RELATIONSHIPS BETWEEN LEADERSHIP STYLES AND EMPLOYEE TURNOVER INTENTION IN THE VIETNAMESE HIGHTECH INDUSTRY Huỳnh Anh Nhy MBUS 2.com At University of Economics Ho Chi Minh City– International School Business Dr. Nguyen Thi Nguyet Que Page | 1 TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENT Frist and foremost I offer my sincerest gratitude to my supervisor, Dr. Nguyen Thi Nguyet Que, who has supported me through my thesis with her patience and knowledge. Without her support, this study would not been completed.
I would like to express appreciations to my friends who support me in discussing initial questionnaire and sending the final ones to survey target. Last but not least, I would like to thank my parents, and family members for their profound supporting, love and caring about me throughout my studies. Huynh Anh Nhy 2013, November 15 Page | i TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT Vietnamese high tech industry is the important part of Vietnam GDP as well as export-shared in the world. Unfortunately, this industry is facing with highest employee turnover rate in 2008 – 2012 period.
Therefore identifying the root cause of employee turnover in this industry is important. Much empirical studies about employee turnover intention was found out the influences of leadership styles (transformational, transactional and laissez-faire leadership) on employee turnover intention. This research was relied on questionnaire survey to discuss whether there are any relationships between leadership styles and employee turnover intention as well as strength of each relationship is. As result, there are only four relationships of one dimension of transformational leadership – individualized consideration and three dimensions of transactional leadership – contingent reward, management by exception (active), management by exception (passive) with employee turnover intention, whilst idealized influence, inspirational motivation, intellectual stimulation and laissez-faire do not significant relate to employee turnover intention.
Therefore, leaders in related industry should focus on negative relationships between individualized consideration and contingent reward and positive relationships between management by exception in active and passive to reduce harmful factor of their business. Keywords: Leadership; Employee turnover intention; Transformation; Transactional; Laissez- faire; Idealized Influence; Inspirational Motivation; Intellectual Stimulation; Individualized Consideration; Contingent Reward; Management by Exception; Relationship. Page | ii TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS ACKNOWLEDGEMENT. ii TABLE OF CONTENTS.
iii LIST OF TABLES. vii LIST OF FIGURES. ix CHAPTER 1: INTRODUCTION .2 Background of study and problem statement .3 Research objective and question .4 Scope and Significant of this study .5 Structure of this study. 7 CHAPTER 2: LITERATURE REVIEW .2 Management by exception (M.5 Laissez-faire leadership .6 Employee turnover intention (T.7 Relationship between leadership styles and turnover intention .1 Transformational leadership and employee turnover intention .1 Idealized influence and employee turnover intention .2 Inspirational motivation and employee turnover intention .3 Intellectual stimulation and employee turnover intention .4 Individualized consideration and employee turnover intention.
19 Page | iii TIEU LUAN MOI download : skknchat@gmail.2 Transactional leadership and employee turnover intention .1 Contingent rewards and employee turnover intention .2 Management by exception and employee turnover intention .3 Laissez-faire leadership and employee turnover intention. 23 CHAPTER 3: RESEARCH METHODOLOGY .3 Research sample size and description .7 Data analysis techniques .1 Data coding and entering to SPSS software .2 Test reliability of measurement scales with Cronbanch’s alpha analysis .3 Test relationship among factors with Exploratory Factor Analysis .4 Regression analysis to see the impact of independent variables to dependent variables. 35 CHAPTER 4: DATA ANALYSIS .1 Reliability of transformational leadership style subscales .1 Reliability of Idealized Influence .2 Reliability of Inspirational Motivation.3 Reliability of Intellectual Stimulation .4 Reliability of Individualized Consideration. 40 Page | iv TIEU LUAN MOI download : skknchat@gmail.2 Reliability of Transactional Leadership style sub-variance.1 Reliability of Contingent Reward .2 Reliability of Managing Exception – Active .3 Reliability of Managing Exception – Passive .3 Reliability of Laissez-Faire Leadership .4 Reliability of Employee Turnover Intention .4 Exploratory Factor Analysis (EFA) .1 EFA for independence factors: Leadership Styles.2 EFA for dependence factor: Employee Turnover Intention .5 The Correlation Analysis (Hypothesis testing).
53 CHAPTER 5: DISCUSSION, RECOMMENDATION AND CONCLUSION .2 Research finding discussion .3 Implication for practice and recommendations for further research .1 Implication for practice .1 Reducing employee turnover intention through negative relationship with Individual Consideration and Contingent Reward .2 Reducing employee turnover intention through reducing the positive related with Management by Exception .2 Recommendations for further research. 61 APPENDIX A - SURVEY QUESTIONNAIRE. 67 APPENDIX B – DESCRIPTIONS OF SAMPLE. 71 Page | v TIEU LUAN MOI download : skknchat@gmail.com APPENDIX C – RESEARCH RESULTS.
72 Page | vi TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Table 1 – Vietnam Merchandise Export. 2 Table 2 – Leadership theories. 9 Table 3 – Demographic Information. 28 Table 4 – Initial questionnaire and its coding in data analysis of transformational leadership.
29 Table 5 – Initial questionnaire and its coding in data analysis of transactional leadership. 30 Table 6 – Initial questionnaire and its coding in data analysis of laissez-faire leadership and employee turnover intention. 30 Table 7 – Sample sizes, mean scores, standard deviations of leadership style and employee turnover intention. 36 Table 8 – Cronbach’s alpha of Idealized Influence.
38 Table 9 – Reliability of Inspirational Motivation. 39 Table 10 – Reliability of Intellectual Stimulation. 40 Table 11 – Reliability of Individualized Consideration. 40 Table 12 – Reliability of Contingent Reward.
41 Table 13 – Reliability of ME Active. 41 Table 14 – Reliability of ME Passive. 42 Table 15 – Reliability of Laissez-Fair. 42 Table 16 – Reliability of Employee Turnover Intention.
43 Table 17 – KMO and Bartlett’s Test. 43 Table 18 – EFA of 31 measurement items. 45 Table 19 – EFA of 30 items. 46 Table 20 – Principal Axis Factoring of Employee Turnover Intention.
47 Table 21 – Factor Matrix of Turnover Intention. 47 Table 22 – Model Summary. 49 Table 23 – ANOVA Result. 49 Table 24 – Coefficients Result.
50 Table 25 – Hypotheses results. 52 Table 25 – Descriptive of transformational leadership. 72 Table 26 – Descriptive of transactional leadership. 73 Table 27 – Descriptive of laissez-faire.
73 Page | vii TIEU LUAN MOI download : skknchat@gmail.com Table 28 – Descriptive of turnover intention. 74 Table 29 – Total variances explained in first EFA test. 74 Table 30 – Total variances explained in final EFA test. 76 Page | viii TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 1 - Industry Has Highest Employee Turnover Rate.
3 Figure 2 – Research Model. 23 Figure 3 – Research Process. 26 Figure 4 – Age of respondents. 71 Figure 5 – Experiences of respondents.
71 Figure 6 – Position of respondents. 71 Page | ix TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 1: INTRODUCTION 1.1 Introduction During two last decades, Vietnam is improving his quality in business environment and workforce also. One of Vietnam attractiveness to Foreign Investors is cheap labor costs. Various studies have conducted in order to analysis Vietnam competitiveness advantages by international organizations, such as United State Industrial Development Organization (UNIDO), World Bank.
It is interesting that, between the “two conflicting location factors of low labor cost on the one hand and the skill level workforce on other hand, investors continue attach relatively higher importance to the cost than to the skills dimension”, according to UNIDO report ( 2011, p. Beside of opportunities from labor costly, investors nowadays are dealing with the extra cost when employee turnover happens.Employee turnover has become a contentious issue, especially in case companies lose critical talent in times when they most need to retain their knowledge capital. Identifying the root causes of employee’s turnover in this industry, thus, is important in this respect.2 Background of study and problem statement Vietnamese high-tech industry has attracted highest investment fund from foreigners since Renovation Policy in 1986 efficiency. The investment fund is continuing grown year by year.
The foreign direct investment fund in 2012 to high-tech industry exceeds US Dollar 10 billion, take 50 percent of total investment fund to Vietnam industries (Vietnam General Statistics Office, 2013). As FDI is the important part of Vietnam economic, take 66 percent of total export, contributes 18.6 percent to GDP, high-tech industry becomes major part of the Vietnamese economic achievements. High-tech products become the largest export item (US Dollar 9.9 billion) in the first 6 month of 2013, surpassing traditional export such as crude oil, garment and footwear (World Bank report, 2013). Despite the decrease in recent year due to commodity price boom, high-tech export continues to dominate world trade, accounting for 61.3 percent Vietnam total manufactured export (UNIDO, 2011).The world market-share for High-Tech exports of Vietnam Page | 1 TIEU LUAN MOI download : skknchat@gmail.com increases from 0.22 percent in 2000 – 2009 periods (Vietnam Manufacturing Competiveness Reports, 2012).
Overall, high-tech industry is becoming an important part of Vietnam economic due to its contributions to Vietnam GDP as well as export shared in world. As potential growth, Vietnam government decides to improve the contribution of high-tech industry to 45% of GDP in the next ten years socio-economic development strategy 2011 – 2020 (Sai Gon Giai Phong, 2011). Table 1 – Vietnam Merchandise Export (Source: World Bank Report, 2013) The most important influence of FDI into High-Tech Industry, besides GDP contribution, is jobs opportunities. Number of employees working in this industry has increased year by year.
Unfortunately, the more job opportunities are created, the more employees decide to leave company when have a good chance. Employees are easy to leave company once new changes come or they do not satisfy with company. Whilst low labor cost is advance competitive, employee turnover is harmful to organizations’ productivity. Therefore, employee turnover becomes serious problem that all organizations are facing.
In order to catch the trends of Vietnamese employee trends, surveys have been done by Human Resources Consultants, namely Towers Watson and American Chamber of Commerce in Page | 2 TIEU LUAN MOI download : skknchat@gmail. The studies found that the highest turnover rate of employees was belonging to High- Tech industry in 2008 – 2012 periods. The voluntary rate increases year to year. In 2008 the employee turnover rate of High-Tech is 16.7%, 2010 is 17,9%, 2011 is 19,3% and first half of 2012 is 9.
Figure 1 - Industry Has Highest Employee Turnover Rate (Source: Towers Watson Vietnam, 2012, P. 28) Employee turnover is very expensive factor. When employee decide to leave an organization, it has become important for specific organization to make costly replacement as soon as possible. The identification of direct and indirect costs of voluntary turnover is as replacement, recruitment, selection, temporary staff, management time, morale, pressure on remaining staff, product or service quality and so on (Morell et al, 2004, Dess & Shaw, 2001).
The labor investment budget which organization spends for is a large amount, in order to support their labors quickly assess job-descriptions as quick as possible. Bureau of Labor Statistics (2008) when accounting for costs of labor turnover organization has estimated the cost of employee turnover to for-profit to be up 150 percent of employee remuneration package. Managers at all costs must minimize employee’s turnover (Henry Ongori, 2007). Page | 3 TIEU LUAN MOI download : skknchat@gmail.com As indicated above, high employee turnover costly impacts to business performance of companies.
Identifying the root causes of employee’s turnover, thus, is important in this respect. Much of the empirical research on employee turnover is based on actual turnover, although some studies are based on employee intentions to quit. Actually, there are strong link between intention to quit and actual turnover. The relationship between intentions and actual turnover is generally stronger than job satisfaction and turnover relationship, even this consistent relationship is accounted for less variability (Mobley et al, 1979).