The role of transformational leadership behaviors in affective employee engagement, an empirical study in the two industries of retail and financial services in HCM city

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY  HUYNH NGOC DUY THE ROLE OF TRANSFORMATIONAL LEADERSHIP BEHAVIORS IN AFFECTIVE EMPLOYEE ENGAGEMENT: AN EMPIRICAL STUDY IN THE TWO INDUSTRIES OF RETAIL AND FINANCIAL SERVICES IN HCM CITY Subject: Master of Business Administration Code: 60.34.01.02 MASTER THESIS OF BUSINESS ADMINISTRATION SUPERVISOR: TS NGUYEN HUU LAM HO CHI MINH CITY – 2012 The Role of Transformational Leadership Behaviors in Affective Employee Engagement: An empirical study in the two industries of retail and financial services in Ho Chi Minh City ABSTRACT According to many previous studies, the effective leaders are one of the most important factors in engaging the employees to the organization; leveraging the human capital to create sustainable competitive advantage for the organization efficacy and leading to organizational benefits The purpose of this study was to investigate the relationship between transformational leadership behaviors and affective employee engagement and to examine their impact on employees’ level of affective engagement in private and foreign-owned companies in Ho Chi Minh City Total participants in the research were 320 full-time employees from the industry of retailing and financial services in Ho Chi Minh City The majority of employees have worked in private organizations (55.3%) and followed by foreign-owned companies (44.7%); in financial services (53.4%) and in retail industry (46.6%) respectively The findings of the study indicated that transformational leadership behaviors including intellectual stimulation, idealized influence behaviors and individual consideration have significant and positive correlations with affective employee engagement Among the independent variables, individual consideration is found to be the most important factor in driving affective employee engagement The research results have contributed to the literature and provided more evidences for the managers in their decisions of their workforce planning However, the sample for the research is still limited due to the application of convenient sampling method and surveyed only in Ho Chi Minh City Therefore, the generalization is not so high; the study might have not covered all the demographic factors; and also some other important variables were not considered all due to the scope of the study All the restrictions will motivate the next researchers in this interesting topic ACKNOWLEDGEMENTS I am deeply grateful to my advisors, Dr Nguyen Huu Lam and Dr Nguyen Dinh Tho for the guidance and comments through the process of completing this thesis Without the support and encouragement from Dr Lam and Dr Tho, the thesis might not be possible in meeting the requirements and expectations of the research I also extend my thanks my classmates in sharing with me the ideas; store managers in Crescent Mall in district and MBA students at the University of HCMC Economics in filling in the questionnaires I would like to acknowledge the support and encouragement of my family in the concession of time, money and effort to complete the program Most of all, I would like to be grateful to my Buddha for giving me good health, optimism and strength to finish the study TABLE OF CONTENTS ABSTRACT ACKNOWLEDGEMENTS TABLE OF CONTENTS CHAPTER ONE: INTRODUCTION 1.1 BACKGROUND OF THE STUDY 1.2 STATEMENT OF THE PROBLEM 10 1.3 OBJECTIVES OF THE STUDY 11 1.4 RESEARCH QUESTIONS 12 1.5 SIGNIFICANCE OF THE STUDY 12 1.6 SCOPE OF THE STUDY 13 1.7 STRUCTURE OF THE STUDY 13 CHAPTER TWO: LITERATURE REVIEW 14 2.1 INTRODUCTION 14 2.2 THE CONCEPT OF LEADERSHIP 15 2.3 THE EVOLUTION OF LEADERSHIP THEORIES 15 2.4 LEADERSHIP MODEL 17 2.5 FIVE DIMENSIONS OF TRANSFORMATIONAL LEADERSHIP BEHAVIORS 18 2.5.1 Idealized influence (Attributes) (IIA): leaders instill pride and build trust 18 2.5.2 Idealized influence (Behaviors) (IIB): leaders emphasize collective sense of mission, talk about values and beliefs 18 2.5.3 Inspirational motivation (IM): leaders communicate and express enthusiasm, optimism, confidence, and emotional appeals 18 2.5.4 Intellectual stimulation (IS): leaders stimulate followers to view the world from new perspectives; encourages problem solving, critical thinking and creativity 18 2.5.5 Individual consideration (IC): leaders develop, coach, and teach each follower to grow individually by paying attention to individual needs, desires and assigning projects 18 2.6 THE CONCEPT OF EMPLOYEE ENGAGEMENT 19 2.7 THE EVOLUTION OF EMPLOYEE ENGAGEMENT 20 2.8 TWO DIMENSIONS OF AFFECTIVE EMPLOYEE ENGAGEMENT 21 2.9 THE RELATIONSHIP BETWEEN TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND EMPLOYEE ENGAGEMENT 22 2.10 RESEARCH MODEL AND HYPOTHESES 24 CHAPTER THREE: RESEARCH METHODOLOGY 26 3.1 QUALITATIVE RESEARCH 26 3.1.1 Sampling 26 3.1.2 Data collection and In-depth interview 26 3.2 QUANTITATIVE RESEARCH 27 3.2.1 Response rate and sample size 27 3.2.2 Data sources and type 29 3.2.3 Data gathering instruments 30 3.2.3.1 Multifactor leadership questionnaire 30 3.2.3.2 Affective employee engagement questionnaire 31 3.2.4 Independent and dependent variables of the study 32 3.2.5 Data analysis and presentation procedures 33 CHAPTER FOUR: RESULTS AND FINDINGS 34 4.1 DEMOGRAPHIC CHARACTERISTICS OF THE PARTICIPANTS 34 4.2 DESCRIPTIVE STATISTICS FOR TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND AFFECTIVE EMPLOYEE ENGAGEMENT 36 4.2.1 Employees perception to Transformational leadership behaviors 37 4.2.2 Employees perception to their organizational engagement 37 4.3 THE RELATIONSHIP BETWEEN TRANSFORMATIONAL LEADERSHIP BEHAVIORS AND AFFECTIVE EMPLOYEE ENGAGEMENT 38 4.4 SCALE ASSESSMENT 40 4.4.1 Cronbach Alpha 40 4.4.2 Exploratory Factor Analysis (EFA) 42 4.4.2.1 Independent variables 43 4.4.2.2 Dependent variables 44 4.5 CORRELATION AND REGRESSION ANALYSIS 44 4.5.1 Correlation analysis 44 4.5.2 Regression analysis 45 4.5.2.1 Assessment of the model 45 4.5.2.2 Testing of the hypotheses 49 4.6 RESULTS AND DISCUSSION 51 4.6.1 Regression analysis 51 4.6.1.1 Intellectual stimulation 51 4.6.1.2 Idealized influence behaviors 52 4.6.1.3 Idealized influence attributes and inspirational motivation 52 4.6.1.4 Individual consideration 52 4.6.2 Industry analysis 53 4.6.3 Discussion of the results 53 4.6.4 Summary 54 CHAPTER FIVE: DISCUSSION, RECOMMENDATION AND CONCLUSION 55 5.1 CONCLUSIONS 55 5.2 THE CONTRIBUTIONS OF THE STUDY 56 5.2.1 Contributions to the literature 56 5.2.2 Contributions to the practices 56 5.3 RECOMMENDATIONS 57 5.3.1 Recommendations for the organizations and managers in Ho Chi Minh City 57 5.3.2 Recommendation for future research 59 5.4 LIMITATIONS OF THE STUDY 60 REFERENCES 61 Appendix A: Total Variance Explained 66 a Appendix B: Rotated Component Matrix 67 Appendix C: Total Variance Explained 68 a Appendix D: Rotated Component Matrix 69 Appendix E: KMO and Bartlett's Test 69 Appendix F: KMO and Bartlett's Test 69 a Appendix G: ANOVA 70 Appendix H: Histogram Dependent Variable AC 70 Appendix I: Normal P-P Plot of Regression Standardized Residual Dependent Variable AC 71 Appendix J: Scatterplot Dependent Variable AC 72 a Appendix K: ANOVA 72 Appendix L: Histogram Dependent Variable SC 73 Appendix M: Normal P-P Plot of Regression Standardized Residual Dependent Variable SC 74 Appendix N: Scatterplot Dependent Variable SC 75 Appendix O: Questionnaire (in English) 76 Appendix P: Questionnaire (in Vietnamese) 81 LIST OF TABLES Table 1: Location for paper survey, sample size and response rates Table 2: Independent and Dependent variables Table 3: Summary of Employees’ profile Table 4: Mean and Standard Deviations of Transformational Leadership Behaviors and Affective Employee Engagement for employees’ responses Table 5: Pearson correlation matrix between transformational leadership behaviors and affective employee engagement dimensions Table 6: Cronbach Alpha Table 7: Result of EFA for Independent variables Table 8: Result of EFA for Dependent variables Table 9: Correlation analysis Table 10: Summary (AC) Table 11: Summary (SC) Table 12: Anova (AC) Table 13: Anova (SC) Table 14:Profile of Independent variables Table 15: Profile of Independent variables Table 16: Summary of results of hypotheses Table 17: Industry analysis LIST OF FIGURES Figure 1: Proposed Research Model CHAPTER ONE: INTRODUCTION 1.1 BACKGROUND OF THE STUDY In Vietnam News (2002), it showed that: More than 43% of employees in Vietnam express high levels of commitment to both their job and the company they work for In its global employee commitment report 2002 Taylor Nelson Sofre says the commitment percentage in Vietnam is higher than the average in the Asia-Pacific region and Europe, but slightly lower than in the United States and Latin America.” And then in Thanhnien News (2008), it is suggested that: Vietnam needs more skilled workers since its WTO accession The survey by Grant Thornton, a global accounting, tax and business advisory firm which involved over 7,800 privately held businesses in 34 countries shows that 84 percent of Vietnamese companies focus on recruiting and retaining staff, compared to a global average of only 59 percent Vietnamese companies focus more on attracting and retaining employees than companies elsewhere Employee retention is considered the greatest challenge for businesses in Vietnam and becomes a hot topic for discussions for any workshops of human resource managers Vietnamese employees aggressively accelerate their career to better positions, challenging jobs and better pay In a survey of Navigos Group, the leading and largest executive recruitment solution provider reported in Vietnam Plus (2010) “63,8 percent of respondents from 168 companies operating in Vietnam including foreign-invested ones ranked the employee retention as the number one human resource challenge in 2010” And it also confirmed “getting the right people into the right job with the right skills and to have them stay and grow are missions which will keep human resource personnel busy in 2010 As long as this is the fact, employee retention is hard work.” According to Towers Watson (2011) in a briefing of engagement indicator survey, Vietnam labor market has experienced a fierce talent war in which Vietnamese employers are trying to engage their talent through some employee engagement programs In the Towers Watson’s data, it also showed that “employee engagement levels in Vietnam have remained steady over the last five years (currently 78% favorable) and higher than employee engagement levels in the overall Asia Pacific Region (currently 74% favorable) However, employee intent to continue working for their current companies is lower in Vietnam (54%) compared to Asia Pacific (61%) In other words, the war for talent is fiercer in Vietnam than elsewhere in Asia Pacific because employees are at higher risk of leaving.” It is clear evidence that employee engagement has become one of the most leading priorities for human resource practitioners and senior managers in the organization today in Vietnam It is also the role of HR managers and line mangers to understand what are the critical factors affecting employees to get their high commitment to the company Based on that, the managers come up with strategic action plans to engage their employees into the sustainability of the organization These requirements from the reality are really urgent for the managers in Vietnam to deal with them in their daily managerial works 70 Appendix G: ANOVA a Model Regression Residual Total a Dependent Variable: AC b Predictors: (Constant), IC, IIB, IS, IIA, IM Appendix H: Histogram Dependent Variable AC 71 Appendix I: Normal P-P Plot of Regression Standardized Residual Dependent Variable AC 72 Appendix J: Scatterplot Dependent Variable AC Appendix K: ANOVA a Model Regression Residual Total a Dependent Variable: SC b Predictors: (Constant), IC, IIB, IS, IIA, IM 73 Appendix L: Histogram Dependent Variable SC 74 Appendix M: Normal P-P Plot of Regression Standardized Residual Dependent Variable SC 75 Appendix N: Scatterplot Dependent Variable SC 76 Appendix O: Questionnaire (in English) I am graduating MBus program at the University of Economics in Ho Chi Minh City This questionnaire is designed to survey your perception of the transformational leadership behaviors or your immediate manager and your affective engagement to your organization Participation in this survey is voluntary and no individual data will be reported Please indicate the extent of your agreement or disagreement with each statement by circling a number from to The information is used for academic purpose only and strictly confidential So I would like to thank you in advance for your indispensable cooperation Strongly disagree No Measurement scales Idealized influence attributes Instills pride in me for being associated with him/her Goes beyond self-interest for the good of the group Acts in ways that builds my respect Idealized influence behaviors Talks about their most important values and beliefs Considers the moral and ethical consequences of decisions 77 Emphasizes the importance of having a collective sense of m Inspirational motivation Talks optimistically about the future Talks enthusiastically about what need to be accomplished Expresses confidence that goals will be achieved Intellectual stimulation 10 Re-examines critical assumption to question whether the appropriate 11 Seeks differing perspectives when solving problems 12 Suggests new ways of looking at how to complete assignmen Individual consideration 13 Spend time teaching and coaching 14 Treats me as an individual rather than just as a member of a g 15 Helps me to develop my strengths Affective commitment 16 I would be very happy to spend the rest of my career in this o 78 17 I really feel as if this organization’s problems are my own 18 I not feel like “part of my family” at my organization 19 I not feel “emotionally attached” to this organization 20 I not feel a strong sense of belonging to my organization Supervisory commitment 21 When someone criticizes my supervisor, it feels like a person 22 When I talk about my supervisor, I usually say “we” rather th 23 My supervisor’s successes are my successes 24 When someone praises my supervisor, it feels like a per compliment 25 I feel a sense of “ownership” for my supervisor 26 If the values of my supervisor were different, I would n attached to my supervisor Demographic questions 1) What is your gender? Male Female 79 2) How long have you worked for the current organization? Under years to years Above years 3) How long have you worked under your current manager? Under years to years Above years 4) What is the type of your organization? Private Foreign-owned Other 5) What is the industry you are working in? Retail Financial services Other 6) What is your age group? Under 26 26 to 35 36 or older 7) What is your highest level of education? High school 80 Bachelor Master 8) What is your marital status? Single Married 81 Appendix P: Questionnaire (in Vietnamese) Hành vi Lãnh đạo ảnh hưởng gắn kết Nhân viên Doanh nghiệp K nh ch o c c Anh Ch , t i hi n l th c hi n lu n v n nghi n c h ng s cs quan điểm Anh/Chị việc gắn bó với tổ chức Anh/Chị làm việc C c c u tr l i c a Anh Ch kh ng c g p r t c gi tr v thi t th c i v i ng hay sai, ch ng u l nh ng ng t i nghi n c u Vi c tr l i kh ch quan c a Anh Ch g p phần quy t nh s th nh c ng c a nghi n c u, v v y r t mong Anh Ch d nh ch t th i gian qu tr l i c u d a theo t nh hu ng v quan iểm ri ng c a c nh n Anh Ch T t c c c c u tr l i c a c k t qu tổng h p.C m ơn s nh n Anh Ch buv c n nh c c gi k n, t i c ng b h p t c c a Anh Ch Tr n tr ng BCH s : …….Phỏng v n l c gi , ng y _ _ 2012 Phỏng v n vi n: ể tr l i cho m i ph t biểu, Anh Ch h y khoanh tr n s thể hi n ng nh t quan iểm c a m nh ngang d ng v i ph t biểu , theo qui c sau: 82 R t kh ng ồng ý Khuy n kh ch c c Anh Ch kh ng dùng m STT Đánh giá hành vi lãnh đạo cấp anh/chị C p tr n l m cho t anh y c C p tr n h ng t i g t bỏ l i ch c nh n ể h ng l i ch t p thể C ch h nh xử c C p tr n th c ng vi c C p tr n th quy t C p tr n th t p thể C p tr n C p tr n say m t C p tr n thể hi n t ho n t t 10 C p tr n th nh gi 11 C p tr n t m ki m c c quan gi i quy t v n 12 C p tr n g i ý, ho n th nh c ng vi c 13 C p tr n d nh th i gian d i quy n 14 C p tr n quan t m 15 C p tr n gi Đánh giá gắn kết anh/chị tổ chức/ công ty 16 T i r t vui l m vi c tr 17 T i nh n th y v n 18 T i kh ng c m nh n tổ ch nh m nh 19 T i kh 20 T i c m th y m nh thuộc v 83 21 22 23 24 25 26 Khi tơi Khi t anh S th nh c Khi ng i m nh T i c m nh n m nh g n k t m t thi t v T i kh ng g n k t v i c p tr n n u ch ng t i k h Phần thông tin cá nhân Anh/Chị: Nam N Gi i t nh c a anh ch ? Tổng th i gian anh ch l m vi c cho c c c ng ty tổ ch c l D i3nm Từ n m n5nm Tr n n m Anh ch l m vi c v i c p tr n hi n t i bao l u? D i2nm Từ n m n3nm Tr n n m Lo i h nh doanh nghi p tổ ch c anh ch Doanh nghi p T nh n Doanh nghi p c v n ầu t n c ngo i Khác Ng nh ngh B n lẻ anh ch ang l m vi c? ang l m vi c? bao l u? 84 Tài Khác Vui l ng cho bi t tuổi c a anh ch ? D i 26 Từ 26 n 35 Từ 36 tr l n Tr nh ộ h c v n c a anh ch ? T t nghi p trung h c Cử nh n Th c sỹ T nh tr ng h n nh n c a anh ch ? C gia nh ộc th n ...1 The Role of Transformational Leadership Behaviors in Affective Employee Engagement: An empirical study in the two industries of retail and financial services in Ho Chi Minh City ABSTRACT... important to test the link between transformational leadership behaviors and affective employee engagement in the industry of retail and financial services in Ho Chi Minh City and also to explore employees’... and affective employee engagement by surveying the employees The target population of the study included the employees in Ho Chi Minh City currently working in the industry of retailing and financial