Distributive injustice in DongA Bank 1 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ---------------------------- CONFIDENTIAL Vo Thi Ngoc Giau DISTRIBUTIVE INJUSTICE IN DONGA JOIN STOCK COMMERCIAL BANK (DongA Bank) MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Dr.Tran Phuong Thao Ho Chi Minh City – 2018 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Distributive injustice in DongA Bank 2 TABLE OF CONTENT Executive summary. Industry overview and company background. Initial cause-effect map. Updated cause-effect map.
Key Performance Indicators. Behaviorally anchored rating scale (BARS). Solution for main cause of distributive injustice of DongA Bank. Action plan in organization.
Define production goal and objectives. Identify potential indicators. Select indicators and set target for implementation. Monitor and communicate results.
Act on results and Review indicators, policies and goals. Initial cause - effect map (qualitative research) .53 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Distributive injustice in DongA Bank 3 1. Initial cause - effect map (quantitative research). Updated cause - effect map (qualitative research) .1 Employer’s interview guide.
Employee’s interview guide. Interview guide for focus group .71 List of Abbreviations DongA Bank DongA joint stock commercial bank HRM Human resource management NPLs Non-performing loans KPIs Key performance indicators BARS Behaviorally anchored rating scale LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Distributive injustice in DongA Bank 4 List of table Figure 1. The main abnormal signs of human resource in DongA Bank. Dividing the number of employees leaving the jobs into organization structure.
Dividing the number of employees leaving the jobs into generation. Dividing the shortage of employees leaving the jobs into position and geographical area. Employer perspective diagram. Employee perspective diagram.
Evaluating the unsatisfied level of internal workplace elements. Initial cause – effect map. Updated cause – effect map. Comparing average salary and benefit packages with same scale banks.
Distributive injustice proof. Price calculation per deal. Recruitment cost and training and development cost from 2015 to 2016. Statistic data about customer complaint from 2015 to 2017.
Statistic data about deposit of DongA Bank from 2015 to 2017. The salary bracket of Sale staff and Administrator in DongA Bank. The reconsideration of labor contract sample. Closed-loop model for key performance indicators.
Balance score card. Scaling of incidents on a particular dimension of BARS. The average net profit of each employee .47 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Distributive injustice in DongA Bank 5 Executive summary The commercial banks in Vietnam play a vital role as the main suppliers of funding for the economic with the compound average annual growth rate reaches 14.2% in 2011 to 2016 period (1). In parallel with the fast-growing rate, banking industry has to face with multiple challenges tied to the legacy system of Vietnam such as the customer satisfaction, technologies, human resource management and risk (2).
Especially, the banking sector is actual a service industry and human resource is the core value and the biggest challenge of each organization in order to get the competitive advantage in a fast-growing industry like Vietnam banking sector. With the main aim is to explore the insight problem of human resource management of DongA Bank that make the shortage of human resource becoming a burden and can lead to a human resource crisis, the qualitative research was conducted for both employers and employees in order to has the general images about the real existing weakness and the unexpected indicators of two side of human resource – the user and the maker. Additionally, the quantitative research has also accomplished for a month in order to revise the commonly level of many collected information throughout the employees and employers perspective. Last but not least, aside from these researches, the context problem of DongA Bank with the evidences from the separate financial statement, the yearly human resource management report and in some conferences of chairman with most of management level is also the important information to make the result of study and the potential solution be suitable with the real initial phenomena of DongA Bank.
Combining whole of the collected information, it defined that the main problem of the high turnover rate and the significant shortages human resource at DongA Bank comes from the imbalance between productivity with salary and benefit packages. Beyond the main problem exploration, the interviews are continued to manipulate with high-top managers level to recheck the emerging main problem and investigate the causes validation. Indeed, the high-top management level illustrated that the distributive injustice in DongA Bank cause form many side such as the fogy salary regulation, the lack of suitable rewards and benefit policy and the lack of an effective performance appraisal. Thus, with the organization instability status of DongA Bank, LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Distributive injustice in DongA Bank 6 the alternative solutions are proposed to take initiative control the turnover rate, maintain the experience labor and limit the increase labor cost.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Distributive injustice in DongA Bank 7 CHAPTER 1: PROBLEM IDENTIFICATION 1. Industry overview and company background 1. Industry overview Throughout the last three years, Vietnam’s real GDP grows slightly over 6% that creates the stable conditions for banks’ asset quality (3). Additionally, the Vietnam government concerns more about the legal framework by issuing many documents such as the circular No.
39/2016/TT-NHNN, the law No. 17/2017/QH14 which is amendment to some articles of the law in credit institutions and the resolution No. 42/2017/QH14 in order to provide the legally solution for handling with non- performance loans. Therefore, banks have the right to take over the collaterals that help reducing the operations cost and the bad debt rates (4).
Subsequently, the International Monetary Fund (5) illustrated that Vietnam banking sector has the rapid credit growth expressing the increasing in funding demand of customer, almost three times faster than the real GDP. In generally, with the rapid economic growth rate, Vietnam banking sector will have a bright prospect with the stable growth rate in the next period from 2018. Company overview DongA Bank is a joint stock commercial bank established from 1992 with the head office in Ho Chi Minh City. With over 25 years experience in financial market, DongA Bank is always tended to become a leading Vietnamese banking group with the main customer segment that are personal customer, small and medium enterprise.
The mission that DongA Bank chases throughout the last decade is expanding international operation, winning clients respect by the high quality of service, engaging the trust and recommendation. According to the statistic about banking equity of CafeF website (6), it can be defined that with the equity reaches 5,000 billion dong, DongA Bank belongs to the group of medium banking with the main competitors are OCB, ABBank, VIB, TPBank and the other ones have same equity and customer segment. Additionally, DongA Bank is a retail banking which reminds customers about the pioneer in ATM card and auto banking system and achieves the highest rank of customer satisfaction. Furthermore, along with the long term goal, it has a broad transaction channel with 213 transaction points in over 50 provinces and the big city of Vietnam such as Ho Chi Minh city, Ha Noi, Da Nang, Can Tho.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Distributive injustice in DongA Bank 8 Additionally, after the organizational structure is revised many times from the past to now, DongA Bank is organized with the fundamental structure of a normal joint stock company consisting of shareholders, board of directors, control board, board of directors and nine divisions (Appendix 1). Symptom According to the annual business report from 2015 to the first 6 months of 2018, it illustrated that DongA Bank has had to face many issues for a long period such as increase in non-performing loans, low growth rate, out of date information technology system and the human resource crisis. Because of the vital role and the rapid growth rate of banking sector, it cannot be doubted that this industry has to bare the highest competitive pressure from external environment such as competitors, new entrants which is the international financial group and the bargain of customer. Indeed, the weight of debts of DongA Bank went down sharply and yearly average at 3,000 billion dong throughout the last three years, 43,098, 40,058 and 37,904 billion dong respectively.
Moreover, the portion of the personal debts accounts for 65% of the weight of debts, and the main credit which is also the credit strength of DongA Bank is non-collateral credit. Therefore, it is difficult to enhance the weight of debt in the short period as the others competitors concentrating on developing enterprise customers. Additionally, from 2015 to 2017, DongA Bank is negatively impacted by much bad information and direct influence on the brand equity. Inadvertently, it creates the barriers to approach and conquer the potential customers.
Especially, with the high turnover rate on sales workforce, the ability to engage customers becomes a hard goal. Aside from the abnormal sign of the weight of debt, non-performance loans are actual the issue influencing on many aspects in financial statement. To specific, the non-performance loans (NPLs) of DongA Bank grew up dramatically year by year, 3,580, 5,165 and 5,667 billion dong respectively. However, it could surely that NPLs are always survival parallel with banking industry as the fundamental risk indicator of the financial system.
Alatabani – Lead financial sector specialist at the World Bank in Vietnam (7) - debated that NPL volumes in Vietnam remain high over the past few years, despite the releasing of many legal instruments in order to tackle and control an LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Distributive injustice in DongA Bank 9 acceptable NPL rate. Therefore, it can be seen clearly that increasing in NPLs is the common tendency of Vietnam financial market. In other words, NPLs will be the biggest problem of every banks with the direct impact on profitability, but depend on the flexibility abilities of each banks, they can use many tactics to reduce the volume of NPLs such as selling bad debt for VAMC, taking over the collateralized assets, suing for damages or many other solutions which human resources play a crucial position. Aside from out of date information technology rooting from lack of investing information technology budget, the human resource crisis becomes the hardest burden of DongA Bank because of the negative influence on entire business aspects.
In fact, the shortage of human resource jumps up significantly from 2015 up to now. In 2015, the shortage labor comparing with human resource planning is only 230 people, account for 5. In 2016, the shortage one is double with the previous year, get 438 people on December, 2016; account for 10.43% and reach a peak at 643 people in 2017. The shortage of human resource makes the business operation of DongA Bank become much more risky and weaker than the other ones in the service field as the banking industry.
In the annual meeting of DongA Bank holding on January 27th 2018, the chairman analyzed that although DongA Bank is in a stand of restructuring stage with three big problems as bad loans, growth rate and human resources, DongA Bank still have a chance to become to a member of top ten of the Vietnam retail banking group if most of employees unite together and strictly obey the internal regulations and the existing Vietnam Law. Particularly, when DongA Bank has enough human resource to run the business operation, coordinating with the law system, the non-performing loan rate will have a chance to decline and the growth rate will be improved by the high service quality.