LV Thạc sỹ_VRB compensation scheme and motivationassessment and recommendation

RESEARCH DISSERTATION VRB’S COMPENSATION SCHEME AND MOTIVATION ASSESSMENT AND RECOMMENDATION ACKNOWLEDGEMENT My dissertation would not have been finished without the help of some very special people Clearly, I would like to thank my supervisor, Dr … for his unfailing support in guidance of my dissertation I have learned a lot from his experience, his ideas and belief in my direction during the time I am collecting information for mine I am much indebted to many of my colleagues in VRB for giving advices and help me make surveys successfully This dissertation would not have been possible if lacking of their sharing in materials, knowledge and experiences I own my deepest gratitude to my family They are always besides me and contribute a great encouragement to me to fulfill my dissertation VRB’s compensation scheme and motivation Assessment and Recommendation ABBREVIATIONS Vietnam-Russia Joint Venture Bank: VRB Human Resource: HR Human Resource Management: HRM Short Term Incentive: STI Long Term Incentive: LTI Compensation & Benefits: C&B VRB’s compensation scheme and motivation Assessment and Recommendation CONTENT CHAPTER I INTRODUCTION CHAPTER II THEORETICAL BACKGROUND CHAPTER III 26 OVERVIEW ON VRB’s COMPENSATION SCHEME AND MOTIVATION 26 CHAPTER IV 39 ANALYSIS ON VRB’S COMPENSATION SYSTEM AND MOTIVATION 39 CHAPTER V 58 RECOMMENDATION & CONCLUSION 58 REFERENCE 68 APPENDIX 1: SURVEY QUESTIONNAIRE 69 APPENDIX 2: VRB’S FORMS OF PERFORMANCE APPRAISAL 73 VRB’s compensation scheme and motivation Assessment and Recommendation LISTS OF FIGURES Figure 1: Components of compensation packages 10 Figure 2: A model of compensation decisions and determinants 15 Figure 3: A pay structure 18 Figure 4: Herzberg’s view of satisfaction and dissatisfaction 21 Figure 5: HAY flow chart 23 Figure 6: The performance management cycle 25 Figure 7: The performance management sequence 26 Figure 8: Credit team report 31 Figure 9: Gender report 32 Figure 10: Education report 32 Figure 11: Employees' experience report 33 Figure 12: VRB's Revenue report 34 Figure 13: Total compensation package of VRB 35 Figure 14: VRB’s general regulation on salary grade 36 Figure 15: VRB’s specific regulation on salary grade 37 Figure 16: VRB’s allowance regulation 38 Figure 17: “Are you satisfied with the salary you are enjoying?” .41 Figure 18: “If you are not satisfied, what is your main reason?” 42 Figure 19: “In your opinions, what is VRB’s merit increase regulation based on?” 45 Figure 20: “Are you satisfied with VRB’s current merit increase regulation?” 45 Figure 21: “Please give your opinions when VRB’s merit increase is based on only latest performance appraisal results” 46 Figure 22: Individuals’ and Groups’ Performance Rating 47 Figure 23: Calculation on incentives for individuals 47 Figure 24: “Please give your opinions on VRB’s current incentive policies in reality” 49 Figure 25: “Are you satisfied with VRB’s current incentive policies in reality?” .49 Figure 26: “Please give your opinions on VRB’s current performance appraisal” 53 VRB’s compensation scheme and motivation Assessment and Recommendation CHAPTER I INTRODUCTION Problem statement Human resource is becoming increasingly important Nowadays, organizations could create their positions not only by their financial strength, new technologies or reputations, but also by their skilled human resources Competition never stops, financial situation never stays the same, and technologies never remain as they used to be Just human resources could be not easily changeable Human capital helps organization achieve its strategic objectives and is the important resource that makes any enterprise care on In order to retain skillful human capital, it’s necessary to have competitive C&B policies The Business Strategy is the main factor affecting HR Strategy and C&B policies When the Business Strategy is approved, it is the time to design and implement a correct Compensation and Benefits Strategy for the organization The HR Strategy helps to navigate and set goals for employees and create their expectations toward the organizations The correct Compensation and Benefits strategy depends on overall HR Strategy and it has a huge influence on the rest of the organization On the one hand, it decides the costs of the organization and it can have a huge impact on total profit of the organization On the other hand, it leads to the reputation of the organization in labor market, whether that organization brings about good income for labors or not That's why the compensation strategy also sets the position of the organization on the job market And it has to be in line with any other HR Strategy - mainly in recruitment, training and development It’s the fact that when considering for recruitment, on the one hand, a qualified candidate often takes some key factors into account, such as company scope, job design, system of reward, corporate culture, organizational structure and his/her direct boss; on the other hand, they still concern on salary, because salary is the means to solve their necessaries of life and serve their self-esteem needs Financial compensation is the first for all the motivation to encourage employees to work and dedicate It's understood that compensation is the total amount of the monetary pay provided to an employee by an employer in return for work performed as requirement Although the concept of compensation has been changed recently, transferring from a traditional base pay and bonus structure to a broader “total rewards or compensation package” approach, up to now, its evolution has not been completed yet Compensation is based on market research about the worth of similar jobs in the marketplace, employees’ contributions and accomplishments, the availability of employees with needed skills in the marketplace, the desire of the employer to attract and retain a particular employee for the value they are perceived to add to the employment relationship, and the profitability of the company or the funds available in a nonprofit or public sector setting, and thus, the ability of an employer to pay market-rate compensation Obviously, the good compensation scheme will have positive impacts on the dedication of employees their organization Building compensation policies is one of the most challenging and sensitive activities in human resource management In which, competitive paid package is the most recognizable part of the whole compensation policies It’s the key in attracting and retaining talents and in achieving and maintaining the organization’s reputation in the labor market That's why it's said that compensation is the main motivational tool in talent management VRB’s compensation scheme and motivation Assessment and Recommendation There is a clear relation between compensation and motivation Compensation package is one of the primary reasons for employees to seek jobs and try their best to achieve good results It's usually considered as a destination on their working way Meanwhile, motivation is the drive of an employee to carry out a task which he desires or is assigned to When an employee is encouraged timely and adequately by reasonable compensation scheme in any forms, he is willing to contribute more and more to his organization However, not every person is motivated by the same factor Some are motivated by financial components, at least for their basic needs, in the form of salary raises, performance bonuses, commissions, profit sharing Meanwhile, some focus on extra benefits such as automobiles, vacations, recognition, working environment, career path or other tangible benefits It's theoretical that there are five key employee motivation factors including satisfaction, appreciation, recognition, inspiration and compensation The close relation here is that an organization should consider coordinating all of these components in creating its compensation scheme that is motivational enough for each employee Vietnam is a developing country where habitants have to face with high inflation, experience economics crisis and their life standard is mostly reduced in recent years In that circumstance, a compensation scheme becomes more and more important to attract and attain qualified employees to dedicate to their organization Vietnam-Russia Joint Venture Bank (VRB) is a joint venture between Bank for Investment and Development of Vietnam (BIDV) and Bank for Trading of Russia (VTB) The foreign partner, Russia, knows that their workforce is the key strength to the success In VRB, employees expect a good financial feedback for their working results However, as others, VRB must still consider among business effectiveness, costs, salary competitiveness and attractiveness to employees; VRB still faces with Vietnam’s economic difficulties as other banks In recent years, VRB’s turnover rate is still increasing due to lack of salary competitive advantages In Vietnam’s current situation, Vietnam (in general) and VRB (in specific) is struggling with the economic crisis, trying to remain their business results as well as VRB’s compensation and benefits for their staff as much stably as possible VRB also faces to troubles of motivational tools in human resource management, or applying motivation theories in creating competitive compensation system The question is that whether VRB built an appropriate compensation scheme that goes in line with VRB’s business objectives, meets their employees’ specific requirements, and makes each employee have competitive advantages in Vietnamese labor market or not; what is the main reasons why their turnover rate is still increasing monthly It’s the main reason that encourages me to choose the subject: “VRB’s compensation scheme and motivation Assessment and recommendation” in order to experiment and improve VRB’s compensation policies I’d like to suggest some suitable methods to improve the current situation in VRB Scope of the research Compensation system includes financial (direct and indirect) and non-financial compensation The issues of VRB come from both However, within my thesis, I concentrate on analyzing and evaluating advantages and disadvantages of direct financial compensation I also pay a little attention on VRB’s indirect and non-financial compensation to prove that a perfect human resource policy needs to care on both financial and non-financial compensation system VRB’s compensation scheme and motivation Assessment and Recommendation Research objectives This dissertation aims to answer these following questions: - Which theories of motivation and compensation should be considered in VRB's case? - What’s VRB’s compensation scheme? What is specific? - Is it suitable to business and human capital strategy? - Does VRB's compensation scheme give motivation on its employees? - Does it meet employee’s need? - Should VRB implement to improve the current policy to increase competitiveness of VRB in the labor market? Research methodology a Reviewing course books and literature In my dissertation, course book and literature review are considered as background to gain better theoretical understanding Basing on the knowledge of Human Resource in general and essence of compensation in particular, we will have much deeper analysis on VRB's current situation From those we will recommend some useful methods for the practical case of VRB b Conducting survey Besides practical knowledge of VRB’s compensation system, it’s important to conduct surveys within the bank to collect contribution of every employee on current pay range It’s the combination of theory, case analysis and practical opinions from survey that make my recommendations for VRB more sufficient Survey will include 20 questions relating to compensation issues This survey will be implemented among selected VRB’s employees I have taken a sample of 300 employees, from all levels, branches and divisions in VRB Research structure This dissertation is divided in five chapters Chapter Introduction Chapter is to introduce the topic, the problems, bound the scope of the research, state research objectives, research methodology and research structure Chapter Theoretical background In this chapter 2, I review course book and literature to set background on theory of compensation scheme and motivation These theories are applied to analyze VRB’s cases Chapter Overview on VRB’s compensation scheme and motivation This chapter clearly presents VRB’s history and development in Vietnam, its business strategy, organization structure, and its human resources I will make a full of introduction on VRB’s compensation system Chapter Analysis of VRB’s compensation scheme and motivation This chapter will demonstrate the analysis of key parts of VRB’s compensation system VRB’s compensation scheme and motivation Assessment and Recommendation Basing on the analysis of each key component, we recommend the strength and weakness of its pay system and talent management Chapter Recommendation and Conclusion This chapter gives recommendation for VRB’s case and summary for dissertation VRB’s compensation scheme and motivation Assessment and Recommendation CHAPTER II THEORETICAL BACKGROUND In this chapter, we review some theories relating to compensation issues, including components of compensation package, determinants of compensation system, strategic compensation and how a pay system is developed Besides, we consider motivation factors that are necessarily counted when creating a compensation scheme These theoretical matters are to be applied to analyze VRB’s case Components of compensation package Compensation is one area of human resources management that involves in making fair, equitable and competitive payment decisions compared to the level of current market rates; providing employees with incentives to enhance their performance; ensuring that payment packages are attractive enough to motivate employees working at one organization over others Financial compensation is in the form of financial returns paid for employees thanks to their dedication for the organization It does not include other forms of rewards such as recognition and interpersonal relationships, intangible benefits, etc A good compensation policy not only helps the company recruit qualified candidates but also improve employees’ performance, achieve equity, keep and enhance job satisfaction, reduce turnover rate and improve relations with unions On the one hand, compensation is an effective tool to manage human capital in the firm; on the other hand, compensation is one of the most difficult and challenging in human resource management And it can be adjusted to changes in organizational demands, goals, and available resources Compensation packages could be divided into extrinsic and intrinsic rewards Extrinsic Rewards are rewards that an employee can receive thanks to the job itself, including cash compensation, benefits, promotions and job security Intrinsic rewards come from corporation’s working environment and are internal values felt by the employee Job satisfaction, self-esteem, achievement, growth, and professional and individual development are some examples of intrinsic rewards To sum up, compensation package is the sum of financial one, including the direct (the monetary pay paid for employees in form of wages, salary, bonus, STI and LTI) and indirect compensation elements (non-monetary reward, including medical insurance, paid time off and retirement pensions…) used by an organization to compensate its employees, and nonfinancial one, including working environment, the position itself… VRB’s compensation scheme and motivation Assessment and Recommendation example, there is no in-equity or ex-equity, no motivation points in its compensation system In more specific, compensation system doesn’t express much its roles as attract qualified employees in aspect of financial compensation It’s not a useful motivation tool to retain outstanding ones Results of survey were taken in July 2012 as proof of above argument and also proof of dissatisfaction among current labor force We suggest that VRB’s compensation system should be changed in order to create fairy, in-equity and ex-equity VRB’s compensation system in a comprehensive view ensures transparency and all basic rights for employee However, improvements are essential to help VRB achieve the most advantage in fierce competitive labor market It also requires the mindset innovation of VRB’s Management Board, close participation of HR and straight responses of employees to bring the most effectiveness for VRB’s compensation system 67 VRB’s compensation scheme and motivation Assessment and Recommendation REFERENCE Literature review - Mary Cassandro Hamel (2008): A manual on Compensation Practice and Theory - Michalel Armstrong (1997): Human Resource Management- A total business approach, Kogan Page Limited - Michalel Armstrong (2006): Performance Management – Key strategies and practical guidelines - Jac Fitz-enz (2002): How to measure Human resource Management – Third edition - Lance A.Berger and Dorothy R.Berger (2008): A state of the art, guide to compensation, strategy and design - Bradley W.Hall (2008): The new human capital strategy - Bruce R.Ellig ( 2008): The complete guide to Executive compensation - Michael A Mulvaney; Willidam E Mckinney; Richard Grodsky: Six steps for improving your agency’s performance appraisal system - Anastasia A Katou, from University of Macedonia (GREECE), (2008): The article “Measuring the impact of HRM on organizational performance” CFVG’s Course Hand-Out - Strategic HRM: The link with business strategy (Charles-Henri Besseyre des Horts, PhD, HEC Paris) - Performance Management and Reward Strategy (Charles-Henri Besseyre des Horts, PhD, HEC Paris) - Career and Talent Management (Charles-Henri Besseyre des Horts, PhD, HEC Paris) - Websites http://www.vrb.com.vn http://www.hr-guide.com http://www.haygroup.com http://www.eridlc.com: Online compensation and benefit education http://www.managementstudyguide.com 68 VRB’s compensation scheme and motivation Assessment and Recommendation APPENDIX 1: SURVEY QUESTIONNAIRE Tôi học viên theo học chương trình Thạc sỹ Quản trị Kinh doanh Trung tâm Pháp Việt đào tạo quản lý (CFVG) Tôi thực Luận văn Thạc sĩ Đánh giá Đề xuất cho hệ thống đãi ngộ số ngân hàng có vốn đầu tư nước ngồi Xin Anh/Chị vui lịng dành chút thời gian (khoảng phút) để điền vào vấn Ý kiến Anh/Chị có ý nghĩa quan trọng nghiên cứu Tôi cam kết sử dụng thông tin cho mục đích nghiên cứu khơng tiết lộ ngồi I am the student of MBA – CFVG I am preparing for my thesis dissertation on Assessment and Recommendation for compensation scheme of some foreign-invested banks Please kindly take your time to answer my survey questionnaire Your opinions are so important for my dissertation I clarify to use your opinions for my research only, not for other purposes Anh/Chị làm việc địa bàn nào? Ghi rõ Tỉnh/Thành Phố bạn chọn phương án Other/ Where are you working and living? Please note specific location if you choose Other  Hà Nội/ Hanoi  TP Hồ Chí Minh/Ho Chi Minh City  Khác/Others: Anh/Chị làm việc cho Hội sở chính, Sở Giao dịch hay Chi Nhánh nào? Which branches you work for?  Hội sở Hà Nội/Head Office in Hanoi  Sở Giao dịch Hà Nội/Hanoi Transaction Bureau  Chi nhánh ………………/……………… Branch Anh/Chị làm việc phận nghiệp vụ nào? Which specialization you belong to?  Quan hệ khách hàng/Customer Relation  Dịch vụ khách hàng/Customer Services  Nguồn vốn/Treasury  Quản lý rủi ro/Risk Management  Phát triển sản phẩm thẻ/Card Sale  Kế tốn/Accountant  Luật/Legislation  Hành chính/Administration  Nhân sự/Human Resource Management  CNTT/Information Technology  Khác/Others: …………… Vị trí chức danh/Position  Chun viên/Officers  Trưởng phịng/Managers  Kiểm soát viên/Supervisors  Giám đốc Ban/Heads of Divisions  Giám đốc Chi nhánh/Branch Directors  Thành viên Ban giám đốc/Members of BOM Mức lương Anh/Chị? Your monthly payment  300USD  400USD 500USD  From 625USD to under 900USD From 900USD to 2000USD  Above 2000USD 69 VRB’s compensation scheme and motivation Assessment and Recommendation Anh/Chị có hài lịng với mức lương khơng? Are you satisfied with your base salary?  Có/Yes  Không/No Nếu không, sao?/ If No, what is the reason?  Mức lương thấp so với vị trí tương đương Ngân hàng khác/ It is to low compared to other businesses  Mức lương không phù hợp với trình độ lực tơi/ It is not fair with my qualifications and abilities  Mức lương khơng tương xứng với đóng góp thành tích tơi với Ngân hàng/ It does not correspond to achievement and contribution to the branch/company  Mức lương khơng cơng có chênh lệch lớn vị trí Ngân hàng/It is not equal due to big gaps among positions in the Bank Anh/Chị có tăng lương hàng năm khơng? Do you get merit increase annually?  Có Cụ thể/Yes, in specific:………………………………………  Không, lý do/No, reasons:……………………………………… Chế độ tăng lương định kỳ tổ chức Anh/Chị thực sở nào? (Có thể chọn nhiều phương án)  Căn vào thâm niên làm việc: năm tăng lương/Basing on working time: employees with over two years working for VRB will get merit increase  Căn vào kết hồn thành cơng việc kỳ đánh giá thi đua gần nhất/ Basing on the lastest performance appraisal results  Căn vào kết hồn thành cơng việc trung bình tất kỳ đánh giá thời gian hưởng bậc lương cũ/Basing on the average performance appraisal results of all periods during which employees enjoying the old salary levels  Khơng có nào, tùy thuộc vào Tổng giám đốc định/ No criteria, basing on General Director’s decisions 10 Bạn có hài lịng với chế độ tăng lương định kỳ áp dụng hay khơng?Are you satisfied with this annual increase?  Có/Yes  Khơng mức tăng lương định kỳ đủ bù đắp lạm phát trượt giá/ Not much because the increase is just enough for inflation and prices increase  Khơng định giá cơng việc đánh giá hiệu cơng việc định kỳ khơng xác/Not much because the job valuation and assessment is not correct 11 Tổ chức Anh/Chị có đánh giá thi đua định kỳ không?/Does your bank implement annual performance appraisal?  Có/Yes  Khơng/No 12 Anh/Chị cho biết ý kiến đánh giá thi đua định kỳ đó?/Please give your own opinions on that performance appraisal  Hiệu quả, xác, đánh giá kết cơng việc/Effective, exact, right to performance results  Hình thức, đối phó, cảm tính việc đánh giá kết cơng việc/ Ineffective, subjective 70 VRB’s compensation scheme and motivation Assessment and Recommendation  Khơng hợp lý tiêu chí chung chung, không phản ánh hiệu làm việc cá nhân/Not reasonable due to general criteria, not reflect the whole effectiveness  Khác/Others 13 Việc xét tăng lương hàng năm có vào kết đánh giá thi đua định kỳ không?/Does VRB base on periodical performance appraisal to implement merit increases?  Có/Yes  Khơng/No 14 Anh/Chị cho ý kiến cách tính tăng lương dựa kết đánh giá kỳ thi đua gần nhất?Please give your opinions on salary increase regulations basing on nearest performance appraisal term?  Hoàn toàn hợp lý, cơng bằng/100% reasonable, equal  Khơng hợp lý thiếu tính cơng /Not reasonable due to lack of equality  Khơng hợp lý rủi ro cho người đến hạn tăng lương mà kỳ gần có kết thấp/Not reasonable and risky for candidates to be in the increase consideration  Khơng hợp lý khơng đánh giá tồn hiệu q trình hưởng bậc lương cũ/Not reasonable because it can’t reflect the whole effectiveness during the time enjoying old salary level 15 Chế độ thưởng hiệu công việc tổ chức nơi Anh/chị làm việc nào? What’s about your bonus policies in your Bank?  Phân loại mức độ hồn thành cơng việc có mức thưởng riêng cho loại/ Basing on performance ranking and spefic bonus level for each rank  Cào bằng, không phân biệt CBVN hồn thành nhiệm vụ hay khơng hồn thành nhiệm vụ/A level for all, not basing on performance results 16 Anh/Chị thưởng hàng năm? How much you get incentive annually?  Khoảng tháng lương /About one month  Từ đến tháng lương /From to month  Từ đến tháng lương /From to month  Hơn tháng lương /More than month  Khác (ghi rõ): …………… /Others (details)……………… 17 Anh/Chị có hài lịng với mức thưởng khơng? Ghi rõ lý khơng hài lịng Anh/Chị chọn phương án Khác/Are you satisfied with the bonus?Please note specific reasons if you choose Others  Hài lòng/Satisfied  Khơng hài lịng thấp so với vị trí tương đương tổ chức khác/ Not very much satisfied because it is lower compared to same positions in other companies  Khơng hài lịng khơng tương xứng với đóng góp tơi cho tổ chức/ Not very much because it is not fair with my contribution to the company  Khác/Others 18 Anh/Chị có hài lịng với chế độ Phúc lợi VRB khơng?How you think of VRB’s Benefit policy?  Hài lòng/Satisfied  Khơng hài lịng/Not satisfied 71 VRB’s compensation scheme and motivation Assessment and Recommendation 19 Anh/Chị có nghĩ việc chuyển chỗ làm anh/chị không thấy thỏa mãn với hệ thống lương VRB không? Have you ever thought of leaving VRB due to the unsatisfied payment?  Có/Yes  Khơng, chế độ phúc lợi tốt/No, because the welfare is good  Khơng, tơi cịn cân nhắc đến hội thăng tiến VRB/ No, I consider others such as promotion, corporate culture 20 Trong yếu tố sau đây, yếu tố đóng vai trị định việc giữ chân Anh/Chị lại làm việc cho tổ chức tại? Có thể chọn nhiều phương án Ghi rõ bạn chọn phương án Other/Among following factors, which plays decisive role in retaining you to work for VRB? You can choose more than one factor Please note specific factors if you choose Others  Chế độ đãi ngộ tốt/Competitive compensation  Cơ hội thăng tiến/Career path  Mơi trường làm việc có yếu tố nước ngoài/Working environment with foreign factors  Thường xuyên có hội luyện tập ngoại ngữ/Usually having chances to practice English  Môi trường làm việc thân thiện, cởi mở công bằng/ Equal, open and friendly working envinronment  Khác/Others Cảm ơn hợp tác Anh/Chị ! Thank you very much for your corporation! 72 VRB’s compensation scheme and motivation Assessment and Recommendation APPENDIX 2: VRB’S FORMS OF PERFORMANCE APPRAISAL 73 VRB’s compensation scheme and motivation Assessment and Recommendation 74 VRB’s compensation scheme and motivation Assessment and Recommendation 75 VRB’s compensation scheme and motivation Assessment and Recommendation 76 VRB’s compensation scheme and motivation Assessment and Recommendation 77 VRB’s compensation scheme and motivation Assessment and Recommendation 78 VRB’s compensation scheme and motivation Assessment and Recommendation 79 VRB’s compensation scheme and motivation Assessment and Recommendation 80 VRB’s compensation scheme and motivation Assessment and Recommendation 81 ... website 28 VRB’s compensation scheme and motivation Assessment and Recommendation 29 VRB’s compensation scheme and motivation Assessment and Recommendation VRB's organization chart and human resource... 31 VRB’s compensation scheme and motivation Assessment and Recommendation Figure 9: Gender report Figure 10: Education report 32 VRB’s compensation scheme and motivation Assessment and Recommendation. .. Lance A.Berger and Dorothy R.Berger (2008): Guide to compensation, strategy and design 18 VRB’s compensation scheme and motivation Assessment and Recommendation performance appraisal scheme With