LV Thạc sĩ_Improving the reward system at VID public bank

TABLE OF CONTENT ACKNOWLEDGEMENT ABBRIVIATIONS LIST OF FIGURES .5 LIST OF TABLES EXECUTIVE SUMMARY CHAPTER 1: INTRODUCTION 1.1 Rationale 1.2 Research Objectives .10 1.3 Research Questions 10 1.4 Research Scope .10 1.5 Theoretical Background 10 1.6 Research methodology 11 1.7 Structure of thesis 12 CHAPTER 2: THEORETICAL BACKGROUND ON REWARD SYSTEM .13 2.1 The concept of reward system .13 2.2 The supporting components 15 2.2.1 Business Strategy 15 2.2.2 Reward strategy 15 2.3 The elements of reward system .17 2.3.1 Financial Reward 17 2.3.1.1 Base Pay 17 2.3.1.2 Variable Pay 18 2.3.1.3 Employee benefits 21 2.3.2 Non financial reward 23 2.4 The aims of reward system 30 2.5 Factors to assess the reward system 30 CHAPTER 3:CURRENT REWARD SYSTEM AT VID PUBLIC BANK .32 3.1 Overview of VID Public Bank 32 3.1.1 History 32 3.1.2 VPB business results 33 3.1.3 Corporate Philosophy 34 3.1.4 VPB business strategy and reward strategy 35 3.2 The current reward system at VID Public Bank 36 3.2.1 Financial reward 36 3.2.1.1 Base salary 36 3.2.1.2 Variable pay 36 3.2.1.3 Benefits .38 3.2.2 Non financial reward 43 3.2.2.2 Promotion Policy 43 3.2.2.3 Training 44 3.3 Findings on the VID Public Bank reward system 45 3.3.1 Findings on financial reward .45 3.3.1.1 Base pay 45 3.3.1.2 Variable pay 47 3.3.1.3 Benefits .49 3.3.2 Findings on non financial reward 51 3.3.2.1 Recognition .51 3.3.2.2 Growth and development 52 3.3.2.3 Work itself 53 3.3.2.4 Supervision .54 3.3.2.5 Interpersonal Relations .54 3.3.3 Summary of strengths and weaknesses of VPB reward system 55 3.3.3.1 Strengths 55 3.3.3.2 Weaknesses and causes of weaknesses .56 CHAPTER 4: RECOMMENDATIONS FOR IMPROVEMENTS 59 4.1 Business Target for 2010 - 2011 .59 4.2 Recommendation to improve VPB reward system 59 4.2.1 Recommendations to financial rewards 59 4.2.2 Recommendations to non financial rewards 62 4.2.3 Participation of the management and staffs 65 CONCLUSION 67 REFERENCES 68 APPENDIX 69 ACKNOWLEDGEMENT First of all, I would like to express my sincere thanks to my supervisor - Dr … who enthusiastically guided me during the last thesis’s implementation As one of the youngest students at EMBA program, I am still lack of certain knowledge and experiences in both theory and practices Ms provided me with such a logical thinking that I can make a clear part in conducting my thesis and view it from different scales Secondly, I would like to thank my family members who support me a lot during the last time Especially, my mother always encourages me to study further for better chance in life She was the one to sponsor for my whole EMBA course even when I got a job with stable salary Moreover, my colleagues at VID Public Bank were so willing to contribute to this research by sharing with me their perspectives I am also grateful of my Manager who allowed me to approach VPB information and gave me useful advice Last but not the least; I would like to mention my closed classmates who motivated me much time by time I will miss some out goings for chatting/beer with them because such occasions enabled me to work harder on my thesis to catch up with them ABBRIVIATIONS BIDV : Bank of Investment and Development COLA: Cost of living allowance HA : Housing Allowance PAI : Personal Accident Insurance PBB : Public Bank Berhad PRP : Performance Related Pay VN : Viet Nam VPB : VID Public Bank LIST OF FIGURES Figure 1.1 – The extension of reward system model by Michael Armstrong 11 Figure 1.2 - Research Process 11 Figure 2.1 – The reward system 14 Figure 2.2 – Performance related pay scheme 18 Figure 2.3 – Job characteristics Model 27 Figure 2.4 – The extension of reward system model by Michael Armstrong 29 LIST OF TABLES Table 2.1 – Advantages and Disadvantages of variable pay to individuals and teams 20 Table 2.2 – Types of benefits .22 Table 3.1 – VPB Business results 2008-2009 .34 Table 3.2 – VPB current base salary structure 36 Table 3.3 – VPB types of leave 39 Table 3.4 – VPB COLA rate .40 Table 3.5 – VPB social and health insurance premium 41 Table 3.6 – VPB PAI coverage 42 Table 3.7 – VPB telephone expense 42 Table 3.8 – VPB transportation expense 43 Table 3.9 – VPB outstation allowance .43 Table 3.10 – VPB staffs perspectives on VPB basic salary (in term of position) 45 Table 3.11 – VPB staffs’ perspectives on VPB basic salary (in term of service duration) 46 Table 3.12 – VPB average incremental level 47 Table 3.13 – VPB average annual bonus 48 EXECUTIVE SUMMARY Labor force is considered as one of the major elements to bring an organization with competitive advantages in business world Most of organizations realize such important role of human resource that they always try their utmost to attract, motivate and retain talented, skilled and committed employees to achieve high turnover and outstanding productivity Among various aspects of human resource management, reward system is supposed to make considerable contribution to help an organization to reach these targets With reference to the above, the author wished to make a research on the reward system of a bank where there is a tough competition in owning strong labor force and high turnover situation occurring VID Public bank is chosen to help the author with chance to have diversified perspectives on different elements of reward system including base pay, variable pay, benefits (financial rewards) and recognition, growth and development, work itself, supervision, interpersonal relations (non financial rewards) More than 20 interviews with both VPB employees and ex-employees and up to 50 questionnaires were carried out at Hanoi offices Most data for the research were ranged from 2007 to 2009 The findings of the research reveal both strengths and weaknesses of the VPB reward system The strong points were found in competitive base pay level, wide range of benefits, supportive supervisors and comfortable relations among staffs The limits of VPB reward system were mainly in the variable pay program, recognition scheme and growth and development Via the direct interviews with both Human resource Manager and the Bank manager, the root causes of such weak points were also found out Based on theoretical background, the results of the research as well as the bank requirement to upgrade its reward system, the author has come up with certain recommendations The improvement requires the involvement of changes in policy and procedures in implementation of each element Moreover, the cooperation of the Management and Staff level employees are also crucial to ensure the success of the reward system enhancement Reward system if being concerned and implemented well will work as positive tool to retain and motivate the labor force CHAPTER 1: INTRODUCTION 1.1 Rationale Human resource in banking sector in Vietnam has been more and more urgent due to the imbalance between labor supply and demand As a report on online human resource parameters in 1st Quarter 2010 by Vietnamworks.com, one of Vietnam’s biggest online recruitment providers, banking field is among sectors being considered to have highest human power demand In comparison with th Quarter 2009, the demand on human resource for banking sector increased 18 percent Meanwhile, the gap between labor supply and demand of this sector still remains the biggest, which leads to a fierce competition in attracting employees among banks Thus, how to retain and motivate employees to maintain strong labor force for the bank has been a big question for human resource manager VID Public Bank was set up in 1992 in a form of joint venture between Public Bank Berhad in Malaysia and Bank for Investment and Development of Vietnam Since its establishment, VID Public Bank has always considered labor force as determinant factor to the bank’s success However, in recent years, VID Public Bank has had to cope with such problems coming from human resource when its staff turnover rate has kept staying at high level rate The turnover rate has respectively maintained at 18.5%, 18.7% and 11.44% in 2007, 2008 and 2009 In exit interview forms that staffs have to fill in before resigning, the listed reasons are the dissatisfaction about salary, bonus, benefits and etc… Based on more than 03 years of working experience at Human Resource Department of VID Public Bank, It is revealed that the high staff turnover rate is the result of some shortcomings of VID Public Bank reward system It is the right time that reward system at VID Public Bank should be reviewed so that weaknesses would be found out and necessary actions should be taken By this way, VID Public Bank would strengthen its labor force to ensure its further development and expansion in the coming time From the above, the thesis of “Improving the Reward system at VID Public bank” is chosen with desire to help enhance VID Public Bank reward system as a method of motivation and retaining staffs 1.2 Research Objectives In this research, the author would like to achieve the following objectives: - To analyze the current reward system at VID Public Bank in order to find out the strengths and weaknesses of the system - To analyze the key causes of the weaknesses of the reward system - To make recommendations to improve the current reward system so that it can retain and motivate VID Public Bank employees 1.3 Research Questions Within the framework of this thesis, there will be some relevant questions raised such as: - What is current reward system at VID Public Bank? - What are the weaknesses and strengths of reward system at VID Public Bank? - What are the roots of the weaknesses? - How to improve the current reward system so that it will help motivate and retain employees at VID Public Bank? 1.4 Research Scope Due to the time limitation and the accessibility to the whole VID Public Bank staffs, the thesis is focused on mainly staffs and management group working at Hanoi office The data provided by the Bank from 2007 to 2009 and information collected from employees are applied to find out the real situation of current reward system at VPB The thesis also focuses on the elements of the reward system instead of digging into the strategy scope of the subject 1.5 Theoretical Background The study has been grounded on the following theories as the theoretical background: - Reward system model by Michael Armstrong - The two factor theory by Frederick Herzberg - Job Characteristics Model by J Richard Hackman and Greg Oldham 10 VPB annual bonus Frequency Valid Quite dissatisfied Percent Valid Percent Cumulative Percent 2.0 2.0 2.0 Dissatisfied 28 56.0 56.0 58.0 Neutral 16 32.0 32.0 90.0 Satisfied 10.0 10.0 100.0 50 100.0 100.0 Total APR affect pay Frequency Valid Yes Percent 50 Cumulative Percent Valid Percent 100.0 100.0 100.0 APR realize weaknesses and strengths Frequency Valid Percent Valid Percent Cumulative Percent Disagree 15 30.0 30.0 30.0 Neutral 18 36.0 36.0 66.0 Agree 16 32.0 32.0 98.0 2.0 2.0 100.0 50 100.0 100.0 Strongly Agree Total APR recognizes achievement Frequency Valid Percent Valid Percent Cumulative Percent Disagree 17 34.0 34.0 34.0 Neutral 18 36.0 36.0 70.0 Agree 15 30.0 30.0 100.0 Total 50 100.0 100.0 80 APR clear criteria Frequency Valid Percent Valid Percent Cumulative Percent Disagree 20 40.0 40.0 40.0 Neutral 14 28.0 28.0 68.0 Agree 16 32.0 32.0 100.0 Total 50 100.0 100.0 APR executed by direct supervisor Frequency Valid Percent Valid Percent Cumulative Percent Disagree 6.0 6.0 6.0 Neutral 16 32.0 32.0 38.0 Agree 30 60.0 60.0 98.0 2.0 2.0 100.0 50 100.0 100.0 Strongly Agree Total APR reviewed by Manager Frequency Valid Percent Valid Percent Cumulative Percent Disagree 6.0 6.0 6.0 Neutral 14 28.0 28.0 34.0 Agree 28 56.0 56.0 90.0 10.0 10.0 100.0 50 100.0 100.0 Strongly Agree Total APR from feeling Frequency Valid Percent Valid Percent Cumulative Percent Disagree 14.0 14.0 14.0 Neutral 12 24.0 24.0 38.0 Agree 27 54.0 54.0 92.0 8.0 8.0 100.0 50 100.0 100.0 Strongly Agree Total 81 APR in Sep reflect performance Frequency Valid Strongly disagee Disagree Percent Valid Percent Cumulative Percent 2.0 2.0 2.0 28 56.0 56.0 58.0 APR reflect performance Frequency Valid Percent Valid Percent Cumulative Percent No 36 72.0 72.0 72.0 Yes 14 28.0 28.0 100.0 Total 50 100.0 100.0 Benefits VPB Housing Allowance Frequency Valid Dissatisfied Percent Valid Percent Cumulative Percent 10 20.0 20.0 20.0 Neutral 26 52.0 52.0 72.0 Satisfied 14 28.0 28.0 100.0 Total 50 100.0 100.0 VPB COLA Frequency Valid Dissatisfied Percent Valid Percent Cumulative Percent 10 20.0 20.0 20.0 Neutral 26 52.0 52.0 72.0 Satisfied 14 28.0 28.0 100.0 Total 50 100.0 100.0 82 Social Insurance Frequency Valid Percent Valid Percent Cumulative Percent No 4.0 4.0 4.0 Yes 48 96.0 96.0 100.0 Total 50 100.0 100.0 Medical Insurance Frequency Valid Percent Valid Percent Cumulative Percent No 15 30.0 30.0 30.0 Yes 35 70.0 70.0 100.0 Total 50 100.0 100.0 Leave day number Frequency Valid Percent Valid Percent Cumulative Percent No 4.0 4.0 4.0 T 2.0 2.0 6.0 Yes 47 94.0 94.0 100.0 Total 50 100.0 100.0 Overtime payment Frequency Valid Percent Valid Percent Cumulative Percent No 47 94.0 94.0 94.0 Yes 6.0 6.0 100.0 Total 50 100.0 100.0 work overtime willingness Frequency Valid Percent Valid Percent Cumulative Percent No 40 80.0 80.0 80.0 Yes 10 20.0 20.0 100.0 Total 50 100.0 100.0 83 Reason for not working overtime Frequency Valid Percent Valid Percent Cumulative Percent I have got my family matters 11 22.0 27.5 27.5 I get nothing from my extra working hour VPB does not pay overtime pay 22 44.0 55.0 82.5 14.0 17.5 100.0 40 10 50 80.0 20.0 100.0 100.0 Other Total Missing System Total 84 overtime pay recommendation Frequency Valid Percent Valid Percent Cumulative Percent Partly recommend 4.0 4.0 4.0 Recommend 4.0 4.0 8.0 Fully recommend 46 92.0 92.0 100.0 Total 50 100.0 100.0 moving recommendation Frequency Valid N/A Percent Valid Percent Cumulative Percent 2.0 2.0 2.0 Partly recommend 11 22.0 22.0 24.0 Recommend 15 30.0 30.0 54.0 Fully recommend 23 46.0 46.0 100.0 Total 50 100.0 100.0 Clothing allowance recommendation Frequency Valid Percent Valid Percent Cumulative Percent N/A 4.0 4.0 4.0 Partly recommend 18.0 18.0 22.0 Recommend 11 22.0 22.0 44.0 Fully recommend 28 56.0 56.0 100.0 Total 50 100.0 100.0 makeup allowance recommendation Frequency Valid Percent Valid Percent Cumulative Percent N/A 18.0 18.0 18.0 Partly recommend 10.0 10.0 28.0 Recommend 10 20.0 20.0 48.0 Fully recommend 26 52.0 52.0 100.0 Total 50 100.0 100.0 85 Higher bonus on VNese holidays Frequency Valid Recommend Percent Valid Percent Cumulative Percent 4.0 4.0 4.0 Fully recommend 48 96.0 96.0 100.0 Total 50 100.0 100.0 86 Sex * Reason for not working overtime Reason for not working overtime I get nothing from my extra I have got my working hour family matters VPB does not pay overtime pay Sex Female Count 12 22 31.8% 54.5% 13.6% 100.0% 10 18 % within Sex Count 22.2% 11 55.6% 22 22.2% 100.0% 40 % within Sex 27.5% 55.0% 17.5% 100.0% % within Sex Male Total Total Other Count Recognition Are you awarded? Frequency Valid Percent Cumulative Percent Valid Percent No 44 88.0 88.0 88.0 Yes 12.0 12.0 100.0 Total 50 100.0 100.0 Feeing about recognition Frequency Percent Valid Percent Valid Cumulative Percent I am praised immediately and appropriately when I fulfill my task 10.0 83.3 83.3 The praise is just in formalism The Officer/ manager does not really care about my achievement 2.0 16.7 100.0 44 50 12.0 88.0 100.0 100.0 Total Missing System Total 87 Growth and development types of training Cumulative Frequency Percent Valid Percent Percent Valid On the job training with official/proper materials 8.0 8.0 8.0 43 86.0 86.0 94.0 Other 6.0 6.0 100.0 Total 50 100.0 100.0 On the job training without official/proper materials enough training Frequency Valid Strongly disagee Percent Valid Percent Cumulative Percent 8.0 8.0 8.0 Disagree 32 64.0 64.0 72.0 Neutral 10 20.0 20.0 92.0 Agree 8.0 8.0 100.0 Total 50 100.0 100.0 Further training is supported Frequency Valid Strongly disagee Percent Valid Percent Cumulative Percent 4.0 4.0 4.0 Disagree 17 34.0 34.0 38.0 Neutral 21 42.0 42.0 80.0 Agree 10 20.0 20.0 100.0 Total 50 100.0 100.0 88 helpful and necessary training Frequency Valid Strongly disagee Percent Valid Percent Cumulative Percent 16.0 16.0 16.0 Disagree 28 56.0 56.0 72.0 Neutral 11 22.0 22.0 94.0 Agree 6.0 6.0 100.0 Total 50 100.0 100.0 VPB should enhance further training Frequency Valid Percent Valid Percent Cumulative Percent Strongly disagee 2.0 2.0 2.0 Neutral 2.0 2.0 4.0 Agree 29 58.0 58.0 62.0 Strongly Agree 19 38.0 38.0 100.0 Total 50 100.0 100.0 Work itself interesting job Frequency Valid Percent Valid Percent Cumulative Percent Disagree 2.0 2.0 2.0 Neutral 34 68.0 68.0 70.0 Agree 15 30.0 30.0 100.0 Total 50 100.0 100.0 suitable skills and knowledges Frequency Valid Percent Valid Percent Cumulative Percent Disagree 18.0 18.0 18.0 Neutral 24 48.0 48.0 66.0 Agree 17 34.0 34.0 100.0 Total 50 100.0 100.0 89 assigned additional work Frequency Valid Percent Cumulative Percent Valid Percent Disagree 16.0 16.0 16.0 Neutral 22 44.0 44.0 60.0 Agree 20 40.0 40.0 100.0 Total 50 100.0 100.0 independence in work Frequency Valid Percent Cumulative Percent Valid Percent Disagree 24 48.0 48.0 48.0 Neutral 20 40.0 40.0 88.0 Agree 12.0 12.0 100.0 Total 50 100.0 100.0 feedback Frequency Valid Strongly disagee Percent Cumulative Percent Valid Percent 8.0 8.0 8.0 Disagree 26 52.0 52.0 60.0 Neutral 11 22.0 22.0 82.0 Agree 18.0 18.0 100.0 Total 50 100.0 100.0 need of being rotated Frequency Valid Percent Valid Percent Cumulative Percent No 21 42.0 42.0 42.0 Yes 29 58.0 58.0 100.0 Total 50 100.0 100.0 90 Reason Frequency Percent Valid Percent Valid I just want to obtain more banking knowledge from other banking field I am fed up with my current job Cumulative Percent 24 48.0 75.0 75.0 16.0 25.0 100.0 Supervision competent manager Frequency Valid Strongly disagee Percent Valid Percent Cumulative Percent 6.0 6.0 6.0 Disagree 14 28.0 28.0 34.0 Neutral 22 44.0 44.0 78.0 Agree 18.0 18.0 96.0 Strongly Agree 4.0 4.0 100.0 50 100.0 100.0 Total delegate responsibility Frequency Valid Percent Valid Percent Cumulative Percent Disagree 16 32.0 32.0 32.0 Neutral 18 36.0 36.0 68.0 Agree 16 32.0 32.0 100.0 Total 50 100.0 100.0 attentive towards employee needs Frequency Valid Percent Valid Percent Cumulative Percent Disagree 10.0 10.0 10.0 Neutral 34 68.0 68.0 78.0 Agree 11 22.0 22.0 100.0 Total 50 100.0 100.0 91 concern about work quality Frequency Valid Percent Cumulative Percent Valid Percent Disagree 8.0 8.0 8.0 Neutral 25 50.0 50.0 58.0 Agree 21 42.0 42.0 100.0 Total 50 100.0 100.0 support subordinates Frequency Valid Strongly disagee Percent Valid Percent Cumulative Percent 6.0 6.0 6.0 Disagree 11 22.0 22.0 28.0 Neutral 15 30.0 30.0 58.0 Agree 21 42.0 42.0 100.0 Total 50 100.0 100.0 Interpersonal relations cooperative departmental colleagues Frequency Valid Percent Valid Percent Cumulative Percent Disagree 6.0 6.0 6.0 Neutral 16.0 16.0 22.0 Agree 36 72.0 72.0 94.0 6.0 6.0 100.0 50 100.0 100.0 Strongly Agree Total cooperative colleagues from different dept Frequency Valid Percent Valid Percent Cumulative Percent Disagree 14.0 14.0 14.0 Neutral 20 40.0 40.0 54.0 Agree 18 36.0 36.0 90.0 10.0 10.0 100.0 50 100.0 100.0 Strongly Agree Total 92 Chance to meet more people Frequency Valid Percent Valid Percent Cumulative Percent Strongly disagee 10.0 10.0 10.0 Disagree 14.0 14.0 24.0 Neutral 15 30.0 30.0 54.0 Agree 18 36.0 36.0 90.0 responsible colleagues Frequency Valid Percent Valid Percent Cumulative Percent Disagree 6.0 6.0 6.0 Neutral 15 30.0 30.0 36.0 Agree 32 64.0 64.0 100.0 Total 50 100.0 100.0 support from Manager Frequency Valid Percent Valid Percent Cumulative Percent Disagree 18 36.0 36.0 36.0 Neutral 16 32.0 32.0 68.0 Agree 16 32.0 32.0 100.0 Total 50 100.0 100.0 93 factor to encourage working spirits Frequency Percent Valid Percent Cumulative Percent Valid Recognition 6.0 6.0 6.0 Growth and development 26 52.0 52.0 58.0 Work itself 6.0 6.0 64.0 Leadership 4.0 4.0 68.0 Interpersonal relations 16 32.0 32.0 100.0 Total 50 100.0 100.0 factor to keep staying at VPB Frequency Valid Financial reward Percent Valid Percent Cumulative Percent 22 44.0 44.0 44.0 18.0 18.0 62.0 Other 19 38.0 38.0 100.0 Total 50 100.0 100.0 Non financial reward 94 ... - What is current reward system at VID Public Bank? - What are the weaknesses and strengths of reward system at VID Public Bank? - What are the roots of the weaknesses? - How to improve the current... revealed that the high staff turnover rate is the result of some shortcomings of VID Public Bank reward system It is the right time that reward system at VID Public Bank should be reviewed so that weaknesses... way, VID Public Bank would strengthen its labor force to ensure its further development and expansion in the coming time From the above, the thesis of “Improving the Reward system at VID Public bank? ??