Turnover rate and performance appraisal biases from supervisors in vina one manufacturing corporation

The purpose of this thesis is to explore the causes of high turnover rate through the current problems with workers at Hot-Rolled Steel factory - Vina One Manufacturing Corporation in sh

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Tran Thanh Hoa

TURNOVER RATE AND PERFORMANCE APPRAISAL BIASES FROM SUPERVISORS IN VINA ONE MANUFACTURING CORPORATION

Ho Chi Minh City - 2017

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Tran Thanh Hoa

TURNOVER RATE AND PERFORMANCE APPRAISAL BIASES FROM SUPERVISORS IN VINA ONE MANUFACTURING CORPORATION

ID: 22140017

Ho Chi Minh City - 2017

Executive Summary

Intellectual capital of human resource, which is often considered the most important asset in all organizations, needs to be well identified and studied Organizations need to ensure they operate in a way that labor loss due to worker turnover is minimized In order to do so, organizations need to understand why people choose to stay or leave their jobs In many manufacturing companies, especially in heavy industry, front - line employees (or in short, they would be called as “workers” in this thesis) are considered less important than those who are in the offices and their voices are the weakest ones in the companies The way their supervisors treat and rate them on the scales of performance and contribution is also a new factor impacting on the turnover rate of these workers

The purpose of this thesis is to explore the causes of high turnover rate through the current problems with workers at Hot-Rolled Steel factory - Vina One Manufacturing Corporation (in short, it would be called Vina One in this thesis)

The findings of the study revealed that biases from supervisors on performance appraisals tend to play a significant role in turnover intention of workers The findings are discussed in details in the research along with some recommendations for the company and management board to increase the level of employee satisfaction and reduce the turnover intention in Vina One Manufacturing Corporation

TABLE OF CONTENTS

Executive Summary 3

Acknowledgements 4

LIST OF FIGURES 6

LIST OF TABLES 6

1 INTRODUCTION 1

1.1 The company background 1

1.2 Company structure and mission 1

2 PROBLEM CONTEXT 3

2.1 The turnover rate status in the industrial and construction sector 3

2.2 The turnover status of Hot-Rolled Steel factory in Vina One 5

3 PROBLEM IDENTIFICATION 15

3.1 Job safety 16

3.2 Performance appraisal 18

3.3 Errors in recruitment process 22

3.4 Compensation and benefits 23

3.5 Work-life balance 24

3.6 Cause –and –effect tree 26

4 CAUSE VALIDATION 27

5 ALTERNATIVE SOLUTIONS 32

5.1 The first alternative solution: biases from untrained supervisors 32

5.2 The second alternative solution: biases caused by inconsistency across supervisors 35

5.3 The third alternative solution: recency bias and personal bias from supervisors 38

6 ORGANIZATION OF ACTIONS 43

7 CONCLUSION 46

8 SUPPORTING INFORMATION 47

APPENDIX 62

REFERENCES 63

LIST OF FIGURES

Figure 1: Vina One organizational structure

Figure 2: Employed population above 15 years old categorized by economic activities

Figure 3: Number of workers at Hot-Rolled Steel factory

Figure 4: Employees‟ age at Hot Rolled Steel factory

Figure 5: Employees‟ working experience

Figure 6: The turnover rate of Hot-Rolled Steel workers at Vina One

Figure 7: The turnover rate of Hot-Rolled Steel workers

Figure 8: The average wages of steel workers

Figure 9: The turnover rate of Hot-Rolled Steel workers in detail for each positon

Figure 10: Reasons why people quit their jobs at Vina One in 2015

Figure 11: Recruitment cost

Figure 12: Cause - and - effect tree

LIST OF TABLES

Table 1: Quantity and income/month of Hot Rolled Steel Factory in 2015

Table 2: Action plan

1 INTRODUCTION

1.1 The company background

Vina One Manufacturing Corporation (herein called Vina One), which was established in

2007 with charter capital of VND 450 billion, is one of the biggest steel manufacturing company in Long An province, Viet Nam In 2015, Vina One achieved stunning operating results with profits before tax of above VND 3,200 billion, charter capital increased to VND

700 billion (Financial statement 2015) Vina One was honorably awarded the certificate of ISO 9001:2008 issued by the International Bureau Veritas Organization It is also listed in the VNR 500 of biggest private enterprises of Vietnam

1.2 Company structure and mission

Figure 1 Vina One organizational structure

(Source: Vina One Human Resource Department)

Board of Director

General Director

Deputy General Director

Domestic

Sales

Division

Financial Division

Hot Rolled Steel Factory

Cold Rolled Steel Factory

Administr -ation and

HR Division

Operation Division

ment Division

Division

Vina One includes 5 main functions: Sale (domestic, import & export), Supply chain (procurement, planning), Finance, Operation, Factory In Factory function, they are divided into 2 small divisions: Hot-Rolled Steel factory and Cold-Rolled Steel factory Hot-Rolled Steel factory has the responsibility to produce hot-rolled steel from the steel billet furnaces This is the first process to produce Hot-Rolled Steel, galvanized, rectangular tubing, square tubing and Cold-Rolled Steel This division has the largest employees in the company with 1,218 workers In this thesis, workers will be the main objects of the study because they are front-line employees who have the responsibilities for producing Hot-Rolled Steel, being an extremely important factor in Vina One Steel Factory‟s successful operation

The main products of Vina One include Hot-Rolled Steel (U Channels, Angles, with volume of 250,000 ton annually) and Cold-Rolled Steel (round tubing, rectangular tubing, square tubing, with volume of 300,000 tons annually) as well as galvanized strips, billets, steel plates, etc Vina One goes with the mission of sustainable development to become the leading steel manufacturer in Vietnam and Southeast Asian region in coming years

To achieve this mission, Vina One has recently focused on upgrading steel production lines and increasing factory acreage of more than 100,000m2, extending office buildings to 30 rooms with specialized functions and developing transportation systems with 30 new trucks

In 2015, they invested in the steel billet furnace system, galvanized Hot-Rolled Steel system and a barcode system stored in warehouses with modern technology in order to build a closed process that brought high efficiency

However, paying too much attention to develop physical properties has made the management board forget that they also have another more important asset which is the intellectual capital of employees According to the statistics shown in the company‟s reports, the number of employees leaving Vina One has dramatically increased in the past 3 years (2013-2015) Especially in Hot-Rolled Steel factory, this number of workers quitted their jobs are even more surprising This problem poses a threat to the company‟s mission to become the leader in its field

2 PROBLEM CONTEXT

2.1 The turnover rate status in the industrial and construction sector

According to General Statistics Office of Viet Nam, the numbers of employees aged above

15 are about 52.9 million people, increasing 142 thousand people compared to 2014 As shown in Figure 2, the sector of agriculture, forestry and fishery accounted for 44.3% (46.3% in 2014); industrial and construction sector was 22.9% (21.5% in 2014) and services sector was 32.8 % (32.2% in 2014)

Figure 2 Employed population above 15 years old categorized by economic activities

(Source: General Statistics Office of Viet Nam)

0,0% 10,0% 20,0% 30,0% 40,0% 50,0%

Agriculture, forestry and fishery

Industrial and construction

In each sector, the problem of high turnover rate has significantly affected to the allocation

of employee According to Price et al.1 with Causal Model of Turnover (voluntary leaving from an organization), turnover is defined as the ratio of the number of organizational members who have left and divided by the average number of people in that organization during the period Opportunity, routinization, participation, instrumental communication, integration, pay, distributive justice, promotional opportunity, professionalism, general training, kinship responsibility are independent variables in models impacting to job satisfaction and intent to stay or leave The model indicates that intent to stay has a direct negative impact on turnover, when job satisfaction increases, intent to stay with the organization will be increase as stated by Price et al.1

There are many reasons leading to increasing number of employees leaving their companies Mrs Nguyen Lan Ngoc - Human Resources Manager - Vina One Corporation stated that:

Hot-Rolled Steel production is listed in the group of heavy - harmful – dangerous jobs by Ministry of Labor, War Invalids, & Social Welfare Workers have to work very hard in toxic environment which

is full of heat, dust and noise Therefore, they easily quit jobs if they are not paid as what they deserve to cover their sufferings

Workers intend to quit after only one or two years working because of various reasons such

as heavy workload, unfair performance appraisals, job safety, etc More than 70 % workers

in steel organizations who joined the annual surveys provide that they are unsatisfied with current jobs and want to leave the jobs Most workers in group of manufacturing organizations suggest that biases from supervisors and unfair treatments are important factors that push them to leave

In addition, Mrs Bui Thi Hai Hau - Human Resources Manager at Tan Thanh Quyen Steel Co., Ltd made a speech in The Association of Long An Province Steel Company about the problem of high turnover rate in current society She shared that:

The percentage of workers, especially in heavy industry such as Hot-Rolled Steel division, has increased continuously over the years Most of them decided to leave early after less than 2 years working They need money to cover their living expenses and support their families, but they do not get the salary level they deserve because of many reasons Some of the reasons are the failure in evaluating their performance, management biases, lacking of benefit and compensation

2.2 The turnover status of Hot-Rolled Steel factory in Vina One

Figure 3 Number of workers at Hot-Rolled Steel factory

(Source: Vina One Human Resource Department) Based on the report and analysis of Human Resources Division in Vina One (Figure 3), the number of workers at Hot-Rolled Steel factory (2015) were 1,218 (account for 74.4%/ total

employees) The number of workers continued to increase during the period of 2013-2015 (from 615 to 1,218 people), while Cold-Rolled Steel nearly keeps unchanged

Figure 4 Employees‟ age at Hot-Rolled Steel Factory in 2015

(Source: Vina One Human Resource Department) Regarding to the average age as shown in Figure 4, about 63% (equivalent 763 workers) were 22 to 25 years old, 22.82 % workers were 18 to 21 years old and only 1.23% has the age range more than 35 year of age It can be seen that most of workers at Hot-Rolled Steel factory were very young (22 to 25 years old) and therefore almost lack experiences

Figure 5 Employees‟ working experience in 2015

(Source: Vina One Human Resource Department)

>35

Age

In Figure 5, there were 744 workers less than 6 month of experience (61% in total), 225 workers were 6 month to 1 year experienced and only 249 worker were more than 1 year experience Based on the population information of Vina One in general and Hot-Rolled Steel factory, it is can be concluded that Vina One‟s workforce is young and inexperienced

In fact, hot-rolling is a milling process which involves rolling steel at high temperature (above the recrystallization temperature for steels) Steel workers are recruited with simple requirements to have high school diploma or equivalent, apprenticeships available (not required to graduate at colleges/university), physical strength, dexterity and stamina According to Reich et al2, there are three different kinds of service work including routine production services, in-person services and symbolic-analytic services Routine production services include repetitive tasks, employees are paid by the amount of time they work at their workplace with routine supervision In-person services have the same point with routine production services This category includes repetitive tasks but require interaction with suppliers or customer in–person, not only a piece of fabric or metal Symbolic-analytic services do not require the manual work such as routine production services, in-person services but also enhance problem-solving and problem- identifying skills

The job of steel workers at Hot-Rolled Steel factory belongs to routine production services that they need to work for long hours stranding, bending or stooping Their responsibilities are to set up and operate production machines up to specific standards, grade batches of raw materials and feed them into the machines; store goods and raw materials in factory storage areas and warehouses, inspect finished products to ensure that they conform to quality standards

In addition, Spence et al.3 identified six types of workers including workaholic worker, positively engaged worker, enthusiast worker, relaxed worker, disenchanted worker and unengaged worker A workaholic worker is a person who works very hard and attends to get everything done at work Workaholic is an addiction that leads to strife in their relationships They can face with stress and work-life imbalance A positively engaged worker is a person who spends almost their time for working and they love their job They always have positive thinking; however this dedication to work can lead to conflict with their family and health problems Enthusiast workers are hard-working and enjoy their job They are not too stressful, but the quality of work may not be high Relaxed workers have high emotional and lack of strife with their relationships However, they may not be motivated to strive to work more efficiently A disenchanted worker has very low life satisfaction and lack of positive emotion This group of workers is a serious problem in corporations Unengaged workers have no motivation to work and they can decide to move

to other organizations They do not have a lot of stress at work and their capacity depends

on the requirements of their managers or supervisors

As it can be seen, workers are the main labor force at Hot-Rolled factory From Table 1 as below, 87.4% of employees (equivalent 1,218 employees) were front-line workers, 10.9% were team leaders and only 1.7% was supervisors and board of directors It means that averagely 8 workers have 1 team leader and 60 workers are put under 1 supervisor This ratio can lead to a pressure on supervisors when evaluating each worker‟s performance and

it is hard for them to do this task correctly

Table 1 Quantity and income/month of Hot Rolled Steel Factory in 2015

1 Board of director of factory 3 26

Moreover, as shown in Figure 6, the turnover rate of Hot-Rolled Steel workers was 41% (it means 499 workers left the company) in 2015, which is the highest number in the last 3 years

Figure 6 The turnover rate of Hot-Rolled Steel workers at Vina One

(Source: Vina One Human Resource Department) Compared to other competitors in this industry, Vina One has the highest turnover rate with 41% in 2015 These rates in others such as Tan Thanh Quyen Steel Co., Ltd, Nguyen Minh Steel Manufacturing &Trading Co., Ltd, TVP Steel are only in the range of 23%-32%.Mrs Bui Thi Hai Hau- Human Resources Manager at Tan Thanh Quyen Steel Co., Ltd shared that:

In the industry of steel manufacturing, Hot-rolled steel division is the one with highest turnover rate because workers often face many dangers in their working environment They also have low salaries; their benefits and performance appraisal are not concerned as well This is one of the reasons why they want to leave

Figure 7 The turnover rate of Hot-Rolled Steel workers

(Source: Report from Vina One Human Resource Department)

As it can be seen from Figure 8 whose the data are collected from Vina One Human Resource Department, the salaries of workers in steel industry are stable and only have a slight rise in the period of 2014-2015 The facts from the below chart show that Vina One is not the one having lowest salary when compared to other competitors in this industry Therefore, it could not conclude that the workers in Vina One quit their job for low salary

Figure 8 The average wages of steel workers

(Source: Report from Vina One Human Resource Department)

Tan Thanh Quyen Steel Co., Ltd

Nguyen Minh Steel Manufacturing

& Trading Co., Ltd

TVP steel

6,2 6,4 6,6 6,8 7 7,2 7,4 7,6

Vina One Manufacturing Corporation

Tan Thanh Quyen Steel Co., Ltd

Nguyen Minh Steel Manufacturing

& Trading Co., Ltd

TVP steel

Million/month

Increasing turnover rate of Hot-Rolled Steel workers poses a threat to Vina One‟s vision of being a leading steel manufacturer in Viet Nam and Southeast Asian region Ellepola MG4stated that maintaining low turnover rate helps reduce recruitment and training costs because new-recruited employees do not contribute to the company outcomes during their training and orientation period Because the high turnover rate, the department of Human resources at Vina One has to recruit new workers for Hot-Rolled Steel factory every week, leading to spend a lot of recruitment costs (about 10 workers left company per week) New workers need time to be trained; therefore the business results of the company in several weeks are negatively affected

Figure 9 The turnover rate of Hot-Rolled Steel workers in detail for each position

(Source: Vina One Human Resource Department)

In the last three years, the percentage of leavers in Hot-Rolled Steel factory of has been increasing From Figure 9, workers who work at reheating furnace have the highest turnover rate with 65% in 2015 (increased 30% compare to 2014)

Reheating

furnace

hot rolled cutting Structural iron

Cooling + coilers Making

Machine control

Figure 10 Reasons why people quit their jobs at Vina One in 2015

(Source: Report from Vina One Human Resource Department) From Figure 10, there are some common potential reasons that employees left Vina One Performance appraisal bias (account for 19%) is significant factor that most affect to the intention to quit the job Biases can influence on employee performance evaluation in incredibly negative ways Other reasons such as job duties boring/no change, overall corporate culture, lack of opportunities for career development, workplace relationship problem, personal problem are not main factors that leading to high turnover rate Most of the people who took part in the in-depth interview did not mention above factors and they were not the top of mind idea from their ends Mr Tran Cao Thang - a worker at Hot-Rolled Steel factory, Mr Nguyen Quang Huy – a senior worker and Mrs Nguyen Lan Ngoc - Human Resources Manager agreed that supervisors‟ point of view on performance appraisal was a main factor that lead to high turnover rate

The causes of bias can come from a variety of sources such as supervisors, managers and human resources Kraiger et al.5 found that supervisors can give higher ratings to their

Job safety Personal problems Compensation and benefits

Work-life balance Performance appraisal bias Recruitment errors Workplace relationship problems

Lack of opportunities for career development

Overall corporate culture Job duties boring/no change

subordinates Prendergast et al.6 indicated that supervisors can distort their opinion in two sides of performance appraisal Firstly, the recruitment process can lead to a waste of time because the candidates do not meet the requirements of organization Secondly, it is difficult

to create an appropriate performance assessment system Poon7 stated that performance appraisals based on personal biases would lead to low job satisfaction and high turnover intention When employees know the results of the evaluation based on personal biases or punitive purposes, they have no satisfaction at work Zimmerman et al.8 found that the supervisor‟s perspective of employee performance impact on employee‟s turnover intention Khan9 also showed the same result that employees' satisfaction and commitment are affected by the bias and feelings of some managers, which then causes to increase employee turnover rate

Figure 11 Recruitment cost

(Source: Vina One Human Resource Department) Turnover rate affects negatively to an organization‟s operation such as increasing cost of recruitment and training new comers, reducing performance efficiency, etc The chart from

Figure 11 show the recruitment cost in Vina One in 2015 which increased together with the turnover rate

The above figures provide strong evidences that high turnover rate of hot-rolled steel worker

is an outstanding problem for the company‟s operation The managers are looking for solutions to reduce turnover rate and achieve financial targets In order to obtain that target, it‟s necessary to understand the causes of turnover rate, why Hot-Rolled Steel workers want

to leave the company and if biases from supervisors have any effects on this rate

3 PROBLEM IDENTIFICATION

It is important to figure out the reasons for high turnover rate of Hot-Rolled Steel workers at Vina One and its consequences After examining many relevant literatures on turnover rate, the potential antecedents that are believed to provide the most understanding are supervisor relation, co-worker relation, perceived organizational support, training & career development, reward & recognition and distributive & procedure justice

In addition, seven in-depth interview sessions are conducted from 3 main groups (first group: managers/supervisors/workers who are currently working in Vina One, second group: workers who already left Vina One and third group: Workers who intended to leave the company, but decided to stay) There are some key reasons leading to the high turnover rate of workers at Hot - rolled steel factory including job safety, performance appraisals bias, recruitment process errors, compensation and work-life balance

3.1 Job safety

The study of Ameen et al.10 provides that job insecurity is related to leaving intention When job insecurity increases, job satisfaction decreases and employees have more intention to seek other jobs Ismail H 11 also found same results showing that job insecurity significantly affects to decisions of quitting the organization

Mrs Nguyen Lan Ngoc - Human Resources Manager in Vina One stated that:

One of the reasons why workers left Vina One was the toxic environment and unsafe situations

Mr Nguyen Hoai Nam – a supervisor at Hot-Rolled Steel factory also blamed the lack of workplace safety toolkit, lack of reward and recognition They are not equipped with adequate protective equipment; many of them feel insecure when working in the factory They often work with harmful objects and suffer dangerous working environment such as steel fragments, electrical spark which could injure them if they make a mistake

Mrs Bui Thi Hai Hau-Human resource manager- Tan Thanh Quyen Steel Co., Ltd shared that:

Some other steel companies with the same scale such as Tan Thanh Quyen Steel Co., Ltd, Nguyen Minh Steel Manufacturing & Trading Co., Ltd, Vina One etc also have not invested in personal protective equipment for workers because they all want to save cost for other activities to enhance competitiveness With the small scale in such a middle-ranked company like Tan Thanh Quyen, saving costs is considered as a main factor to compete with other competitors such as Viet Nam Steel Corporation, Hoa Phat Steel JSC, Pomina Steel Corporation

Mrs Nguyen Tuong Vi - a factory worker in Reheating furnace department left Vina One 3 month ago after 1 year working, currently working for TVP Steel in Long An province She shared that:

Reheating furnace department is the most dangerous workplace but she had no employment insurance because the employers only had a temporary contract

She had tried to work but she felt unsafe for her health while she had one breastfed children She often exposed to toxic gases which is not conducive to children, so she decided to leave

In addition, work injuries occurring in manufacturing firms lead to high employee turnover12 Urbanaviciute et al.13 stated that job insecurity and affective organizational commitment have a negative relationship According to statistics from the Human Resources Department at Vina One, in 2015 there were 14 accidents for workers in hot-rolled steel factory In detail, there were 3 cases involving fainting due to breathe toxic gases, 5 cases of injured in hands and foots due to sharp objects, 3 cases of nerves affected

by noise, 2 cases related to eye diseases and 1 accident with permanent disability due to no protective safety toolkits when operating machinery Workers are worried about level of safety in their jobs that lead to increase intention to quit If the company does not fix this problem, workers may decide to leave the company sooner or later

Mr Tran Cao Thang- a worker at Hot-Rolled Steel factory left Vina One 2 months ago shared that:

All workers are well aware of this fact, but they accept to do the job as their job risks because they do not know any other better job to move

3.2 Performance appraisal

Zimmerman et al.8 stated that job performance has a negative relationship with intention to quit Employees were less likely to quit if their supervisors regarded them as good performers

Mr Tran Nhat Tan – a worker who has been working for 2 years in the role of Hot-Rolled Steel- TVP Steel (Vina One„s competitors) and now he has joined Vina One in role of Hot-Rolled Steel factory in 2013 He stated that:

Workers left factory due to lack of support from supervisors, unclear job description (misunderstanding and unsure) for workers Worker performance evaluation was based on their supervisor‟s perspective In addition, there is inconsistency in the way supervisor evaluate their team A few of them had good performances but were not recognized because they didn‟t have good relationship with their supervisors Directors and Human Resources manager do not care about the real job performance of workers, only based on evaluation from supervisor

Mr Tran Cao Thang – a worker at Hot-Rolled Steel factory left Vina One 2 months ago thought that:

Many workers have been suffering poor working conditions with consecutive shifts, unfair working assessment and unanswered requests The main problem was that their voices were not listened Biron et al.14 found that there was a negative relationship between performance appraisal and turnover intentions under conditions of low task interdependence

Mrs Nguyen Lan Ngoc - Human Resources Manager shared that:

Majority of leavers from Hot-Rolled Steel factory received no support from their supervisors Many

of them decided to work for other steel companies such as Nguyen Minh Steel Manufacturing &

Trading Co., Ltd, Hoa Phat Steel Joint Stock Company, TVP Steel though these ones offered less attractive benefits.

Selvarajan et al.15 provide evidences showing that employee‟s performance assessment results are influenced by management‟s bias Managers can evaluate whether an employee work successfully or not up to their perspectives without listening to employee‟s opinions Most recent behaviors or presented items become the primary focus of the review (recency effect) Supervisors tend to make assessments based on short-term events, not based on the entire appraisal period that can lead to false performance appraisals They assume that the trend which occurs in short term will continue and repeat This is a dangerous bias because

of inaccurate performance ratings

On the other hand, Moers16 found that subjectivity in performance evaluation can lead to difficulty in making accurate decisions This paper undertakes some literature reviews that provide types of biases and errors in performance appraisal process These biases are as below:

Halo Effect was first introduced by Edward Thorndike17 that is a type of cognitive bias in which our overall impression of a person (feature or trait) and how we think about him or her For example, when we perceive him or her to be successful, beautiful or attractive, we also tend to see them as intelligent, kind The managers may ignore other objective traits of

an employee because his positive qualities This perspective is often based on personality conflict or other factors that are not related to job performance Managers can give high rate for employees who have good relationship with them This influences employee performance appraisals as well

Central tendency is a bias that managers rate all employees as middle level This bias can lead to inappropriate in the performance appraisals because this does not reflect all the contributions and problems of employees Many employees have low performance that may

be rated slightly above average, on the other side a good employee should not be rated in the same rate as they deserve a better grade Managers or supervisors with a view to play it safe try to avoid conflicts and other issues

Spillover effect is a bias in which managers or supervisors evaluate the current performance

of an employee based on the basis of his or her performance in the past The worker who was a good performer in the past is assured to be fine rated at present This kind of performance assessment cannot be accurate If the performance review of employees is good, managers can keep the same rating for their current performance.18

Leniency and severity errors are the biases depending upon supervisors‟ standards, values and physical and mental makeup Supervisors can rate in a harsh or lenient way They tend

to give high scores to people under their supervision or in their teams Leniency or severity error is important issues that lead to inaccurate performance appraisals Moers16 stated that supervisors can give more lenient score of performance appraisals toward their employee when they have power to make decision in performance evaluation If they want to get high score performer, they try to review leniently for their workers with high results in exchange for personal benefits such as rewards and promotions

Mr Nguyen Quang Huy – a senior worker at Hot-Rolled Steel factory who intended to quit his job but then were convinced to stay and move to an easier job at Cold-Roll Steel He has

contributed his 5 years to work at Hot-Rolled Steel – where he hoped to receive high salary for the hard and dangerous condition Unfortunately, he did not go along well with his supervisor, and all his outstanding contributions were not recognized through all these years with the low salary when compared with the market

Watrous et al.19 showed that there are relationships between employee turnover and performance appraisals which can be different for each managers at different levels in the organization Kondrasuk20 provided that the performance reviews of employees should be based on both objective and subjective aspects of the employee's job performance within the context of a challenging job situation

The personal bias leads to unfair appraisals for the employees Personal bias can come from different sources such as core values, social and family backgrounds and ways of thinking

or believing Selvarajan et al.15 developed a cognitive performance appraisal model that was influenced by schematic, affective and attributional process

Moreover, Tsai et al.21 indicated that the employees' communication satisfaction is directly related to both their job performance and turnover intention Employees‟ communication includes their discussions with supervisors, getting company information from them and receiving personal feedback According to Min et al.22, lack of close personal interaction leads to lack of emotional attachment and loyalty to the organizations, thereby increasing employee turnover Supervisors need to have more objective assessment on performance appraisal process and interact with their employees more frequently about their performance outcome rather than just base on personal bias

3.3 Errors in recruitment process

The recruitment process plays an important role in the development strategy of any organization The good recruitment program can provide a positive impact to increase employee commitment, productivity and working quality

Ms Nguyen Thi Thanh Thao - Operation manager of Hot-Rolled Steel factory, has been working as an operation manager of an 1,218-worker factory at Vina One for nearly 8 years She stated that:

Workers left Vina One due to the failures in recruitment, career development and team engagement The workers have the rights to know their detailed career paths at the company but they were unable

to reach the information which was only transmitted through top managers This could lead to the miscommunication among leaders and employees More importantly, rumors had it that the managers committed a fraud by purposely giving false or misleading information or willfully hiding information in order to get benefits

Allen23 indicates that team communication is more closely related with intention to quit in

an organization If employees engage well with their teams, they are less voluntarily intent

to leave the organization

Besides, Ms Nguyen Thi Thanh Thao also provided some evidences of priority recruitments when hiring acquaintances as well as how inexperienced recruiters offered poor job descriptions and giving unfair work allocations which made many workers confused Chen et al.24 found that different channels of recruitment had different effects on turnover intention The acquaintance priority in recruitment process will make employees confused and discriminated in the workplace.25 On the other hands, the employees who are

hired by their acquaintances, many of them can‟t meet the job requirements and lower the performance of the whole company

Ellepola MG4 indicated that candidates should be well-screened in the hiring process; if not, they not only have no contribution to the operation of company, but also waste costs of training during the orientation process In addition, Vispute26 suggested that the recruitment process plays an important role in creating loyalty and reducing turnover rate The managers need to prepare their recruitment strategies to maintain the loyalty of employees in the organization

3.4 Compensation and benefits

Luna-Arocas27 found that the importance of financial incentives in staff retention goal is huge According to compensation policy in Vina One, workers' wages are paid including 4 elements: base pay, job performance, overtime and cost of living adjustment

Base pay, which takes about 50% of total income, is quite low from 3 to 4 million per month based on the number of hours worked during the month Wages paid in job performance accounting for 30-35% in total income is evaluated by supervisor base on productivity, teamwork, compliance with regulations and attitude at work Overtime is paid equally to 150% of the base pay but not more than 20% of the monthly base pay Cost of living adjustments are applied only for workers residing outside Long An province (where the company is registered) We can see that majority in the income of workers except base pay depend much on the assessment of the supervisors Carraher28 provided that there is a

relationship between pay satisfaction and turnover To retain employees, the company needs

to make better salary policy than what competitors offer

In addition, Mrs Nguyen Tuong Vi - a factory worker in Reheating furnace department left Vina One 3 month ago She thought that:

She was willing to work hard as long as to gain better salary and benefits, but her efforts were not paid off Lack of reward, recognition and unfair pay are the biggest reason why employee decided to leave Vina One The inconsistent career paths, severe discipline as well as poor promotional opportunities pushed her to leave

O'Halloran29 revealed that benefits tend to reduce turnover If workers receive some more benefits based on their good performance, their intention to quit is lower than other workers

3.5 Work-life balance

Work-life balance is what companies help their employees to improve their health, satisfy their personal life, which can also improve their productivity and performance However, many employees nowadays have to face with challenges to balance their work and personal life.30 Surienty et al.31 provided turnover intention is related to work-life balance, supervisory behavior and job characteristics

Mr Nguyen Quang Huy – a senior worker at Hot-Rolled Steel shared that:

Work-life balance is an important problem impacting on turnover intention because the workload is

so heavy, they could not manage time well and don‟t have time for their personal life Many workers can‟t find their own mate, be unable to visit family due to tight schedule

Aziz et al.32 stated that workaholics have higher levels of work-life imbalance than enthusiasts, and disenchanted workers have higher levels of work-life imbalance than others Positively engaged workers can improve their work-life balance by staying involved

in personal activities Besides that, Lee et al.33 provided that people leave their jobs because

of variety of events (called shocks to the system) with Unfolding Model of Voluntary Employee Turnover A shock might be anticipated or unanticipated, positive, neutral, or negative When people experience a shock, they can quickly decide to leave an organization without planning for the future to pursue another job

Moreover, Mr Tran Cao Thang – a worker at Hot-Rolled Steel factory shared that:

Heavy workload leads to low engagement in teams Workers could not organize time for work and for their family because the working schedule from Monday to Saturday, 8 am to 5h30 pm In many days, they have to work overtime (3 to 5 hours/day including Sunday) in order to keep up with the production progress

Devi et al.34 found that balance work-life plays an important role in the development of company workforce Mitchell et al.35 have introduced a new construct, entitled “Job Embeddedness Model”, explaining why people stay and leave in organizations Job embeddedness model indicates that many non-financial and non-attitudinal factors serve to place people in a network of forces that keep them in their job.36 Companies need to implement work-life balance program such as child care, flexible work arrangements, employee support program in accordance with the different personalities of employees

From the result of surveys in seven respondents together with turnover literatures, performance appraisal bias theories, the preliminary cause –and –effect tree will be developed as five main groups as follow:

Figure 12 Cause –and –effect tree

Supervisors are not trained

Inexperienced recruiter

Recency bias and personal bias errors Inconsistency

across supervisors Unclear job description

(misunderstanding and unsure)

Lack of reward and recognition

Compensation and benefits

Performance appraisal bias from supervisor Recruitment errors

High turnover rate (Hot- Rolled Steel workers)

Increasing cost of recruitment and training

Reducing factory capacity

Five factors leading to high turnover rate of Hot-Rolled steel workers include compensation and benefit, work-life balance, job safety, recruitment errors, performance appraisal bias from supervisor This problem could have serious impact on Vina One‟s activities because it could increase cost of recruitment and training new employees that reduce performance efficiency. 37 Lashley C38 mentioned 03 types of direct costs when replacing staff including: the cost of discontinuing of an existing employee, the cost of finding a replacement, the cost

of bringing the new comers into company and training them to full effectiveness

Turnover costs are not easy to be counted exactly, according to a report of annual volume from Hot-Rolled Steel factory, its capacity reduced from 250,000 ton/year to 160,000 ton/year due to high turnover, which takes the factory more time to train new workers The company currently suffers high depreciation cost of 230 million VND/month while the capacity utilization rate cannot exceed beyond 65% which cause huge wastes and low profit margin

Simons et al.39 also found that turnover drives out profits, many of the specified costs derive from productivity losses that are difficult to estimate

4 CAUSE VALIDATION

Based on the cause and effect tree, in-depth interview from 7 respondents divided into 3 main groups (see Interview guides), secondary data from Human Resources department and theories informed, it can be seen that the main causes leading to high turnover of workers in hot-rolled steel factory are performance appraisal and recruitment errors It is important for Vina One to have action plans to solve this problem immediately

Regarding to compensation and benefit, this issue cannot be solved immediately because of some reasons as follows Firstly, Vina One can improve the compensation and benefit for some workers who have good performance If it is applied for all workers, it should be considered between cost and benefit Secondly, from employee‟s perspective, they accept to work hard to get high income because compensation and benefit in Vina One are quite competitive to other firms such as TVP Steel, Nguyen Minh, Tan Thanh Quyen (see Figure 8) March et al.40 who stated that turnover rate is defined by perceived desirability and ease

of leaving an organization Individual's career rewards (salary and job status) can reduce employee turnover If individual has a bright career prospect in the organization, they will have little intention to quit the job However, this model lacks sufficient demonstrative and empirical validity.41 The action that workers really want is the support from the supervisors and the fair-evaluation appraisal that they deserve

Regarding to work-life balance, it is not a key factor leading to massive turnover in Vina One For money, workers are forced to choose between their personal life and the dead-end job along with high pressure and heavy workload To earn money and support their family, many workers accept this fact as a normal situation In fact, not many workers in Vina One leave jobs because of the workload itself only.Mr Tran Nhat Tan - a worker at Hot-Rolled Steel factory and Mrs Nguyen Tuong Vi - a factory worker in Reheating furnace department also indicated that biases from supervisors on performance evaluation is main cause that leads to high turnover rate

For job safety, it can be seen that risks in heavy industry are unavoidable They all face some forms of occupational hazards in the workplace However, thanks to some

requirements in laws and regulations of the government, many firms have improved their workplace and provided personal protective equipment to their workers The problem only arises when some companies break laws or purposely accept the current occupational accident rate as an acceptable one Mrs Bui Thi Hai Hau - Human Resources Manager at Tan Thanh Quyen Steel Co., Ltd also stated that:

Not only Vina One but also her company and other steel manufacturers are trying to improve working conditions for workers by equipping workplace safety toolkit, training employees on safety regulations that help reduce the risk of worker injuries This issue cannot be solved in short time but

need time to examine many aspects to enhance employee awareness of labor safety.

It can be seen that performance appraisal and recruitment errors are considered as main factors that affect to workers‟ turnover In these two factors, performance appraisal has the most impact on the turnover rate at Hot- Rolled Steel factory because of three main reasons

It is important for all employees to have a good relationship with their supervisors because it would have impact on how their performances are evaluated If not, the employees can be unfairly judged which leads to the crisis of high turnover

Mr Tran Cao Thang - a worker at Hot-Rolled Steel factory and Mrs Nguyen Lan Ngoc - Human Resources Manager also agreed that supervisors‟ point of view on performance appraisal has strong connection to how many employees quit their jobs

Secondly, most of workers‟ income comes from base pay which accounts for more than 50% in total salary but this could not help them afford to meet their living standard due to lower level compared to the market The remaining part of the income from job performance is assessed based on their supervisor perspectives (accounts for 30-35% in total income) Therefore, if there are any biases in assessment from supervisors, it could strongly affect to the workers‟ decisions to stay or leave the company

Thirdly, workers are put under heavy pressure due to the lack of supervisors‟ support in daily operation and no response in their demands of elucidation in wages and performance assessment Moers16 also indicate that performance measurement with subjectivity is related

to performance appraisals bias

Currently, Vina One has recognized the supervisor‟s biases as the main reason for its high turnover rate The company has applied many solutions including changing performance appraisal process and eliminating recruitment errors However, the results from these solutions seem not to be very effective due to these below reasons:

Firstly, these processes need time to be changed and communicated to all employees while how the current supervisors treat their workers still causes chagrin and disappointment in worker‟s minds