UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --------------------------- Vuong Bich Hang Ineffective HR Management at Nam Long Investment Corporation - NLIC MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2017 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --------------------------- Vuong Bich Hang Ineffective HR Management at Nam Long Investment Corporation - NLIC MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR. PHAN THI MINH THU Ho Chi Minh City – Year 2017 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS EXECUTIVE SUMMARY. 7 II/ PROBLEM IDENTIFICATION. Possible problem externally and Core problem .1 Possible problems externally.
Cause effect map. 14 III/ ROOT CAUSE AND POSSIBLE SOLUTIONS. Root cause: Lack of strategic human resource management. Performance Management Development Tool (PMDT).
Compensation and Benefits policy. 31 IV/ ACTION PLAN. 36 V/ CONCLUSION AND RECOMMENDATION. 37 VI/ SUPPORTING INFORMATION.
List of Questionnaire. List of respondents. Transcript in depth interview. Summary and Implication of Questionnaire and Answering.
Nam Long Group Organization chart. Effect of action plan. 58 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EXECUTIVE SUMMARY Nam Long Investment Corporation - NLIC is a Real Estate company with our mission: “Creating living environments with humane values to the community”, in order to achieve our goal to be top three leading urban developer of Vietnam best understanding and meeting customers’ expectations and top 3 developer in affordable housing in Vietnam until 2020. We must have accountable, capable and strong in leadership human resources that obtain talent pile-line from 14 subsidiaries which are located around Ho Chi Minh area.
In the past years from 2013 until 2016 Nam Long Group has had labor cost increasing year by year that affected profit to whole group in business then the organization need to be considered about its competitive advantage in the specific case of human resource management effectively in term of strategic human resource management alignment with HR practices within the Group. The interviews were proceeded to 9 Subsidiaries of Nam Long Group: Nam Khang Construction Co., Ltd (NK); Nam Long Transaction Floor Co., Ltd (NLTF); Nam Long Services Corporation (NLS); Nam Long Apartment Development Corporation (ADC); Nam Long Apartment Development Corporation (ADC); Nam Long Property Management Development Co., Ltd (PMD); Nam Phan Corporation (NP); Nam Long Hong Phat Corporation (NLHP); Nguyen Son Corporation (NS); and VCD Corporation (VCD) with 5 directors named Mr. Bui Duc Khang-NK; Ms. Tran Thi Tron Lanh-NLTF; Mr.
Truong Chi Nhan-ADC; Mr. Quach Kim Dong-NP; Mr. Phan Van Toan-NS and 4 HR Managers with the name of Mr. Nguyen Thanh Phong-NLS; Ms.
Khuong Thuy Ngu-PMD; Mr. Vo Thanh Thuan and Ms. Nguyen Thi Nhu Hoang. In which the depth interviews have been done with the 3 key companies of the Group like NK, NLTF, NLS to find out the supporting ideas for problem identification and solving the problem.
Once employees leave a company this issue will cost company certain expenses. Those expenses are recruiting cost, training cost for hiring a replacement including advertising cost, administrative cost, interviewing cost… The above cost will contribute to make the profit of company is reduced. Sales staff who deal with customers day to day. Especially, high performance salespersons who have good relationship with customers whenever they leave they will bring experience curve out of company.
New staffs will take time to make acquaintance to new environment, the speed of work is slow down which affects the productivity of sales not only for filling gap of resigned staffs but morale of existing sales staffs. The services to customers are not continuous to affects the repeat orders and loyalty from customer by providing inconsistent, un-high-quality service with well-trained staffs. All of these things will make customers turn into another competitors. Therefore, the revenue of company is decreased.
The above-mention issues have been affected company productivity as company can’t utilize the experience curve from employees and availability of employees to make sure constant productivity. 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com The following table will show in detail as per annual financial report through Vietstockfinane14 Year 2013 2014 2015 2016 Number of 40 55 61 75 resignation Total 377 489 510 487 headcount Turnover rate 10.4% With the increasing labor cost and turnover rate caused the decreasing productivity of the Group as Mr Bui Duc Khang-NK said in the interview the labor cost has been increasing over the last 3 years from 2014 until 2016 as they have key staffs left company and they have to pay for workers overtime constantly when these questions were asked “How do you think about your company labor cost over the last 3 years?” and “why do your workers need to take over time to do urgent projects?” ; or Ms. Lanh- NLTF also complained the lost good sales staffs caused the decreasing of productivity in NLTF when she was asked ” What’s affected to your company’s productivity?” and Mr. Phong-NLS revealed his company still requires for skillful staffs in service industry these days.
From the interviews to those key persons in NK, NLTF, NLS the labor cost and headcount has been decreasing year by year due to lacking of effective HR management in strategic manner. As per Elise Wile 5said worker availability is a common status in many companies to push high productivity, especially employees who are skillful and talent with experience curve to produce good products, services in speed with efficiency that takes less time or resources to do a job and low labor cost in all cases whether a production companies or services companies. For instance, in production industry, employees are almost workers or engineers deal with machines that sometimes machines need to be repaired, if un-skill workers constantly have to repair the machinery they use, their tasks will be completed in longer time. On the other hand, for services industry, efficient staffs always bring good services to customers and make customers satisfy with company’s service.
Consequently, company will pay more to employees in case of production example and gain more profitability in case of services industry example due to repeated order from satisfied customer. Through the interviews to Board of Management to Group’s Subsidiaries that the Group need to improve HR management in strategic policies of reward and performance evaluation by 66%, consideration of compensation and benefits scheme by 33%, training and development by 22%. In the question 9 of summary “What about staff performance appraisal in your company? “ almost companies perceived performance evaluation tool is very important, necessary to motivate staffs in work; there are 3 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com subsidiaries of NK, NLTF, NLS who have basic regulation and on track of the tool, while, the others 6 companies are out of the policies. Similarly, compensation and benefits policy is shortage in NLS, NP, NS.
However, the training and development policy is just lack in 2 companies that are NP and VCD by the questions of asking Subsidiaries “How do you think about training programs? Does your company have training policy for staffs and how is often training program?” With the interviews and percentage of the response from Subsidiaries, the action plan will focus firstly on Performance Management Development Tool which measures activities of each employee for motivation, then the Compensation and Benefits policy together with Training and Development policy are also considered to develop as a strategic human resource management. The policies will be composed with approval, cascaded and periodically checked to Subsidiaries to put into action in the year 2018 to improve the Nam Long Group HR strategic HR management. In order to put the above-mentioned policies/ procedures cascading to Subsidiaries to improve HR management effectively, we will do the matrix structure to quote the relationship between head quarter – NLIC and Subsidiaries for such project as Schnetler, R.J 13 stated in “Characteristics of matrix structures, and their effects on project success” in term of communication, collaboration between head of functional leaders in NLIC and head of departments in Subsidiaries. 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com I/ COMPANY INTRODUCTION In the year 1992, Nam Long Company Limited was established, the Company transformed into Corporation in 2005 with it vision of “Creating living environments with humane values to the community” Core value: Ownership (Self leading for the benefit of the organization), Professionalism (Maximizing our capabilities to meet the requirements of the Organization), and Integrity (Respect and implement our commitments).
Nam Long Investment Corporation have invested in different business line subsidiaries of construction, trading, services and projects companies which operate separately. Construction/ Services Subsidiaries: Nam Khang Construction Co., Ltd (NK): 132 staff headcount Nam Long Transaction Floor Co., Ltd (NLTF): 106 staff headcount Nam Long Services Corporation (NLS): 35 headcount Nam Long Apartment Development Corporation (ADC): 27 headcount Nam Long Property Management Development Co., Ltd (PMD): 19 headcount Local projects Subsidiaries Nam Phan Corporation (NP): 6 headcount Nam Long Hong Phat Corporation (NLHP): 3 headcount Nguyen Son Corporation (NS): 5 headcount VCD Corporation (VCD): 9 headcount Joint Venture projects Subsidiaries Kikyo Valora Co.: 3 headcount Kikyo Flora Co.: 3 headcount Fuji Co.: 5 headcount Mijuki Co., Ltd: 4 headcount Nguyen Phuc Co., Ltd: 3 headcount II/ PROBLEM IDENTIFICATION 2. Symptom According to Internal audit report of Human resource management in subsidiaries, there is issue that concern in increasing labor cost in Subsidiaries and cause inefficient Group human resource management in project subsidiaries. The total labor cost has been increasing year by year based on HR annual operation budged report 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Labor cost table - Unit: VND billion Year 2013 2014 2015 2016 Total labor cost per year 350 400 500 750 The increasing rate +0.5 From the above-mentioned statistic, we found that the labor costs are increasing over last 3 years with increasing rate over last year respectively from the year 2014, 2015 and 2016 is 0.5 Besides the increasing of labor cost, turnover rate of Nam Long Group are also increasing over the last 3 years as the following data.
Year NK NLTF NLS Others NL Group 2013 10. Possible problem externally and Core problem 2.1 Possible problems externally There are some possible problems externally cause high labor cost Market supply and demand of labor Government regulation in minimum salary in each area of Vietnam For external factors we are impossible to control directly, for instant, Government regulation on minimum salary in each area, however the increasing rate of minimum salary in Ho Chi Minh city area has been raising with tiny rate as table below, International Labor Organization2 according to Decree No. 182/2013/ND9-CP dated 14th Nov.103/2014/ND9-CP dated 11th Nov. 122/ 2015/ND9-CP dated 14th Nov.
2015 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Unit: VND million Year 2013 2014 2015 2016 Minimum salary 2.5 The increasing rate 0.12 0 According to Falmi HCMC 3 Construction – Architecture and real estate over the year 2013 – 2016 has been still in the difficult situation. Therefore, the construction field was not developed over the period and the supply-demand labor of the construction was kept decreased or unchanged. As the chart below, The general labor from 2014 to 2015 is reduced 5% and between 2015 and 2016 is remaining unchanged. The middle rank labor is also decreased from 2014 to 2015 The College labor is decreased from 2015 to 2016 Rate of labor workforce demand of construction require 32% 27% 27% 25% 23% 21% 15% 16% 15% 2014 2015 2016 General labor Middle rank labor College labor Even in the structure of general labor, middle rank labor and college labor, the percentage of general labor acquired 50% of total workforce for construction industry.
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