Heavy workload at herbalife’s member service department

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business NGUYEN XUAN MINH HAN HEAVY WORKLOAD AT HERBALIFE’S MEMBER SERVICE DEPARTMENT MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR TRAN PHUONG THAO Ho Chi Minh City – Year 2020 1    TABLE OF CONTENT LIST OF FIGURES EXECUTIVE SUMMARY PROBLEM CONTEXT 1.1 Industry and company overview 1.1.1 Industry Overview 1.1.2 Overview on Herbalife Vietnam 1.1.3 Member service department 10 1.2 Symptom 11 1.2.1 High turnover rate 11 1.2.1 Low employee engagement 12 PROBLEM IDENTIFICATION 14 2.1 Possible problems 14 2.1.1 Heavy workload 15 2.1.2 Unclear salary policy 16 2.1.3 Bad company image 17 2.1.4 Lack of motivation 18 2.1.5 Poor working environment 18 2.2 Main problem validation 19 2.3 Consequences 22 2.3.1 Main problem definition 22 2.3.2 Consequences 22 CAUSE VALIDATION 24 3.1 Potential causes 24 3.2 Real cause validation 26 3.3 Main cause validation 27 SUGGESTED SOLUTION 29 4.1 Alternative solutions 29 4.1.1 Expand new headcounts 30 4.1.2 Using human resource outsourcing service 32 4.2 Solution selection 35 2    4.3 Action plan 36 SUPPORTING INFORMATION 39 5.1 Summary of research method 39 5.2 Interview scripts 39 APPENDICES 66 3    LIST OF FIGURES Figure 1: Herbalife Sales Trend in 2019 ………………………………………………… Figure 2: Herbalife Distributor Trend in 2019 …………………………………………… Figure 3: Number of employees from 2016 to 2019 ………………………………………9 Figure 4: Herbalife Organization Chart …………………………………….…………… 10 Figure 5: Member Service Organization Chart …………………………….…………… 10 Figure 6: Herbalife turnover rate by from 2015 to 2019………………………………… 12 Figure 7: Number of quitted staff in 2019 by department ……………………………… 12 Figure 8: Herbalife Vietnam engagement rate from 2015 to 2019 ……………….……….13 Figure 9: Herbalife employee engagement rate in 2019………………………… ……….13 Figure 10: Reasons for low engagement rate at Herbalife…… ………………………… 14 Figure 11: Order trend at Herbalife …….………………………………………………….15 Figure 12: Problem mess…………………… …………………………………………….17 Figure 13: Herbalife salary versus market………… …………………………………….18 Figure 14: Cause and effect map ………………………………………………………… 22 Figure 15: Reasons for heavy workload in Member Service department at Herbalife …….25 Figure 16: Final Cause and effect map …………………………… …………………….26 4    EXECUTIVE SUMMARY Direct selling in Vietnam is a very exclusive industry that mostly bases on the trust among stake holders Besides the well-known companies with reliable products, some companies use this model to swindle Hence, Vietnam government has strictly tightened the operation of the enterprise using direct selling model Overcome these obstacles, Herbalife is one of successful company and grows stability Since 2009, after 10 years, it achieves a lot of success and becomes the leader in this industry with more than one hundred thousand distributors nationwide However, accompany with these achievements, Herbalife also faces the serious issues related to high turnover rate in 2019 & 2020 Human resource always plays a key factor in any organizations, especially in an exclusive industry like direct selling Based on the employee survey in 2019, heavy workload is the main reason for high turnover rate at Herbalife The purpose of this thesis is to find the main problem of high turnover rate of Herbalife in recent years which impacts on business not only in short term, but also in long term Some possible problems have been come up with including heavy workload, unfair salary and bad reputation of MLM in Vietnam Indeed, heavy workload is pointed out to be the main problem of high turnover rate at Herbalife From that, two solutions are suggested to Herbalife management team and recruiting temporary staffs is selected to solve this problem 5    PROBLEM CONTEXT 1.1 Industry and company overview 1.1.1 Industry Overview Beside traditional business models, Multilevel Marketing or Direct Selling is seemed to be an effective method to approach customers Founded in 1939 by Carl Rehnborg, there are approximately 90 Million people involved (1) Poe (2) stated that “Multilevel or Networking Marketing (MLM) is a strategy for selling products and services in which independent salesmen are permitted (by product/service producers) to recruit other salesmen and to draw commissions from the sales of their recruits” These salesmen or representatives who work for direct selling or Multilevel Marketing (MLM) companies are usually called distributor or member These distributors are seemed to be independent partners who collaborated with companies to sell products by some type of method such as person-toperson, group selling….According to the Direct Selling Associate (DSA) in 2015, 70% of MLM sales were generated by person-to-person method, party or group selling accounted for 20% and 10% were other types Distributors make money mostly by commission on product sales or buying products wholesale and selling at retail prices Besides that, some MLM companies also offer luxury vacations and cash reward for those reaching sales goals or compensation for recruiting additional distributors Unlike other traditional method, the independent distributors can receive benefits by building up their organization (usually referred as “downlines”) through recruiting other distributors to reach their expected sales Particularly, distributors’ benefits are not only based on their own revenue by selling products but also the entire purchases of their downline salesmen There are some popular types of multilevel marketing such as network marketing, pyramid selling and referral marketing However, pyramid selling is illegal by the law when it relates to its operation schemes 6    Some well-known companies using MLM worldwide are Amway, Avon, Culligan International, Mary Kay, Schwan Food, Tupperware, Vorwerk, Natura, Herbalife… Direct selling has been in Vietnam since early 21st century According to Ministry of Industry and Trade of the Socialist Republic of Vietnam (3), till Dec 2017, there are 707,330 people participating this industry which is up by 11% compared to the end of 2016 Thuong Xuan Cosmetics Co., Ltd has the largest number of participants with 371,547 people, accounts for 52.53% nationwide Amway Vietnam Co., Ltd (11.18%), New Image Vietnam (10.12%), Herbalife Vietnam Co., Ltd (6.21%) and Thien Su Vietnam (4%) These companies account for 84.47% total number of participants Consumer healthcare is the key part in direct selling in Vietnam due to increase health awareness, go with word-of-mouth which help to push the consumption of healthcare products through direct selling Moreover, as the Vietnamese culture, they have bond connections with friends and relatives, which help them build the trust to sell the products via multi-level marketing Accordingly, direct selling sales revenue from health supplement accounts for 71%, cosmetics 23% and other items 6% However, Direct selling in Vietnam is very complicated due to a lot of violation and disguises of some companies Hence, Vietnam government has to tighten policies on direct selling In 2017, Vietnam Ministry of Industry and Trade (MOIT) decided to revoke the business licenses of 40% of direct selling companies due to their violations As of the end of December 2017, only 34 enterprises have multi-level sales registrations (down by 20% versus the beginning of 2017) Vietnamese government has gradually formed the legal framework for direct selling: July 1st 2005, the Competition law was effective including provision on direct selling August 24th 2005, Decree 110/2005/ND-CP on the Management of Multi-level marketing was promulgated However, the decree still has many loopholes that defrauded companies can take advantages May 14th 2014, Prime Minister Nguyen Tan Dung has issued Decree 42/2014/ND-CP 7    Decree 40/2018/ND-CP replaces Decree 42 which has been effective since 2nd May 2018 According to the latest legal framework, direct selling companies have to control their participants strictly and they have obligation to follow the rules 1.1.2 Overview on Herbalife Vietnam Herbalife is one of successful companies using Multilevel Marketing in its business and ranked in top biggest direct selling companies in the world behind Amway and Avon by the 2018 DSN global 100 Till 2018, Herbalife markets and sells nutrition supplements, weight management, sports nutrition and personal-care products in 94 countries including Vietnam The company came to Vietnam in November, 2009 and since then, has maintained their sustainable development throughout the years and its first ranking in the country in terms of market share In 2019, Herbalife Vietnam recorded outstanding value growth and reinforces its leading position in direct selling, with a value share that far exceeded the second-player Figure 1: Herbalife Sales Trend in 2019 (source: Herbalife internal data) Not only increasing in Sales revenue, Herbalife also increases in number of participants In particularly, more than 100.000 new participants joined Herbalife in 2019 which is up by 58% compared to 2018 8    Figure 2: Herbalife Distributor Trend in 2019 (source: Herbalife internal data) Fast-growing in 2019 that helps Herbalife acquires major market share compared to other competitors According to Euromonitor, Herbalife Vietnam retain its leading position in 2018 and 2019 with a value share that is far above Amway (stands at second position) Moreover, Herbalife Vietnam also ranks #9 of sales volume in Herbalife Worldwide Following the growth of business, Herbalife also extends number of staffs in Ho Chi Minh and Hanoi office year by year Unlike other competitors such as Amway, Herbalife imports its products instead of producing in local manufactory Hence, the company size is under 100 people till 2018 No. of staff 2016 55 2017 75 2018 80 2019 105 Figure 3: Number of employees from 2016 to 2019 (source: Herbalife internal data) 9    General  Manager Finance &  Planning Sales Finance Member  Service Supply  Chain Legal Govern‐ ment  Affair Human  Resource MPC Metrics Figure 4: Herbalife Organization Chart (source: Herbalife internal data) It is clear to see that Herbalife applied Flat structure in company organization with 10 departments under General Manager The most crowded departments are Supply Chain (10 staffs), MPC (10 staffs), Sales (25 staffs) & Member Service (40 staffs) Others usually have to people Each function has one senior manager and they are all reporting to General Manager However, all departments also have dotted line reporting in Hongkong and Singapore where Herbalife has regional offices Importantly, Member Service is considered as the most important department in Herbalife, which is in charge of consulting, registering and servicing distributors Besides the fast-growing business, Herbalife Vietnam also faces the problem that needs to be improved 1.1.3 Member service department Figure 5: Member Service Organization Chart (source: Herbalife internal data) 10    Q7: How heavy workload impacts on business? Dao Le: Member service team + Responsible for + Consequence “Member plays an important role in the supporting Herbalife of heavy service connection between company and members workload manager distributors Member service and coordinators manager and coordinators are + Takes us from – are responsible responsible for supporting for supporting months to find Herbalife members and control the suitable replacement Herbalife market However, in 2019, one and at least more members and Member Service manager left months for training control Herbalife and coordinators left market” the Herbalife It takes us from – months to find suitable “Moreover, replacement and at least more the months government for training In the meantime, we are out of control in are tightening the direct regions managers without sales Moreover, the selling industry, we government are tightening direct need selling experience industry, we need experience staffs who understand staffs the understand the industry and guide distributors to follow the law the who industry and guide the distributors to follow the law” 57    Q8: What is the reason for heavy workload? Dao Le: Herbalife Vietnam is + Business growth + reason for “Herbalife growing over expectation and out unexpectedly heavy workload Vietnam of control which requires us to recruit more people to adapt is growing over + Lack of staff expectation and out of control which requires us to recruit more people to adapt” Interview 4: Purpose: Find the main problem of high turnover rate in Vietnam and get advise Who: Mr Hao Nguyen When: Herbalife office at 2:30 PM Detail: 58    Interview – Hao Nguyen Q&A Coding Category Quote Q1: After searching information of Herbalife, I found the high turnover rate Do you have any comments on this? Hao Nguyen: Yes, you are + High turnover rate “We recorded right We recorded the highest the turnover rate in recent years, that turnover rate in brings us a lot of difficulties to recent years, that deal with the growing business brings us a lot of highest difficulties deal with to the growing business” Q2: As our research, some staffs raise the unfair salary issue What you think about it? Hao Nguyen: More and more + Difficulty to attract the talented difficulty to attract the talented especially in direct selling + Reason for “More and more unfair salary difficulty attract industry, for example, if a talented candidate receives two offers especially with the same salary rank from direct Herbalife industry” and a traditional to the in selling company, they surely choose a traditional company For the current staffs, it relies on the company policy to increase the salary Time by time, it creates 59    the gap between employees at the same level Q3: What is the impact of high turnover rate at Herbalife? Hao Nguyen: Direct selling in + Exclusive market + Consequences “Direct selling in Vietnam is very exclusive, not of high turnover Vietnam is very much rate exclusive, workforce + Take time for current training in not market can understand about this much workforce industry and we have to take a in current market lot can of time for training understand Therefore, it would bring the big about impact on the business industry and we In addition, the number of health + Increase health insurance cost insurance cost increases rapidly have to take a lot in 2017 & 2018 training” of this time for “the number of health insurance cost increases rapidly in 2017 & 2018” Q4: What is your comment on current heavy workload situation? + Handle the work + Heavy “Currently, we Hao Nguyen: Currently, we see load three time higher workload see that one staff that one staff has to handle the than before situation has to handle the work load three time higher than work load three before due to the fast growth of time higher than business It is not easy for before due to the recruitment in MLM industry in fast growth of Vietnam due to bad reputation business” 60    Hence, we usually take a lot of time to find a suitable candidate When the business grows so fast which require many people, it would be a big challenge Q5: Which department shows the highest turnover rate by heavy workload? Hao Nguyen: Member Service + Member Service & + high turnover “Member and Sales show the highest Sales Service and turnover rate by heavy workload Sales show the highest turnover rate by heavy workload” Q8: As we come up with solutions to deal with heavy workload, which solution is the most suitable for Herbalife? Hao Nguyen: It is not easy and + Not easy and too + Solution “It is not easy too risky of reducing recruitment risky of reducing selection for and too risky of process As Herbalife is a global recruitment process heavy workload reducing company that requires the systematical and professional + Recruiting temp recruitment process” process, especially in recruiting, staff is a good idea to Head Office in USA could not deal with the heavy “I think approve to shorten the level of workload recruiting temp approvement which involves in staff is a good code of conduct Moreover, it is idea to deal with too risky if we hire wrong the people I think recruiting temp workload” heavy 61    staff is a good idea to deal with the heavy workload Interview 5: Purpose: Mr Thoat Do is a FP&A manager, he is responsible for Who: Mr Thoat Do When: Herbalife office at 8AM Detail Interview – Thoat Do Q&A Coding Category Quote Q1: Could you please share your job as a FP&A manager? Thoat Do: My main job is to work + Build annual budget closely with head of other and forecast + Job description “My main job is to work closely with head of department to shape the business to other department long term financial, build annual shape the business to budget and forecast ,… long term to financial, build annual budget and forecast” 62    Q2: Could you please share about how we manage number of head count yearly? Thoat Do: Number of head count + Unexpected growth of business every year is planned basing on + Head count “Number of head count management every year is planned sales forecast The unexpected + Difficulties to plan enough headcount growth of business causes the basing on sales forecast difficulties of business causes the to plan enough The unexpected growth headcount Moreover, Herbalife is difficulties a global company which requires enough headcount” the approval from to mother company in USA for hiring any new employees that may cost much time to process The bad reputation of MLM in Vietnam is also contributed to the difficulties in recruiting probably 63    plan Q3: What is the difficulty in current forecast? Thoat Do: The forecast is usually + Far below the actual sales far below the actual sales and we + Consequences “The forecast is usually of high turnover far below the actual are behind the market rate sales and we are behind + Behind the market Besides the internal data, we don’t the market” + Don’t know much know much about market such as about market distributor behavior, “We don’t know much market about market such as driven, the reaction of customer to distributor the market changes of government behavior, driven, the regulations, the effectiveness of reaction of customer to our promotional activities… This the information is very important for government regulations, our planning the effectiveness of our changes of promotional activities….” Q4: What is your comment on current heavy workload situation? Hao Nguyen: Currently, we see + Handle the work + Heavy “Currently, we see that that one staff has to handle the load three time higher workload one staff has to handle work load three time higher than than before situation the work load three time before due to the fast growth of higher than before due business It is not easy for to the fast growth of recruitment in MLM industry in business” Vietnam due to bad reputation Hence, we usually take a lot of time to find a suitable candidate When the business grows so fast which require many people, it would be a big challenge 64    Q5: Which department shows the highest turnover rate by heavy workload? Hao Nguyen: Member Service + Member Service & and Sales show the + high turnover highest Sales “Member Service and Sales show the highest turnover rate by heavy workload turnover rate by heavy workload” Q8: As we come up with solutions to deal with heavy workload, which solution is the most suitable for Herbalife? Thoat Do: Opening a permanent + Costly and time + Solution “Opening a permanent position selection for position is costly and heavy workload time consuming than is costly and time consuming consuming than temp staffs I prefer hiring temp staff solution temp staffs” “I prefer hiring temp staff solution” 65    APPENDICES Appendix 1: Herbalife Vietnam engagement rate from 2015 to 2019 Appendix 2: APAC Herbalife employee engagement rate in 2019 Appendix 3: APAC Herbalife employee engagement rate in 2019 66    REFERENCES (1) Top Solid 100 MLM companies in 2018! 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