1.6. Impact of recruitment and selection
1.6.1. Positive impacts of recruitment and selection practices
Recruitment and selection process are important practices for human resource management, and are crucial in affecting individual and organizational success ( Nguyen thi Le Tram, 2016). Jovanovic (2004). Recruitment and selection play a pivotally important role in shaping an organization‟s effectiveness and performance, if work organizations are able to acquire workers who already possess relevant knowledge, skills and aptitudes and are also able to make an accurate prediction regarding their future abilities, recruiting and selecting staff in an effective manner can both avoid undesirable costs for example those associated with high staff turnover, poor performance and dissatisfied customers and engender a
mutually beneficial employment relationship characterized, wherever possible, by high commitment on both sides.
Recruitment and selection also has an important role to play in ensuring worker performance and positive organizational outcomes. It is often claimed that selection of workers occurs not just to replace departing employees or add to a workforce but rather aims to put in place workers who can perform at a high level and demonstrate commitment (Dessler, 2000).
Pilbeam and Corbridge, (2006) provide a useful overview of potential positive and negative aspects noting that: „The recruitment and selection of employees is fundamental to the functioning of an organization, and there are compelling reasons for getting it right. Inappropriate selection decisions reduce organizational effectiveness, invalidate reward and development strategies, are frequently unfair on the individual recruit and can be distressing for managers who have to deal with unsuitable employees.‟
According to Odiorne, (1984) one result of effective recruitment and selection is reduced labour turnover and good employee morale. Recruiting ineffectively is costly, since poor recruits may perform badly and/or leave their employment, thus requiring further recruitment. A cross national study of recruitment practices, suggests that, in reality, recruitment practices involve little or no attempt to validate practices. Personnel managers tend to rely on feedback from line managers and probationary periods and disciplinary procedures to weed out mistakes. Firms with high quit rates live with them and tend to build them into their recruitment practices and they do not analyze the constitution of their labour turnover.
In order to get maximum output from employees, it is important to consider a fit between successful candidates and the organization. This is made possible by the use of selection criteria as basis on the questions asked by the selection panel and in interview. By selecting the required candidates for positions in respective
departments, line managers could help achieve a better fit between job and candidate (Zhuand Dowling, 2002).
Other researchers Terpstra and Rozell (1993) have found a positive relationship between the extensiveness of recruiting, selection test validation and the use of formal selection procedures and firm profits. Other studies have shown that implementing an effective staffing process is positively related to organizational performance (Syed and Jama, 2012). Koch and McGrath (1996), also found that sophisticated recruitment and selection procedures are positively related to labor productivity as cited in Asiedu-Appiah et al. (2013).
1.6.2. Negative impacts of poor recruitment practices
According to Foot and Hook (1996), the primary aim of the recruitment and selection processes is to ensure that the best applicants are appointed into positions.
This implies that the recruitment and selection processes can assist in predicting applicants‟ future performance and the period the applicant will stay as an employee. As evidenced, human resources should be partners in strategic planning to determine the types of skills and competencies that are required to achieve objectives (Cascio, 1991).
Inappropriate selection decisions also reduce organizational effectiveness, invalidate reward and development strategies, are frequentlyunfair on the individual recruit and can be distressing for managers who have to deal with unsuitable employees (Nguyen Thi Cuc, 2016) . Poor recruitment practices and recruiting poor performing employees can have several negative effects on the organization some of which are stated below:
+ Employees with limited role specific capabilities take time to become productive and need more training to build their skills, good employees hit the ground running and are interested in learning
+ Underperforming staff also affect the performance of many by a multiplier effect.
+ People who are not a good fit to the role require more time and attention from their manager. The time that managers spend on developing their best people is reduced
+ Higher human resources cost may arise as a result of time spent in recruiting poor performing employees;
+ Client satisfaction is impacted through a increase in errors, poor decision making and less effective client services;
1.7. Proposed model
Previous research has pointed out several positive and negative inpacts of recruitment and selections. Positive impacts may include employees‟ subsequent performance (Dessler, 2000), employee commitment and retention (Odiorne, 1984) and employee satisfaction (Pilbeam and Corbridge, 2006). On the other hand, negative inpacts include: reduced morale and satisfaction (Cascio, 1991) and reduced productivity (Foot and Hook, 1996).
Figure 1.2.Research model
Source: Author develops for this study (2017) Recruitment
Job analysis
Multiple sources
Selection Preliminary screening
Selection test Interviews Reference
Employee outcomes
Job satisfaction
Retention Employee performance
Based on the literature, the author proposed the model to validate the influence of recruitment and selection practices on employee outcomes.
Recruitment practices were represented by three variables: the implementation of HR planning and the availability of recruitment and selection policy, use of job analysis and multiple sources of candidates. Selection practices were captured by four variables: preliminary screening, selection tests, selection interviews, and reference check. Employees outcome was operationalized using three variables:
employee performance, job satisfaction and employee retention.
CHAPTER 2: RECRUITMENT AND SELECTION PRACTICE IN SMALL AND MEDIUM SIZED ENTERPRISES
2.1. Overview of SME in Vietnam
Small and medium sized enterprises always occupy a vital role in any economic system of all countries. This sector works closely with customers and is an essential element to push the economy. Yet, SMEs is also the most sensitive sector because of facing with many difficulties such as shortage of capital, material or management skills. Vietnam‟s private sector had a long time been depressed and almost eliminated totally during the civil war of the North and South (from 1945 to 1975). Private sector merely put some first step after Doi Moi renovation in 1986 when the Government recognized the private sector in the Vietnam‟s economy.
Another marked step during this renovation was the revision of 1992 Constitution recognizing the private sector in the economy together with the commitment to protect private sector and removing the privilege of state-owned enterprises. This contributed to create a fair play ground for the economy of Vietnam. Nevertheless, Current SMEs categorize in Vietnam economic still suffer some limitations that SME is not “separate” enterprise domains. This limitation could lead to a paradox that services sector does not need as much capital as production sector and, consequently, a large number of SMEs in Vietnam‟s economy is operating in repair service (Tran & Nguyen 2008).
Small- and medium-sized enterprises are dominant and essential subjects within the Vietnamese economy. SMEs amount to about 90% in 2000–2008, even 97% in 2008of the total enterprises in Vietnam (Vu et al., 2016). Moreover, SMEs play considerable roles for the economy (Hung, 2007; Trung et al., 2009; Kokko &
Sjửholm, 2005). For instance, SMEs account for approximately 40% of GDP and 32% of the total investment in 2006 (Hung, 2007). In addition, SMEs generate about 2.5 million of new jobs in 2005 (Trung et al., 2009) and it was also the main driver for poverty reduction in rural Vietnam (Kokko & Sjửholm, 2005). Given SMEs‟ contributions, understanding management-related practicesincluding HRM
actions of SMEs therefore provides more efficiently evidence-based policies for the pro-growth and the pro-poor strategies in Vietnam.
According to data released by the General Statistics Office, most operating business are SMEs as defined in the Government‟s Decree. And sorting by the labor size, group micro enterprises accounted for 66.75%, group of small enterprises is 28.75%, group of medium enterprises is 2.1% and group of large enterprises is only 2.4%. GRAPH 2 showed that the number of new SMEs escalated in recent years.
This trend once again affirmed for the trend of the economy of Vietnam in which SMEs sector will be the motive force for the whole economic system.
SMEs are central to the structural of Vietnam‟s economic system. In global market in general, and in Vietnamese market in particular, Small and medium sized enterprises act significant role in the economy system SMEs always have extraordinary positions, covering 58% Vietnam GDP with more than 315,000 enterprises, and 97,6% employment share, of which micro 67,6%, small 28% and medium 2%. And the number of SMEs from year 2000 to year 2010 was displayed in GRAPH 3. SMEs in Vietnam generated 30% of gross national industrial output, 60% of regional industrial value and 64% of commodity circulation. (General of Statistics Office of Vietnam, 2015.)
Figure 2.1. Size of enterprises in Vietnam
Source: General Statistics Office, 2015
In Vietnam, the number of SMEs has significantly increased between 2004 and 2013. According to the Statistical Year-book of Vietnam 2014, as at December 2013, 368,010 SMEs were operating in the economy. They accounted for approximately 98 per cent of the total number of enterprises, 46 per cent of the total number of employees and contributed 40 per cent of GDP (GSO 2014).
Figure 2.2. Total number of SMEs by year
Source: General Statistics Office, 2017
The most recent report on the operation of Vietnamese SMEs covering the period between 2006 and 2011 was published by the General Statistics Office (GSO) in 2012 (GSO 2012). Figure 2.2 illustrates a massive transformation away from the agricultural economic sector towards the industrial and services sectors since Doi Moi (GSO 2012). In 2011, SMEs employed 46 per cent of the total employed labour in the country. The industry and construction sector employed the largest number of people, 3,364,076, of which the manufacturing sector accounted for 1,997,499 people. The second largest sector is the services sector with 2,218,929 people. The agriculture, forestry and fishing sector ranked third in terms of the number of those working in it with 97,809 people.
Figure 2.3. Allocation of SMEs in Vietnam by industry
Source: GSO, 2017
In addition, SMEs also contribute to increasing incomes of members of the society. As reported by GSO 2012, the average income of workers in the SME sector more than doubled between 2006 and 2011, from VND1,996,000 to VND4,829,000. In terms of ownership, in comparison to state-owned and FDI SMEs, average income of workers in non-state SMEs was still very low. In terms of economic activity, average income in the industry-construction and service sectors was higher than in the agricultural sector.
Table 2.1. Revenue and Employment created by SMEs
2011 2012 2013 2014 2015
No. of employees
(million) 10,9 11,1 11,6 12,1 12,8
Growth (%) 11,6 1,7 4,3 4,1 5,9
Revenue (Trillion
VND) 10.577 11.458 12.494 13.908 15.462
Revenue Growth (%) 34,6 8,3 9,0 11,3 11,2
Source: VCCI, 2016
SMEs in Hanoi Capital
Hanoi is among the top three provinces in Vietnam in terms of global integration capability. Hanoi have been official members of many different international organizations such as Association of Large City, Network of Asian
2.50%
57.50%
40%
Agriculture, forestry &
fishing
Industry & construction Trade & Service
Nation Cities. Because of these conditions, recent years see the strong development of SMEs in Hanoi. Hanoi is among the top two cities with regards to the total of enterprise registation and establishment.
Figure 2.4: Number of SMEs in Hanoi by year
Source: GSO, 2017
SMEs in Hanoi mainly operate in the field of service and construction while the contribution of arguculture, forstry and fishing has been gradually diminishing. The contribution to GDP of the three sectors in 2015 was showed in figure 2.4.
Figure 2.5: Contribution to GDP by sector between 2009 and 2015
Source: GSO, 2016 72455 76242 82128 88356
96889
105365
0 20000 40000 60000 80000 100000 120000
2011 2012 2013 2014 2015 2016
Number of SMEs in Hanoi
Number of SMEs in Hanoi
52.3
41.2
6.5 53.8
41.7
4.5 0
10 20 30 40 50 60
Trade & Service Industry &
Construction
Agriculture, forestry &
fishing
2009 2015