THE ROLE OF TRANSFORMATIONAL LEADERSHIP BEHAVIORS IN AFFECTIVE EMPLOYEE ENGAGEMENT AN EMPIRICAL STUDY IN THE TWO INDUSTRIES OF RETAIL AND FINANCIAL SERVICES IN HO CHI MINH CITY

1 The Role of Transformational Leadership Behaviors in Affective Employee Engagement: An empirical study in the two industries of retail and financial services in Ho Chi Minh City ABSTRACT According to many previous studies, the effective leaders are one of the most important factors in engaging the employees to the organization; leveraging the human capital to create sustainable competitive advantage for the organization efficacy and leading to organizational benefits. The purpose of this study was to investigate the relationship between transformational leadership behaviors and affective employee engagement and to examine their impact on employees’ level of affective engagement in private and foreign-owned companies in Ho Chi Minh City. Total participants in the research were 320 full-time employees from the industry of retailing and financial services in Ho Chi Minh City. The majority of employees have worked in private organizations (55.3%) and followed by foreign- owned companies (44.7%); in financial services (53.4%) and in retail industry (46.6%) respectively. The findings of the study indicated that transformational leadership behaviors including intellectual stimulation, idealized influence behaviors and individual consideration have significant and positive correlations with affective employee engagement. Among the independent variables, individual consideration is found to be the most important factor in driving affective employee engagement. The research results have contributed to the literature and provided more evidences for the managers in their decisions of their workforce planning. However, the sample for the research is still limited due to the application of convenient sampling method and surveyed only in Ho Chi Minh City. Therefore, the generalization is not 2 so high; the study might have not covered all the demographic factors; and also some other important variables were not considered all due to the scope of the study. All the restrictions will motivate the next researchers in this interesting topic. 3 ACKNOWLEDGEMENTS I am deeply grateful to my advisors, Dr. Nguyen Huu Lam and Dr. Nguyen Dinh Tho for the guidance and comments through the process of completing this thesis. Without the support and encouragement from Dr. Lam and Dr. Tho, the thesis might not be possible in meeting the requirements and expectations of the research. I also extend my thanks my classmates in sharing with me the ideas; store managers in Crescent Mall in district 7 and MBA students at the University of HCMC Economics in filling in the questionnaires. I would like to acknowledge the support and encouragement of my family in the concession of time, money and effort to complete the program. Most of all, I would like to be grateful to my Buddha for giving me good health, optimism and strength to finish the study. 4 TABLE OF CONTENTS ABSTRACT 1 ACKNOWLEDGEMENTS 3 TABLE OF CONTENTS 4 CHAPTER ONE: INTRODUCTION 8 1.1 BACKGROUND OF THE STUDY 8 1.2 STATEMENT OF THE PROBLEM 10 1.3 OBJECTIVES OF THE STUDY 11 1.4 RESEARCH QUESTIONS 12 1.5 SIGNIFICANCE OF THE STUDY 12 1.6 SCOPE OF THE STUDY 13 1.7 STRUCTURE OF THE STUDY 13 CHAPTER TWO: LITERATURE REVIEW 14 2.1 INTRODUCTION 14 2.2 THE CONCEPT OF LEADERSHIP 15 2.3 THE EVOLUTION OF LEADERSHIP THEORIES 15 2.4 LEADERSHIP MODEL 17 2.5 FIVE DIMENSIONS OF TRANSFORMATIONAL LEADERSHIP BEHAVIORS 18 2.5.1 Idealized influence (Attributes) (IIA): leaders instill pride and build trust 18 2.5.2 Idealized influence (Behaviors) (IIB): leaders emphasize collective sense of mission, talk about values and beliefs 18 2.5.3 Inspirational motivation (IM): leaders communicate and express enthusiasm, optimism, confidence, and emotional appeals. 18 2.5.4 Intellectual stimulation (IS): leaders stimulate followers to view the world from new perspectives; encourages problem solving, critical thinking and creativity. 18 2.5.5 Individual consideration (IC): leaders develop, coach, and teach each follower to grow individually by paying attention to individual needs, desires and assigning projects. 18 2.6 THE CONCEPT OF EMPLOYEE ENGAGEMENT 19 2.7 THE EVOLUTION OF EMPLOYEE ENGAGEMENT 20 2.8 TWO DIMENSIONS OF AFFECTIVE EMPLOYEE ENGAGEMENT 21 2.9 THE RELATIONSHIP BETWEEN TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND EMPLOYEE ENGAGEMENT 22 2.10 RESEARCH MODEL AND HYPOTHESES 24 CHAPTER THREE: RESEARCH METHODOLOGY 26 3.1 QUALITATIVE RESEARCH 26 3.1.1 Sampling 26 3.1.2 Data collection and In-depth interview 26 3.2 QUANTITATIVE RESEARCH 27 5 3.2.1 Response rate and sample size 27 3.2.2 Data sources and type 29 3.2.3 Data gathering instruments 30 3.2.3.1 Multifactor leadership questionnaire 30 3.2.3.2 Affective employee engagement questionnaire 31 3.2.4 Independent and dependent variables of the study 32 3.2.5 Data analysis and presentation procedures 33 CHAPTER FOUR: RESULTS AND FINDINGS 34 4.1 DEMOGRAPHIC CHARACTERISTICS OF THE PARTICIPANTS 34 4.2 DESCRIPTIVE STATISTICS FOR TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND AFFECTIVE EMPLOYEE ENGAGEMENT 36 4.2.1 Employees perception to Transformational leadership behaviors 37 4.2.2 Employees perception to their organizational engagement 37 4.3 THE RELATIONSHIP BETWEEN TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND AFFECTIVE EMPLOYEE ENGAGEMENT 38 4.4 SCALE ASSESSMENT 40 4.4.1 Cronbach Alpha 40 4.4.2 Exploratory Factor Analysis (EFA) 42 4.4.2.1 Independent variables 43 4.4.2.2 Dependent variables 44 4.5 CORRELATION AND REGRESSION ANALYSIS 44 4.5.1 Correlation analysis 44 4.5.2 Regression analysis 45 4.5.2.1 Assessment of the model 45 4.5.2.2 Testing of the hypotheses 49 4.6 RESULTS AND DISCUSSION 51 4.6.1 Regression analysis 51 4.6.1.1 Intellectual stimulation 51 4.6.1.2 Idealized influence behaviors 52 4.6.1.3 Idealized influence attributes and inspirational motivation 52 4.6.1.4 Individual consideration 52 4.6.2 Industry analysis 53 4.6.3 Discussion of the results 53 4.6.4 Summary 54 CHAPTER FIVE: DISCUSSION, RECOMMENDATION AND CONCLUSION 55 5.1 CONCLUSIONS 55 5.2 THE CONTRIBUTIONS OF THE STUDY 56 5.2.1 Contributions to the literature 56 5.2.2 Contributions to the practices 56 5.3 RECOMMENDATIONS 57 5.3.1 Recommendations for the organizations and managers in Ho Chi Minh City 57 6 5.3.2 Recommendation for future research 59 5.4 LIMITATIONS OF THE STUDY 60 REFERENCES 61 Appendix A: Total Variance Explained 66 Appendix B: Rotated Component Matrix a 67 Appendix C: Total Variance Explained 68 Appendix D: Rotated Component Matrix a 69 Appendix E: KMO and Bartlett's Test 69 Appendix F: KMO and Bartlett's Test 69 Appendix G: ANOVA a 70 Appendix H: Histogram Dependent Variable AC 70 Appendix I: Normal P-P Plot of Regression Standardized Residual Dependent Variable AC 71 Appendix J: Scatterplot Dependent Variable AC 72 Appendix K: ANOVA a 72 Appendix L: Histogram Dependent Variable SC 73 Appendix M: Normal P-P Plot of Regression Standardized Residual Dependent Variable SC 74 Appendix N: Scatterplot Dependent Variable SC 75 Appendix O: Questionnaire (in English) 76 Appendix P: Questionnaire (in Vietnamese) 81 7 LIST OF TABLES Table 1: Location for paper survey, sample size and response rates 28 Table 2: Independent and Dependent variables 32 Table 3: Summary of Employees’ profile 35 Table 4: Mean and Standard Deviations of Transformational Leadership Behaviors and Affective Employee Engagement for employees’ responses 36 Table 5: Pearson correlation matrix between transformational leadership behaviors and affective employee engagement dimensions 39 Table 6: Cronbach Alpha 41 Table 7: Result of EFA for Independent variables 43 Table 8: Result of EFA for Dependent variables 44 Table 9: Correlation analysis 45 Table 10: Summary (AC) 46 Table 11: Summary (SC) 46 Table 12: Anova (AC) 46 Table 13: Anova (SC) 47 Table 14:Profile of Independent variables 47 Table 15: Profile of Independent variables 48 Table 16: Summary of results of hypotheses 50 Table 17: Industry analysis 53 LIST OF FIGURES Figure 1: Proposed Research Model 24 8 CHAPTER ONE: INTRODUCTION 1.1 BACKGROUND OF THE STUDY In Vietnam News (2002), it showed that: More than 43% of employees in Vietnam express high levels of commitment to both their job and the company they work for. In its global employee commitment report 2002 Taylor Nelson Sofre says the commitment percentage in Vietnam is higher than the average in the Asia-Pacific region and Europe, but slightly lower than in the United States and Latin America.” And then in Thanhnien News (2008), it is suggested that: Vietnam needs more skilled workers since its WTO accession. The survey by Grant Thornton, a global accounting, tax and business advisory firm which involved over 7,800 privately held businesses in 34 countries shows that 84 percent of Vietnamese companies focus on recruiting and retaining staff, compared to a global average of only 59 percent. Vietnamese companies focus more on attracting and retaining employees than do companies elsewhere. Employee retention is considered the greatest challenge for businesses in Vietnam and becomes a hot topic for discussions for any workshops of human resource managers. Vietnamese employees aggressively accelerate their career to better 9 positions, challenging jobs and better pay. In a survey of Navigos Group, the leading and largest executive recruitment solution provider reported in Vietnam Plus (2010) “63,8 percent of respondents from 168 companies operating in Vietnam including foreign-invested ones ranked the employee retention as the number one human resource challenge in 2010”. And it also confirmed “getting the right people into the right job with the right skills and to have them stay and grow are missions which will keep human resource personnel busy in 2010. As long as this is the fact, employee retention is hard work.” According to Towers Watson (2011) in a briefing of engagement indicator survey, Vietnam labor market has experienced a fierce talent war in which Vietnamese employers are trying to engage their talent through some employee engagement programs. In the Towers Watson’s data, it also showed that “employee engagement levels in Vietnam have remained steady over the last five years (currently 78% favorable) and higher than employee engagement levels in the overall Asia Pacific Region (currently 74% favorable). However, employee intent to continue working for their current companies is lower in Vietnam (54%) compared to Asia Pacific (61%). In other words, the war for talent is fiercer in Vietnam than elsewhere in Asia Pacific because employees are at higher risk of leaving.” It is clear evidence that employee engagement has become one of the most leading priorities for human resource practitioners and senior managers in the organization today in Vietnam. It is also the role of HR managers and line mangers to understand what are the critical factors affecting employees to get their high commitment to the company. Based on that, the managers come up with strategic action plans to engage their employees into the sustainability of the organization. These requirements from the reality are really urgent for the managers in Vietnam to deal with them in their daily managerial works. 10 1.2 STATEMENT OF THE PROBLEM Nowadays, the workplace changes day by day and requires products and services to keep in line with this demand. In order to remain competitive, employee engagement is one of the most important factors in the face of these pressures.Since employee engagement is strongly correlated to the leadership behaviors of direct mangers and this concerns a focus on improving the quality of leadership in achieving greater employees to engage to the organization and its sustainable growth, and the profitability as well. Many researchers have revealed that employee engagement and leadership behaviors are of crucial determinants in the organizational success. However, leadership is one of the least understood concepts in the corporate world and the term of employee engagement should also be considered in many dimensions to result in a full picture of this relationship. Beverly and John (2008) shows indisputable links between employee engagement and various measurements of financial success in which a US survey of 24 publicly listed traded companies with a total of over 250,000 employees over the last 5 years recognized the stock prices of 11 companies with highest engagement increased an average of 19.4% in comparison to only 8% of those in the same industries. Several surveys also reveals that companies with high employee engagement levels experienced a higher operating margin, net profit margin, revenue growth and earnings per share than those with low employee engagement. It is clear that employee performance or behavior on the job is influenced by his or her immediate manager and its positive relationship will be essential to strengthening employee engagement. So, to improve the quality of leadership and management can be the most important step in keeping the employee committed to the organization. [...]... and employee engagement, especially in Vietnam setting 13 1.6 SCOPE OF THE STUDY The focus of this study is to examine the relationship between transformational leadership behaviors and affective employee engagement in the industry of retail and financial services in Ho Chi Minh City, Vietnam Of course, the data for the study is delimited to the surveyed employees of the two industries in Ho Chi Minh. .. important to test the link between transformational leadership behaviors and affective employee engagement in the industry of retail and financial services in Ho Chi Minh City and also to explore employees’ perceptions on these behaviors 1.3 OBJECTIVES OF THE STUDY The research is to explore the relationship between transformational leadership behaviors and affective employee engagement in the industry of. .. further explorations 3.2 QUANTITATIVE RESEARCH The purpose of the study is to explore the relationship between transformational leadership behaviors and affective employee engagement by surveying the employees The target population of the study included the employees in Ho Chi Minh City currently working in the industry of retailing and financial services In summary, the combination of purposive and. .. What are the perceptions of employees in the industry of retail and financial services about transformational leadership behaviors and two dimensions of affective employee engagement? 2) What is the relationship between transformational leadership behaviors and two dimensions of affective employee engagement? 1.5 SIGNIFICANCE OF THE STUDY Firstly, the result of the research is important to bring the awareness... the industry of retail and financial services in Ho Chi Minh City To achieve the goal, the specific objectives of the study are: 12  To examine the relationship between transformational leadership behaviors and two dimensions of affective employee engagement  To identify the employees’ perceptions about the transformational leadership behaviors and two dimensions of affective employee engagement 1.4... Babin, and Anderson, 2010) However, in order to increase the accuracy of the data for further analysis a sample of 320 respondents was selected from the employees in Ho Chi Minh City currently working in the industry of retailing and financial services For paper survey, I distributed 130 questionnaires to the employees in Crescent Mall and 115 questionnaires to the employees currently joining MBA, Finance... morality Transformational leaders enhance the followers’ capability by creating new demands and values so that they can grow their performance Moreover, transformational leaders often challenge others for changes, extraordinary works and drive the organization effectively They have an important role in influencing the organization changes; designing a very clear picture for the organization and share the. .. sample of 320 full-time employees participating in this study from the industry of retailing and financial services in Ho Chi Minh City In the summary of employees’ profile, male and female were equal in the percent by sharing 50% for each The majority’s age group was between 26 to 35 years (49.4%), followed by those under 26 years old (46.9%) Most of the employees have worked for their current organization... success and provide discretionary effort to accomplishing their tasks for the achievement of organizational goals According to Nitin (2005), employee engagement is the level of commitment and involvement that an employee has towards their organization and its value An engaged employee can be aware of business context and works to improve performance for the benefit of the organization Kahn (as cited in Sandeep,... provided to show the amount of variance in explaining the dependent variables, F statistic and the significance level help interpret the results In the research presentation, frequency table was to summarize the respondents profile of frequency and percentages whereas the descriptive statistics such as mean and standard deviations of employees’ answers to transformational leadership behaviors and employees . 1 The Role of Transformational Leadership Behaviors in Affective Employee Engagement: An empirical study in the two industries of retail and financial services in Ho Chi Minh City ABSTRACT. engagement in the industry of retail and financial services in Ho Chi Minh City, Vietnam. Of course, the data for the study is delimited to the surveyed employees of the two industries in Ho Chi Minh. considered important to test the link between transformational leadership behaviors and affective employee engagement in the industry of retail and financial services in Ho Chi Minh City and also to