The effects of empowerment and job enrichment on employee loyalty in a downsizing and reducing salary enviroment, empirical evidence from the banking industry in vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Huynh Thi Kim Hanh THE EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY IN A DOWNSIZING AND REDUCING SALARY ENVIRONMENT EMPIRICAL EVIDENCE FROM THE BANKING INDUSTRY IN VIETNAM MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2014 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Huynh Thi Kim Hanh THE EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY IN A DOWNSIZING AND REDUCING SALARY ENVIRONMENT EMPIRICAL EVIDENCE FROM THE BANKING INDUSTRY IN VIETNAM ID: 21120003 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr VO XUAN VINH Ho Chi Minh City – Year 2014 Running head: EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY i ACKNOWLEDGEMENTS Firstly, I would like to express my sincere gratitude to my research advisor, Dr Vo Xuan Vinh, who made me believe in myself and gave me the possibility to complete this thesis He has supported me a lot with the thesis preparation and motivated me throughout the journey of the thesis His guidance helped me in all the time of research and writing this thesis I am sure that this thesis would not have been possible without his support I also thank Dr Nguyen Thi Mai Trang I am extremely grateful and indebted to her for her expert, valuable guidance, insightful comments, and encouragement extended to me I would like to express my grateful thanks to my friends and colleagues in my bank and others who participated in filling the questionnaires and provided the valuable information for this study I would like to extend deep senses of gratitude to lecturers who have taught and transferred me valuable knowledge and experience during the period of Master of Business course at International School of Business Besides, I would like to express my gratitude to all ISB staffs that supported necessary materials and helped summit my papers Personally, I would like to give my special thanks my family for supporting me spiritually throughout my life Huynh Thi Kim Hanh th Ho Chi Minh City, December , 2014 EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY ii ABSTRACT Maintaining and increasing the loyalty of the survivors in a downsizing and reducing salary background is a complex problem for management trainees The study tests the affection of the empowerment and job enrichment policies to employees in the downsizing and post-retrenchment context using a case of the banking industrial sector in Vietnam It focuses on the impact of lossing job and reducing salary on the survivors (those who remain in the organization after downsizing), and organization This study was designed with the primary objective of determining the relationship between empowerment behaviors of management, awareness of job enrichment, and loyalty behaviors of the staffs, who had survived in a downsizing and reducing salary environment on the specific case to employees of the Vietnam’s Banks A sample of population will be selected using random sampling technique So, the purpose of the current research thesis is to investigate the direct and indirect relationship between empowering managerial practices and employee loyalty as mediated by job enrichment, particularly, review in a downsizing and reducing salary environment of the Vietnam’s banking sector The results show that loyalty is affected more by empowering loyalty through indirect effects by job enrichment, rather than a direct relationship The study ends with a discussion of limitations and suggestions for future research Keywords: Employee Loyalty, Empowerment, Job Enrichment EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY iii TABLE OF ACKNOWLEDGEMENTS ABSTRACT TABLE OF CONTENTS LIST OF FIGURES LIST OF TABLES CHAPTER I: INTRODUCTION 1.1.Background of the Study 1.2.The Research Problem 1.3.Research Objectives and Research Questi 1.4.Research methodology 1.5.Scope of the study 1.6.Thesis structure CHAPTER 2: REVIEW OF LITERATURE 2.1.Empowerment, Job Enrichment and Empl 2.1.1 Employee E 2.1.2 Job enrichm 2.1.3 Employee l 2.2.Literature review and Empirical studies 2.2.1 The relationships between empowerment and loyalty 2.2.2 The relatio 2.2.3 The relatio EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY iv 2.3.The Research Model and Hypotheses CHAPTER 3: METHODOLOGY 3.1.Research process 3.2.Measurement scales 3.3.Pilot Study Design – Qualitative Researc 3.4.Main Study Design – Quanlitative Resear 3.4.1 Sampling m 3.4.2 Data analy CHAPTER 4: RESULTS AND DISCUSSION 4.1.Decriptive analysis 4.2.Measurement Assessment 4.2.1 Scale valid 4.2.2 Model fitne 4.2.3 Hypotheses 4.3.Disscussions of the findings CHAPTER 5: SUMMARY AND CONCLUSIONS 5.1.Findings of the Study 5.2.Managerial implications 5.3.Limitations and directions for future resea REFERENCES APPENDICES APPENDIX A: Questionnaire (English Version) EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY v APPENDIX B: Questionnaire (Vietnamese Version) 83 APPENDIX C: Pilot Study 86 APPENDIX D: List some of result tables and figures 89 LIST OF FIGURES Figure 2.1: Proposed Research Model 26 Figure 3.1: The research process 31 Figure 4.1: Saturated model of the first CFA 94 Figure 4.2: Saturated model of main survey 49 Figure 4.3: SEM result of research model 52 Figure 4.4: SEM result of research model (Standardized) 95 LIST OF TABLES Table 3.1: The Empowerment Measurement Scale 32 Table 3.2: The Job Enrichment Measurement Scale 33 Table 3.3: The Employee Loyalty Measurement Scale 34 Table 4.1: Descriptive statistics of the data Sample size = 336 observations 43 Table 4.2: Standardized Regression Weights (The first CFA factor loading of items) 46 Table 4.3: Confirmatory factor analysis of measurement model 50 Table 4.4-1: Standardized Regression Weights: (Group number - Default model) 90 Table 4.4-2: Regression Weights: (Group number - Default model) 91 Table 4.5: Relationship between constructs of research 92 Table 4.6: Relationship between constructs in research model (standardized) 53 Table 4.7: Result of hypotheses testing 55 EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY CHAPTER I: INTRODUCTION This chapter is starting point of this study In this chapter, the research background of thesis is first introduced Subsequently, the research problem is discussed Research objectives as well as research questions are presented in the next section Then, methodology and scope of this research is introduced summarily Final, structure of this study is presented This chapter aims at specifying the purpose of this research and the research content 1.1 Background of the Study Due to the continued economic downturn, many organizations have difficulties to maintain a large workforce The organization had to restructure their operations apparatus, cutting the excess staffing and poor morale in a difficult position, which is one of the measures used by the organization during the past Due to economic constraints, most organizations are required to make difficult decisions about the distribution of human capital as they try to control costs and competition One of cost-cutting program is usually used by companies including reducing the number of employees, reduce salaries and decrease the budget, reduce hiring and cut bonuses (Datta, Guthrie, Basuil, & Pandey, 2010) For the bank financial system, the crisis can occur in cycles or irregular, causing major damage to a bank, or even lead to bankruptcy or cripple the system Specifically, customers can withdraw mass money from a bank because of bad information, then the bank fall into the inability to pay For example, in 2003, the rumor which Asia Commercial Bank’s director general had fled caused a confusion EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY and panic psychological for customers who had deposits at Asia Commercial Bank In all the causes of bankruptcy of a bank, the liquidity can cause the fastest crash The crisis occurs in practice is certainly a very bad thing, because there are no banks to withstand the crisis and went bankrupt, insolvent But with the banks to overcome difficulties and to restore the crisis as an opportunity to test their stamina practical difficulties, as well as the lessons learned in order to pass the next crisis One of the core issues to overcome crisis is reorganized, in which, only maintain sufficient workforce, reducing operation costs, streamlined operational procedures, emphasizing the importance of work efficiency In the context of near the end of 2012, many banks in Vietnam falls into the difficult situation, in order to survive it must restructure and cut operating costs One immediate solution is often used by organizations such as salary cuts and layoffs Many weaknesses are eliminated first, this makes the job productivity per capita increased, leading to downward pressure on the rest Additionally wage cuts, leading to the willpower, motivation decreases This is the time when the rate jumped employee's banking sector is quite high, suggesting that the loyalty of employees in the organization dropped at an alarming rate Surviving employees perceive that the organization is not loyal to its own employees, reducing the survivors' motivation to remain loyal to the organization and dealing a crushing blow to employee citizenship and other support behaviors (Chambel & Alcover, 2011; Xuan & Park, 2012) Given that the employer has invested time and money significantly to the recruitment and training of staff and management need to be EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY Job Enrichment Strongly disagree ▼ 10 11 12 13 14 15 16 17 18 19 20 The opportunity to things other than work description There will be no repetition of your current job There is more abundant in the present work There are similarities with your daily work Your current job diversity Themselves decide the entire work of their own responsibility Can you complete the work initiated Opportunity to receive the work from beginning to end more (ie, the opportunity to a work in its entirety) Currently you have been involved in management of the work from start to finish Assess your ability to work with others Interaction at work with other colleagues in your workflow You get feedback from other colleagues through your supervisor You're free to the work the way you see fit Your job can work independently of others Opportunity to think and work independently You can handle the job within the charge independently with your supervisor Freedom to plan for everything Get information about the evaluation of superior ability to handle your job Opportunity know myself how to a good job? You receive feedback effectively work faster Employee loyalty: Please indicate your level of agreement with the following statement You tried to find fellow advocates are criticizing certain banks You emphasize the positive aspects of working with others (outside the organization) You have to defend the others (outside the organization) criticized the bank Are you proud to be representing the bank in a public place You never publicly complained about the changes in the organization EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY PART C: INDIVIDUAL INFORMATION What is your gender? a Male b Female What is your age? a Under 26 years old b 26 – 30 years old c 30 – 35 years old d Over 35 years old What is your education background? a High-school b College student c Bachelor’s level d Master’s level e PhD level f Other How many years you work in the banking industry? a Under years b - years c – years d – 10 years e Over 10 years EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 83 APPENDIX B: Questionnaire (Vietnamese Version) nh ch o Anh/Ch , T i l Hu nh Th im H nh, h c vi n c a Vi n o t o qu c t ISB - Đ i h c inh t TP HCM Hi n t i, H nh ang nghi n cứu ề t i "TÁC ĐỘNG CỦA VIỆC TRAO QUYỀN QUẢN LÝ TỚI LÒNG TRUNG THÀNH CỦA NHÂN VIÊN TẠI CÁC NGÂN HÀNG VIỆT NAM TRONG BỐI CẢNH GIẢM LƯƠNG VÀ NHÂN SỰ" Bằng cách trả lời bảng câu hỏi vấn n y, Anh/Ch giúp H nh nghi n cứu lợi ch c a vi c trao quyền quản lý lương v nhân hi n Trong trình thực hi n khảo sát n u Anh/Ch Anh/Ch chưa rõ nghĩa, hanh.huynh88@gmail.com s Xin chân th nh cám ơn hỗ trợ nhi t tình c a Anh/Ch ! nh chúc Anh/Ch lu n khỏe, may mắn v A - THƠNG TIN SƠ BỘ Bạn vui lịng khoanh trịn vào ô thích hợp bên dưới: B n ang l m t i ngân h ng: …………………………………… B n ã l m vi c ây bao lâu? a.Dưới năm b Từ n năm c.Từ n năm d Tr n năm V tr hi n t i c a b n: a.Nhân vi n b Chuy n vi n c.Trưởng phòng/ cấp kiểm soát d Giám c v tr tương ương e hác Trong giai o n bi n ộng nhân c a ng nh ngân h ng năm 2012 – 2013, b n có nhảy vi c? a Có t lần chuyển ổi nơi c ng tác (sang c ng ty/ngân h ng khác) b h ng thay ổi Vẫn l m vi c ngân h ng hi n t i Đ i với trường hợp a (b n ã thay ổi nơi l m vi c): Nguy n nhân ch y u l : (N u áp án câu l "b", b n vui lòng bỏ qua câu hỏi n y.) a.Lý cá nhân: tự nguy n, lương thấp, c ng vi c trở n n nhiều mức, b B buộc th i vi c vấn ề tinh giảm bi n ch theo nh hướng ch nh sách c ng ty c.hác EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 84 B - BẢNG CÂU HỎI Anh/chị vui lòng cho biết mức độ đồng ý với câu phát biểu bên (1 Ho n to n kh ng ồng ý h ng ồng ý Hơi kh ng ồng ý h ng Hơi ồng ý Đồng ý Ho n to n Về trao quyền Bạn vui lịng cho biết "SẾP" bạn: Có truyền cảm hứng v t o ộng lực cho b n ể khuy n kh ch b n l m nhiều Có giúp b n ặt mục ti u phấn ấu c Có khuy n kh ch b n với cách ti p cận d i h n, ki n nhẫn l cách ti p cận chớp nhống Có dùng từ ngữ chuyển tải quyền sở hữu nói chuy n với b n như: “ hách h ng c a chúng ta”, “ngân sách c a chúng ta”, “ngân h ng c a chúng ta”… Có khuy n kh ch b n tin v o ch nh Có giúp b n lo i bỏ r o cản, trở ng i c ng vi c Có khuy n kh ch b n tập trung v o b n l m, kh ng phải l b n ã lu n lu n l m ược Có khuy n kh ch b n cải thi n dần l n th ng qua ho t ộng v trình l m vi c c a b n Có sẵn s ng cho b n thời gian c a h b n cần Có mu n b n tham gia v o xử lý s tình hu ng li n quan m kh ng cần & kh ng phải chờ ợi có bảo v tr n Có mang l i cho b n tự v linh ho t ể b n trãi nghi m c ng vi c Có khuy n kh ch b n c ng khai b y tỏ cảm nghĩ v Có t o cho người khác thấy b n l người tin tưởng v uy t n c ng vi c Có tr ng phát triển m i quan h tin tưởng lẫn cách chia sẻ nhiều th ng tin với b n Thấy ược ti n c a tập thể có giá tr c ng vi c EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 85 Đánh giá c ng vi c Bạn nghĩ trao quyền tác động đến công việc bạn 10 11 12 13 14 15 16 17 18 19 20 Cơ hội ể l m vi c kh Vẫn có lặp l i c Có phong phú c ng vi c hi n t i Có tương ồng với c ng vi c h ng ng y c a b n C ng vi c hi n t i c a b n có a d ng Tự quy t Có thể ho n th nh c ng vi c b n ề xướng Cơ hội ể b n ti p nhận c ng hội ể l m c ng vi c Hi n t i b n có thúc Đánh giá khả l m vi c c a b n với người khác Có tương tác c ng vi c với ồng nghi p khác ti n trình c B n nhận giám sát c a b n B n tự thực hi n c ng vi c theo cách b n thấy phù hợp C ng vi c c a b n có Cơ hội ể suy nghĩ v B n xử lý c ng vi c ph m vi phụ trách cách với người giám sát c Tự l n k ho ch cho m i vi c Nhận th b n Cơ hội bi t B n nhận Lòng trung th nh vớ phát biểu B n sức b nh vực thấy ồng nghi p n o ó h ng B n nhấn m nh kh a c nh t ch cực c a c ng vi c với người khác (b n ngo i tổ chức) B n l n ti ng b nh vực có người khác (b n ngo i tổ chức) tr ch ngân h ng B n tự h o l B n kh ng c ng khai ph n n n thay ổi tổ chức EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 86 C - THÔNG TIN CÁ NHÂN Với câu hỏi, bạn vui lòng lựa chọn phương án trả lờ phù hợp đánh dấu chọn vào bên trái phương án Giới t nh a Nam b Nữ Tuổi a Dưới 26 b 26–30 c 30–35 d Tr n 35 Trình ộ h c vấn a Trung cấp b Cao ẳng EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 87 APPENDIX C: Pilot Study PILOT STUDY EVALUATION FORM Were the questions understandable and clearly stated? _ If not, please giving comment on what changes are needed in the questionnaires? _ _ _ _ Were the scales understandable and appropriate? _ If not, please describe your concerns with the scales _ _ _ _ Do you have any suggestion to improve the questionnaire? _ _ _ _ _ I may have some questions regarding what you have written If you would not mind, may I contact you to get clarification? Please, provide your name and e-mail address Your name E-mail Thank you for participating in the pilot study! EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 88 GROUP INTERVIEW QUESTIONS General questions Could you tell me how long have you been working in your workplace? Could you tell me what manager’s empowerment behavior means to you? Do you perceive leadership empowerment in your organization? Could you tell me what job satisfaction means to you? Let’s talk about leadership empowerment behaviors I will explain four categories of empowerment behaviors After reviewing these behaviors, could you provide me some examples of your managers’ behaviors exhibit related to these categories? - How does your manager emphasize the purpose and meaning of work so that employees identify themselves as an important person? - How does your manager help employees in problem solving or in the decision making process? job? How does your manager show confidence in employee’ ability to a good - How does your manager enhance employee skills and provide resources needed for effective organization performance? - How does your manager allow employees to their job in their way and minimize regulations so that employees can perform their jobs in the manner? - When you feel empowered? Let’s talk about job enrichment - How you feel about your current job? - What things are you done with your job? - What things are you not done with your job? - How much can you be enriched your job? Employee loyalty Let’s talk about employee loyalty I would like you think how you perceive your organization or job in terms of loyalty We will discuss five types of loyalty EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 89 categories Could you provide me your perceptions below categories and some examples, which are based on your experiences? - Discuss your willingness to take any job assignment if necessary - Describe your feeling of pride in your organization - What you tell your friends about your job? - Describe your feeling toward your organization - Do you think you have a loyalty toward a current workplace or job, why or why not? What relationship you think there is between manager’s empowerment behaviors and employees’ job enrichment? What relationship you think there is between job enrichment and employee loyalty? 10 What factors may impact the relationship between job enrichment and employee loyalty? 11 Do you think that manager’s empowerment behavior influences employee loyalty toward organizations? If so, how and why? 12 Could you tell me your opinion if there is relationship among empowerment, job enrichment, and employee loyalty, why or why not? 13 One of the demographic categories (e.g., age, length of work, gender, or job classification), what categories are strongly impact empowerment, job enrichment, and employee loyalty? Thank you for your participation! EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY APPENDIX D: List some of result tables and figures Table 4.4-1: Standardized Regression Weights: (Group number - Default model) Autonomy1 Autonomy2 Autonomy3 Autonomy4 Autonomy5 Task.Identity1 Task.Identity2 Task.Identity3 Competence1 Competence2 Competence3 Task.Significance1 Task.Significance2 Task.Significance3 Impact1 Impact2 Impact3 Feedback1 Feedback2 Feedback3 Meaningfulness1 Meaningfulness2 Meaningfulness4 Skill.Variety3 Skill.Variety1 Skill.Variety4 Employee.Loyalty1 Employee.Loyalty3 Employee.Loyalty4 Self.Determination2 Self.Determination3 Self.Determination4 90 EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY Table 4.4-2: Regression Weights: (Group number - Default model) Autonomy1 Autonomy2 Autonomy3 Autonomy4 Autonomy5 Task.Identity1 Task.Identity2 Task.Identity3 Competence1 Competence2 Competence3 Task.Significance1 Task.Significance2 Task.Significance3 Impact1 Impact2 Impact3 Feedback1 Feedback2 Feedback3 Meaningfulness1 Meaningfulness2 Meaningfulness4 Skill.Variety3 Skill.Variety1 Skill.Variety4 Employee.Loyalty1 Employee.Loyalty3 Employee.Loyalty4 Self.Determination2 Self.Determination3 Self.Determination4 91 EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY 92 Table 4.5: Relationship between constructs of research Relationship AUT AUT AUT AUT AUT AUT AUT AUT AUT IDE IDE IDE IDE IDE IDE IDE IDE COM COM COM COM COM COM COM SIG SIG SIG SIG SIG SIG IMP IMP IMP                 LOY SELF COM SIG IMP SKI LOY SELF SIG IMP FEE MEAN      SKI LOY SELF IMP FEE MEAN     SKI MEAN   IMP FEE   SIG MEAN   COM FEE   IDE SKI LOY SELF FEE MEAN SKI EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY IMP IMP FEE FEE FEE FEE MEAN MEAN MEAN SKI SKI LOY 93             LOY SELF MEAN SKI LOY SELF SKI LOY SELF LOY SELF SELF EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY Figure 4.1: Saturated model of the first CFA 94 EFFECTS OF EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY Figure 4.4: SEM result of research model (Standardized) 95 ... EMPOWERMENT AND JOB ENRICHMENT ON EMPLOYEE LOYALTY ii ABSTRACT Maintaining and increasing the loyalty of the survivors in a downsizing and reducing salary background is a complex problem for management... collect the survey data and the way to carry out a research analysis of the findings to see how the empowerment and job enrichment effecting on employee loyalty in a downsizing and reducing salary. .. modeling (SEM) is a statistical technique for testing and estimating causal relations using a combination of statistical data and qualitative causal assumptions From the analysis, model testing and