Content: Details on research methods, results of the qualitative research, scale calibration, sample selection.
Chapter 4: Result and Discussion
Content: Data analysis and presentation of the results of the data analysis.
Chapter 5: Conclusions and Suggestions
Content: Summary, discussion on research results as well as the contributions and the practical meaning of the research, proposal of measures to apply the research results into practice, limitations of the research, and suggestion for further studies.
1.7 Chapter Summary
The objectives of this thesis “Factor analysis of the Loyalty of Employees: Case study of Vietnamese Enterprise in Ha Noi City” are identifying the factors affecting the loyalty of employees and measuring their influence on the loyalty of employees. The research is carried out in two phases: qualitative research and quantitative research.
The thesis consists of five chapters: Introduce, Literature review, research methodology, Result and Discussion, Conclusions and Suggestions.
2 L ITERATURE R EVIEW
2.1 Theoretical foundations
2.1.1 Issues of employee loyalty in organizations
In a research on loyalty Auh, S., & Johnson, M. D. (2005) found out that employees’ loyalty was caused more by their job than by “the employers and the nature of the relationship between employees and employers had been fundamental changed therefore the loyalty concept needed to be revaluated (reevaluating loyalty). In the competitive labor market today, many employers find it hard to retain their staff” because of the attractiveness and the potential wealth of the stock market (Cheryl Breetwor 2001).
In Vietnam the appearance of many foreign investors and banks with lack of highly qualified HR since the WTO member in 2007. As Penelope Trunk (2007) “loyalty as a function of time is a dated idea, work is only appealing if there’s constant learning”. However, “companies do not want blind loyalty; the best kind is when both companies and employees are benefiting”.
Some general managers said that the organization preferred an excellent employee for three years rather than one low-skilled employee for the whole company life. However, the new perspective on loyalty has not been widespread in Vietnam and enterprises have difficulties in measuring. Therefore, this study is still based on the loyalty definition of Mowday et al (1979) and the measuring scale of Man Power (2002).
2.1.2 Summary of some previous studies on employee loyalty
There are many studies on employee loyalty to organizations, but most previous studies focused on one aspect in general, for example the impact of organizational culture or leadership style on the loyalty of employee. Therefore, there are currently no studies investigating the specific factors affecting employee loyalty. This research will assess the impact of each specific factor such as: high income, good working conditions, target fit, etc.
on employee loyalty to the organization.
2.1.3 The relationships among factors and employee loyally
2.1.3.1 High income
Income “can have many different names such as labor remuneration, labor income, etc. In France, the remuneration is construed as wages or basic, minimum salaries and other benefits paid directly or indirectly, in cash or in kind, which the employers pay for workers”. In Taiwan “income is just the remuneration that employees received for their work; it is paid in form of wages, allowances, bonuses or any other words for the performed hours, days, months or products”. In Japan “income, whatever is called salaries, wages, dividends or any other words, is only the labor remuneration that employers pay for workers”.
Remuneration has always been one of the most challenging issues for managers in every organization. Companies often have different opinions and goals while defining the remuneration system, but in general they pursue four basis objectives of: attracting employees, maintaining good employees, motivating employees and fulfilling the legal requirements.
Attracting employees: Companies that pay more are likely to attract good candidates from the local market.
Maintaining good employees: In order to maintain good employees for your business, it is not enough to pay high salaries, companies also need the show the fairness within the organization.
Motivating employees: All the components of employee’s income such as basic salaries, bonuses, benefits, and allowances should be used effectively to generate the highest employee’s motivation.
Fulfilling the legal requirements: The legal requirements “relating to remuneration in enterprises often focus on the following aspects: minimum wages, time and working conditions, child labor, allowances, social welfare such as social insurance, health insurance, maternity, labor accidents, etc.” as Dung (2000) recommended.
When it comes to job and the job quality, Dung (2000) said that most people often assess and measure it “with income that the work brings. Therefore, income is considered as a measure for the job as well as the success of the employee at work”
High income makes people more satisfied materially so that they are more likely to dedicate to the job, focus on the work, and try to prove their own value for the company. Therefore, this large impact on the employee’s behavior is described as follows:
If the income that the employees earn seems to be worthy of their dedication, they will be motivated at work.
They will have little intention of leaving the company for another job and be temporarily satisfied with his current income.
They will feel like having higher responsibilities for the work.
They will be more disciplined in following the organizational rules and work more independently.
Therefore, the first hypothesis is formulated as follows:
H1: High income can increase employee loyalty.
2.1.3.2 Good working conditions
Employees are always interested in the working environment because it is related to the personal convenience and it is also the factor that helps them completing the tasks. Employees do not want to have a dangerous, disadvantageous, and inconvenient working environment.
“Temperature, lighting, noise, and other environmental factors must be suitable. Moreover, many workers prefer to work closer to home, to have clean working place as well as modern and suitable equipment” as Lam, (1998) required.
The second hypothesis is formulated as follows:
H2: Good working conditions can increase employee loyalty.
2.1.3.3 Target fit
Target fit is described as when the employees realize that their goals and values are suitable and they are committed “to the goals and values of the company” (Vancouver & Schmitt, 1991). The individual-organization fit (target fit) is the most important aspect among all studied factors (Chatman, 1991; Kristof, 1996; Van Vianen, 2000). The target fit is associated with such behavioral results as longer stay in the office, more commitment to the organization, and better job performance (O’Reilly & CTG, 1991; Vancouver & Schmitt, 1991)
The third hypothesis is formulated as follows:
H3: The target fit can increase employee loyalty.
2.1.3.4 Management support
The supporting behavior of managers have been focused by many studies (Podsakoff et al, 1996). Management support is defined as “the degree of consideration and help that employees receive from their employers” (Netemeyer et al., 1997). A supportable manager should have a high qualification and treat employees fairly, encourage two-way communication, and recognize their contribution to the achievement of company’s goal (Singh, 2000).
The fourth hypothesis is formulated as follows:
H4: Management support can increase employee loyalty.
2.1.3.5 Support from colleagues
The behavior of managers is also a crucial factor determining employees’ satisfaction. It increases when their managers are knowledgeable and friendly, give praise if they do a good job, listen to their opinions, and care about their interests. (Lam, 1998).
Therefore, the fifth hypothesis is formulated as follows:
H5: Support from colleagues can increase employee loyalty.
2.1.3.6 Fair reward
Fair reward exists when the employees notice they receive a deserved remuneration for their work pressure and performance (Netemeyer & et al, 1997). Fair reward is “based on the concept of fair distribution” as Lane and Messe, (1971) defined. The concept of fairness contains both fair distribution and procedures. Nonetheless, “previous studies indicate that the fair distribution is more important than the fair procedures in a working relationship”
(Netemeyer & et al, 1997; Organ, 1988).
Equity theory indicates that each individual follows his own fairness rule affecting his attitude and behavior (Lane & Messe, 1971). This theory shows that fairly rewarded employees are more likely to have positive thinking and willingness to support their organizations.
Based on these arguments the sixth hypothesis is formulated as follows:
H6: Fair reward can increase employee loyalty.
2.1.3.7 Empowerment
Empowerment exists when employers believe in the decision-making ability of employees and encourage them to use initiative (Conger & Kanungo, 1998; Hartline et al, 2000).
Empowerment means the self-monitoring of tasks (Singh, 2000, Varca, 2001). The core of these both concepts is the willingness of the management to give employees the right to make decisions within a defined frame and use initiative.
Therefore, the seventh hypothesis is formulated as followed:
H7: Empowerment can increase employee loyalty.
2.2 Scale model used in the study
The scale model used in this study included the scales of dependent variables and scales of independent variables.
2.2.1 Scales of independent variables
The scales of independent variables consist of following scales:
2.2.1.1 High income variables
High income is measured by the three following observed variables:
1) My current salary is commensurate with my job performance.
2) I am living totally fine with my current salary.
3) I think the company where I am working pays very fairly.
2.2.1.2 Working conditions variables
Good working conditions are measured by the four following observed variables:
1) The supporting equipment for my work is very good.
2) The airy office makes me feel very comfortable.
3) Temperature, lighting, and noise in the office are fit to my work.
4) I feel very safe in my office.
2.2.1.3 Target fit variables
The target fit is measured by the four following observed variables:
1) I feel that my personal ability is in line with the job requirements of the organization.
2) I am committed to the organization’s objectives.
3) I agree with the way how the business works.
4) My own development goal fits to the organization’s objectives.
2.2.1.4 Management support variables
Management support is measured by the three following observed variables:
1) I always have the support from my direct manager in all areas.
2) My managers always support me when problems arise.
3) I often get the support of the management when things go bad.
2.2.1.5 Support from colleagues variables
Support from colleagues is measured by the two following observed variables:
1) My colleagues always listen to my opinions and concerns and care about my interests.
2) My colleagues are always knowledgeable, friendly and approachable.
3) I and colleagues work effectively together
2.2.1.6 Fair reward variables
Fair reward is measured by the five following observed variables:
1) I got a fair reward according to accomplishing my role.
2) I got a fair reward according to my job responsibilities.
3) I got a fair reward according to my spent efforts.
4) I got a fair reward when working under pressure.
5) I got a fair reward when performing my job well.
2.2.1.7 Empowerment variables
Empowerment is measured by the five following observed variables:
1) Managers assign the work to me and let me do it independently.
2) Managers empower me to decide.
3) Mangers believe in my decision-making ability.
4) Managers encourage me to use the handed decision-making right.
5) Managers believe in my ability to evaluate the working results.
2.2.2 Scales of dependent variables
The dependent variable “loyalty” is measured by the three following observed variables:
1) I am happy to introduce people about my company as a good working place.
2) I am proud to introduce people about the products / services of the company.
3) I will stay with the company for the long term despite offers with more attractive salaries elsewhere.
2.3 Research model
The assumptions of the model are formulated as follows:
H1: High income has positive relationship with employee loyalty.
H2: Good working has positive relationship with employee loyalty.
H3: The target fit has positive relationship with employee loyalty.
H4: Management support has positive relationship with employee loyalty.
H5: Support from colleagues has positive relationship with employee loyalty.
H6: Fair reward has positive relationship with employee loyalty.
H7: Empowerment has positive relationship with employee loyalty.
Based on the qualitative research process the research model for this study is built as follows:
Figure 1 Research model in this study
2.4 Chapter summery
The criteria for evaluating employees’ loyalty include: the willingness to introduce the company as a good working place, the willingness to introduce the company products and services, and the intended long-term commitment to the company.
The research model includes loyalty as the dependent variable and seven independent variables such as high income, good working conditions, target fit, support from managers, and support from colleagues, fair reward, and empowerment.
Target fit Good working
conditions
Management support High income
Employees’ loyalty
Support from colleagues
Fair reward
Empowerment
H1
H2
H3
H4
H5
H6
H7
3 R ESEARCH M ETHODOLOGY
3.1 Research design
Research will be conducted in two phases of qualitative research and quantitative research which are described in the following flowchart:
Figure 2 Research design
3.1.1 Quantitative research
The quantitative research is the phase of collecting and analyzing the data obtained by a questionnaire. The collected data is analyzed using the SPSS software.
Loyalty = B0 + B1* High income + B2 * Good working conditions + B3 * Target fit + B4 * Management support + B5 * Support from colleagues + B6 * Fair reward + B7 * Empowerment
Then the accreditation of T-Test and ANOVA analysis (Analysis Of Variance) is applied to test the difference among demographic of respondents and company’s loyalty.
Data analysis and evaluation
Questionnaire
Research results
Phase 1 Quantitative research
n = 435
Statistic software SPSS 24
3.2 Research procedure
3.2.1 Scale calibration for the questionnaire
All observed variables are measured through five-point Likert scales containing from 1
“strongly disagree to 5 “strongly agree” with the statement.
3.2.2 Quantitative analysis procedure
a) Sample size
In the model shown above, seven hypothesis and 29 observed variables have been identified using the five-point Likert scales. Therefore, under the minimum rule of: 5 x 3 = 15 samples for a measured variable (Bentle & Chou, 1987), the initial calculated sample size is: 29 x 15 = 435.
b) The sampling
By the random sampling method a number of students at the night classes was randomly selected (in-service, 2nd degrees, master’s degree, etc.) in several universities in Hanoi
c) Results and information about samples
The detailed questionnaires are presented in Appendix A.
There are all 600 questionnaires sent directly to the research objects from January to April 2016. During the survey process some objects do not have a job yet and therefore they leave many fields in the questionnaire blank. All this questionnaires were removed prior to data entry. Therefore, the number of final questionnaires that are recorded for the analysis is only 435, which means 73 % of response rate.
3.2.2.1 Collecting and analyzing data
Using of the statistical analysis software SPSS 24, the testing was conducted on the following steps:
1) Preliminary assessment scale and reliability of measured variables with Cronbach’s Alpha and the factor loading with EFA (Exploratory Factor Analysis),
2) Testing of hypotheses of the structural model and the overall model fit, following by the accreditation of T-Test and ANOVA analysis between different groups with the
components of the structural model which had already been tested in order to find significant differences between specific groups.
3.3 Chapter Summary
The study was conducted in two phases of qualitative research and quantitative research.
The qualitative research was conducted in the form of bilateral discussions based on a pre-prepared content and available scales. The discussion will be recorded, summarized and used as a basis for the calibration and supplement of variables.
For the quantitative research data was collected via questionnaires. The collected data was analyzed by the SPSS software. After coding and cleansing the final data evaluation process was conducted as follows: evaluation of the reliability and values of the scales, factor analysis using to test the variance of the variables, testing of hypotheses of the structural model and the overall model fit, and afterwards performing of T-Test and ANOVA analysis (Analysis Of Variance) between different groups.