UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Huynh Thi Kim Hanh THE EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY IN A DOWNSIZING AND REDUCING SALARY ENVIRONMENT EMPIRICAL EVIDENCE FROM THE BANKING INDUSTRY IN VIETNAM MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Huynh Thi Kim Hanh THE EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY IN A DOWNSIZING AND REDUCING SALARY ENVIRONMENT EMPIRICAL EVIDENCE FROM THE BANKING INDUSTRY IN VIETNAM ID: 21120003 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr. VO XUAN VINH Ho Chi Minh City – Year 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Running head: EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY i ACKNOWLEDGEMENTS Firstly, I would like to express my sincere gratitude to my research advisor, Dr. Vo Xuan Vinh, who made me believe in myself and gave me the possibility to complete this thesis. He has supported me a lot with the thesis preparation and motivated me throughout the journey of the thesis.
His guidance helped me in all the time of research and writing this thesis. I am sure that this thesis would not have been possible without his support. I also thank Dr. Nguyen Thi Mai Trang.
I am extremely grateful and indebted to her for her expert, valuable guidance, insightful comments, and encouragement extended to me. I would like to express my grateful thanks to my friends and colleagues in my bank and others who participated in filling the questionnaires and provided the valuable information for this study. I would like to extend deep senses of gratitude to lecturers who have taught and transferred me valuable knowledge and experience during the period of Master of Business course at International School of Business. Besides, I would like to express my gratitude to all ISB staffs that supported necessary materials and helped summit my papers.
Personally, I would like to give my special thanks my family for supporting me spiritually throughout my life. Huynh Thi Kim Hanh Ho Chi Minh City, December 8th, 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY ii ABSTRACT Maintaining and increasing the loyalty of the survivors in a downsizing and reducing salary background is a complex problem for management trainees. The study tests the affection of the empowerment and job enrichment policies to employees in the downsizing and post-retrenchment context using a case of the banking industrial sector in Vietnam. It focuses on the impact of lossing job and reducing salary on the survivors (those who remain in the organization after downsizing), and organization.
This study was designed with the primary objective of determining the relationship between empowerment behaviors of management, awareness of job enrichment, and loyalty behaviors of the staffs, who had survived in a downsizing and reducing salary environment on the specific case to employees of the Vietnam’s Banks. A sample of population will be selected using random sampling technique. So, the purpose of the current research thesis is to investigate the direct and indirect relationship between empowering managerial practices and employee loyalty as mediated by job enrichment, particularly, review in a downsizing and reducing salary environment of the Vietnam’s banking sector. The results show that loyalty is affected more by empowering loyalty through indirect effects by job enrichment, rather than a direct relationship.
The study ends with a discussion of limitations and suggestions for future research. Keywords: Employee Loyalty, Empowerment, Job Enrichment LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY iii TABLE OF CONTENTS ACKNOWLEDGEMENTS .ii TABLE OF CONTENTS. iii LIST OF FIGURES. v LIST OF TABLES.
Background of the Study. The Research Problem. Research Objectives and Research Questions. Scope of the study.
7 CHAPTER 2: REVIEW OF LITERATURE. Empowerment, Job Enrichment and Employment Loyalty. Literature review and Empirical studies. The relationships between empowerment and loyalty.
The relationships between empowerment, job enrichment and loyalty 20 2. The relationships in a downsizing and reducing salary environment. 21 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY iv 2. The Research Model and Hypotheses.
Pilot Study Design – Qualitative Research. Main Study Design – Quanlitative Research. Data analysis methods. 39 CHAPTER 4: RESULTS AND DISCUSSION.
Disscussions of the findings. 55 CHAPTER 5: SUMMARY AND CONCLUSIONS. Findings of the Study. Limitations and directions for future research.
79 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY v APPENDIX B: Questionnaire (Vietnamese Version). 83 APPENDIX C: Pilot Study. 86 APPENDIX D: List some of result tables and figures. 89 LIST OF FIGURES Figure 2.1: Proposed Research Model .1: The research process .1: Saturated model of the first CFA.2: Saturated model of main survey .3: SEM result of research model .4: SEM result of research model (Standardized).
95 LIST OF TABLES Table 3.1: The Empowerment Measurement Scale .2: The Job Enrichment Measurement Scale.3: The Employee Loyalty Measurement Scale .1: Descriptive statistics of the data Sample size = 336 observations .2: Standardized Regression Weights (The first CFA factor loading of items).3: Confirmatory factor analysis of measurement model .4-1: Standardized Regression Weights: (Group number 1 - Default model).5: Relationship between constructs of research .6: Relationship between constructs in research model (standardized) .7: Result of hypotheses testing. 55 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 1 CHAPTER I: INTRODUCTION This chapter is starting point of this study. In this chapter, the research background of thesis is first introduced. Subsequently, the research problem is discussed.
Research objectives as well as research questions are presented in the next section. Then, methodology and scope of this research is introduced summarily. Final, structure of this study is presented. This chapter aims at specifying the purpose of this research and the research content.
Background of the Study Due to the continued economic downturn, many organizations have difficulties to maintain a large workforce. The organization had to restructure their operations apparatus, cutting the excess staffing and poor morale in a difficult position, which is one of the measures used by the organization during the past. Due to economic constraints, most organizations are required to make difficult decisions about the distribution of human capital as they try to control costs and competition. One of cost-cutting program is usually used by companies including reducing the number of employees, reduce salaries and decrease the budget, reduce hiring and cut bonuses (Datta, Guthrie, Basuil, & Pandey, 2010).
For the bank financial system, the crisis can occur in cycles or irregular, causing major damage to a bank, or even lead to bankruptcy or cripple the system. Specifically, customers can withdraw mass money from a bank because of bad information, then the bank fall into the inability to pay. For example, in 2003, the rumor which Asia Commercial Bank’s director general had fled caused a confusion LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 2 and panic psychological for customers who had deposits at Asia Commercial Bank. In all the causes of bankruptcy of a bank, the liquidity can cause the fastest crash.
The crisis occurs in practice is certainly a very bad thing, because there are no banks to withstand the crisis and went bankrupt, insolvent. But with the banks to overcome difficulties and to restore the crisis as an opportunity to test their stamina practical difficulties, as well as the lessons learned in order to pass the next crisis. One of the core issues to overcome crisis is reorganized, in which, only maintain sufficient workforce, reducing operation costs, streamlined operational procedures, emphasizing the importance of work efficiency. In the context of near the end of 2012, many banks in Vietnam falls into the difficult situation, in order to survive it must restructure and cut operating costs.
One immediate solution is often used by organizations such as salary cuts and layoffs. Many weaknesses are eliminated first, this makes the job productivity per capita increased, leading to downward pressure on the rest. Additionally wage cuts, leading to the willpower, motivation decreases. This is the time when the rate jumped employee's banking sector is quite high, suggesting that the loyalty of employees in the organization dropped at an alarming rate.
Surviving employees perceive that the organization is not loyal to its own employees, reducing the survivors' motivation to remain loyal to the organization and dealing a crushing blow to employee citizenship and other support behaviors (Chambel & Alcover, 2011; Xuan & Park, 2012). Given that the employer has invested time and money significantly to the recruitment and training of staff and management need to be LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 3 considered in developing strategies to protect protection of their investment (Leghari, Suleman, Leghari, & Aslam, 2014; Yamamoto, 2013). In general, the problem to maintain the loyalty of employees is a matter of survival of an organization, especially in difficult contexts, when an organization has undergone a process of restructuring the organization. Maintaining and promoting the loyalty of a workforce survived the filtering and sizing is a difficult issue for many businesses.
Therefore, the task of these organizations is how to promote the loyalty of the individual remaining after the process of restructuring the corporate structure. The Research Problem In the last year, when the economic sector in general and the banking sector in particular are faced with many difficulties, such as bad debt, credit growth is difficult, higher operating costs, while profits decline even losses. Not only cut dividends, which previously sluggish credit situation, shrunken profits, banks have aggressively cut wage costs and staff layoffs to reduce costs. Previously, many commercial banks aggressive expansion and network operation, including major banks now forced to cut staff at most.
Specifically related to Tran Duc Kien arrested, this has directly affected the operation of the banking sector in Vietnam, not only Asia Commercial Bank. Asia Commercial Bank is severely one of the first banks affected most, the leaders of this bank has aggressively cut jobs. Thus, in 2013, the bank's employees have been laid off 1271 people, accounting for 11.1 percent compared to 2012, this is a significant concern for those who are doing LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 4 work in the banking sector. Along with the layoffs, many banks also cut salaries and bonuses.
Compared with the end of 2012, while salaries and allowances for each employee average 15.28 million VND / month, wages and allowances in the past 6 months has fallen 29. ACB is not the only case to aggressively cut jobs amid the economic downturn. Techcombank has fallen by more than 1,000 workers in 2012 and continued restructuring of personnel towards streamlining, by profit fell by 83.9% compared with FY2012. While Eximbank also restructure staffing and reduce payroll by 30%, in difficult situation, the results fail to achieve business and restructuring, restructuring personnel, plans to reduce 1,000 employees in the department to direct to indirect boost retail strategy, aimed at increasing fund salaries for the sales department directly.
Eximbank to terminate the contract with 48 people and more than 300 employees transferred from the departments of the Head Office to branches to strengthen the sales team in order to promote retail operations, generate revenue (Anh & Dang, 2013). Once the market is difficult to screening personnel is difficult to avoid.