Factors Affecting Employee's Performance: An Empirical Study in Vietnam

Abstract

In the context of economic growth, the banking system has greatly contributed to a substantial rise in living conditions, connecting savings and investment, and economic growth. Since economic reform in 1986, Vietnam's banking system has increasingly expanded in quality and quantity of banks including state-owned, private-owned, and foreign banks. The aim of this study is to evaluate the main factors affecting employee's performance in the banking system in the case of an emerging economy of Vietnam. Using the pilot study by investigating three experts in a few banks in order to correct the questionnaires, and a mega sample data of 170 observations conducted from bank's staffs, and managers in Hanoi capital of Vietnam, empirical results demonstrate that the independent variables included in the model can explain 67% of the change of the dependent variable of employee's performance, and the rest (31%) can be explained by other reasons. Further, motivation (MO), and working ability (WA) have a positive and insignificant impact on employee's performance, reflecting that motivation, and working ability have insignificantly affected employee's performance. In contrast, four factors, namely, welfare, working environment, cooperation, and education have a positive and significant impact on employee's performance in the case of Hanoi, Vietnam.

1. Introduction

Human resources’ quality is considered one of the most important factors that significantly impact on economic growth of each country worldwide, and growth in the banking system (Pradhan & Jena, 2017; Nguyen, 2020; Nguyen et al., 2020). In the financial institutions, a bank is a financial institution that connects the deposits from savers and demand their financial resources to lenders (Phan et al., 2021), and it helps economic development (Nguyen & Nguyen, 2020). A country with a greater financial development can easily support savings and investment by reducing transactions costs and affordable costs to the lenders (Lwiza & Nwankwo, 2002).

A banking sector functions as the heart of any economy. A bank can borrow from individuals, businesses, financial institutions, and government with their savings and taking loans, therefore responding to interest rate signals. In this argument, the banking sector plays in important role in the economy worldwide. The effectiveness of the banking sector and financial markets can connect between savings and investment by reducing transaction costs. As suggested by Lwiza and Nwankwo (2002) in most nations, the adjustment of the financial sector has been at the heart of broader adjustment programs, in which institutional environment can take place for easing barriers to the development of the market orientation culture. In addition, Ruza et al. (2019) believe that the health of the banking sector is dependent on resilience-stability indicators that indicate different scenarios in relation to the aftermath of the financial situation.

Factors affecting employee’s performance are discussed in numerous empirical studies in the world (Elias & Scarbrough, 2004; Carter & Shelton, 2009; Atatsi et al., 2019; Diamantidis & Chatzoglou, 2019; Do et al., 2020). According to Baharia and Astuti (2019), in a study in Medan City of Indonesia, factors that can influence employee’s performance are motivation, living costs, work environment, and compensation. Carter and Shelton (2009) also confirm that individual’s capacity, working environment, and working motivation can affect employee’s performance. Further, Kim and Lee (2010), in a study of employees’ knowledge acquisition, emphasize that goals and social networks are positively consistent with a higher level of ability of employee’s knowledge acquisition.

Qiaoqiao and Hong (2021) used personnel data of a firm to investigate the incentive impact of employee’s options on performance in China. In order to obtain the causality impact, the method of difference-in-difference was carried out with a data set of employees nominated for option ownership. Collating employees who were granted options with ones who had only been nominated, the authors found that the influence of option ownership on employee’s performance was statistically insignificant and results were robust across the board. Furthermore, an analysis of heterogeneity indicated that the incentive impact existed for employees who were in high job levels, but remained statistically insignificant for workers who were at low job levels; moreover, there was no difference in impact across genders or between education level; besides, whether employees had plans to exercise their options had no effect on the incentive impact.

Similarly, job analysis and employees’ perception of justice were proven to have a statistically significant impact on employee’s performance within an organization by Mohamed et al. (2020). This study explored the relationships between job performance, job analysis and procedural justice of local employees in Jordan Industrial Estates. The data were collected with a survey questionnaire from 690 Jordanian employees who were working in three industrial estates. The data analysis was carried out through Structural Equation Modeling (SEM). The empirical results showed that there existed a significant positive influence between job performance and job analysis, procedural justice and job analysis, and a positive impact between job performance and procedural justice. Moreover, it was found that procedural justice mediated the relation between job performance and job analysis. In addition, it contributed to the current of knowledge and supported the mediating role of procedural justice in proposing decisions within the organization.

Referring to another modern perspective, James and Meredith (2020) introduced boss phubbing or phone snubbing, defined as an employee’s perception that his immediate supervisor was distracted by smartphone while in their presence, and studied the relationship with employee’s performance. In spite of the importance of supervisor-subordinate interactions, and the ubiquitous nature of smartphones, the research was yet to study how smartphones impact important employee’s outcomes. Three scenarios were deployed to undergird the proposed model of relationships among supervisory trust, boss phubbing, job satisfaction and performance: Reciprocated Social Exchange theory, Expectancy Violations theory, and Social Presence theory. A sequential mediation model was also carried out to investigate the relationships between employee’s job performance and boss phubbing. Two samples of the US adults who were working in a range of industries (with sample sizes were respectively 156 and 181) revealed that boss phubbing had a negative association with employee’s job performance through supervisory trust and job satisfaction.

The above-mentioned theoretical and practical research suggested us to study the impact of motivation, working ability, welfare, working environment, cooperation, and education on employee’s performance in the case of Hanoi, Vietnam.

Since 1990, the official law on bank was issued in Vietnam. Vietnam’s banking sector consists of a combination of state- owned, private-owned, and foreign banks, but state-owned banks still dominate in the quantity of assets and equity (Nguyen & Nguyen, 2020). The top banks in Vietnam include four biggest state banks such as Vietcombank, Vietinbank, Agribank, and BIDV (Hanoi Times, 2020). In particular, all banks are supervised under the State bank of Vietnam that looks like the central bank in worldwide terminology. In the period from 2012 to 2015, Vietnam’s banking sector had encountered problems in terms of bad debt. Specifically, State bank of Vietnam (2016) indicated that the bad debt ratio in Vietnam’s banks stood at 4.67 percent of total loans in April 2013, and reached 11.5 percent of total loans in a later few months. Accordingly, the economy of the country had fallen. In this situation, human capital in the banking sector has been considered as the most important factor to maintain the efficiency of the bank. Therefore, the aim of this study is to examine factors influencing employee’s performance in the case of Hanoi capital in Vietnam. The study uses both qualitative and quantitative methods in order to investigate the empirical findings in the emerging economy in the background of changing the financial institutions in general and banking sector in particular.

This study is organized into five sections. Following Section 1 with the introduction above, Section 2 discusses the literature review. Section 3 presents data collection and methodology, and Section 4 goes over results and discussions. Conclusions and recommendations are included in Section 5.

2. Literature Review

Firms always realized that they should develop their internal abilities by increasing employee’s performance in their organizations for enhancing the profit for its company and dividends for shareholders. As suggested by Diamantidis and Chatzoglou (2019), using the structural equation modeling approach to examine the linkage between firm related factors such as training culture, management support, firm climate, and job-related factors including environment, autonomy, communication, and employee-related factors, indicate that job environment and management can positively impact job performance.

Elias and Scarbrough (2004) indicate that human resources discipline in general, and particularly employee’s performance, was identified as a criterion to evaluate employee’s performance to increase salary, bonus, and welfare in enterprises. In addition, working performance is related to employee’s desired activities. As a result, task completion is completely consistent with a satisfactory level of human resources. Sendawula et al. (2018) also indicate a significant positive correlation between employee’s engagement and employee’s performance in Uganda’s healthcare sector.

It is also suggested in Atatsi et al. (2019) in a systematic literature review regarding employee’s performance across different countries, particularly concentrated on Africa with a unique cultural setting in this area. Atatsi et al. (2019) indicate that a positive linkage between behaviors and employee’s performance exists, as well as a diversity across multidisciplinary fields holding cultural and contextual significance. Similarly, Kim and Lee (2010) state that a clear vision in the organization, goals, and social networks are positively associated with great ability of employee’s knowledge acquisition. In other words, centralization has a negative and significant impact on employee’s knowledge acquisition. Further investigation on public or private employees, social network is positively consistent with public employee’s knowledge acquisition while a similar effect between performance-based reward systems and private employee’s knowledge acquisition is also found.

In the context of fast economic growth, and human resource’s threat in the digital economy era, there have been many theoretical and empirical studies on administrative efficiency. According to Carter and Shelton (2009), employee’s performance depends on three main factors including individual’s capacity, working environment, and working motivation. In addition, Carter and Shelton (2009) reaffirmed that the motivation of employee was of decisive importance in working performance that can affect firm performance. In the case of less motivation, employee with good working ability might not be able to achieve their goals.

Baharia and Astuti (2019) agree in a study in Medan City of Indonesia in the context of global integration and opening the borders among economies through FTAs (free trade agreements). This process also brings both strengths and weaknesses to the employee in Indonesia. Using a questionnaire and employing advanced econometrics, factors influencing employee’s performance are motivation, living costs, work environment, and compensation.

In order to find out factors affecting employee’s performance in the banking industry in the case of an emerging economy of Vietnam, we propose the following research model (Figure 1).

Figure 1: Proposed Research Model

3. Data and Methodology

3.1. Data Collection

Vietnamese banking system includes a combination of state-owned, private-owned, and foreign banks. The top banks in Vietnam are almost all state-owned banks including Vietcombank, BIDV, Vietinbank or Aribank. In recent years, both private-owned, and foreign banks are increasingly developing in terms of assets and operational areas. In this study, we use both qualitative and quantitative methods. Through the qualitative research, we review previous studies and discuss the gaps, we also design the questionnaire in the case of Vietnam in order to generate descriptive statistics for analysis. Before conducting a vast questionnaire, we perform the pilot study with three experts (bank managers) in the banking industry.

After pilot study, we interview twelve employees working in the financial institution using convenience sampling method, that is a type of nonprobability sampling where people are sampled simply. This method makes it easy to collect data as each observation in the population has nonzero chance of being chosen. Accordingly, we revised the preliminary questionnaire’s validity and adjust the scales to be suitable. In this study, quantitative research is performed by using SPSS software, and the 5-point Likert scale to measure the values of observed variables.

In order to produce the sample size, according to Slovin (1984) and Tabachnick and Fidell (1991), the minimum sample size should be formulated as follows:

n ≥ 8m + 50

In which,

n is the minimum sample size,

m is the number of independent variables,

In this research, we have six independent variables, and a dependent variable, therefore the minimum sample size is 8 × 6 + 50 = 98 observations.

In another study by Hair et al. (1998), the optimal sample size needs a minimum of five times of number of questionnaires, as follows:

n ≥ 5m

In which,

n is the minimum sample size,

m is the number of questionnaires,

In this study, there are six scales with 30 observed variables, so the minimum sample size is 32 × 5 = 160 observations. Thus, we choose a sample size of 170 observations. The data in this study is also collected in the banking industry in a specific area in Hanoi. As a result, with a nominal GDP of $42 billion, it is equivalent to 15% GDP of Vietnam; Hanoi is the second most productive economic area in Vietnam after Ho Chi Minh City with approximately 22% GDP of the country. Therefore, the data collection in Hanoi will be typically denoted for the case of Vietnam in the banking industry regarding employee’s performance.

3.2. Research Model

Numerous empirical studies regarding employee’s performance have been analyzed by Diamantidis and Chatzoglou (2019), Elias and Scarbrough (2004), Atatsi et al. (2019), Kim and Lee (2010), Baharia and Astuti (2019). In this study, we revise the model for the context of Vietnam, the estimation can be written in the following equation:

WP = β₀ + β₁MO + β₂WA + β₃WF + β₄WE + β₅CO + β₆EDU + u_i

In which,

MO, WA, WF, WE, CO, EDU, are independent variables including motivation, working ability, welfare, working environment, cooperation, and education.

WP is independent variable, indicating for working performance of banking industry.

u_it is the error term.

4. Results and Discussion

4.1. Descriptive Statistics

The data comes from approximately 170 question naires; after cleaning the errors, missing, and the wrong information, 162 questionnaires were valid for further analysis. The descriptive statistics of the data are shown in Table 1.

Table 1: Descriptive Statistics

4.2. Scale Reliability

Scale reliability is the degree to which the measure of a model is consistent. According to results of Cronbach’s Alpha, all coefficients of Cronbach’s Alpha > 0.6, indicating that the scale is suitable for exploratory factor analysis (EFA) in the next analysis (Table 2).

Table 2: Scale Reliability

4.3. Exploratory Factor Analysis (EFA)

We have six independent variables with 32 observed variables, the EFA analysis can be shown in Table 3.

Table 3: EFA Analysis

Table 3 shows the EFA analysis. For independent variables, KMO value is 0.812, which was between 0.5 and 1, therefore, the analysis is acceptable. In addition, cumulative variance of six extracted factors was 69.223%, and larger than 50%. All six factors satisfied the condition with the eigenvalue coefficient of 1.812 and greater than 1. For dependent variable, EFA analysis for one factor analysis indicates that KMO value is 0.789, which was between 0.5 and 1, satisfied the appropriateness of factor analysis. Additionally, the cumulative variance was extracted of 78.224% and greater than 50%, factors are eligible with the eigenvalue coefficient of 2.311, and larger than 1. Thus, the result is acceptable.

4.4. Hypothesis Testing and Discussion

The regression of the study is shown in Table 4.

Table 4: Results of Multiple Linear Regression Analysis

Multiple linear regression analysis is performed using SPSS software 22. Table 4 shows that the value of adjusted R² is equal to 67%. It means that the independent variables included in the model can explain 67% the change of the dependent variable of employee’s performance, the rest (31%) is due to other variables and random error that are not found in this study. In addition, Table 4 also depicts that motivation (MO) and working ability (WA) have insignificant impact on employee’s performance, indicating that motivation, and working ability have not affected employee’s performance in the case of Vietnam.

In this study, we find that four factors have positive and significant impact on employee’s performance, including working environment (WE), welfare (WF), education (EDU), and cooperation (CO). Further, factors that have the strongest impact are, respectively, CO, EDU, WF, and WE. Table 4 also indicates that VIF is less than 10, it meant that the multi-collinearity may not be present in this study. The regression would be written as follows:

In which,

Unstandardized coefficients

WP = 0.123 + 0.112MO + 0.132WA + 0.167WF + 0.162WE + 0.356CO + 0.256EDU + u_i

Standardized coefficients

WP = 0.131MO + 0.136WA + 0.185WF + 0.169WE + 0.376CO + 0.278EDU + u_i

In which,

MO, WA, WF, WE, CO, EDU are, respectively, motivation, working ability, welfare, working environment, cooperation, and education.

WP is denoted for working performance of banking industry.

Table 4 indicates that welfare has a positive and significant impact on employee’s performance in the case of Hanoi, Vietnam. It meant that a great benefit for employee such as wage, insurance premium, union and training costs can boost employee’s performance. In fact, a firm with a higher welfare can bring more energy to employee to work efficiently. This finding is consistent with Elias and Scarbrough (2004), employee’s performance is dependent on the remarkable changes in salary, bonus, welfare in enterprises. Therefore, task completion is consistent with a satisfactory level of human resources.

Working environment includes social features and physical conditions that can appear surroundings around employee. It can be known by workplace relationships, collaboration, employee’s health, and other activities. In this study, it is evident that the working environment is becoming an important role of increasing employee’s performance. More specifically, a 1 unit increase in working environment can positively enhance 0.169 units of employee’s performance. This is in line with previous studies by Diamantidis and Chatzoglou (2019) who confirm that the job environment has a positive and significant impact on job performance, and therefore enhances employee’s performance.

In each institution, cooperation has been a great contribution to the development of the organization. An organization with higher cooperation is where an employee can easily participate in number of activities in the organization. Table 4 indicates that, in the case of Vietnam, cooperation can positively promote employee’s performance. Specifically, a 1 unit increase in cooperation can positively promote 0.376 units of employee’s performance. This is in line with previous studies by Diamantidis and Chatzoglou (2019). In addition, Elias and Scarbrough (2004) indicate that human resources disciplines can boost employee’s performance. Kim and Lee (2010) also indicate that social networks are positively consistent with great ability of employee’s knowledge acquisition.

Regarding training and education, Table 4 shows that a 1 unit increase in ability of training and education can positively generate 0.278 units of employee’s performance. In fact, education increases human capital in the labor force, which is willing to enhance labor productivity in the organization. Therefore, training and education in the organization can help develop an employee’s personality and it has led to remarkable increasing in human life and social development (Aslam et al., 2021).

4.5. ANOVA Test

To differentiate the employee’s working performance, Table 5 reveals that there is no difference in the personal characteristics as age, marital status and education level. However, there is a difference in gender, that is, there is a higher difference for male than for female.

Table 5: ANOVA Analysis

5. Conclusion and Recommendations

The aim of this study identifies factors affecting employee’s performance in the banking industry in the case of an emerging economy of Vietnam. The Vietnamese banking system includes a combination of state-owned, private-owned, and foreign banks. It uses a pilot study with three experts in the banking industry in order to correct the questionnaires, and a sample data of 170 observations from bank’s staffs, and managers in Hanoi capital of Vietnam. Results demonstrate that the independent variables included in the model can explain 67% the change of the dependent variable of employee’s performance, and the rest (31%) can be explained by other reasons. Further, motivation (MO), and working ability (WA) have a positive and insignificant impact on employee’s performance, reflecting that motivation, and working ability have not promoted employee’s performance. By contrast, welfare, working environment, cooperation, and education have a positive and significant impact on employee’s performance in the case of Hanoi, Vietnam.

This study makes some recommendations regarding employee’s performance in an emerging economy in Asia. First, the country should enhance the welfare of employees in the banking sector. In this context, welfare includes wage, bonus, and other welfare in health and social benefits that have become the most important factor for solving living conditions of employees and their families. Further, an employee with satisfied welfare will encourage human resource development, and therefore improving employee’s productivity and working efficiency. It is important to note that managers need to do well in implementing the policies of health insurance, social insurance, unemployment insurance, and holidays to their staffs. In addition, welfare should be linked to achieving clear goals based on the employee’s ideas and initiatives. Secondly, the country should increase the working environment. More specifically, the working environment is a fairly important factor in connecting the members of the organization in general and therefore, it is evident that members can easily share their ideas through the organization. Accordingly, this method will be the effective bridge to help employees becoming closer and friendlier. In the context of fierce competition in the banking system, it is necessary to provide a full range of equipment to serve the work of employee’s efficiently. The banking system should create a friendly and comfortable working environment for employees to share work experience by coordinating teamwork.

In the context of economic growth, and the important role of the banking sector in the economy, each bank should manage the organization with a great cooperation and spirit of leadership. It is difficult for the organization to operate effectively when leaders who want to increase working efficiency do not have a good vision for the future. In the working process, being aware of how to use leadership styles in a flexible way to solve problems at work is a key success. There should be reward and punishment policies in agreement. Finally, the organization should contact a study organization based on development of knowledge, good professional qualifications and, good spirit for each individual. In addition to updating their own knowledge and professional expertise regularly, staff in the banking sector should enhance their foreign language skills, communication skills with superiors, colleagues and especially customers to improve the interpersonal connection (Hoang & Nguyen, 2020).

*Acknowledgments:

The authors thank the Editor and two anonymous reviewers for their constructive comments in this paper.