UNIVERSITY OF ECONOMICS HO CHI MINH CITY 1 International School of Business --------------------- NGUYEN HUU MINH PHUONG FACTORS AFFECTING FRONTLINE EMPLOYEE PERFORMANCE IN VIETNAM RETAIL BANKING SECTOR MASTER OF BUSINESS (Honours) SUPERVISOR: Dr. Vo Thi Ngoc Thuy Ho Chi Minh City – Year 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2 TABLE OF CONTENTS ABSTRACT .3 RESEARCH METHODOLOGY AND RESEARCH SCOPE .4 STRUCTURED OF REASEARCH .8 CHAPTER2: LITERATURE REVIEW AND HYPOTHESES .1 FRONTLINE EMPLOYEE PERFORMANCE .3HUMAN RESOURCE PRACTICES .5 THE CONCEPT MODEL .21 CHAPTER 3: RESEARCH METHODOLOGY .23 CHAPTER4: DATA ANALYSIS .2 CRONBACH’S ALPHA COEFFICIENT OF REABILITY TEST .3 EXPLORATORY FACTOR ANALYSIS (EFA) .4 MULTIPLE REGRESSION ANALYSIS .5 DISCUSSION OF DATA RESULTS .38 CHAPTER 5: CONCLUSIONS, IMPLICATIONS, LIMITATIONS AND FURTHER RESEARCHES .3 LIMITATIONS AND FURTHER RESEARCHES .50 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3 LIST OF TABLES Table 1: Cronbach’s Alpha Table 2: Rotated Component Matrix Table 3: KMO and Bartlett’s Test Table 4: Model Summary Table 5: ANOVA Table 6: Coefficents LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 4 Abstract This study empirical examined quality of frontline employee performance to satisfy customers in the Vietnam retail banking. Based on the model of multilevel investigation of factors influencing employee service performance and customer outcomes by Liao and Chuang (2004), this study identified three factors that influencing direct to front line performance as followed: personality characteristics, human resource practices and service climate. A quality method survey based on a sample of 200 people working in banks and using banking service in HCM City to test the concept model was given.
The result of this research shows the positive influence of service climate of banking environment and self- efficacy of frontline employees and the negative impact of employee involvement element to their performance. The finding of this study could suggest some practical implications for mangers to improve their employees’ performance as well as competitive advantage in Vietnam retail banking sector. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 5 CHAPTER 1: INTRODUCTION 1.1 RESEARCH BACKGROUND Development of retail banking segment is becoming a potential business and promises to bring more profit for banks in the context of difficult domestic and foreign financial market. In terms of slowdown credit growth in recent years, investment in developing a model of modern retail banking aim to divert revenue from services instead of focusing on profit from credit which is a traditional banking model.
When switched to retail fields, banks will have bigger market and have an ability to reduce risks in business. Vietnam market with a population of nearly 90 million people and growing level of income is considered as a potential retail market of commercial banks. In addition, SMEs (small and medium enterprises) also tend to develop and expand the scale of business; hence this market will flourish in the future due to growth of income and all kinds of businesses. Retail banking could be understood that is the provision of banking services to private individuals and SMEs through a network of bank or customers could access directly through means of technology, electronics, internet and telecommunications.
Services offered include saving and transaction accounts, mortgages, personal loans, debit cards, credit cards and online banking. From 2008 to now, the foundation of retail banking model has been begun to appear. The first is card services and consumption loans (debit and credit cards) are more common to customers. Until April 2012, the number of cards circulating is 44.
In addition, more 13,700 ATMs and 83,000 POS were installed and almost 32,000 POS is connected (from IDG- International Data Group and BIU- Business Intelligence Unit).The next is the continued growth of online banking. According to the State Bank of Vietnam, while there were only 4 banks which were deploying online LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 6 banking services in 2004, this number was increasing to 25 banks in 2008 and continually rising to 40 banks in the quarter 3/2012 with the main service is to provide information, bill payments and transfer periodic cash in the system. And finally, the associated financial products (banking services in conjunction with insurance, securities, gold) are being deployed more and more. An example of this type of products is the "bancassurance" (selling insurance through banks) that makes there venues for banks, develop customer market and create more diverse utilities to attract deposits, insurance premiums and payments via ATM cards.
The expansion of the banking market lead to competitions in retail banking is inevitable. Banks are constantly improving the quality of service that not only effective but also improve the business position and brand for the banks to pursue retail banking model, cultivate clients and build close relationships between bank and customers. Banks tend to have prestige clients in the service commitment to eliminate the risks on the path towards sustainable retail banking. According to a survey of 18,000 retail customers in 35 countries by Capgemini Group- an international information technology group, the rate of customers who intend to change products and banking services in 2012 increased to 79% (up 12% compared to 2011).
In Vietnam, 69% of customers would not sure to be faithful to current bank. The reason of this psychological is due to the quality of services, interest rates and fees. Since customer retention is a critical goal, the question that banks wonder becomes: what factors affect a customer’s perception of the bank and what actions can the bank take to increase positive perceptions. Some previous studies proved that frontline employee performance significantly influence the quality of service operations, since these employees present the face and the voice of their organizations to customers (Harline and Ferrell, 1996; Schneider, Wheeler and Cox, 1992).
All customers need is relatedness, assurance, empathy and reliability from employees and LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 7 service quality (Brady and Cronin, 2001). Consequently, to improve service quality, bank need frontline employees who have good performance to attract customers using their service and high knowledge and experience to consult appreciate services/products, introduce new services and solve customer problems. Therefore, frontline employee performance enhancement is becoming a concerned subject of managers and economists.2 RESEARCH OBJECTIVES In order to solving problems that mentioned above, the study specify the following objectives: -Figure out the most important factors that contribute to change frontline employee’s performance to customers in Vietnam retail banking sector. -Examine the extent of each factor influence on frontline employees’ performance.
The remainder of the paper presents the literature review and hypotheses and articulates the research method.3 RESEARCH METHODOLOGY AND RESEARCH SCOPE This study based on literature and concerned researches and develop a questionnaire by English. Then author select questions that are suitable for needs and culture of Vietnamese and translate in to Vietnamese. An in-depth interview was carried out with first ten people for reference and amendment. The questionnaire would be tested in the pilot study with 50 responses.
The aim of the pilot study is checking certain issues before undertaking large-scale study. After that, the completed questionnaire was distributed through two ways: 1- face to face interview and 2- online survey on Google drive sent to social networks and banking websites. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 8 The sample has been chosen to conduct in Ho Chi Minh City- a biggest and crowded city with a population of nearly 8 millions. The total observations must be at least 200 frontline employees and 200 customers After gathering up full data, SPSS software was used to analyze multiple regressions linear.
The initial steps of this method are testing Cronbach’s alpha (the reliability of the measurement scale) and Exploratory Factor Analysis (the validity of the measurement scale) would be executed. Finally, multiple regressions is analyzed after assumptions had been tested.4 STRUCTURE OF THE RESEARCH This research includes five chapters: Chapter 1: Introduction The first chapter presents the background and purpose of the study through following part: Research Background, Research Objectives, Research Methodology and Scope. Chapter 2: Literature review and Hypotheses In this chapter, the previous related researches are conducted to prove and supplement for hypotheses. The author provides literature and recognized result of last researches in different fields and over the world that connecting to frontline employee performance.
The author also figures out evidences of positive impact of three main factors on frontline employee performance: personality characteristics, human resource practices and organization climate. On that basic, hypotheses and concept model are established and tested in Vietnam retail banking. Chapter 3: Research Methodology LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 9 This next chapter describes the method that research applies and the processes that author conduct the survey such as: identifying target populations, choosing sampling technique, data collection procedure and measurement scale for items. The chapter divided in to two parts: Sample and Measurement Scale.
Chapter 4: Data Analysis Chapter 4 reports the results of the survey. Based on the survey data, the author tests items, hypotheses and concept model, the chapter presents in detail the steps that analyse database such as: Cronbach’s Alpha Coefficient of Reliability Test, Exploratory Factor Analysis and Multiple Regression Analysis. Chapter 5: Conclusions, Implications, Limitations and Further Research The final chapter present the conclusions unify research results and discussion and elaborate on their significance to thesis. Then the author gives some practical implication in real working environment.
Limitations and Further research are also given to complete thesis. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 10 CHAPTER 2: LITERATURE REVIEW AND HYPOTHESES In this chapter, the literature that concerned to frontline employees will be provided and hypotheses will be suggested: 2.1 FRONTLINE EMPLOYEE PERFORMANCE No one can deny the important role of frontline employees who do the most interacting with customers and observes customers’ responses about bank’s products or services then contribute significantly to the customers’ access to the services of the bank. Solomon, Suprenant, Czepiel, &Gutman (1985) emphasized that frontline service employees play a pivotal role in services encounters and have a connection with customers and organization services and represent an organization to its customers, which often involve dyadic interactions between customers and service employees. The employees’ performance in relation to customer service activities can either create a sale for the bank or lose a customer.
Most of banks spend more time and energy trying to find new customers than they spend retaining the customers they have. And every interaction between frontline employees and their customers has a direct impact on the publics’ opinion of the bank due to these employees are the primary connection between the banks and customers. Some customers want to refer and find out information about the services of retail banking; the first thing they have to do is to meet the front line staffs for advices. This is a decisive step when bank customers want to approach and persuade customers to use its services caused by the great first impression through the performance of the customer service representatives.
Agreeing with this point of view, Chase and Tansik (1983) argued that greater frontline employee knowledge and skills are needed where customers and employees have high level of communication because unpredictable situations creates a need for employees who can make LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 11 continuous and multiple non-programmed decisions during the service encounter. In some cases, frontline employees may observe all service delivery process to contribute the testing and development of new service. Hence, Schneider and Bowen (1984) argued that frontline employees are a valuable source of new service ideas and are even more useful in helping to determine ways to implement a new service to get a favorable customer response. The previous studies have been undertaken to explore factors affecting employee performance in high contact services that means typically involve activities in which neither service providers nor customers absent from the transaction and have a close and direct interaction for a prolonged period (Chase, 1981).