Solution to enhance the internal communication issues interlog company

1 EXECUTIVE SUMMARY The terminology “logistics” was first used in the late 19th century and for military purposes during wars Since the 1950s, logistics have grown gradually from the simplest stage as first party logistics (1PL) to more complex stages such as third- party logistics (3PL) and fourth-party logistics (4PL) nowadays To date, Asia Pacific’s logistics sector has been expanding rapidly together with economic growth; therefore the industry landscape of Vietnam’s logistics sector is teaming with both opportunities and challenges The main drivers are the growth of GDP and import-export activities based on the upcoming Trans-Pacific Partnership (TPP) that Vietnam has joined recently Inter Logistic Company is a small logistic firm with its head office located in Ho Chi Minh City, Vietnam They have built a powerful workforce with more than 100 full time staffs and three members of Board of Directors (BoD), developed an official network in three big cities in Northern, Central and Southern regions of Vietnam In reality, the high turnover rate at Interlog was increasing significantly in the last two recent years from 2013 till now from 20 to 27 percent out of total Especially, the Sales Department is one of the most important departments at the company that accounted for 50% out of total This rate is extremely high compared with the average rate in the same industry and it strongly affects the expansion and development activities of the company particularly before the Asean Economic Community (AEC) comes into effect and holds immense potential for the region in many aspects including logistics service starting in 2016 Indeed, the AEC allows the free flow of goods, services and skilled labor across the region so that the competition has become even harsher than before in several industry sectors of Vietnam economy After conducting research on various viewpoints of several people at different positions in the company by using in-depth interviews technique and collecting the secondary information from some reliable sources both inside and outside company The author has noticed that there are some tentative problems that have directly affected the employees such as lackluster motivation and promotion, the ineffective internal communication between each other, and the heavy workload Among these, the ineffective internal communication between Sales and Custom Department is the most serious issue because it comprises numerous causes such as inappropriate leadership style, shortcoming in the managerial skills of mid-level managers, poor working relationship etc Hence, this dissertation has come up with two main objectives: critically review the vital factors that affect the high turnover rate of employees at Interlog Company and recommend solutions to solve the core problem in order to improve the entire organizational performance All of these tentative solutions have carefully considered in three vital elements: benefits, costs and feasibility, then finally the most appropriate one is chosen to implement In reality, the implementation plan breaks each solution into identifiable steps, assigns each step to one or more divisions and suggests when each step will be completed as well Table of Contents EXECUTIVE SUMMARY LIST OF FIGURES LIFT OF TABLES ACKNOWLEDGEMENT I VIETNAM’S LOGISTICS OVERVIEW .8 1.1 General Overview Figure 1: Number of 3PL Members of Vietnam Logistics Association (VLA) .8 Figure 2: The Growth Rate of Vietnam’s Logistics Market Figure 3: Types of Logistics Service Table 1: Types of Transportations in Global 10 Table 2: Transportation Infrastructure in Vietnam 11 1.2 Limitations and Obstacles 11 II PROBLEM CONTEXT 13 2.1 Company Background 13 2.2 Main Achievements .14 2.3 Organizational Structure 15 Figure 4: Organizational Structure Chart .15 III PROBLEM IDENTIFICATION 16 3.1 Problem Symptom 16 Table 3: The Overall Turnover Rate in year 2013 and 2014 17 Table 4: Elements Contributing to Losses Related with Employee High Turnover 18 Table 5: The Specific Turnover Rate of Each Department at Interlog Company 20 Table 6: List of Literature Reviews 21 3.2 The Lackluster Motivation and Promotion 26 Table 7: The Comparison Between Annual Base Salary Increase and Inflation Rate 27 Table 8: Vietnam’s Logistic Average Salary 28 3.3 The Ineffective Internal Communication 30 3.4 The Heavy Workload 34 Table 9: The Number of Male and Female Left the Company in 2013 & 2014 34 Figure 5: Results of Incident Analysis at Interlog Company .37 3.5 The Real Core Problem 38 IV SOLUTIONS 44 Table 11: The Internal Communication Strategy Suggestion .45 V IMPLEMENTATION 53 VI CONCLUSION 60 VII SUPPORTING INFORMATION 61 7.1 Research Methodology 61 7.2 Report of Transcript 62 7.3 Detailed Transcript .64 REFERENCES 75 LIST OF FIGURES Figure Number of 3PL Members of Vietnam Logistics Association (VLA) Figure The Growth Rate of Vietnam’s Logistics Market Figure Types of Logistics Service Figure Organizational Structure Chart Figure Results of Incident Analysis at Interlog Company LIFT OF TABLES Table Types of Transportations in Global Table Transportation Infrastructure in Vietnam Table The Overall Turnover Rate in year 2013 and 2014 Table Elements Contributing to Losses Related with Employee High Turnover Table The Specific Turnover Rate of Each Department at Interlog Company Table List Paper Research Topic Table The Comparison Between Annual Base Salary Increase and Inflation Rate Table Vietnam’s Logistic Average Salary Table The Number of Male and Female Left The Company in 2013 and 2014 Table 10 List of Alternative Solutions Table 11 The Internal Communication Strategy Suggestion ACKNOWLEDGEMENT I would like to extend the warmest thanks and a debt of gratitude to the following people who have truly made vital contribution to the completion of this dissertation Indeed, without them I definitely would not have written this paper Firstly, I would like to express my truthful thanks to my advisor, Mrs Nguyen Thi Mai Trang for her kindly guidance and deeply encouragement from the beginning to the ending Secondly, special thanks to Mrs Thao Linh, Ms Bao Ngoc, Mrs Thanh Hoa, Mr Phuoc Loc, Ms Hoang Linh, Mrs Minh Nguyet, Mrs Ngoc Diep for their valuable and precisely information during the information collection period and in-depth interviews at the International Logistic Company Last but not least, a big thank-you to all of my family’s members and my close friends who made invaluable contributions I hope to receive more support from all of them in the future I VIETNAM’S LOGISTICS OVERVIEW 1.1 General Overview Nowadays, Vietnam’s logistics sector is expected to grow at a Compound Annual Growth Rate (CAGR) of 27% from 2013 to 2020 with increasing 3PL – outsourcing needs from both existing and new multinational corporations as well In fact, the 3PL industry in Vietnam is growing quick in terms of revenues and active firms, particularly in the Southern region In addition, the 3PL revenues are projected to achieve 11.8 billion USD in 2020 with a CAGR at 25.8% from 2007 to 2020 Indeed, the number of 3PL members of Vietnam Logistics Association increased tremendously from four members in the period of 1994 to 1997 to 275 members in June 2014 Figure 1: Number of 3PL Members of Vietnam Logistics Association (VLA) Figure 2: The Growth Rate of Vietnam’s Logistics Market Logistics industry typically comprises of three key elements as the following: • Infrastructure: ports, terminals, railway, and roads • Operations: warehousing, storage, local distribution and trucking • Services: freight forwarders and customs brokers The main objective of logistics is to move goods from their point of beginning to the point of consumption while conforming to customer requirements Figure 3: Types of Logistics Service Among the above several types of logistics, the most common one is transportation (on the right-hand side), which occupies about 40% to 60% of logistics cost Transportation can take the form of many combinations of modes and routes Basically, there are five routes in worldwide: Table 1: Types of Transportations in Global Notably, Vietnam enjoys a good location within the region and is equipped with a huge transport infrastructure As people may know, it has more than 3,000 kilometers of coastline, is situated nearby vital international shipping lanes; 49 seaports, classified in six groups according to their geographic location along the coastlines (Vietnam Marine Administration – VMA, 2013); and 206 thousand kilometers of roadways (GSO, 2012) Nonetheless, the quality of the transport infrastructure is still low compared with the good geographical condition Vietnam was ranked 44th in infrastructure Logistics Performance Index (LPI), which is much lower than Malaysia (26th), China (23rd) and Thailand (30th) Additionally, in the “Global Competitiveness Report” of WEF, Vietnam was ranked low in terms of quality of transport infrastructure but did show a bit of improvements from 2012 to 2014 every year in order to match the rapid development of the market At Interlog, there are many fresh graduated students annually with different education backgrounds appling into the company After spending two or three months of probation period in different positions of different departments at different locations, some people can wisely adapt the working enviroment and be able to work meanwhile some people may not be suitable and they leave due to many reasons Conversely, the experienced employees are easy to adapt the jobs but they mostly request quite high salaries and benefits so it is not easy to retain them in the long period of time Subjectively, the organizational struture is currently too bulky and the employees not have the power to make major decisions in work because they need to get the approval from many relevant people In reality, the CEO is lacking of an effecitve assistant so that he most likely gets involved in too many small details in each department Furthermore, he has a strong belief in Feng Shui and Chinese zodiac signs, thus he does not completely trust any subordinates especially in recruitment process He wants to directly conduct the final job interview and then make a final decision rather than base on the recommendation of department managers and HR manager Sometimes, it causes to the misleading of internal communication between the CEO and mid-level managers Ms Bao Ngoc: In my opinion, some experienced employees after working for a long time may have different directions with the company’s develpment strategy or their career ladders are not as expected as before so they leave the company Additionally, as we know the import and export industry of Vietnam has been developed very quickly after Vietnam has been integrated wider and deeper in WTO, ASEAN etc Hence the workload is extremely heavy especially for those who have to work in seaports or custom decalratens and paper work as well This activity happens frequently in the peak season and causes many inconveniences for female employees particularly who just get married or have a baby since they need to have more time to take care of their own family Specifically, I noticed that the number of female employees left the company increased nearly triple from 2013 to 2014 Additionally, according to some mid-level aged employees in the company, they said, “2014 is a year of the horse which symbolizes enthusiasm and energy This animal gives people an impression of independence and integrity Thus, it is considered as a good year, hence many people want to have babies in this year and the employees at Interlog Company are not an exception too” Last but not least, the current reward system of the company is not attractive enough also could be one of the root causes that affect the intention to quit of employees Mr Phuoc Loc: I can list down some typical reasons such as: the first one is “over work and under pay”; thus someone would like to find other companies that offer better salary and benefits for them even though the working environment in that company is extremely harsh and not friendly at all This one most likely happened for those who not own a house in HCMC because they have to spend more money and therefore strongly pay attention to the base salary rather than those who own a house or live with their family in HCMC In addition, some employees might not be able to adapt with their direct managers or even CEO’s management styles so that it gradually created the internal conflicts between each other In reality, when the conflicts could not be solved properly, they left the company without any hesitation I noticed that this incident happened mostly for those who are talented and high working experience Mrs Thanh Hoa: To me, there are two main reasons for this symptom Firstly, they request a higher salary and commision percentage but the company cannot satisfy them so they decide to leave Most of these incidents happened to the young employees and the company most likely allowed them to leave freely This is because the BoD knows that they cannot always satisfy the increasing dramatically demand of them Secondly, the working styles of someone are not consistently followed the company’s new policies so that their direct managers have to intensely push and monitor them which creates high working pressure for them and the internal conflicts are easy to happen as well This cause happens mostly from those who have worked at Interlog for a long time, and it is quite hard for managers to convince them to stay longer with company Ms Hoang Linh: Personally, some of salesmen have to leave the company due to lacking of skills and knowledge in this industry Additionally, the connection between each department is quite loose because the role allocation is not clear and the transfer of employees make them feel uncomfortable and inconsistent in work Last but not least, the sales team does not feel comfortable because they have to share the sales commision due to the new policy of company They think they are strongly depened on other divisions in dealing with customers Interviewer: As an expericenced employee and also a mid-level manager in Interlog Company, what you think is the most crucial problem that causes employees to leave their jobs at a relatively high rate and why? Mrs Thao Linh: Personally, I think the working process between different departments in an organzation is not transparent and consistent; and the management style of midlevel managers has not completely created the trust for the subordinates Hence, these factors have created the internal conflicts between each other and most of them choose to leave the company Ms Bao Ngoc: In my opinion, the most crucial problem that caused to this symtom is the dissatisfaction between experienced employees and managers particularly in working progress and the changing policies in company as well In fact, they might not be able to adapt and did not feel satisfiy so that the conflict occured all the time Mr Phuoc Loc: To me, I think the base salary of the company is not attractive enough to retain the talented people particularly those who come from other provinces to work in HCMC In reality, it is quite difficult for them to deny an attractive offer from another firm because it is not easy at all for non-Saigonese people to surive in a harsh environment as HCMC with a low income Mrs Thanh Hoa: I myself think that the most crucial problem comes from the diffrence in the mindset between employees and managers in working style and the future development plan In addition, the base salary and commission rates particularly for the sales force at Interlog are average comparing to the logistic industry in Vietnam However, some other logistic companies allow their salesmen the right to the service for customer from beginning to ending and thus the sales force receives higher commission Nevertheless, this policy is quite risky for the company since the customer definitely gets used with that salesman rather than the company so that one day if he leaves the company, the customer will follow him as well Therefore, Interlog Company has implemented some tactics to restrain the power of salesmen by dividing the job task into small activities with more people involving in the whole process rather than salesmen only Ms Hoang Linh: The most crucial problem is shortcoming in the managerial skills in management of managers In reality, there are only two people in this company who have Master of Business Administration (MBA) degree meanwhile the majority of staffs got the bachelor and diploma degrees Additionally, most of the mid-level managers did not have management background and before getting promotion, they were sent to learn a very short course about management Thus they may not be able to closely monitor and support their subordinates in the appropriate way One more thing, the connection between different departments particularly Sales and Custom deparments is quite loose due to ineffecitve internal communication among each other during the working process Last but not least, the CEO is also the chairman in this company so that the BoD cannot provide proper oversight on all of CEO activities, and that can easily lead to some inappropriate decisions from top managers due to the organizational structure like this Interviewer: After investigating the real core problem at the Interlog Company, you have any tentative solutions for any specific department and people to improve it? Mrs Thao Linh: I myself want to increase the transparent of all working processes in order to avoid the overlapping between each other That means the jobs design plays a vital role because each of position must be meaningful and contribute distinctly to the organization Notably, the jobs design has to optimize three following factors: timeresources and efficiency From that point, the workflow among different positions and departments would be smoothed and rapid as well Ms Bao Ngoc: To me, I really want to improve the organizational culture because a company cannot develop consistently without a strong culture Here are some actions: • Encourage mutual reliance and relationshop among colleagues particularly between managers and staffs in both same and different departments and even branches • Inspire sharing of useful and practical knowledge between non-experienced and experienced employees without any hesitation • Mid-level managers need to pay attention about their subordinates not only in work but also in life Mr Phuoc Loc: The BoD has to hightlight the fairness and transparent in performance evaluation of every mid-level managers and staffs in an organization It helps them to visibly distinguish good-average and under performers and from that results the BoD will have some adjustments in order to help them improve their performances Moreover, it will significant restraint the rumors or gossip in workplace because the evaluation is based on real performance not any kind of special relationship Mrs Thanh Hoa: As a manager of sales division, I just want to adjust the reward system in order to retain the talented employees by some issues: • Distinguishing good performers from average and under performers • Sticking both financial and non-financial rewards to outstanding performance per quarter and per year • Paying salary and commission as well as the direct competitors in the logistics market Ms Hoang Linh: I am a straightforward person so I really want the CEO can change his current management style by less directly involve in too many small details in each department He should most likely focus on big projects and long-term strategies and confidently empower more to the mid-level managers in major issues If so, the managers would feel more confident and trust in the CEO and he also can have more free time to manage the company Thank you for your sharing We really appreciate your understanding and support  REFERENCES Allen, N., & Meyer, J (1990) The measurement and antecedents of affective, continuance and normative commitment to the organization Journal of Occupational Psychology, 63, 118 Anderson, E., Fornell, C., & Lehmann, D (1994) Customer satisfaction, market share, and profitability: findings from Sweden Journal of Marketing, 58(July), 53-66 Argenti, P (2007) Corporate communication (4th ed.) 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Upper Saddle River, NJ: Prentice Hall Zeffane, R., Syed, A., & James, C (2011) Communication, commitment & trust: exploring the triad International Journal of Business And Management, THE END ... salesmen the right to the service for customer from beginning to ending and thus the sales force receives the high commission Nevertheless, this policy is quite risky for the company since the customer... within the real life of the company that is to improve the effectiveness of internal communication The internal communication process directly influences the building of mutual relations between the. .. that salesman rather than the company so that one day if he leaves the company, the customer will follow him as well Therefore, in order to prevent this bad incident, Interlog Company has implemented