INTRODUCTION
Logistics industry overview
Logistics plays a crucial role in supply chain management, encompassing transportation, warehousing, forwarding, and value-added services It involves planning and managing the flow and storage of goods, services, or information from origin to consumption to meet customer needs As a vital component of global trade, logistics ensures the efficient movement of resources and supplies, requiring businesses to have the right items in the right place at the right time Lower logistics costs and higher service quality directly correlate with increased global trade volume According to the World Bank (2004), logistics activities typically include several key elements.
- Infrastructure: ports, terminals, railway, roads;
- Operations: warehousing, storage, local distribution, trucking, cabotage;
- Services: freight forwarders and customs brokers
Source: Decree No 140/2007/ND/CP issued by September 5, 2007
Among the types of logistics includes Forwarding, Transportation, Warehouse and Other value added services, Transportation is the most common one which occupies 40% to
60% of logistics cost Besides, Transportation can create many combinations of transport modes appropriately There are five common modes of transportation as follows:
Airways / airplanes Airplanes are the fastest mode but very expensive
Availability of appropriate airport facilities
Roadways / trucks Trucks are relatively quick and a very flexible mode
Subject to the fluctuation of fuel cost and road conditions
Railway / rail Rail is a cost efficient mode but can be slow
Shipping / vessels Ship is very cost efficient but the slowest mode of transport
Availability of port and canals
Pipelines Pipelines can be very efficient Restricted to liquid commodities and gases
Logistics has evolved significantly from its earliest form, first-party logistics (1PL), to more sophisticated levels such as third-party logistics (3PL) and fourth-party logistics (4PL) With advancements in technology, infrastructure, and human resources, 3PL services have become increasingly prevalent in developed countries, including Vietnam.
Vietnam is developing quickly in terms of revenues and number of active firms The Vietnam
Logistics Association stated that their 3PL members increased from 4 members in the period of 1994 to 1997 to 275 members in 2014
Table 2: Historical development of growth stage of logistics
Logistics were limited to distribution Problems relating to transaction with finished products and related physical distribution were dominant The problem of inventories was not important
Corporate logistics were gradually extended to supplying (purchases, procurement) and to production management
Companies are developing comprehensive logistics chains and systems that connect customers and suppliers This integration of corporate activities is leading to the advancement of supply, production, and distribution systems.
Integrated logistics system is a very complex, system-related problem
One of the requirements is the establishment of strategic alliances between companies, their customers, products suppliers and logistics providers
In Vietnam, logistics are now becoming a major driving force in the development of national economic development In fact, Vietnam’s logistics cost nowadays occupies about
25% of GDP that it still much higher than peer countries Reality, logistics development in
Vietnam faces significant challenges in its logistics sector, including cumbersome and inconsistent government regulations that facilitate unofficial payments Additionally, there is a disconnect between planning and implementation in transportation infrastructure, which fails to adequately consider supply and demand dynamics.
The fragmented trucking industry and imbalanced infrastructure pose significant challenges in Vietnam However, the country has demonstrated consistent economic growth year after year According to the World Bank's 2014 report, "Connecting to Compete," Vietnam ranked 48th out of 166 countries and 5th in its region, highlighting its progress and potential in the global market.
Association of Southeast Asian Nation with a Logistics Performance Index (LPI) score of
3.15 which following after Singapore (4.3), Malaysia (3.59) and Thailand (3.43)
Figure 2: Percentage changes of LPI score from 2007 – 2014
The establishment of free trade agreements like the Trans-Pacific Partnership (TPP) and the Vietnam-European Union (EU) Free Trade Agreement (FTA) at the end of 2015 is set to significantly enhance Vietnam's economy and international trade Notably, the logistics sector is expected to experience substantial growth as a result of these agreements.
Company background
International Logistics Joint Stock Company, known as Interlog, is a prominent small and medium-sized enterprise (SME) in Vietnam's logistics sector Established in August 2005 and headquartered in Ho Chi Minh City, Interlog plays a vital role in the country's economic development The company has expanded its reach with branch offices in both Southern and Northern Vietnam, as well as partnerships in Hai Phong and Da Nang Since its inception, Interlog has built a robust workforce of 30 to 100 full-time employees, a number expected to grow in the future The company is committed to enhancing its employees' professional qualifications to meet the increasing competition in the logistics industry.
Interlog is committed to creating an effective supply chain that benefits customers, itself, and the community, with a vision to become the leading supply chain innovator in Vietnam and Indochina within the next five years The company emphasizes teamwork as a core value, fostering collaboration towards shared objectives and accountability Effective communication is prioritized, ensuring information is exchanged accurately and promptly to address challenges efficiently Additionally, Interlog values knowledge, combining individual backgrounds with comprehensive training to cultivate a culture of continuous learning and adaptability The leadership team recognizes the importance of training in enhancing service quality and actively seeks passionate employees to drive their mission forward.
In the logistics industry, fostering win-win cooperation through equitable benefit sharing is crucial Interlog prioritizes creating corporate advantages that align with the interests of their customers and partners Additionally, the company ensures that all stakeholders, including employees, are recognized and rewarded based on their performance, promoting a culture of fairness and collaboration.
Over 10 years, Interlog has developed with achievements through significant milestones, include:
- 2005: Established Intelog Head office in Hochiminh City Achieved ISO 9001:2000
- 2006: Achieved Vietnam Excellent Brand Certificate, which was organized by Ministry of Trade and Vietnam Economic Times
- 2007: Became the agent of PCI (Pacific Concord INTL in Taiwan) who is one of the leading of NVOCC in Asia
- 2008: To be approved as an Official Licensed Customs Broker by Vietnam Customs General Agency
- 2011: Became the partner of AGS (AGS World Transport) in Vietnam AGS is one of the leading of NVOCC in Asia
- 2014: Established Nhon Trach Depot in Dong Nai province
Company structure
Interlog organizes its logistics business into distinct departments to efficiently manage each aspect of customer shipments The structure includes a Sales Division, which is further divided into segments for Export, Import, and Domestic shipments Meanwhile, the Production Division handles essential tasks such as paperwork, documentation, customs, trucking, and warehousing This systematic approach ensures streamlined operations and effective service delivery in the logistics sector.
Productivity Institute about enterprises capacity, Interlog’s organizational structure quite cumbersome with many different departments This structure are split many small parts with intermediate levels of management
Source: Organizational structure from Human Resources Department in 2015
Board of Director Board of Supervisor
Working in Logistics services, Interlog started business with basic forwarding services includes Sea and Air freight forwarding, customs clearance, warehouse management and Non
Vessel Operating Common Carrier (N.V.O.C.C) From 2008 until now, Interlog has developed
Logistics service provider with total logistics services and ongoing projects
Interlog aims to be a leading logistics services provider in Vietnam by establishing a comprehensive global network of agents With a decade of experience, the company has developed a range of solutions tailored to factories and FDI companies with significant import and export needs Interlog enhances customer value through innovative projects that optimize production processes and streamline supply chains, including initiatives like barge transportation launched in 2012.
Hanoi Hub as Logistics Center in Northern Vietnam and Dong Nai Hub as Logistics Center in
Dong Nai, Binh Duong and neighboring regions in 2013; Nhon Trach Depot of New Transport
Model in 2014; and the Nhon Trach – Cai Mep connection by trucking solution in 2015.
PROBLEM IDENTIFICATION
The problem symptom
Small and medium-sized enterprises (SMEs) in the logistics sector are currently experiencing significant challenges in human resource management The rising demand for skilled personnel, particularly in management roles, is not being met, hindering the growth and development of these SMEs Addressing the shortage of qualified individuals is crucial for the sustainability and success of logistics SMEs.
Vietnam, during 10 years of operation, Interlog has made a lot of changes and developments
From 30 employees to nearly 100 ones and from the basic service provider to total logistics services provider in recent proved that Interlog has been to the right direction Additionally, the revenues and profits have been growing annually although the growth rate is relatively low
Interlog has experienced significant personnel challenges despite a decade of stable growth and diverse services Notably, between 2014 and 2015, the company faced its highest turnover rate of 26.88%, starkly higher than the 10% average reported by Tower Watson Company in 2014 (Gioi, 2015).
Interlog has experienced a significant employee turnover issue, with turnover rates rising from 19.5% in 2013 to 26.88% in 2014 Notably, the Sales Division has been particularly affected, exhibiting a turnover rate exceeding 50%.
Table 3 The turnover rate of each department
Number of employee The ratio (%)
Source: Data sourced from Annual human resource report of year 2013 & 2014
The Employee Satisfaction Survey (ESS) conducted by the Vietnam National Productivity Institute (VNPI) in May 2015 revealed that certain factors significantly impacted employee satisfaction at Interlog, with low positive response rates Key areas of concern included wages, workload, evaluation and promotion, interdepartmental relations, working hours, physical work environment, supervision, customer relations, motivation, job enrichment, job assignment, career development, corporate understanding, and colleague relations The survey, which included 79 participants from both management and staff, identified four critical factors with the lowest satisfaction rates: interdepartmental relations, evaluation and promotion, workload, and wages Detailed analyses of these dimensions highlighted the specific survey questions that received the least favorable responses from employees, particularly regarding interdepartmental relations, wages, and evaluation and promotion.
Figure 4 Ranking of Positive responses to each dimension
Source: Report on Management Consultancy of Vietnam National Productivity Institute in 2015
Relation with Colleagues Understanding Corporation Career Development Job Assignment, Allocation Motivation, Job Enrichment Relation with Customers
Supervision Physical Work Environment Working hours, Leaves Relation with Other Department
Ranking of Positive responses to each dimensions
Figure 5 [Relation with other Department] dimension
Source: Report on Management Consultancy of Vietnam National Productivity Institute in 2015
Source: Report on Management Consultancy of Vietnam National Productivity Institute in 2015
The necessary information is shared well with the relevant departments
In the workplace, support for the relevant departments is provided enormously
The coordination of work between departments is smooth and appropriate
[Relation with other Department] dimension
Agree Slightly agree Neither agree nor disagree Slightly Disagree Disagree
I am satisfied with the mechanism of determination of my salaries and bonuses
My salary is appropriate level in the aspect of the job description
My salary is equal or more compared to the other companies of the same industry
Agree Slightly agree Neither agree nor disagree Slightly Disagree Disagree
Source: Report on Management Consultancy of Vietnam National Productivity Institute in 2015
Data from the Human Resources Department and the Vietnam National Productivity Institute indicates that Interlog has low employee job satisfaction, particularly in factors influencing employee intentions over the years According to Anis, Rehman, Khan & Humayoun (2011), job satisfaction is defined as an employee's emotional state regarding their job, determined by the gap between actual and desired outcomes Additionally, job satisfaction reflects an individual's attitude towards their work, leading to varying scores on satisfaction factors based on positive or negative feelings (Buitendach, Rothmann, 2009) Furthermore, employee turnover is characterized as the movement of employees within the labor market, including transitions between firms and positions (Ongori, 2007).
I am satisfied with the mechanism of personnel evaluation
I am satisfied with the mechanism of promotion and pay hike
The staffing of our company is in accordance with the competencies and aptitude of the employees properly
By obtaining the qualification or enhancing the high level of knowledge and skills, opportunity for the highly specialized positions are available in my…
Agree Slightly agree Neither agree nor disagree Slightly Disagree Disagree
Turnover is defined as the replacement of employees who leave an organization, as noted by Jang and Erdem (2006) Price (2001) explains that turnover rates are calculated by dividing the number of employees who exit over a specific period by the average number of employees during that time, then multiplying by one hundred Recent data from Interlog Company indicates high turnover rates over the past two years, which could harm the company's image and growth Notably, the three lowest dimensions of employee satisfaction are critical issues that require immediate attention.
The findings presented in the table serve as a valuable resource for the writer to identify potential issues and pinpoint the central problem at Interlog Company These insights highlight the significant relationship between antecedents, turnover intention, and job performance.
Table 4: List of literature reviews
No Author Antecedents Outcomes Research findings
Antecedents and Consequences of Organizational Commitment
This research identified that personal characteristics, job satisfaction elements, and both distributive and procedural justice significantly contribute to organizational commitment Additionally, it explored how organizational commitment impacts job performance and turnover intentions.
Perceived Organizational Justice, Job Satisfaction and Turnover Intentions:
- Distributive justice: employees' perceptions about the fairness of managerial decisions relative to the distribution of outcomes such as pay, promotions…
- Procedural justice: decision-making process
There was a significant positive correlation between Perceived Organizational justice and Job satisfaction whereas significant negative correlation was found between Perceived
Organizational justice and Turnover Intention; Job satisfaction and Turnover Intention
Impact of Compensation, Performance Evaluation and Promotion Practices on Government Employees Performance VS Private Employees Performance
Interdisciplinary Journal Of Contemporary Research In Business
This study investigated the impact of three HRM practices namely compensation, performance evaluation and promotion practices on employee performance of both public and private sector organizations of Pakistan
The study revealed a significant positive relationship between compensation and performance evaluation practices and employee performance in both public and private sector organizations in Pakistan Conversely, promotion practices showed an insignificant correlation with employee performance across these sectors.
Organizational Environment, Job Satisfaction and Career Growth Opportunities: A
This study explores how the organizational environment, employee job satisfaction, and career growth opportunities influence employees' intentions to leave their jobs By examining these factors, the research aims to provide insights into turnover intentions within organizations.
Link to Employee Turnover Intentions in Public Sector of Pakistan
Interdisciplinary Journal Of Contemporary Research in Business results of this study indicate significant negative correlations among three independent variables and turnover intentions
Source: Literature reviews of own collection
Human resources are a vital component for companies to develop and sustain over time, serving as an "invisible asset" that contributes significantly to organizational value (Itami & Roehl, 1987) This essential element is integrated into the operational framework, enhancing the firm's core competencies (Prahalad and Hamel, 1990).
Interlog operates in the logistics service industry, where a people-oriented approach is crucial The effectiveness of human asset strategies significantly influences cost, quality, responsiveness, and overall customer satisfaction.
In logistics, timely delivery of the right products and services is essential for customer satisfaction Logistics companies face the challenge of providing optimal solutions to enhance their systems Late deliveries can disrupt factory planning and negatively impact the supply chain Additionally, with high logistics costs in Vietnam, companies must focus on reducing expenses to remain competitive in the market.
Logistics service providers face significant challenges related to collaboration, communication, and high employee turnover, which can adversely impact both employee satisfaction and overall business performance (Chyn & Kalianna, 2011) According to Samad (2006), various factors influence an employee's decision to leave an organization, including attitudinal, behavioral, and organizational elements Additionally, job satisfaction plays a critical role in shaping employees' intentions to depart from their roles (Samad, 2006).
(2008), job satisfaction is attitudinal response of employee towards organization Brown and
The inefficiency of internal coordination at Interlog Company
Interlog Company is currently facing a significant issue with internal coordination, resulting in ineffective communication, strained interdepartmental relationships, insufficient information sharing, and limited employee empowerment According to Osifo (2012), effective coordination involves empowering and organizing individuals to collaborate towards organizational goals This managerial function is essential for linking and adjusting various activities and employees within the business A lack of internal coordination can jeopardize stability and flexibility, ultimately impacting overall organizational efficiency.
Poor coordination can lead to employee turnover, negatively impacting business performance and productivity The evolution of service practices has transformed the selling and delivery of customer solutions into collaborative efforts, emphasizing the importance of coordinated teamwork.
Team effectiveness is rooted in key organizational group processes, including boundary management and intra-group dynamics that facilitate knowledge transfer and communication (Gladstein, 1984) Employees serve as both the driving force behind organizational performance and as brand ambassadors, representing the organization to external stakeholders (Cespedes, Doyle, & Freeman, 1989) Fostering strong employee-organization relationships not only enhances productivity but also cultivates a cost-efficient workforce that maintains quality external relations and safeguards intangible assets like reputation (Berger, 2008) Additionally, the social network behaviors of employees significantly influence their decisions to remain with or leave the organization (Moynihan & Pandey, 2008), while positive perceptions of these relationships can reduce turnover intentions (Martin, Jones & Callan, 2005).
Tremblay (2000), the lack of recognition in working environment as supervisory career, participative decision-making, and work autonomy can lead to increase turnover intention
Regarding to Mr Nguyen Duy Minh who is Managing Director (CEO) of Interlog, the existence of conflict between employees of functional departments is one of the main reasons
The lack of interdepartmental connection and understanding among employees has led to poor coordination within the company Mr Duy Minh highlighted the inefficiencies of monthly meetings, where departments often focus on their own issues rather than the overall company direction, resulting in conflicts, particularly between the Sales and Customs Departments Despite the Board of Directors communicating a clear vision, departments continue to pursue their individual objectives, undermining collective goals Mr Minh emphasized that weak communication skills, including email writing and information sharing, have contributed to misunderstandings and a lack of clarity in objectives Consequently, this has resulted in strained relationships between departments and a failure to align with the company's overarching vision.
Development Department stopped working in 2013 due to a difference of opinions with Deputy
Director Additionally, Mrs Dao Thi Hoang Anh who was Manager of Supply Chain
In 2014, a conflict arose between the Management Department and the Customs Department, leading to the departure of a key employee, as the issues could not be resolved Additionally, the Employee Satisfaction Survey (ESS) results from VNPI revealed that only 24.1% of respondents strongly agreed that inter-departmental coordination was smooth, indicating a significant area for improvement Research has shown that interpersonal interactions, including information exchange and relationships between co-workers and supervisors, greatly influence employees' psychological job outcomes, such as job satisfaction (Muchinsky, 1977; Down and Hain, 1982; Pincus, 1986).
Internal communication plays a crucial role in fostering positive relationships among employees and between employees and supervisors, as highlighted by Downs, Clampitt, and Pfeiffer (1988) and Ray and Miller (1994) Effective internal communication relies on delivering appropriate messages in formats that employees find useful and acceptable; otherwise, poor communication can jeopardize organizational relationships The workplace is fundamentally built on various working relationships, particularly the supervisory relationship Benkhoff (1997) suggests that when employees perceive their supervisory relationships as fair, they exhibit greater commitment to the organization Moreover, Ni (2007) emphasizes that satisfaction, one of the key indicators of effective employee relations, has garnered significant attention in research Satisfied employees are more likely to engage in long-term commitments to their organizations.
Furthermore, according to Ms Nguyen Thi Hoang Linh who is Sales Executive of
The Interconsol Department faces significant challenges due to gaps and overlaps in its inter-departmental operations Employees express frustration over the limited decision-making power they possess, as most decisions rest with the management board, leading to confusion during the shipment handling process, especially when issues arise This inefficiency results in wasted time and decreased productivity, as the shipment must be approved sequentially by the Sales, Production, and Accounting departments, causing duplication of efforts Consequently, delays in shipment can negatively affect customer payments Empowerment, as outlined in human resource management theory, emphasizes employee involvement in the decision-making process, which is crucial for enhancing operational efficiency and productivity (Ford & Fottler, 1995; Pardo del Val & Lloyd, 2003).
Mr Ho Phuoc Loc, the Customs Manager, and Ms Vo Van Cat Duyen, a Sales Executive, highlighted a significant gap in knowledge between the Production and Sales departments.
Mr Phuoc Loc expressed frustration over the Sales Division's lack of initiative in acquiring knowledge about import and export processes, highlighting that their dependence on Customs staff for repeated answers hampers efficiency and creates tension He emphasized the importance of self-improvement in the industry to foster development Conversely, Ms Cat Duyen defended the Sales Division, arguing that their inquiries are essential for customer service and that Customs staff should facilitate knowledge sharing rather than complicate interactions This situation reveals a significant gap in knowledge and collaboration between the Sales and Customs departments, impacting overall productivity.
Production Division This limitation of knowledge and interaction proceeded from two reasons
The central reason is of limited knowledge sharing from Customs Department Mr Nguyen Duy
Minh pointed, “The Board of Director carried out meeting to review working of Customs
The handling of shipments by the department has been disappointing due to a monopolistic mindset among employees Their control over the decision to accept shipments from the Sales Department leads to confusion and results in incomplete information being provided to customers.
Ms Dang Nguyen Thao Linh, a Human Resource executive, highlighted that most sales staff are recruited from universities with limited knowledge of the logistics industry, necessitating basic training for effective job performance She noted that the company's current training system is outdated and lacks a structured approach, often relying on existing employees to train newcomers This results in sales staff having insufficient knowledge of the company's professional standards Additionally, she mentioned that Interlog Company's training process is not cohesive, beginning with general information about the company, labor regulations, and collective agreements, followed by department-specific training.
The Managing Director will conduct fundamental logistics training twice a year, emphasizing the importance of a structured training system led by responsible individuals Ms Thao Linh noted that the logistics training is closely aligned with the Managing Director's schedule, which can lead to inconsistencies in timing and coordination, especially with recent personnel changes.
Effective knowledge transfer is crucial for firms to gain a competitive advantage and enhance performance, as highlighted by Menon and Varadarajan (1992) and Kogut and Zander (1996) Interlog Company suffers from a lack of structured information and knowledge sharing, which negatively impacts productivity and service quality Okhuysen and Eisenhardt (2002) emphasize that knowledge sharing occurs when individuals communicate their unique information Additionally, the aggregation of individual knowledge among decision-making members is positively correlated with group performance, according to Strasser, Taylor, and Hanna (1989).
Internal coordination at Interlog is identified as a key factor negatively impacting employee satisfaction The primary issues contributing to this problem include poor working relationships, inadequate knowledge sharing, and insufficient empowerment in the work process, all of which reflect low efficiency These insights are supported by detailed reviews from personnel and the unsatisfactory results of the Employee Satisfaction Survey (ESS).
Furthermore, the related theories have shown the direct or indirect impact of these causes to internal coordination of Interlog.
The low satisfaction of salary and wages at Interlog Company
Interlog faces significant challenges in employee retention, particularly in the Sales Division and Documentation Department, where many employees leave for higher-paying positions at other logistics companies after gaining experience The company's employee satisfaction survey (ESS) results indicate a troubling turnover rate, with approximately 50% of sales staff leaving, a notable increase from 19.5% in 2013 and 26.88% in 2014 Furthermore, only 15.4% of employees strongly agree that their salary is competitive compared to industry standards, highlighting dissatisfaction with compensation Interlog's reward system is limited and inflexible, primarily offering annual rewards, which fails to meet the diverse needs of employees seeking both tangible and intangible benefits.
Simultaneously, they will work for purposes combined of particularly salary and passion
Theoretically, an organization’s reward structure can have a significant impact on employee satisfaction (Bowen, Gilliland, & Folger, 1999; Brown & Peterson, 1993; Farrell & Rusbult,
Timely and sincere recognition of employee contributions is crucial for enhancing satisfaction and engagement (Heskett et al., 1994; Lawler, 2000) Employees in stable positions view wage increases as essential, while those with short-term career goals perceive them differently In unstable employment situations, wage increases serve primarily as short-term incentives (Takahashi, 2006).
The Board of Directors at Interlog Company has determined that increasing wages will not be the primary focus for enhancing employee satisfaction, despite survey results suggesting otherwise According to statistical data from the Finance Division, which was implemented in early 2015, the annual labor cost, encompassing salaries and benefits per employee, is a significant consideration for the company.
Interlog was increased from 99.167.613 Vietnam dong in 2012 to 115.387.261 Vietnam dong in
Between 2013 and 2014, Interlog Company raised salaries from 102,000,000 to 118,502,135 Vietnam dong, reflecting a 16% increase This adjustment outpaced the inflation rates of 4.09% in 2013 and 6.59% in 2014, demonstrating the company's commitment to enhancing employee compensation Moreover, data from the Human Resource Department indicated that the average salary in the logistics industry was also taken into account during these adjustments.
Interlog Company maintains a balanced approach to its overall compensation strategy Currently, the average salary for entry-level employees at Interlog ranges from 4 to 5 million Vietnam dong, while experienced employees and mid-level managers can expect an average salary of around 7 million dong.
17 million Vietnam dong in turns
Table 5: Vietnam Logistics Average Salary
EMPLOYEE POSITIONS AVERAGE SALARY PER MONTH
Non-experienced employees From 4 to 6 Million VND Experienced employees From 7 to 10 Million VND
Mid-level manager From 15 to17 Million VND
Source: Data gathered from DHB International JSC Vietnam in year 2014
Low salary satisfaction at Interlog Company is a significant issue that needs attention, as indicated by the ESS results showing it as the lowest scoring factor affecting job satisfaction Although company leadership has compared internal salary data with industry averages and found the differences negligible, this oversight may still impact employee morale Consequently, while the salary concern is acknowledged, it is not deemed a top priority for immediate resolution.
The limited evaluation and promotion system at Interlog Company
This situation of leaving employment is the general rule of the current competitive market
The survey results from VNPI indicate that the "Evaluation, Promotion" dimension ranks among the four lowest in employee satisfaction at Interlog Company, highlighting a significant dissatisfaction regarding salary and wage policies This reflects a broader issue of insufficiently promoted environments and opportunities for continuous policy improvement within the organization.
More details, the employee satisfaction survey results from VNPI showed that
“evaluation, promotion” dimension is one of the lowest rates with only 31.6% strongly agree with the statement “I am satisfied with the mechanism of personnel evaluation” Regarding Ms
Nguyen Thi Van, the Director of VNPI, has noted that the Key Performance Index (KPI) system at Interlog has not been fully implemented across the company Currently, the existing KPI evaluation system is cumbersome and lacks alignment with the overall company KPIs, which hinders effective performance assessment.
Company has not had clear career paths for employees such as manager or job specialist This shades employee orientation when they cannot recognize opportunities in this company
Personnel evaluation is crucial for fostering employee motivation, often serving as a more effective motivator than salary alone Recognition of an employee's efforts and commitment can lead to greater job satisfaction and loyalty Many individuals aspire to achieve higher promotions within their organizations, reflecting a common desire for career advancement Furthermore, employees frequently assess their compensation in relation to their peers, particularly those in similar roles, which can influence their motivation and overall job performance.
Many organizations today understand that motivating employees hinges on mutual respect between management and staff This respect is demonstrated by involving employees in decision-making processes, actively listening to their feedback, and implementing their suggestions when suitable Consequently, employees view fair evaluations and promotions as valuable opportunities that enhance both their tangible and intangible benefits This approach not only allows employees to showcase and develop their skills but also fosters a stronger commitment to the organization.
In the third quarter of 2015, Interlog Company’s Board of Directors implemented a new structural salary scale that introduces two functional branches: management and expert functions This change aims to provide clarity in employee development and assist managers in effectively guiding their teams The Board anticipates that this revised salary structure will enhance the company's promotion system.
Thereby, it will create confidence to employee’s motivation and job development
Table 6: Salary scale according functional position Management Function Salary Scale (VND) Expert Function
Trainee Statutory minimum wage Trainee
Source: Data sourced from Human Resource Department at Quarter 3 of Year 2015
In summary, Interlog Company faces challenges with its limited evaluation and promotion system, which lacks clear connections to specific KPIs and leaves employees uncertain about their career advancement opportunities To address these issues, the Board of Directors has implemented a structured salary scale system that distinguishes between management and expert roles, aiming to motivate and clarify career paths for employees.
Causes and effect diagram
Interlog Company faces three significant challenges: internal coordination, salary, and the evaluation system, all of which adversely affect employee satisfaction and contribute to a high turnover rate over the years Internal coordination issues stem from various factors that impact both employee morale and overall business performance, particularly within logistics services (Chyn & Kalianna, 2011) These challenges highlight the need for improved working relationships, effective internal communication, knowledge sharing, and employee empowerment in the workplace Conversely, while the salary and evaluation system problems are not urgent, the company has identified short-term solutions to address them.
In summary, the primary issue identified is the lack of effective internal coordination, which can obscure disunity and lead to significant repercussions for the company Addressing this central problem promptly is crucial for analysis and resolution.
Figure 8 Fishbone diagram of the inefficiency of internal coordination in Interlog
High Turnover Rate Motivation and Evaluation
The real core problem
Based on secondary data from Interlog Company and insights from in-depth interviews, the writer identifies three key issues: ineffective internal coordination, low wage satisfaction, and a restricted evaluation and promotion system.
The Board of Directors at Interlog Company has determined that increasing wages will not be the primary focus for enhancing employee satisfaction Instead, the company prioritizes a balanced approach, implementing annual salary increases at a reasonable rate that aligns with overall company growth.
Over the years, the basic salary in Vietnam has increased, ranging from 500,000 to 1,000,000 Vietnam Dong for various positions Additionally, the unit price for detailed jobs is regularly adjusted alongside the basic salary This proactive approach by company leadership reflects their commitment to employee satisfaction, as they compare internal salary data with industry averages, ensuring that any discrepancies are minimal and do not adversely affect employee morale.
The limited evaluation and promotion system significantly impacts employee motivation, making personnel evaluation crucial In many instances, opportunities for promotion or fair evaluations can be more motivating than salary alone However, at Interlog, the evaluation system is vague and lacks specific, targeted connections, undermining its effectiveness.
To address the lack of clarity in career progression for employees, the Board of Directors implemented a structured salary scale system that includes both management and expert tracks, aimed at motivating staff and enhancing their professional development.
Employees can choose between two distinct paths for personal development: becoming effective managers or gaining expertise in their field This decision not only addresses immediate challenges but also fosters long-term growth and success.
Interlog Company faces a central issue concerning business performance, a significant challenge for logistics service providers (Chyn & Kalianna, 2011) Key factors contributing to this problem include poor communication, inadequate working relationships, insufficient knowledge sharing, and a lack of employee empowerment, all of which negatively affect employee satisfaction and turnover rates Implementing effective communication strategies is essential for fostering positive employee engagement and improving overall organizational performance (Bakker, Albrecht, & Leiter, 2011; Bindl & Parker, 2010; Saks).
Poor communication and strained working relationships hinder effective information sharing and reduce professional skills among employees These issues create a cycle of negative effects that ultimately impact employee satisfaction, contributing to a high turnover rate over the years Therefore, the inefficiency of internal coordination emerges as a critical problem that requires immediate and effective resolution.
TENTATIVE SOLUTIONS
The first alternative of enhancing communication and
Interlog Company’s first alternative aims to improve working relationships through enhanced communication and internal knowledge sharing Research on team effectiveness highlights essential components of organizational processes, such as boundary management and intragroup dynamics, which are crucial for effective coordination (Gladstein, 1984) Knowledge management literature emphasizes that skills, resources, and knowledge are dispersed throughout the organization, making relationships vital for acquiring necessary information According to Borgatti and Cross (2003), the nature of organizational relationships significantly affects an individual's likelihood of seeking information from others Ultimately, the creation and sharing of knowledge is a social process, with relationships serving as the foundation for identifying and accessing relevant information.
Research by Argote, McEvily, and Reagans (2003) highlights that individuals with strong, direct, and dependent social links are more inclined to share information According to Lai and Wong (2002), frequent and direct interactions among these partners facilitate knowledge transfer Borgatti and Cross (2003) emphasize that relational characteristics, such as awareness of another's knowledge, access to individuals, and appreciation of their expertise, significantly influence information-seeking behavior Additionally, organizations are recognized as knowledge systems that encompass knowledge creation, storage, transfer, and application (Alavin and ).
Knowledge management is influenced by various factors, including structural, human, and technical causes (Leidner, 2001) Effective internal communication is crucial for enhancing knowledge sharing and organizational coordination, thereby providing a competitive advantage in challenging market conditions Welch & Jackson (2007) emphasize that communication between strategic managers and internal stakeholders fosters a sense of commitment and belonging, which aids in developing awareness of the changing environment and understanding the evolving goals within the organization.
Consequently, Interlog Company may consider the information technology (IT) solution and non-IT solution aim to communication and internal sharing knowledge
To enhance IT solutions, the company is implementing an expert system and knowledge database that enables employees to easily access information By establishing a knowledge expert list and an electronic library through the intranet, the company aims to improve communication and knowledge sharing This electronic library will serve as a centralized space for storing and accessing various materials, including memos, training manuals, and seminar resources, addressing the need for standardized work procedures Additionally, the IT department will provide tailored user manuals and systems that align with departmental needs, facilitating better knowledge management within the organization.
To foster a culture of knowledge sharing among employees, the company should implement non-IT solutions that encourage proactive participation Establishing a compensation scheme for the time dedicated to knowledge contribution can incentivize employees, while offering rewards for sharing information will further motivate engagement and collaboration.
Creating opportunities for private exchanges among employees, such as informal gatherings or coffee breaks, can significantly enhance feelings of trust and understanding within the team Effective communication, particularly from senior management, is essential for fostering positive employee engagement This two-way communication process allows managers to convey expectations while encouraging employees to share their ideas and participate in decision-making By valuing employee input, organizations can improve relations and promote cooperation across departments, ultimately paving the way for success.
IT solution helps improve direct communication through technology in order to access exactly necessary information for work
By means of interaction through technology, all employees can quickly find information and knowledge as well as update immediately as occurred to avoid being outdated
The server computer with strong capacity of memory to storage files and database costs 20.000.000 VND
Annual maintenance of server computer costs 7.000.000 VND
Distribution program to access electronic library costs 20.000.000 VND
Non-IT solution helps bring motivation of employees in sharing knowledge enthusiastically Moreover, they will feel their contributions are recognized and useful for the whole company
Reward for sharing knowledge related to each concept consists of:
- To handle existing shipment: 10% of basic salary
- Initiative of solving trouble or working process: cash bonus according to each initiative
The establishment of private exchange space contributes time and space to build trust among employees to enhance their connectivity
The private exchange space is set up such as the existing greenroom of the company
Therefore, of the cost will be minimal to office administrative costs.
The second alternative of standard working process
Interlog Company is dedicated to enhancing and standardizing its internal processes across all departments to optimize job performance Despite these efforts, gaps and overlaps in operational procedures have been identified, particularly in transferal documentation, delegation systems, and decision-making, leading to inefficiencies This misalignment results in suboptimal use of human resources, increased hidden costs, and a loss of overall control within the organization.
Meyer and Herscovitch (2001) emphasize two key strategies to improve effective commitment and efficient coordination within organizations First, it is essential for management to engage employees in decision-making processes relevant to their departments Second, fostering a culture that recognizes and values contributions from employees is crucial This aligns with human resource management theory, which defines empowerment as employee involvement and highlights its importance in the participatory phase of managerial decision-making (Ford & Fottler, 1995; Pardo del Val & Lloyd).
2003) From these supportive theories, the Board of Director should complete the overall working process throughout the company by:
Establish an independent council to oversee the building process, tasked with reviewing, adjusting, and integrating each procedure into a cohesive framework This mission is set to be completed within a one-month timeframe.
The council comprises professionals with expertise and logical reasoning from various departments, including Sales, Production, and Accounting, to ensure a cohesive and efficient building process across all divisions.
To enhance the working process, it is essential to strengthen the delegation of authority from middle managers to their subordinates This strategy fosters trust and encourages a sense of responsibility among employees, motivating them to engage more deeply in their tasks rather than merely completing their assigned duties.
Accordingly, the management will be freed to solve general administrative tasks instead of resolve the detailed issues
A streamlined and efficient workflow enhances employee productivity and minimizes errors during collaborative tasks, while also fostering self-motivation among employees in managing their responsibilities.
The wages for each member of this council cost approximately 10.000.000 VND/person
In conclusion, the proposed solutions address Interlog Company's central issue of inefficient internal coordination, stemming from weak colleague relationships, inadequate knowledge sharing, and ineffective working processes Each solution presents distinct advantages and disadvantages Ultimately, Interlog Company should select the most cost-effective option that maximizes human resource efficiency while maintaining reasonable expenses.
Interlog Company has encountered misunderstandings regarding its general objectives, particularly in coordinating efforts between departments Clear communication and shared knowledge among the Board of Directors, mid-level managers, and staff can significantly enhance working relationships and minimize internal shortcomings Additionally, implementing detailed and normative documents as guidelines for various tasks will streamline processes Therefore, prioritizing this approach is crucial for Interlog Company, given its current focus on enhancing internal human and technological capabilities.
Establishing an independent council to streamline the working processes across departments is a challenging task that demands significant time and expertise Integrating various functions into a cohesive system is essential, yet it may lead companies to consider hiring costly process consultants, even when operations are stable Consequently, the second proposed solution appears to be a viable long-term strategy, as it allows for thorough implementation and ongoing improvements.
IMPLEMENTATION
Base on the first suitable solution, the strategy execution would be followed the steps:
The Human Resource Department, in collaboration with the Administrative section, established a private space within the office This initiative was successfully implemented within one week and included the installation of artificial walls and equipment to support designated break times.
The company plans to implement an IT system as an electronic library for effective knowledge and information sharing The IT department will set up a high-capacity server to store all databases and develop a distribution program for accessing the electronic library Additionally, user manuals and training sessions will be provided quarterly for each department To ensure smooth operation, the IT department will conduct periodic maintenance on a yearly or semi-annual basis.
To enhance employee motivation for knowledge sharing, the Board of Directors, Human Resource Department, and Managers will hold meetings to discuss compensation schemes that incentivize this behavior Following these discussions, the Human Resource Department will collect feedback and communicate the finalized initiatives across the company A structured reward system will be implemented to recognize various types of contributions, encouraging a culture of knowledge sharing and collaboration among employees.
- Sharing the latest information on business regulations by summarizing concise important ones with easily understanding This post-standardized information will be updated in the intranet system
- Propose the improvements of specific job or working process in department The proposals must be practical and approved through the direct Manager and the Board of Directors
- The proposal of changing is effectively applied within department as well as become learning model of other departments
- Participate in innovate the detailed work issues, information management at the company level in order to create the more efficient working system
To enhance internal coordination and improve employee satisfaction, the company should implement a biannual employee satisfaction survey This approach allows for ongoing assessment of employee morale and the effectiveness of solutions aimed at addressing inefficiencies.
CONCLUSION
In summary, this thesis focuses on identifying the current challenges faced by Interlog Company and proposing potential solutions A critical analysis of Interlog's situation revealed that high employee turnover is significantly influenced by internal coordination issues, which affect overall company operations, job performance, and employee behavior Addressing these core problems is essential for improving the work environment at Interlog.
Effective internal coordination within a company is hindered by issues such as poor communication, inadequate knowledge sharing, and weak working relationships, which ultimately affect employee empowerment and satisfaction A significant number of employees have expressed strong agreement that low working relationships are a key factor impacting their overall job satisfaction.
SUPPORTING INFORMATION
Research methodology
The approach to study problem used the secondary data that comes from annual report of Human Resource Department of Interlog Company, the report on Management Consultancy of
Vietnam National Productivity Institute in 2015 and statistical numbers of Vietnam Logistics
In research, two traditional methods—Quantitative and Qualitative—are widely utilized to collect and analyze data Quantitative research focuses on numerical data, while Qualitative research emphasizes non-numerical data As noted by Saunders (2007), quantitative methods are ideal for data collection and analysis involving numbers, whereas qualitative methods gather insights into cultural values, opinions, and social contexts The qualitative approach is particularly effective in capturing complex textual descriptions of individuals' experiences, revealing the nuanced "human" side of issues, including their beliefs, emotions, and relationships.
The primary qualitative data collection methods include observation, in-depth interviews, and the analysis of documents and audiovisual materials (Creswell, 2003) Each method offers distinct advantages and limitations The resulting data can be formatted as text, audio, video files, or photographs This thesis focuses on the realistic scenarios observed within Interlog.
The company employs in-depth interviews, a qualitative research method defined by Boyce (2006) as intensive individual interviews with a small group of respondents to gain insights into their perspectives on specific topics This technique is particularly useful for obtaining detailed information about individuals' thoughts and behaviors or for exploring new issues comprehensively In the context of Interlog's problem-solving thesis, the qualitative research aims to investigate how working relationships, communication, knowledge sharing, and empowerment affect internal coordination A total of five individuals, including managers and experienced staff, participated in one-hour interviews featuring open-ended questions, representing roles in Director, HR, sales, and customs functions.
The interviews conducted with individuals from Interlog Company provide valuable insights into the current internal coordination and various challenges faced by the organization Each interview was meticulously tape-recorded and transcribed to ensure accurate representation of their experiences and perspectives.
Report transcript
This report summaries the content of in-depth interview with five people working in different positions at Interlog Company The interviewees included Deputy Manager at Human
Resource Department, Sales Executive at Interconsol Department, Manager of Customs
The Managing Director and Team Leader of the Customer Services Group at Interlog addressed the issue of high turnover rates from 2013 to the present, sharing their insights on the company's current situation.
Firstly, the interviewees introduce their functional department concerned working process and connection with other departments The Sales Executive at Interconsol Department and
Team leader of Customer services group are responsible for dealing business, serving, contact with customers included domestics and foreign companies, forwarding and logistics companies
The Manager of the Customs Department oversees import and export procedures, ensuring seamless customs declarations for customers while also supporting the Sales Department in meeting client needs Meanwhile, the Human Resource Department is responsible for recruitment, training, and social insurance, fostering collaboration across all departments to establish and maintain a stable workforce.
Since 2013, Interlog has experienced a high employee turnover rate, with the Sales Department facing the most significant impact, averaging around 50% annually.
The current organizational structure is overly complex, limiting employee decision-making power and causing confusion in workflows due to excessive involvement from the CEO and managers in minor details This lack of transparency and consistency in processes, coupled with an unappealing reward and motivation system, drives talented employees to seek better opportunities elsewhere Additionally, internal conflicts, particularly between the sales and customs departments, arise from ineffective communication Furthermore, managers exhibit a deficiency in leadership skills, while employees lack essential knowledge and skills in the logistics industry.
The company expressed concerns about inefficiencies stemming from unclear communication and objectives, with departments focusing solely on their own issues rather than aligning with the overall direction The Deputy Manager of HR emphasized the need for effective utilization of employees, highlighting limited leadership skills in identifying and assigning the right roles Additionally, the influx of fresh graduates from diverse educational backgrounds poses significant challenges for training In summary, three primary issues have been identified: insufficient internal coordination through communication, knowledge sharing, and empowerment; inadequate salary; and a lack of motivation.
The interviewees proposed several ideas for improving the incident, emphasizing the need for increased transparency in all work processes to prevent overlap This includes clearly defined job descriptions, streamlined workflows, and better interdepartmental connections They also stressed the importance of fostering a culture of knowledge sharing throughout the company Furthermore, insights from both the interviewees and the Vietnam National Productivity Institute suggest that the Board of Directors should prioritize transparent performance evaluations for managers and staff by implementing Key Performance Indicators (KPIs).
Interview transcript
Interviewer: Tran Bao Ngoc Interviewees:
- Interviewee 1: Dang Nguyen Thao Linh – Deputy Manager at HR Department
- Interviewee 2: Nguyen Thi Hoang Linh – Sales Executive at Interconsol Department
- Interviewee 3: Ho Phuoc Loc – Manager of Customs Department
- Interviewee 4: Nguyen Duy Minh – Managing Director
- Interviewee 5: Vo Van Cat Duyen – Team leader of Customer services group
Date: August 20 th , 2015 Place: Interlog Company’s meeting room
The meeting will take place on the 5th floor of the Sai Gon Port building, located at No 3 Nguyen Tat Thanh Street, Ward 12, District 4, Ho Chi Minh City Thank you for taking the time to meet with me today; my name is [Your Name].
Tran Bao Ngoc, a Master's degree student at ISB, is researching employee turnover and retention at Interlog Company This dissertation aims to identify the factors contributing to the high turnover rate at Interlog since 2013 and to propose effective solutions to address these issues.
The interview will last under one hour and will be recorded to ensure that all your insights are captured accurately I want to emphasize that this recording is solely for research purposes and will not be shared with Interlog Company; both the tape and transcript will remain confidential My aim is to explore the current situations at Interlog Company based on your experiences to identify the real issues Rest assured, your responses will only be accessible to the research team, and I sincerely appreciate your willingness to support this inquiry.
Interviewer: Please tell us your full name and the position that you are holding in your company at the moment?
Interviewee 1: My full name is Dang Nguyen Thao Linh I am currently Deputy Manager at
Human Resource Department I graduated from University of Education and I have been working at Interlog Company since 2010
Interviewee 2: My full name is Nguyen Thi Hoang Linh I have been with Interlog Company since 2010 and now I am a Sales Executive of Interconsol Department
Interviewee 3: My full name is Ho Phuoc Loc I have worked at Interlog since 2005 and now I am a manager at Customs Department since 2011
Interviewee 4: My full name is Nguyen Duy Minh I have been the Managing Director of Interlog
Interviewee 5: My full name is Vo Van Cat Duyen I have been as Sales Executive of Sales
Department from 2007 From 2012 until now, I have been a team leader of customer services group
Interviewer: Could you please briefly describe the working process in your department particularly the connection with other departments?
Interviewee 1: I have to take responsibility on several issues such as HR, Social Insurance,
Internal Marketing, recruitment and training That’s quite a very heavy workload for the HR
Department Additionally, the request for human of each department is mostly different and unstable meanwhile we do not have enough labor force and resources to do everything properly
Interviewee 2: My department was established at the end of 2012 and the main responsibility is dealing business with other forwarding and logistics companies and foregin agents in China,
The newest department in our company focuses on establishing processes based on guidelines from foreign agents, including pricing calculations and sea routes This role demands a strong understanding of import and export procedures, as well as essential skills such as proficiency in English and the ability to negotiate and manage relationships with VIP customers.
Therefore, a new employee mostly takes around 2 years in order to work proficiently in my department
Interviewee 3: My department takes a responsibility in import and export procedures and custom declaration This is a very important task because if we make any mistake in paperwork, the goods of customers would get into trouble; and the company would receive a big loss in both reputation and finance Therefore, all of my subordinates have to regularly and carefully update the lastest decrees of government in order to do in a right way Additionally, we have to provide the sufficient information to the Sales Department before making contract with customers whethere their goods can be done or not
Interviewee 4: As the Managing Director, I am responsible for the entire operations of the company Interlog is a company operating in an extremely competitive and fierce Logistics sector In current, the Vietnam Logistics Company only accounts for a small market share in proportion of Logistics services in Vietnam Meanwhile, the major market share has been manipulated by the foreign multinational Logistics group Therefore, the difficulties of Logistics
Interlog is a leading company recognized both domestically and internationally However, we face daily challenges such as technological obsolescence, evolving knowledge, and fluctuating human resources My mission is to ensure the stability and profitability of the company in every fiscal year.
Interviewee 5: I am responsible for serving customers, especially VIP customers Moreover, my department has worked with both domestics and foreign export customers Nowadays, the customers are fastidious with detailed and cautious requirements Correspondingly, each of sales staff has important tasks to find many of quality customers that make profit for the company We have faced a lot of pressure from the market and price competition of the opponent companies
Interviewer: Many small and medium-sized enterprises across various industries are struggling with high employee turnover rates Has Interlog Company experienced this issue, and which department is seeing the highest turnover?
Interviewee 1: Working in the HR department, I know clearly about the employee retention situation at the company Within company, the sales division has existed the highest turnover rate with approximately 50% each year
Interviewee 2: In my department, there were sales staff quit jobs every year In year 2014, three of my sales staffs left the job after receiving training Most of them had low commitments to the company Furthermore, they are lack of knowledge with this consolidation function that I have been hard to train and secure their acquirement
Interviewee 4: Of course, it does occur in our company almost 2 years from 2013 till now And the department that has the highest turnover rate is Sales Department which comprises four small divisions: Interconsol, Agents Development, Sales and Supply Chain Management
Interviewer: In your opinion, what are the main reasons that cause this symptom and why?
Interview 1: Personally, I thought everything in life has come from both sides and this issue also can be seen through both objective and subjective aspects Objectively, logistics industry in
Vietnam's logistics sector presents numerous challenges but remains highly lucrative, prompting many companies to recruit new employees annually to keep pace with market growth At Interlog, a diverse pool of fresh graduates applies each year, bringing various educational backgrounds After a two to three-month probation period across different departments and locations, some employees adapt well to the work environment, while others may leave for various reasons Conversely, experienced employees tend to adjust easily but often demand higher salaries and benefits, making long-term retention a challenge.
The current organizational structure is overly cumbersome, limiting employees' decision-making power as they must seek approval from multiple stakeholders The CEO, lacking an effective assistant, becomes overly involved in minor departmental details His strong belief in Feng Shui and Chinese zodiac signs leads to a distrust of subordinates, particularly in the recruitment process, as he prefers to conduct final job interviews himself rather than relying on recommendations from department and HR managers This approach often results in miscommunication between the CEO and mid-level managers.
Interviewee 2: 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 For instance, the shipment handling process is too limited due to lack of decision making power of staffs while most of decisions belongs to management board and a lower-level empowerment from the manager to their staffs I am really confused about the process of waiting for shipments handled through every department, especially when trouble needs to be solved The result is that employees will waste time to connect together and their productivity will be also decreasing 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 the company They think they are strongly depended on other divisions in dealing with customers