UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Tran Thanh Hoa TURNOVER RATE AND PERFORMANCE APPRAISAL BIASES FROM SUPERVISORS IN VINA ONE MANUFACTURING CORPORATION MASTER OF BUSINESS (Honours) Ho Chi Minh City - 2017 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Tran Thanh Hoa TURNOVER RATE AND PERFORMANCE APPRAISAL BIASES FROM SUPERVISORS IN VINA ONE MANUFACTURING CORPORATION ID: 22140017 MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: NGUYEN THI MAI TRANG Ho Chi Minh City - 2017 TIEU LUAN MOI download : skknchat@gmail.com Executive Summary Intellectual capital of human resource, which is often considered the most important asset in all organizations, needs to be well identified and studied. Organizations need to ensure they operate in a way that labor loss due to worker turnover is minimized. In order to do so, organizations need to understand why people choose to stay or leave their jobs. In many manufacturing companies, especially in heavy industry, front - line employees (or in short, they would be called as “workers” in this thesis) are considered less important than those who are in the offices and their voices are the weakest ones in the companies.
The way their supervisors treat and rate them on the scales of performance and contribution is also a new factor impacting on the turnover rate of these workers. The purpose of this thesis is to explore the causes of high turnover rate through the current problems with workers at Hot-Rolled Steel factory - Vina One Manufacturing Corporation (in short, it would be called Vina One in this thesis). The findings of the study revealed that biases from supervisors on performance appraisals tend to play a significant role in turnover intention of workers. The findings are discussed in details in the research along with some recommendations for the company and management board to increase the level of employee satisfaction and reduce the turnover intention in Vina One Manufacturing Corporation.
TIEU LUAN MOI download : skknchat@gmail.com Acknowledgements I would like to acknowledge all who supported me during my studies without whom I wouldn‟t be where I am today. I would especially like to thank my supervisor – Professor Nguyen Thi Mai Trang for all her advice and guidance, without her help this could not have been possible. I also would like to show my gratitude to my colleagues at work and classmates at ISB for their continuous support. I also send my sincere thankfulness to my parents and friends for their support and encouragement.
TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS Executive Summary .4 LIST OF FIGURES .6 LIST OF TABLES. The company background .2 Company structure and mission .1 The turnover rate status in the industrial and construction sector. The turnover status of Hot-Rolled Steel factory in Vina One .3 Errors in recruitment process .4 Compensation and benefits .5 Work-life balance.6 Cause –and –effect tree .1 The first alternative solution: biases from untrained supervisors .2 The second alternative solution: biases caused by inconsistency across supervisors .3 The third alternative solution: recency bias and personal bias from supervisors. ORGANIZATION OF ACTIONS .63 TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 1: Vina One organizational structure Figure 2: Employed population above 15 years old categorized by economic activities Figure 3: Number of workers at Hot-Rolled Steel factory Figure 4: Employees‟ age at Hot Rolled Steel factory Figure 5: Employees‟ working experience Figure 6: The turnover rate of Hot-Rolled Steel workers at Vina One Figure 7: The turnover rate of Hot-Rolled Steel workers Figure 8: The average wages of steel workers Figure 9: The turnover rate of Hot-Rolled Steel workers in detail for each positon Figure 10: Reasons why people quit their jobs at Vina One in 2015 Figure 11: Recruitment cost Figure 12: Cause - and - effect tree LIST OF TABLES Table 1: Quantity and income/month of Hot Rolled Steel Factory in 2015 Table 2: Action plan TIEU LUAN MOI download : skknchat@gmail.
The company background Vina One Manufacturing Corporation (herein called Vina One), which was established in 2007 with charter capital of VND 450 billion, is one of the biggest steel manufacturing company in Long An province, Viet Nam. In 2015, Vina One achieved stunning operating results with profits before tax of above VND 3,200 billion, charter capital increased to VND 700 billion (Financial statement 2015). Vina One was honorably awarded the certificate of ISO 9001:2008 issued by the International Bureau Veritas Organization. It is also listed in the VNR 500 of biggest private enterprises of Vietnam.2 Company structure and mission Board of Director General Director Board of Assistants Supervisory Board Deputy General Director Domestic Import & Procure- Planning Operation Administr Financial Accounting Hot Cold Sales Export ment Division Division -ation and Division Division Rolled Rolled Division Sales Division HR Steel Steel Division Division Factory Factory Figure 1.
Vina One organizational structure (Source: Vina One Human Resource Department) TIEU LUAN MOI download : skknchat@gmail.com 2 Vina One includes 5 main functions: Sale (domestic, import & export), Supply chain (procurement, planning), Finance, Operation, Factory. In Factory function, they are divided into 2 small divisions: Hot-Rolled Steel factory and Cold-Rolled Steel factory. Hot-Rolled Steel factory has the responsibility to produce hot-rolled steel from the steel billet furnaces. This is the first process to produce Hot-Rolled Steel, galvanized, rectangular tubing, square tubing and Cold-Rolled Steel.
This division has the largest employees in the company with 1,218 workers. In this thesis, workers will be the main objects of the study because they are front-line employees who have the responsibilities for producing Hot-Rolled Steel, being an extremely important factor in Vina One Steel Factory‟s successful operation. The main products of Vina One include Hot-Rolled Steel (U Channels, Angles,. with volume of 250,000 ton annually) and Cold-Rolled Steel (round tubing, rectangular tubing, square tubing,.
with volume of 300,000 tons annually) as well as galvanized strips, billets, steel plates, etc. Vina One goes with the mission of sustainable development to become the leading steel manufacturer in Vietnam and Southeast Asian region in coming years. To achieve this mission, Vina One has recently focused on upgrading steel production lines and increasing factory acreage of more than 100,000m2, extending office buildings to 30 rooms with specialized functions and developing transportation systems with 30 new trucks. In 2015, they invested in the steel billet furnace system, galvanized Hot-Rolled Steel system and a barcode system stored in warehouses with modern technology in order to build a closed process that brought high efficiency.
TIEU LUAN MOI download : skknchat@gmail.com 3 However, paying too much attention to develop physical properties has made the management board forget that they also have another more important asset which is the intellectual capital of employees. According to the statistics shown in the company‟s reports, the number of employees leaving Vina One has dramatically increased in the past 3 years (2013-2015). Especially in Hot-Rolled Steel factory, this number of workers quitted their jobs are even more surprising. This problem poses a threat to the company‟s mission to become the leader in its field.1 The turnover rate status in the industrial and construction sector According to General Statistics Office of Viet Nam, the numbers of employees aged above 15 are about 52.9 million people, increasing 142 thousand people compared to 2014.
As shown in Figure 2, the sector of agriculture, forestry and fishery accounted for 44.3% in 2014); industrial and construction sector was 22.5% in 2014) and services sector was 32. 32,80% Services 32,20% 22,90% 2015 Industrial and construction 21,50% 2014 44,30% Agriculture, forestry and fishery 46,30% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% Figure 2. Employed population above 15 years old categorized by economic activities (Source: General Statistics Office of Viet Nam) TIEU LUAN MOI download : skknchat@gmail.com 4 In each sector, the problem of high turnover rate has significantly affected to the allocation of employee. According to Price et al.1 with Causal Model of Turnover (voluntary leaving from an organization), turnover is defined as the ratio of the number of organizational members who have left and divided by the average number of people in that organization during the period.
Opportunity, routinization, participation, instrumental communication, integration, pay, distributive justice, promotional opportunity, professionalism, general training, kinship responsibility are independent variables in models impacting to job satisfaction and intent to stay or leave. The model indicates that intent to stay has a direct negative impact on turnover, when job satisfaction increases, intent to stay with the organization will be increase as stated by Price et al.1 There are many reasons leading to increasing number of employees leaving their companies. Nguyen Lan Ngoc - Human Resources Manager - Vina One Corporation stated that: Hot-Rolled Steel production is listed in the group of heavy - harmful – dangerous jobs by Ministry of Labor, War Invalids, & Social Welfare. Workers have to work very hard in toxic environment which is full of heat, dust and noise.
Therefore, they easily quit jobs if they are not paid as what they deserve to cover their sufferings. Workers intend to quit after only one or two years working because of various reasons such as heavy workload, unfair performance appraisals, job safety, etc. More than 70 % workers in steel organizations who joined the annual surveys provide that they are unsatisfied with current jobs and want to leave the jobs. Most workers in group of manufacturing organizations suggest that biases from supervisors and unfair treatments are important factors that push them to leave.
TIEU LUAN MOI download : skknchat@gmail.com 5 In addition, Mrs. Bui Thi Hai Hau - Human Resources Manager at Tan Thanh Quyen Steel Co., Ltd made a speech in The Association of Long An Province Steel Company about the problem of high turnover rate in current society. She shared that: The percentage of workers, especially in heavy industry such as Hot-Rolled Steel division, has increased continuously over the years. Most of them decided to leave early after less than 2 years working.
They need money to cover their living expenses and support their families, but they do not get the salary level they deserve because of many reasons. Some of the reasons are the failure in evaluating their performance, management biases, lacking of benefit and compensation. The turnover status of Hot-Rolled Steel factory in Vina One 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2013 2014 2015 Officers and other 70 85 117 Cold rolled steel workers 298 290 302 Hot rolled steel workers 615 845 1218 Figure 3. Number of workers at Hot-Rolled Steel factory (Source: Vina One Human Resource Department) Based on the report and analysis of Human Resources Division in Vina One (Figure 3), the number of workers at Hot-Rolled Steel factory (2015) were 1,218 (account for 74.4%/ total TIEU LUAN MOI download : skknchat@gmail.
The number of workers continued to increase during the period of 2013-2015 (from 615 to 1,218 people), while Cold-Rolled Steel nearly keeps unchanged. 1% Hot rolled steel factory 5% 8% Age 23% 18-21 22-25 26-30 63% 31-35 >35 Figure 4. Employees‟ age at Hot-Rolled Steel Factory in 2015 (Source: Vina One Human Resource Department) Regarding to the average age as shown in Figure 4, about 63% (equivalent 763 workers) were 22 to 25 years old, 22.82 % workers were 18 to 21 years old and only 1.23% has the age range more than 35 year of age. It can be seen that most of workers at Hot-Rolled Steel factory were very young (22 to 25 years old) and therefore almost lack experiences.
More than 3 year 48 2 year to 3 year 88 1 year to 2 year 113 6 month to 1 year 225 Less than 6 month 744 0 100 200 300 400 500 600 700 800 Figure 5. Employees‟ working experience in 2015 (Source: Vina One Human Resource Department) TIEU LUAN MOI download : skknchat@gmail.