FACTORS INFLUENCING ORGANIZATIONAL COMMITMENT AND INTENTION TO STAY OF CORE EMPLOYEES IN SMALL - MEDIUM SIZED COMPANIES IN HOCHIMINH CITY

Scope of the study Purpose of the research investigate and determine the factors the affective staying decision of core employees in SMEs, it will exam the relative between the factors

International School of Business

-

Huỳnh Thiên Hải

ORGANIZATIONAL COMMITMENT AND INTENTION TO STAY OF

CORE EMPLOYEES IN SMALL - MEDIUM SIZED COMPANIES

IN HOCHIMINH CITY

Ho Chi Minh City - Year 2012

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

FACTORS INFLUENCING ORGANIZATIONAL COMMITMENT

AND INTENTION TO STAY OF

CORE EMPLOYEES IN SMALL - MEDIUM SIZED COMPANIES

INDEX

ACKNOWLEDGEMENTS 5

LIST OF FIGURES 6

LIST OF TABLES 6

LIST OF APPENDIX 7

ABSTRACT 9

1.1 Background to the research 10

1.1.1 The importance of small and medium sized companies 10

1.1.2 The facts of labor force in SMEs and problem statement 10

1.2 Research objective 12

1.3 Scope of the study 12

1.4 Significances of the study: 12

1.5 Structure of the study 13

CHAPTER 2: LITERATURE REVIEW 14

2.1 Chapter introduction 14

2.2 Relative concepts and definition 14

2.2.1.Small and medium companies 14

2.2.2 Core employees 15

2.2.3 Core employee retention 15

2.3 Review of previous study 17

2.3.1 Organizational commitment 18

2.3.2 Training 19

2.3.3 Leadership 19

2.3.4.Working environment 20

2.3.5 Remuneration and reward 21

2.3.6 Organizational culture and policies 22

3.3.7 Intention to stay 22

2.4 Proposal research hypotheses 23

2.5 Chapter conclusion 24

CHAPTER 3: METHODOLOGY 25

3.1 Research process 25

3.2 Questionnaire design 26

3.2.1 Measure of variable 26

3.2.2 Draft questionnaire 30

3.3 Pilot study 30

3.4 Main survey 31

3.4.1 Sample method 31

3.4.2 Sample size 31

3.5 Data analysis technique 32

3.5.1 Recoding data 32

3.5.2 Testing of Reliability 32

3.5.3 Exploratory factor analysis (EFA) 33

3.5 4 Hypotheses testing: Multiple Regression Analysis 33

3.7 Chapter conclusion 34

CHAPTER 4: DATA ANALYSIS 35

4.1 Sample description and data clearance 35

4.2 Demography Sampling 35

4.4 Testing of Reliability 36

4 5 Exploratory factor analysis (EFA) 37

4.7 Chapter conclusion 43

5.1 Finding and discussion 45

5.2 Limitation 46

5.3 Suggestion for future Research 47

APPENDIX 55

APPENDIX 1.1: QUESTIONAIRE (English version) 55

APPENDIX 1.2: QUESTIONAIRE (Vietnamese version) 59

APPENDIX 4.1 CODING 62

Appendix 4.2 Demography 65

Appendix 4.3: Testing of reliability variables 65

Appendix 4.4 EFA for all independent variables 67

Appendix 4.4 1 EFA for all independent variables (The first time in 4 times) 67

Appendix 4.4.2: EFA with all independent variable (the second time in 4 times) 68

Appendix 4.4 3 EFA for all independent variables (The third time in 4 times) 70

Appendix 4.4 4 EFA for all independent variables (The fourth time in 4 times) 71

Appendix 4.5 Regression, model 1 Independent variables: Training, leadership, remuneration and company policies; dependent variable: Commitment 73

Appendix 4.6 Regression, model 2 Independent variables: Organizational Commitment; dependent variable: intention to stay 76

I would like to thank my Mummy, my sisters, brothers and my special friend who is

my moral support in all my studying period

Last at all, I would like to present the achievement to my Dad's soul who spent all the life for my family

Ho Chi Minh City, December 28, 2012

LIST OF FIGURES

Figure 2.1 proposal research hypothesis 24 Figure 3.1 Research Design Process 26

LIST OF TABLES

Table 2.1 Classification of SMEs in Vietnam 16 Table 3.1 Measurement of training and career

Table 3.2 Measurement of leadership 27 Table 3.3 Measurement of working environment 28 Table 3.4 Measurement of remuneration and

Table 4.2: Cronbach’s alpha reliability coefficient

Table 4.3: Pattern matrix in the last time (the fourth

Table 4.5 Model Summaryb model 1 40

Table 4.7 Coefficientsa of medel 1 41 Table 4.8 Model Summaryb model 2 43 Table 4.9 Coefficientsa of model 2 43 Table 5.1 Questionnaire for organizational polices 46

LIST OF APPENDIX

Appendix 4.3: Testing of reliability of variables 65

Appendix 4.4 EFA for all independent variables 67

Appendix 4.4 1 EFA for all independent variables (The first

Appendix 4.4.2: EFA with all independent variable (the

Appendix 4.4 3 EFA for all independent variables (The third

time in 4 times)

70

Appendix 4.4 4 EFA for all independent variables (The

Appendix 4.5.Correlation bivariable model 1 73

Appendix 4.5.Correlation bivariable model 2 76

LIST OF ABBREVIATION

SME Small and medium sized company SMEs Small and medium sized companies HCMC Hochiminh City VCCI Vietnam Chamber of Commerce and Industry

HR Human resource VND Vietnam Dong WTO the World Trade Organization

WB World Bank

ABSTRACT

Employee retention especially core employees is one of the most important ongoing practices of human resource management Employee’s turnover is a major HR organizational threat The problem is being faced by different organizations of almost all the countries Organizations are trying different plans to get maximum output from employees Core employee retention is one of the main factors that could help in achieving the required results

There are many theories for retention employees but there is not any closed research for SME employees in HCMC

This study elaborates the retention of core employees; its benefits and factors that may help

to retain the best employees of the organization

Questions with five-point Likert scale are used to the research for investigating needs of core employees Base on the result of investigation, the most affective factors among of factors: training-career path; leadership; working environment ; remuneration-rewards and organizational culture-policies will be recognized Intermediary variable is organizational commitment that is used in the research

The research findings prove significant relationship of training-career path; leadership; working environment; remuneration-rewards and organizational culture-policies that influence the staying decision of core employee This study will help SMEs in HCMC to find out various HR policies and to revise their current policies for further improvements

CHAPTER I: INTRODUCTION

1.1 Background to the research

1.1.1 The importance of small and medium sized companies

Small and medium sized companies (after here called by SMEs) are important to almost all economies in the world SMEs are main element in all economics, in Europe, there are 57 per cent of 1- person enterprises, 34 per cent of micro enterprises (less than 10 employees); 7.7 per cent of small enterprises; 1per cent of medium, totally of SME is 99.7 per cent but there are only 0.27 per cent of large companies and 0.03 per cent of Stock Exchange (Agnès, 2010) SMEs in Russia (with up to 250 employees) account for about 90 per cent of the total number of firms, they provide 45 per cent of total employment and they account for 40 per cent of total sales; SMEs in China account for 99.9 percent of the total number of firms, they provide 84 per cent of total employment and account for 71 percent of total sales (Qimiao, 2003)

General Statistics Office (2012) reported SMEs are approximately 97 per cent of 448.393 companies in Vietnam and they represent the main drivers in obtaining employment and VCCI (2012) reported SMEs contribute 60 per cent GDP in Vietnam with the capital of 6 million billion VND

1.1.2 The facts of labor force in SMEs and problem statement

Although there are many important SME's distribution, they still face many problems in HR, the demands for the human resource is increasing and the lack of the right personnel, especially in the management personnel, prevent the SMEs development

One of the specifications of HR in SMEs is not clearly function between administration and human resource such as administration usually is responsibility recruitment function in SMEs, but that are 2 different functions of HR in the organization (Torben., 2003)

SMEs is very hard to completive with other organization type to attract qualified employee because there is not clearly policies to intent them According to a recent poll of undergraduates and recent graduates of the three local universities, Singapore Management

University (SMU), National University of Singapore (NUS) and Nanyang Technological University (NTU), MNCs, as a category, still outstrip SMEs as employers of choice Recruitment firm Jobs Factory, which polled over 4,500 students, revealed that in this year’s survey, the top five employers of choice in the private sector are Apple, Singapore Airlines, Google, 3M and DBS Bank – all large companies with operations across the world It is not difficult to see why job seekers flock to MNCs Besides the easily-recognizable brand names, they are also seen as organizations that are more transparent, offer higher remuneration, superior benefits and strong organizational structure – all of which point to better career prospects Recent surveys have highlighted that ‘”‰ƒ‹œƒ–‹‘ƒŽ culture and work-life balance are important to the younger generation, and bigger firms are perceived to

be more flexible – or at least, more open to suggestion – in these areas Conversely, SMEs are often seen to be non-transparent, authoritarian and less professional (than MNCs) More often than not, the founder/boss’ inner circle is made up of family and relatives, with competence a secondary consideration (Developing an Argument, 2010)

Employee working life in SMEs is short, most of employee think SMEs is temporary place,

so they do not have any long term plan for the SME The other specification of employees in SMEs is they are not confident working, always waiting direction for leader

The studies indicated that the work relationship between the employer and the employee in SME’s is not generally governed by a contract Only (15%) of the workers had a contract (El Mahdi, Nov.1999) The lack of contract may just be a reflection of the traditional and informal environment in which SME’s is conducting its affairs So, the most important issue

of SME’s is the insecurity of the workers regarding their future, due to the lack of social security coverage and due to the fact that employers are not bound by any contract towards their employees

The previous studies indicated that although the provision of technical and other aspects of running the small firms are highly needed, the training assistance that is offered to small enterprises through the different programs of support and finance is almost negligible According to the study of Soliman et al., (1998) only 66.9% of the studied projects indicated

that they did not get any kind of assistance, especially training, from the finance providers Despite the fact that a few studies tackled the issue of small enterprises, employment and micro-finance, none of these research tried to assess the kind of relationship that exists between offering micro finance and employment creation in the small enterprises

There are many reasons (or factors) are influencing employee but there is no study that researches what the factors more affect to employee, which factors are influencing organizational commitment and intention to stay of employee in the SMEs Those questions are the problem of labour force in SMEs and that will be answered in the study

1.2 Research objective

In the thesis, we will review relevant theories and previous researches on factors that have impact on the intention to stay of core employees stay in SMEs Specially, the study will investigates what factors influencing the intention to stay of core employees and measure how deep the influencing factors effect organizational commitment and intention to stay of core employees

1.3 Scope of the study

Purpose of the research investigate and determine the factors the affective staying decision of core employees in SMEs, it will exam the relative between the factors and identify the factors which are strongly affective the organizational commitment and intention to stay of core employees in SMEs The result of this research can be applied to SMEs in HCMC and help SME directors re-construct company and give new human resource policies that to retain core employees

1.4 Significances of the study:

HCMC is the biggest trading, financial and service center of Vietnam There are over 170.000 SMEs, among of 38 per cent of SMEs in Vietnam SMEs in HCMC is very flexible

so they are not only achieve the best result but also get bad influence with any negative chances There are many companies among 26.324 companies that quit in 6 months in beginning 2012 face difficult situation to retain core employees Because of the importance

of core employees and their position of HCMC, this research focus in retention core employees in SMEs in HCMC

In general, core employees are normal employees with some special specification such as working period, their importance in organizations, So besides normal requested as normal employees, they need more request and to meet their requests is one of the key to retain them

in organizations In next chapter, the study will show the request of core employees

1.5 Structure of the study

The study consists of five main content

Introduction: Overview of SMEs such as the importance of SMEs, the facts of labor force

in SMEs, research objective, scope of study and Significances of the study

Literature review: Some relative concept and definition of the study will be explained in

this chapter such as small and medium companies, core employees, core employee retention

as well as review of previous study about training and Career path; leadership; working environment; remuneration & reward; organizational culture and policies; organizational commitment and intention to stay Proposal research hypotheses will be introduced in this chapter

Methodology: Research process will be introduced in this chapter This chapter also

introduces the methodologies of questionnaire design, measure of variable, draft questionnaire, pilot study as well as the way to collect data and methodologies of data analysis

Data analysis: Collected data will be analyzed in this chapter This analysis include testing

of Reliability, exploratory factor analysis (EFA) and hypotheses testing: Multiple Regression Analysis

Finding, discussion, limitation and suggestion for future study : This is the result of the

study distribution of study for theory and applied, the limitation of the study and suggest to later study

CHAPTER 2: LITERATURE REVIEW 2.1 Chapter introduction

There are many previous study for the factors that influencing organizational commitment and intention to stay of core employee in the world In this chapter, the definition of core employee, SMEs, core employee retention and the factors influencing organizational commitment and intention to stay of core employee are introduced Hypotheses, proposal scales are introduction is also showed in this chapter

2.2 Relative concepts and definition

2.2.1.Small and medium companies

That is synonymous definition between small and medium companies and small and medium sized enterprises The abbreviation "SME" for small and medium sized companies

is used in the European Union and by international organizations such as the WB, and WTO The term "small and medium businesses" (or SMBs) is predominantly used in the USA In most economies, smaller enterprises outnumber large companies by a wide margin SMEs are said to be responsible for driving innovation and competition in many economic sectors Wikipedia (2012) defined that are the companies whose personnel number fall below certain limit The certain limits are different from the countries The EC definite SMEs are three broad parameters which define SMEs: micro-entities are companies with up to 10 employees; small companies employ up to 50 workers, whilst medium-sized enterprises have

up to 250 employees

In Vietnam, Decree No 56/2009/ND-CP dated 30/6/2009 of the Government defined SMEs are the organizations that are less than 200 employees or capital less than 100 billion Vietnam Dong, More detail show in table 2.1

Table 2.1: Classification of SMEs in Vietnam (Decree No 56/2009/ND-CP)

Scope of business Micro

company

Small company Medium company

Employees Employees Capital (bil) Employees Capital (bil)Agriculture, Forestry, Less 10 10-200 Less 20 20-200 20-100 Industry and

construction

Less 10 10- 200 Less 20 20-200 20-100 Trading and services Less 10 10-50 Less 10 50-100 10-50

2.2.2 Core employees

Core employee are permanent employees comprising the central and foundational group that provides the skills essential to the survival and growth of an organization Core employees are supported in their work by contingent or peripheral employees (Business Dictionary) Critical job functions will be retained by small group, relatively permanent "core" of employees with board skill allowing them to tackle a variety of jobs (Janet, 2004) As definition from Renee (2012) a core employee is a full-time attendance Core employee usually are required to work at least 40 hours per week Core employees are necessary for a business to function A contingent worker is usually a temporary worker

Definition of core employee in the research is person who works full time (Renee, 2012), they are the persons who respond multi job and affect on other person (Janet, 2004) and work for organization more than 6 months

2.2.3 Core employee retention

Once a SME finds an employee, it's very hard to find knowledgeable people who is suitable

to expect position because some disadvantage of SMEs Hiring knowledgeable people for the job is essential for an employer But retention is even more important than hiring In order to keep employees motivated and willing to stay with the organization, the company do not only pay more but also make motivation working environment

Harvard Manage Mentor Journal (2012) said Core employee retention is to keep that people who will help the organization remain competitive to competitors in the market

In other hand, when core employee leaves, the organization will loss many things: the turnover is high so the cost of turnover (including hiring costs, training costs and productivity loss) is high; When an employee leaves, valuable knowledge about the company, customers, current projects and past history will go with him, employer must pay much time and money has been spent on the employee in expectation of a future return When the employee leaves, the investment is not realized; customers and clients do business with a company in part because of the employee Relationships are developed that encourage continued sponsorship of the business When an employee leaves, the relationships that employee built for the company are severed, which could lead to potential customer loss When an employee terminates, the effect is felt throughout the organization Co-workers are often required to pick up the slack The unspoken negativity often intensifies for the remaining staff The goodwill of a company is maintained when the attrition rates are low Higher retention rates motivate potential employees to join the organization If an employee resigns, then good amount of time is lost in hiring a new employee and then training him/her and this goes to the loss of the company directly which many a times goes unnoticed And even after this you cannot assure us of the same efficiency from the new employee

Employee retention is beneficial for the organization as well as the employee They are not the ones who don’t have good opportunities in hand As soon as they feel dissatisfied with the current employer or the job, they switch over to the next job, and when they left, with their effectiveness, other employees will be left or their willing go down in a period A good employer should know how to attract and retain its employees

The question of SME leaders is how to retain their employee, especially core employee as long as possible The problems that are companies should found desire of core employees, but that is very difficult because each employee has different desire even it are different in each stage of their life

2.3 Review of previous study

Best employees searching will be very difficult things in coming years for organizations, core employee retention is a process not only to maintain existing core employees but also recruits right person to appropriately position In the scope of study, researcher studies factors to maintain core employees in SMEs

There are several previous research about employee retention topic with various result and ideas to applied to organizations

Retention can be possible by many ways but one of the most used in organizations is paying more than they are earning Hansen (2002) argued that pay more to the employees in order to achieve better financial position and retain those employees who lead from the front to attain business goals Short and long term incentives should be given according to the goals of business that will help to have more organized and strong management team for long term results Lawler II (2005) stated that in these days organizations are competing for talent rather than counting employees loyalty They are focusing on attracting, hiring and retaining the required core persons For this purpose organizations must utilize those practices which are in favor of both employees and employers leading them towards higher performance levels

We have closed look to development of employee retention concept to now (2012):

From 1975, Dubin et al., found a strong relationship between central life interests of workers and their commitment to the organization This research show the relationship between work value and commitment to the organization

Ans et al., (2003) found employee’s staying in decision has found some positive effects on the job content, social atmosphere, work-life balance, career development

Janet (2004) in her PhD thesis for retention of core employee in SMEs in Australia, argued that core employees retention higher if they get high human commitment: with human resource practice and organization factors such as selection (organization fit), remuneration and rewards Training and career develop, challenging work and opportunities and

organization commitment such as leadership, team work, organizational culture and policies, work environment;

Prateek et al., (2011) said Organization commitment (ownership, loyalty, attachment), Career Advancement (career needs, career path, career planning and management), quality of work life (fair compensation, working condition, job Involvement) has some direct and independent effects organizational commitment and intention to stay of core employee Bhavna & Swati (2012) researched the quality of working relationships, workplace leadership, having a say, clear values, being safe, the built environment, recruitment, pay and conditions, getting Feedback, autonomy and uniqueness, a sense of ownership and identity, learning, passion, having fun, community connections, that can influence iorganizational commitment and intention to stay of core employee in the organization

2.3.1 Organizational commitment

The concept of organizational commitment has attracted considerable attention over recent years and has become a central objective of human resource management As Guest (1987) indicated, HRM policies are designed to maximize organizational integration, employee commitment, flexibility and quality of work For the topic in question our focal interest refers to “Commitment ” which can be described as attachment and loyalty Individuals can display this attachment and loyalty at a variety of levels: their job, profession, department, boss or organization Realistically then, commitment may therefore be diverse and divided between any of these More specifically, organizational commitment has been defined by Mowdray (1992) as consisting of three components: an identification with the goal’s and values of the organization, a desire to belong to the organization and a willingness to display effort on behalf of the organization

Shorter meaning of organizational commitment in the study that is satiability of core employees in SMEs

2.3.2 Training

That definition is called by different way by the authors: Learning, training opportunities (Bhavna & Swati., 2012; Waleed., 2011) training and career development (Muhammad, 2011), coaching (Liette, 2010), training and development, (Mohammad A & Mohd H.R J., 2009), learning and development (Andy et al., 2003), amount of training available, training methods (Karen, 2001), training and career develop (Janet, 2004)

As Dawn R Mc K (2012) Career development, a major aspect of human development, is the process through which an individual's work identity is formed It spans one's entire lifetime Career development begins with a person's earliest awareness of the ways in which people make a living, continues as he or she explores occupations and ultimately decides what career to pursue, prepares for it, applies for and gets a job and advances in it It may, and probably will include, changing careers and jobs

If the SME leaders help core employee set their career path, that is weapon to retain them because they feel ensuring their jobs in the future Career path is a system which is organized, formalized and it’s a planned effort of achieving a balance between the individual career needs and the organization’s workforce requirements (Leiboiwitz et al, 1986)

H 1: Training and career path has positive impact on organizational commitment

2.3.3 Leadership

That was defined by different words as Workplace leadership (Bhavna & Swati, 2012)

Management style and lack of opportunities (Waleed, 2011), good leadership (Petra, 2011), supervision (Kazi & Sisi, 2011), a sense of ownership and identity (Bhavna & Swati, 2012), leadership behavior (Mohammad & Mohd, 2009), trust in supervisor (Fleischlin, 2008), having a say (Agarwal & Gupta , 2012), supervisor support (Muhammad, 2011), leadership (Janet, 2004)

Leadership is definite as behavior of an individual that result in none-coercive influent when that person in directing and cooperating the activities of a group towards the accomplishment

of the shared goal (Bryman, 1992) That affect directly to retain core employees

One of the most important factors that have impact on commitment is the relationship between a core employee and a supervisor Leaders are the “human face” of an SMEs (Eisenberger, 1990), leader interact as a link to practice applications among stated goals and expectations By harmonizing the competing demands, they support in managing both inside and outside the work environment If the relationship does not exceed then employee will seek to any other opportunity for new employment and vice versa The leader support is so essential to retention that it can be said that employees leave bosses, not jobs (Ontario, 2004) If the leader focuses towards the employee’s progress, other than the formal evaluation process; this improves the employee’s retention and commitment towards the SMEs (Freyermuth, 2007)

H 2: Leadership is has positive impact on organizational commitment

2.3.4.Working environment

There are many alternative names with the same meaning: The quality of working relationships (Bhavna & Swati, 2012), the built environment, work place environment (Bhavna & Swati, 2012., Waleed, 2011), work place culture (Waleed, 2011), work environment (Muhammad, 2011), working environment (Yasir & Hussain, 2011), working environment (Mohammad & Mohd, 2009), trust in company (Fleischlin, 2008), being safe (Bhavna & Swati, 2012), positive and negative situations (Waleed, 2011), having fun (Bhavna & Swati, 2012), freedom and autonomy (Petra, 2011), highly incentive work (Petra 2011), working environment (Yasir & Hussain, 2011), working environment, (Mohammad & Mohd, 2009) having job security (Elizabeth et al., 2008), internal communications (Andy et

al, 2003), Social atmosphere (Ans et al., 2003), work environment (Janet, 2004)

The purpose of the study by Nadeem et al., (2011) was to determine what relationships between working environment and organizational commitment That is support of the

organization for flexible time working, working stress Working environment is one of the factors that affect core employee’s decision to stay with the SMEs It’s very important to recognize the emerging needs of individuals to keep them committed and provide the work environment as necessitate (Ramlall, 2003) Milory (2004) reported that people enjoy working, and strive to work in those SMEs that provide positive work environment where they feel they are making difference and where most people in the organization are proficient and pulling together to move the organization forward Workspace designs have a profound impact on workers and tend to live with job as long as satisfied (Brill et al., 2001)

H 3: Working environment has positive impact on organizational commitment

2.3.5 Remuneration and reward

That is defined by some researchers by different words: compensation and rewards is more popular and was called by Waleed (2011) Muhammad (2011) Kazi & Sisi (2011),

Mohammad & Mohd (2009) and Elizabeth et al.(2008); Waleed (2011) called it is pay and conditions, Muhammad (2011) called it is salary and wages rewards, Janet (2004) called it is remuneration and rewards

The term ‘reward’ is discussed frequently in the literature as something that the organization gives to the employees in response of their contributions and performance and also something which is desired by the employees (Agarwal, 1998) A reward can be extrinsic or intrinsic it can be a cash reward such as bounces or it can be recognition such as naming a worker employee of the month, and at other times a reward refers to a tangible incentive, reward is the thing that an organization gives to the employee in response of their contribution or performance so that the employees become motivated for future positive behavior In a corporate environment rewards can take several forms It includes, cash bonuses, recognition awards, free merchandise and free trips It is very important that the rewards have a lasting impression on the employee and it will continue to substantiate the employee’s perception that they are valued (Silbert, 2005) That income is correlation between compensation and employee's performance (Shun., 2003, Sriyan, 2010)

H 4: Remuneration and rewards has positive impact on organizational commitment

2.3.6 Organizational culture and policies

It has been defined by the words: organization justice (Muhammad, 2011), Culture (Kazi & Sisi, 2011), autonomy and uniqueness (Bhavna & Swati, 2012), organizational culture and policy (Mohammad & Mohd, 2009), culture (Andy et al., 2003), organizational culture (Karen, 2001), organizational culture and policies (Janet, 2004)

Organizational culture and policies: Culture is invisible that are management philosophy and type, communication protocol, ritual and taboo to create the uniqueness of each company (Furnham, 2002) The complement of organizational culture is structure: job design and work pattern That is including control, reporting relationship That expresses how work to

be done and business conduct

It is very importance in SMEs because there are a few of persons (especially for the SMEs that is less ten employees)

H 5: Organization culture and policies has positive impact on organizational

commitment

3.3.7 Intention to stay

According to Fishbein & Ajzen, "the best single predictor of an individual's behavior will be

a measure of the intention to perform that behaviour" (1975, p 369) Empirical evidence strongly supports the position that intent to stay or leave is strongly and consistently related

to voluntary turnover (Dalessio et al., 1986; Griffeth & Hom 1988; Mathieu & Zajac., 1990)

H 6: organizational commitment positive is correlated to intent to stay

Although Janet (2004) researched very carefully for core employee retention but her research has some limits to apply to SMEs in HCMC because with specific of characteristics, SMEs in HCMC is different from SMEs in Australia such as they are not competitive with bigger companies or FDI in recruitment the best person, so they cannot choose right person

to right position As Hang (2001), SMEs have several characteristics: Management: management is usually directly from owner and because of that, relationship between Owner-Director and employees is closed; capital: it's usually from owner's saving or from owner's friends loan; there are not many employees and some of them are owner-family relation, because of small number of employee, factors training and career development in SMEs usually are together so they are combine into unique factor in this study

There are several previous research from Eastern countries to Western countries about employee retention topic but each research has some limits to apply to SMEs in HCMC Because of characteristics of SMEs as above, the study focuses only in some factors such as: training/career path (development), leadership, work environment, remuneration and rewards and organizational culture and policies

2.4 Proposal research hypotheses

The study builds research model base on five factors and it is adapt with the model of Janet (2004)

Figure 2.1: proposal research hypothesis

Training and career

Intention to stay

H 1 Training and career path has positive impact on organizational commitment

H 2: Leadership is has positive impact on organizational commitment

H 3: Working environment has positive impact on organizational commitment

H 4: Remuneration and rewards has positive impact on organizational commitment

H 5: Organizational culture and policies has positive impact on organizational commitment

H 6: organizational commitment positively is correlated to intent to stay

2.5 Chapter conclusion

Although there are many factors that influence organizational commitment and intention to stay of core employees in HCMC but the study focuses in five factors: training & career path, leadership, working environment remuneration rewards and organizational culture & policies

The influencing of the factors to organizational commitment and intention to stay of core employees will be introduced in chapter 4

CHAPTER 3: METHODOLOGY

Methodologies will be explained in this chapter to collect the data to address the research issues of this study It starts with the research design process, questionnaire design It provides information about the sample demography It further describes the instruments, the data collection processes and the type of analysis carried out on each phase of the study

3.1 Research process

Figure 3.1 – Research Design Process

Initial questionnaire

Literature review

Back-translated questionnaire

Revision Draft

EFA

Reliability analysis

3.2 Questionnaire design

3.2.1 Measure of variable

The measurement of the factor is founded and developed by many researchers:

Training and Career Development: Training adequacy, job design, job control This

measurement was developed by Blau (1989), Cammann at al., (1979), Hausknecht at al., (2002), Jones et al (2001), Warr at al., (1979) and the study adapted from Janet (2004) 5 items

Table 3.1 Measurement of training and career development

Leadership: Transformational leadership effectiveness, performance and satisfaction those

factors are including organization leader and team leader, that origin is 8 items from Metcalfe & Alban Metcalfe (2001), Bass & Avolio (1995), Podsakoff at al.(1996), Singh at al., (2000), Yammariono at al., (1990), Bass & Avolio (1995), Bishop at al., (1997)

Alimo-Table 3.2 Measurement of leadership

Training 1- " People are properly orientated and trained upon joining

this organization."

Training 2- "This organization does provide regular opportunities for

personal and career development "

Training 3- "The organisation has career development activities to

help an employee identify/improve abilities, goals, strengths &

weaknesses."

Leader 4-"The leadership practices in this organization help me to

become a high performing employee"

Leader 5 "The leadership practices in this organization enhance my

satisfaction with my job"

Leader 6 "The organizational leadership practices are consistent

with my personal values"

Working environment That measure humanistic and socialization, physical working

conditions and organization climate, origin of that measurement is from 7 items by Bateman

& Strasser (1984), Ashford at al., (1992) Mathieu at al., (1990) Mottaz (1988), it was develop to 4 items by Janet (2004)

Table 3.3 Measurement of working environment

Remuneration and Reward: Job characteristics, intrinsic and extrinsic, rewards This

variable was measured by 4 items, that is founded and developed by Broadfoot & Ashkanasy (1994), Cammann at al., (1979), Hackman & Oldham (1975), Idaszak & Drasgow (1987), Rhoades at al., ( 2001), Seashore at al., (1982), Warr & Wall (1979) and Janet (2004)

Leader 7 "The organizational leadership practices make a positive

contribution to the overall effectiveness of the organization"

Leader 8 "This organisation keeps employees well-informed on

matters important to them"

Leader 9 "Sufficient effort is made to determine the thought and

responses of people who work here"

Leader 10 "Communications across all levels in this organisation

tend to be good"

Leader 11 "Organisational structure encourages horizonal and

vertical communication

Environment 12 "My working life balances with my family life"

Environment 13 "Overall this organization is a harmonious place to

work"

Environment 14 "This organization regards welfare of its employees

as its first priority"

Environment 15 "For the work I do , The physical working

conditions are very pleasant"

Table 3.4 Measurement of remuneration and rewards

Organizational culture and policies Measures the degree the organizational structure limits

the action of employees, testing the focus on the influence of policies and procedures, the organizational goal clarity and planning The origin is 5 questions from Broadfoot & Ashkanasy (1994), Kabanoff (2000), O’Reilly at al (1991), Morita at al., (1989), Sheridan (1992), Janet (2005) developed to 5 items

Table 3.5 Measurement of company policies

Organizational commitment That measures the feedback of employees for the company's

affection, It founded from Meyer & Allen (1997); Porter at al., (1974) with 5 items and Janet (2004) developed to 9 items

Remuneration 16 "Employees are given positive recognition when they produce high

quality work"

Remuneration 17 "This organization pays well"

Remuneration 18 "This organization offers a good benefits package compared to

other organizations"

Remuneration 19 "This organization values individual excellence over teamwork"

Remuneration 20 "This organization offers good opportunities for promotion"

Policies 21 "Organizational policies and procedures are helpful, well understood and

up to date"

Policies 22 "Progress towards meeting planned objectives is periodically reviewed"

Policies 23 "The organizational structure facilitates the way we do things."

Policies 24 " This organization has a defined vision/mission to meet its goals"

Table 3.6 Measurement of organizational commitment

Intention to stay That is measurement the trend of stay or leave the organization of

employees That is 4 items, founded and developed by Cammann at al., (1979); Dalessio at al., (1986), Griffeth at al., (2000), Lambert at al., (2001) Mathieu & Zajac (1990), McCloskey & McCain 1987; Mueller & Wallace (1992), Seashore at al., (1982)

Table 3.7 Measurement of intention to stay

Commitment 25 "I feel a strong sense of belonging to this organization"

Commitment 26 "I could just as well working for a different organization if the type

of work was similar (negative) "

Commitment 27 "I find it difficult to agree with this organization's policies

(negative)

Commitment 28 "This organisation really inspires the very best in me in the way of

job performance"

Commitment 29 "My values and this organisation's values are very similar"

Commitment 30 "There is little to be gained by sticking with this organization

indefinitely (negative) "

Commitment 31 "I am willing to put in a great deal more effort than normally

expected to help this organisation be successful"

Commitment 32 "I am proud to tell others that I am part of this organization"

Commitment 33 "I really care about the future of this organization"

Intention 34 "I plan to work at my present job for as long as possible"

Intention 35 " I will most certainly look for a new job in the near future (negative) "

Intention 36 "I plan to stay in this job for at least two to three years"

Intention 34 "I would hate to quit this job"

3.2.2 Draft questionnaire

All references are English but interviewees are Vietnamese so it is necessary to translate the reference questionnaire from English into Vietnamese To prevent misunderstanding or unclear meaning, the Vietnamese version questionnaire (that just translated from English) should translated into English again by other person to ensure similar meaning with the original questionnaire

The questionnaire was designed to allow the researcher to collect the relevant information to test proposed model Forty four questions were incorporated into the questionnaire for the purpose of this study Detail is in Appendix 3.1

PART A: This part to choose core employees: There are 4 questions in this section The core employees will be chosen base on the answer of questions, in which the chosen candidate interviewees should be not company owner, work for the company longer six months, they are fulltime employees, and they are people who support the organizational culture and vision The interview will be cancel if one of question does not meet requirement

PART B: Demographic Profile is in this part: That data help the author understand about

their interviewee and know deeply research objective That data also help the author in SPSS regression to deeply research the factors influencing the core employee's age, gender,

education and field of working

PART C: Main questions: this part is base on designed Likert scales: that part show the action and attitude of core employee about their company such as training, leadership, working environment, remuneration and policies also

3.3 Pilot study

The main purpose of pilot study is to test the questionnaire on a small sample of respondents

by trying to identify and excluding potential problems (Malhotra, 2004) It can also help to increase the reliability and to assure the appropriateness of the data collection instrument (Wong & Ko, 2009) According to Malhotra (2004), the sample size of pilot study is small, which is around 10 to 30 respondents

The pilot study of this research involved distribution of questionnaire to 10 interviewees randomly chosen from 2 companies, and the feedback answers used to revision questionnaire Once the data for pilot study was entered into the questionnaire, it was double-checked for accuracy

Likert scales is chosen to use in the study

After pilot surveying, Vietnamese questionnaire change in "Rất không đồng ý" to "hoàn toàn không đồng ý" and "Rất đồng ý" to "hoàn toàn đồng ý"

3.4 Main survey

The purpose of this study was to examine the relationship between retention and training and career path, leadership, working environment, remuneration and rewards organizational culture and policies

3.4.2 Sample size

Sampling size for EFA is ratio of number of question and sampling is from 5/1to 10/1 (Hair

at al., 2006) There are 37 items in the research so requested is 185 to 370 data is enough (there are 421 data in the research)

Requested sampling size for regression is more than 50+8m (Tabachnick at al., 1996) so the requested sampling size is more than 50+8x(37)= 346 (there are 421 data in the research)

3.5 Data analysis technique

All data were initially analyzed via SPSS Version 20 (Statistical Package for the Social Sciences)

be judged on their content and construct validity”

Internal reliability refers to the core to which measures are free from random error and therefore yield consistent results (Nancy et al., 2005) The scales of the seven factorized variables were checked for reliability using Cronbach’s Alpha (Nancy et al., 2005) An alpha

of 0.70 or above is considered to be reliable as suggested by many researchers (Leech et al., 2007) how ever 0.60-0.69 should be accepted in common articles (Nancy et al., 2005)

Leech et al (2007) provide the following techniques show in table 3.8

Table 3.8: Cronbach’s alpha reliability coefficient

Cronbach’s alpha Internal consistency

0.6 ≤ α < 6.9 Acceptable

α < 0.5 Unacceptable

3.5.3 Exploratory factor analysis (EFA)

In the study, that is used the Extraction Method: Principal Axis Factoring Rotation Method: Promax with Kaiser Normalization

Norris & Lecavalier (2010, p.9) supposed that “EFA is based upon a testable model and can

be evaluated in terms of its fit to the hypothesized population model; fit indices can be generated to help with model interpretation” And “EFA’s purpose is to identify latent constructs underlying a set of manifest variables” Nancy at al.(2005) argued that KMO Measure of Sampling Adequacy above 0.7 is accepted

Hair et al (1998, cited in Lee and Hooley, 2005, p.376) claimed that with samples of 350 or more, a factor loading of the attribute higher than 0.3 is significant And, with samples of

200, a factor loading of 0.4 or greater will take to indicate Therefore, the researchers must carefully consider the sample size for choosing significant factor loadings Moreover, factors with a total eigenvalue of 1 or greater will take into account; hence any factors with an eigenvalue of less than 1 are discounted (Kim & Mueller, 1978, cited in Lee & Hooley,

2005, p.376) Based on these studies, any factors with eigenvalues greater than 1 will be retained And, any factor loadings of 0.3 or higher on a factor are counted

3.5 4 Hypotheses testing: Multiple Regression Analysis

Loading factors above 0.4, this means indication that is efficient item for this factor (Nancy

et al., 2005) (there is 0.88 in the study) (The regression model selected for this study is stepwise regression and the dependent variables examined were organizational commitment and intent to stay, there are thirty seven items The purpose of stepwise regression analysis was to develop a group of independent variables that are useful in predicting the dependent variables and to eliminate those independent variables that do not provide any additional prediction to the independent variables already in the equation In this study, the stepwise regression analysis was conducted to test the relationship between the five independent variables of the study: remuneration and recognition, training and career development, leadership and policies and one dependent variables: organizational commitment-Intent to stay

Significant is less than 0.05 to assure this correlation matrix is significant different from an identify matrix (Nancy et al., 2005)

Means, and standard deviations and correlations Correlation coefficients were calculated for initial exploration of the relationships between variables Correlation is used to measure the size and direction of the relationship between two variables (Tabachnick & Fidell, 2001) In this study, a correlation analysis was carried out to measure the inter-relationship between independent variables (remuneration and recognition, training and career development, leadership, policies, and work environment), dependent variables (organizational commitment and intention to stay) On completion of the correlation analysis, a regression analysis was conducted in order to further evaluate and understand the relationships between the dependent and independent variables of the study, and to test the hypotheses of interest

3.7 Chapter conclusion

This chapter provided an overall explanation of the research methodologies used for this study There are 4 main parts of the chapter: questionnaire design, pilot survey, main survey and data analysis The development of the instruments for data analysis was described Subsequent Chapter 4will report the results of main survey base on methodologies in this chapter

CHAPTER 4: DATA ANALYSIS

SPSS version 20 is used in the study, this chapter shows the collected data, coding, reliable testing as well as EFA and multi regression to check proposal model

4.1 Sample description and data clearance

There are 600 questionnaires that have sent, there are 421 collected questionnaire (rate 70 percent) Among 421 collected questionnaires, there are 335 valid questionnaires (79.57 percent) The reasons of invalid questionnaire is missing data, interviewer's mistake in interview part time employee, company owner,

Although data collecting and typing is very carefully but the data collected in this study had missing data scattered randomly throughout the data matrix All missing data were treated with list wise deletion Factor analysis is best suited to identifying the interrelationships among a set of items in a scale, all designed to measure the same construct

4.2 Demography Sampling

The respondents of this study consisted of core employees from some organizations of different field of working As in table 4.1, twenty two percent of these respondents were from technical companies, thirty two percent from trading company, nine percent from banking and thirty seven per cent from the others As stable 4.1, the occupations of the respondents consisted of twenty three technicians, thirty three percent office employees, seventeen percent salesman, fourteen per cent managers, thirteen percent others As shown in

As stable 4.1, education of the respondents consisted of twenty eight percent high school, thirty percent college, thirty seven percent bachelor and five percent upper bachelor This study surveyed a good range of employment services and therefore provided a much broader scope for generating the research More detail refer in appendix 4.2

Table 4.1 Sample Demography

Frequency Percent Valid

As Nancy at al., (2007) factors are accepted if corrected item total correlation above 0.3 so

item 30 is omitted because its corrected item total correlation 0.276, item 27 (0.218) is

deleted Similarly is for item 35 because its corrected item total correlation is 0.181

So after testing reliable, there are three items omitted, it means there are 34 items in EFA,

overview reliability of variables is show in table 4.2, more detail refers in appendix 4.3 to

4 5 Exploratory factor analysis (EFA)

There are 5 independent variables training, leadership, remuneration & rewards and policies

In the first time running EFA, the items cluster into 5 groups define by high loadings

In the second time, lea4 is loading into 2 factors at 377 and 277 so it is omitted

In the third time, the variables are loading into 4 factors env12, env13 and env14 are loading into 2 factors so they are omitted

In the fourth time, the item rem20 is omitted All items cluster into 4 groups with high loading

More detail refers in appendix 4.4.1 to appendix 4.4.4

Pattern matrix in last time result shows in table 4.3

Table 4.3: Pattern matrix in the last time (the fourth time) of regression analysis

POL 21 903

Extraction Method: Principal Axis Factoring

Rotation Method: Promax with Kaiser Normalization

a Rotation converged in 6 iterations

Group 1: TRA01 (loading 0.839),TRA02 (loading 0.848), TRA03 (loading 0.713)

Group 2: LEA05 (loading 0.500), LEA06 (loading 0.604), LEA07 (loading 0.760), LEA08 (loading 0.828), LEA09 (loading 0.664), LEA10 (loading 0.594), LEA11 (loading 0.681) Group 3: ENV15 (loading 0.472), REM16 (loading 0.736), REM17 (loading 0.958), REM18 (loading 0.601), REM19 (loading 0.780)

Group 4: POL21 (loading 0.903), POL 22 (loading 0.921), POL23 (loading 0.623), POL24 (loading 0.565)

Because all the independent variables and dependent variable run separately so it must run correlate with option bi variable if the Pearson correlation is less that 700 that is accepted

As result of running, all Pearson correlation are less than 0.7, that means no independent variable has high correlation together high (Julie, 2011)

As the result of analysis software, most of item in working environment is deleted, item ENV15 is merged to remuneration & rewards variable There are 2 type of looks to see that problem: base on result of SPSS: it meets condition because all of their items have loading less than 0.4; base on the fact: there are almost ten to twenty employees in SMEs in HCMC, especially there are three to five employees in some SMEs so working environment in those SMEs naturally is good and the core employees in there do not feel it is important for them

Compute transform variable: In this session, methodology for compute is statistical function group, special variables are using sum function