Human resource challenges in transition economies

The background of the research, the overview picture of Vietnam’s emergent economic transformation, is emergent and still changing. Vietnam has experienced many challenges, especially rapid growth which is creating new challenges for human resource managers; the Vietnamese economy has taken off dramatically. Gross, 2008 and Kim 1996 have supposed that the human factor could be the biggest obstacle to Vietnam’s economic progress. These challenges will address in the review of the literature of this section with two issues: (1) major human resource challenges in Vietnam’s economic transformation, and (2) the extant literature on work engagement, retention, and turnover.

2.1.1 Major human resource challenges in Vietnam’s economic transformation

We have already seen that in the previous centralized economic system in Vietnam before “Doi Moi/Open-Door”, the personnel function was regarded mostly as a set of administrative tasks and not as a personalized managerial relationship with workers. Hence, managers as well as HR staff currently lack or are significantly lagging in their knowledge and expertise to deal with the current and emerging human resource management (HRM) challenges. Due to mainly basing learning by doing in managerial skills, managers often lack some important human relationship skills and professional knowledge, especially in HRM to perform their business properly (Le Chien Thang &

Truong Quang, 2005). General responsibilities regarding human resources in Vietnam

are thus a bit unclear even while being surrounded and impacted by stressors that accompany any rapid change. HR departments in Vietnam are often poorly organized, thus further compounding the process of change; HR managers at all levels are struggling due to the lack the skills, knowledge and ability to effectively support the economic decentralization currently underway.

According to Angsuthanasombat (2007), the strengths of Vietnamese overseas workers are being hard-working, active, intelligent, open, skillful and always ready to do extra work. In contrast, the weaknesses of most of Vietnamese workers are from rural areas: not yet used to industrialized working practices and having poor foreign language skills, particularly in English. As a result, these workers fail to integrate into foreign markets with high salaries. Moreover, their certificates as well as degrees have not yet been recognized internationally, therefore they are only able to engage in non-professional work when going overseas to work. And, as mentioned earlier, although the educational system is helping to prepare a competent and motivated workforce, the numerical shortage of competent graduates for management positions does not look good for sustained economic rejuvenation.

As described by Mrak et al., (2004), the process of transitioning to a market economy has diverted the attention of high-level managers to hard issues of privatization and enterprise restructuring such as financial resources and technology, thereby “soft” human resources issues and HR factors are often left behind except for the constant pressure to lower labour costs. Experimentation with free-market economic activities has led to organizational restructuring, procedural changes, conformity to international standards, and a constant pressure to reduce labor costs. All-in-all, these stressors generate a serious, ever-demanding, still-evolving, constantly changing organizational culture and work climate that must adjust to sound business practices for sustained profitability. Meanwhile personal aspirations for an improved quality of life are increasing in parallel. Indeed, there are many stressors, some potentially invigorating while some are potentially debilitating.

Thus, the purpose of this research study is to answer the questions: Why and how do Vietnamese stock brokers experience these forces, to what degree do they experience job stress, what it the nature of their commitment to their organizations, and do they wish to stay or do they wish to leave?

2.1.2 Work Engagement, Retention, and Turnover

According to Jackson, Schuler & Werner (2009, pp.190), “Retention includes all the activities an employer does to encourage qualified and productive employees to continue working for the organization”. Retention means keeping the workers or employees in the organization as long as possible. Ramlall (2003) stated “managing work engagement is a strategy for increasing organizational competitiveness”

underscoring its essential value to the very existence of an organization.

Bakker & Leiter (2010) supposed that “modern organizations need energetic and dedicated employees who are engaged with their work”. These organizations expect pro-activity, initiative and responsibility for personal development from their employees. Retention, according to Hassan (2010), “is an energetic, deep involvement with work and includes energy, involvement, and professional efficacy. Engagement confirms to an individual that they are good at doing important work”.

According to Van de Heuvel, Demerouti, Shaufeli & Bakker (2010, pp.124),

“organizations are continuously changing. Developments in society such as the current financial crisis and ongoing technological innovation increase pressure on employees to show change-ability and resilience”. Moreover, they also suppose that “most planned change initiatives, whether they concern a restricting, cultural change, or policy innovation, share the aim of maximizing organizational performance”. Besides, organization change has an impact on the working environment and subsequently it may affect employee well-being, motivation, and performance.

“Work engagement in academia”, according to Kahn (1990, pp.694), one of the first scholars who conceptualized engagement as work described work engagement as the “harnessing of organization member’s selves to their work roles: in engagement, people employ and express themselves physically, cognitively, emotionally and mentally during role performances”.

Work engagement is defined as “a positive, fulfilling, work-related state of mind that is characterized by vigor, dedication, and absorptions” (Shaufeli, Salanova, Gonzáler-Romá, and Bakker, 2002b:74). “Vigor” shows the high levels of mind, energy, willingness, effort, persistence and abilities to face with difficulties in one’s work.

Dedication is strong involvement in one’s work such as enthusiasm, inspiration, pride and challenge. Absorption is presented the high level of concentration, fervor, passion, engross while working (Shaufeli & Salanova, 2008).

The viewpoint of Shimazu & Schaufeli (2009), is that work engagement in business may play a crucial role in the development of the organization’s human capital.

Being an essential, positive element of employee health and well-being, it may help to create synergy between positive outcomes for organizations. Besides, Schaufeli &

Bakker (2010, pp.11), see that “all major human resources consultancy firms are in the business of improving levels of work engagement”. Also Schaufeli & Bakker (2010, pp.11) said that “work engagement increases profitability through higher productivity, sales, customer satisfaction, and employee retention”. Moreover, “the message for organizations is clear: increasing work engagement pays off”.

Employers must understand what is important to their employees before formulating work engagement strategies. Once employers clearly understand and enact what their workers value most, then employers will succeed in retaining their top talented employees instead of watching them walk out the door.

Otherwise, the costs are very high. In research conducted by Hale (1998), recruitment costs of a new employee were about 50% to 60% of the first year’s remuneration and up to 100% in the case of a specialized high-skilled position. Hale (1998) found that 86% of employers experienced difficulty attracting new employees and 58% experience difficulty retaining their employees.

Retention, according to Jim Goodnight, CEO of SAS Institute is critical to success. SAS Institute Inc. is the largest private software company in the world with 10,000 employees and revenues exceeding 1.3 billion dollars, and Goodnight states

“attracting and retaining the best people is crucial to our success” (Jackson, Schuler &

Werner, 2009). Not only does SAS recruit talented employees but also focuses upon retaining its employees by making them feel satisfied. For instance, SAS offers very attractive benefits such as three weeks of vacation after only one year of working with the company, unlimited sick leave, and an on-site medical facility. However, Mitchell, Holtom and Lee (2001, pp.104) stated, “Retention cannot be accomplished purely through money. A host of on-the-job and off the-job factors must be considered when

developing a retention plan”. Jackson, Schuler and Werner (2009, pp.190) also noted that “the objective of retention activities is to reduce the unwanted voluntary turnover by people the organization would like to keep in its workforce”.

Turnover is another fact of organizational life. In every organization, there are some employees who leave their organizations voluntarily due to some individual reasons such as changes in their family situation, a desire to learn and master new skills from another organization, a desire to set up their own company, a wish to trade and conduct business by themselves or to accept an unsolicited job offer. However, there are others leaving their work due to reasons which are brought on by their own organization such as: perceptions of inequity, unfair treatment of a coworker, being passed over for promotion, or being required to do something against one’s beliefs/values.

Turnover is when an employee leaves for any reason and then must be replaced.

Voluntary turnover occurs when “voluntary cessation of membership of an organization by an employee of that organization” (Morrell et al., 2001, pp.6). Voluntary turnover happens when an employee leaves willingly to accept a job with better salary and better working conditions. In contrast, involuntary turnover happens when movement across the membership boundary of an organization, which is not initiated by the employee (Price, 1997, pp.9). Therefore, involuntary turnover occurs when an employee leaves against his/her desire as in the case of a termination or lay-off.

Turnover, voluntary or involuntary, can also be very costly. In a study conducted by Fitz-enz (1997), it was found that “on average a company loses approximately $1 million with every 10 top managerial and professional employees leaving the organization”. Sarkar (2002) also indicated that “when all direct and indirect costs are considered, the total turnover cost of an exiting employee ranges from a minimum of one year’s remuneration and benefits to two years’ remuneration and benefits. Now, that’s a huge cost to the organization”. From the viewpoint of Mitchell, Holtom & Lee (2001), the impact of employee turnover is not just financial, “It is a problem because it imposes extensive costs on both individuals and organizations”.

In summary, if work engagement strategies are successful then employee turnover will be minimized and retention enhanced. An employer would be wise to invest time, energy and resources to identify and strengthen non-financial intangibles.