEMENT .10 RESEARCH MODEL AND HYPOTHESES .24 CHAPTER THREE: RESEARCH METHODOLOGY .2 Data collection and In-depth interview .27 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.1 Response rate and sample size .2 Data sources and type .3 Data gathering instruments .1 Multifactor leadership questionnaire .2 Affective employee engagement questionnaire .4 Independent and dependent variables of the study .5 Data analysis and presentation procedures .33 CHAPTER FOUR: RESULTS AND FINDINGS .1 DEMOGRAPHIC CHARACTERISTICS OF THE PARTICIPANTS .2 DESCRIPTIVE STATISTICS FOR TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND AFFECTIVE EMPLOYEE ENGAGEMENT .1 Employees perception to Transformational leadership behaviors .2 Employees perception to their organizational engagement.3 THE RELATIONSHIP BETWEEN TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND AFFECTIVE EMPLOYEE ENGAGEMENT .2 Exploratory Factor Analysis (EFA) .5 CORRELATION AND REGRESSION ANALYSIS .1 Assessment of the model .2 Testing of the hypotheses .6 RESULTS AND DISCUSSION .2 Idealized influence behaviors.3 Idealized influence attributes and inspirational motivation .3 Discussion of the results .54 CHAPTER FIVE: DISCUSSION, RECOMMENDATION AND CONCLUSION 55 5.2 THE CONTRIBUTIONS OF THE STUDY .1 Contributions to the literature .2 Contributions to the practices .1 Recommendations for the organizations and managers in Ho Chi Minh City .57 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.2 Recommendation for future research .4 LIMITATIONS OF THE STUDY .61 Appendix A: Total Variance Explained .66 Appendix B: Rotated Component Matrixa .67 Appendix C: Total Variance Explained .68 Appendix D: Rotated Component Matrixa .69 Appendix E: KMO and Bartlett's Test .69 Appendix F: KMO and Bartlett's Test .70 Appendix H: Histogram Dependent Variable AC .70 Appendix I: Normal P-P Plot of Regression Standardized Residual Dependent Variable AC .71 Appendix J: Scatterplot Dependent Variable AC .72 Appendix L: Histogram Dependent Variable SC .73 Appendix M: Normal P-P Plot of Regression Standardized Residual Dependent Variable SC .74 Appendix N: Scatterplot Dependent Variable SC .81 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 7 LIST OF TABLES Table 1: Location for paper survey, sample size and response rates .28 Table 2: Independent and Dependent variables .32 Table 3: Summary of Employees’ profile .35 Table 4: Mean and Standard Deviations of Transformational Leadership Behaviors and Affective Employee Engagement for employees’ responses .36 Table 5: Pearson correlation matrix between transformational leadership behaviors and affective employee engagement dimensions .39 Table 6: Cronbach Alpha .41 Table 7: Result of EFA for Independent variables .43 Table 8: Result of EFA for Dependent variables .44 Table 9: Correlation analysis .47 Table 14:Profile of Independent variables .47 Table 15: Profile of Independent variables .48 Table 16: Summary of results of hypotheses .50 Table 17: Industry analysis .53 LIST OF FIGURES Figure 1: Proposed Research Model .24 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 8 CHAPTER ONE: INTRODUCTION 1.1 BACKGROUND OF THE STUDY In Vietnam News (2002), it showed that: More than 43% of employees in Vietnam express high levels of commitment to both their job and the company they work for. In its global employee commitment report 2002 Taylor Nelson Sofre says the commitment percentage in Vietnam is higher than the average in the Asia-Pacific region and Europe, but slightly lower than in the United States and Latin America.” And then in Thanhnien News (2008), it is suggested that: Vietnam needs more skilled workers since its WTO accession. The survey by Grant Thornton, a global accounting, tax and business advisory firm which involved over 7,800 privately held businesses in 34 countries shows that 84 percent of Vietnamese companies focus on recruiting and retaining staff, compared to a global average of only 59 percent. Vietnamese companies focus more on attracting and retaining employees than do companies elsewhere.
Employee retention is considered the greatest challenge for businesses in Vietnam and becomes a hot topic for discussions for any workshops of human resource managers. Vietnamese employees aggressively accelerate their career to better LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 9 positions, challenging jobs and better pay. In a survey of Navigos Group, the leading and largest executive recruitment solution provider reported in Vietnam Plus (2010) “63,8 percent of respondents from 168 companies operating in Vietnam including foreign-invested ones ranked the employee retention as the number one human resource challenge in 2010”. And it also confirmed “getting the right people into the right job with the right skills and to have them stay and grow are missions which will keep human resource personnel busy in 2010.
As long as this is the fact, employee retention is hard work.” According to Towers Watson (2011) in a briefing of engagement indicator survey, Vietnam labor market has experienced a fierce talent war in which Vietnamese employers are trying to engage their talent through some employee engagement programs. In the Towers Watson’s data, it also showed that “employee engagement levels in Vietnam have remained steady over the last five years (currently 78% favorable) and higher than employee engagement levels in the overall Asia Pacific Region (currently 74% favorable). However, employee intent to continue working for their current companies is lower in Vietnam (54%) compared to Asia Pacific (61%). In other words, the war for talent is fiercer in Vietnam than elsewhere in Asia Pacific because employees are at higher risk of leaving.” It is clear evidence that employee engagement has become one of the most leading priorities for human resource practitioners and senior managers in the organization today in Vietnam.
It is also the role of HR managers and line mangers to understand what are the critical factors affecting employees to get their high commitment to the company. Based on that, the managers come up with strategic action plans to engage their employees into the sustainability of the organization. These requirements from the reality are really urgent for the managers in Vietnam to deal with them in their daily managerial works. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.2 STATEMENT OF THE PROBLEM Nowadays, the workplace changes day by day and requires products and services to keep in line with this demand.
In order to remain competitive, employee engagement is one of the most important factors in the face of these pressures.Since employee engagement is strongly correlated to the leadership behaviors of direct mangers and this concerns a focus on improving the quality of leadership in achieving greater employees to engage to the organization and its sustainable growth, and the profitability as well. Many researchers have revealed that employee engagement and leadership behaviors are of crucial determinants in the organizational success. However, leadership is one of the least understood concepts in the corporate world and the term of employee engagement should also be considered in many dimensions to result in a full picture of this relationship. Beverly and John (2008) shows indisputable links between employee engagement and various measurements of financial success in which a US survey of 24 publicly listed traded companies with a total of over 250,000 employees over the last 5 years recognized the stock prices of 11 companies with highest engagement increased an average of 19.4% in comparison to only 8% of those in the same industries.
Several surveys also reveals that companies with high employee engagement levels experienced a higher operating margin, net profit margin, revenue growth and earnings per share than those with low employee engagement. It is clear that employee performance or behavior on the job is influenced by his or her immediate manager and its positive relationship will be essential to strengthening employee engagement. So, to improve the quality of leadership and management can be the most important step in keeping the employee committed to the organization. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 11 On the contrary, engagement is also complicated and continuous for further research then it requires a simultaneous solution as the employees can be emotionally engaged, cognitively engaged or physically engaged.