INTRODUCTION
Logistics industry overview
Logistics plays a crucial role in supply chain management, encompassing transportation, warehousing, forwarding, and value-added services It involves planning and managing the flow and storage of goods, services, or information from origin to consumption to meet customer needs In today's global trade landscape, effective logistics is essential for controlling resource and supply movement, ensuring that items are available at the right place and time Lower logistics costs combined with high-quality services can significantly boost global trade According to the World Bank (2004), logistics activities typically include several key elements.
- Infrastructure: ports, terminals, railway, roads;
- Operations: warehousing, storage, local distribution, trucking, cabotage;
- Services: freight forwarders and customs brokers
Source: Decree No 140/2007/ND/CP issued by September 5, 2007
Logistics encompasses various types, including forwarding, transportation, warehousing, and other value-added services, with transportation being the most prevalent, accounting for 40% to 60% of logistics costs Additionally, transportation allows for the effective combination of different transport modes The five common modes of transportation are essential for optimizing logistics operations.
Airways / airplanes Airplanes are the fastest mode but very expensive
Availability of appropriate airport facilities
Roadways / trucks Trucks are relatively quick and a very flexible mode
Subject to the fluctuation of fuel cost and road conditions
Railway / rail Rail is a cost efficient mode but can be slow
Shipping / vessels Ship is very cost efficient but the slowest mode of transport
Availability of port and canals
Pipelines Pipelines can be very efficient Restricted to liquid commodities and gases
Logistics has evolved significantly over time, transitioning from first-party logistics (1PL) to more sophisticated models like third-party logistics (3PL) and fourth-party logistics (4PL) In countries like Vietnam, advancements in technology, infrastructure, and human resources have made 3PL services increasingly relevant and efficient The growth of 3PL in Vietnam is notable, with a dramatic rise in both revenue and the number of active firms; the Vietnam Logistics Association reported an increase in 3PL members from just 4 in the mid-1990s to 275 by 2014.
Table 2: Historical development of growth stage of logistics
Logistics were limited to distribution Problems relating to transaction with finished products and related physical distribution were dominant The problem of inventories was not important
Corporate logistics were gradually extended to supplying (purchases, procurement) and to production management
Companies are establishing comprehensive logistics chains that connect customers and suppliers This integration of corporate activities is leading to the development of efficient supply, production, and distribution systems.
Integrated logistics system is a very complex, system-related problem One of the requirements is the establishment of strategic alliances between companies, their customers, products suppliers and logistics providers
Logistics is becoming a key driver of national economic development in Vietnam, with logistics costs accounting for approximately 25% of GDP, significantly higher than that of neighboring countries However, the logistics sector faces challenges, including inconsistent government regulations, corruption, and a lack of cohesive planning in transportation infrastructure that fails to align with supply and demand Additionally, the trucking industry is fragmented, and there are imbalances in infrastructure provision Despite these issues, Vietnam has shown consistent annual improvements in economic growth According to the World Bank's 2014 report, Vietnam ranked 48th out of 166 countries and 5th in the ASEAN region with a Logistics Performance Index (LPI) score of 3.15, trailing behind Singapore, Malaysia, and Thailand.
Figure 2: Percentage changes of LPI score from 2007 – 2014
The establishment of free trade agreements like the Trans-Pacific Partnership (TPP) and the Vietnam-European Union (EU) Free Trade Agreement (FTA) at the end of 2015 is set to significantly enhance Vietnam's economy and international trade Notably, the logistics sector is expected to experience substantial growth as a result of these agreements.
Company background
International Logistics Joint Stock Company, known as Interlog, is a small and medium-sized enterprise (SME) in Vietnam's logistics sector, established in August 2005 in Ho Chi Minh City Recognizing the vital role of logistics in economic development, Interlog has expanded its presence with branch offices in both southern and northern Vietnam, as well as partnerships in Hai Phong and Da Nang The company has built a strong workforce of 30 to 100 full-time employees, with plans for future growth Interlog is committed to enhancing its employees' professional qualifications to meet the demands of a competitive logistics market.
Interlog is committed to creating an effective supply chain that benefits customers, the company, and the community With a vision to become the leading supply chain innovator in Vietnam and the Indochina region over the next five years, Interlog emphasizes the importance of corporate culture Teamwork is a key criterion, fostering collaboration towards common goals and shared responsibilities while ensuring precise and timely communication for efficient problem-solving Additionally, Interlog values knowledge, combining individual backgrounds with rigorous training to promote a culture of continuous learning and adaptability The leadership team recognizes that training is crucial for enhancing service quality, and they prioritize recruiting passionate employees to drive the company’s mission forward.
In the logistics industry, fostering win-win cooperation and equitable benefit sharing is crucial Interlog prioritizes creating value for both customers and partners, ensuring that all stakeholders, including employees, are recognized and rewarded based on their performance This approach not only enhances collaboration but also drives mutual success across the organization.
Over 10 years, Interlog has developed with achievements through significant milestones, include:
- 2005: Established Intelog Head office in Hochiminh City Achieved ISO 9001:2000
- 2006: Achieved Vietnam Excellent Brand Certificate, which was organized by Ministry of Trade and Vietnam Economic Times
- 2007: Became the agent of PCI (Pacific Concord INTL in Taiwan) who is one of the leading of NVOCC in Asia
- 2008: To be approved as an Official Licensed Customs Broker by Vietnam Customs General Agency
- 2011: Became the partner of AGS (AGS World Transport) in Vietnam AGS is one of the leading of NVOCC in Asia
- 2014: Established Nhon Trach Depot in Dong Nai province
Company structure
Interlog has structured its logistics business into distinct departments to efficiently manage every aspect of customer shipments The organization consists of a Sales Division, which includes segments for Export, Import, and Domestic shipments, and a Production Division that handles paperwork, customs, trucking, and warehousing A survey by the Vietnam National Productivity Institute indicates that Interlog's organizational structure is somewhat cumbersome, featuring numerous departments and multiple intermediate management levels.
Source: Organizational structure from Human Resources Department in 2015
Board of Director Board of Supervisor
Interlog, a leading logistics service provider, began its journey in basic forwarding services, including sea and air freight forwarding, customs clearance, warehouse management, and Non-Vessel Operating Common Carrier (N.V.O.C.C) solutions Since 2008, the company has evolved to offer comprehensive total logistics services and has been actively engaged in various ongoing projects.
Interlog is committed to becoming a leading logistics services provider in Vietnam by establishing a comprehensive global network of agents With a decade of experience, the company has developed diverse solutions tailored to its core customers, including factories and FDI companies with significant import and export needs Interlog enhances customer value through innovative projects that optimize production processes and streamline supply chains Key initiatives include the launch of barge transportation in 2012, the establishment of the Hanoi Hub as a logistics center in Northern Vietnam and the Dong Nai Hub in 2013, the introduction of the Nhon Trach Depot in 2014, and the implementation of the Nhon Trach – Cai Mep trucking solution in 2015.
PROBLEM IDENTIFICATION
The problem symptom
Small and medium-sized enterprises (SMEs) in the logistics sector face significant challenges in human resources, particularly in recruiting suitable management personnel, which hinders their growth Interlog, a Vietnamese logistics SME, has experienced notable development over its 10 years of operation, expanding its workforce from 30 to nearly 100 employees and evolving from a basic service provider to a comprehensive logistics solutions provider Despite steady revenue and profit growth, Interlog has struggled with high employee turnover, reporting a turnover rate of 26.88% in 2014, significantly above the 10% average reported by Tower Watson Company This issue is particularly pronounced in the Sales Division, where turnover exceeded 50%, highlighting the ongoing personnel challenges that threaten the stability and growth of the company.
Table 3 The turnover rate of each department
Number of employee The ratio (%)
Source: Data sourced from Annual human resource report of year 2013 & 2014
The Employee Satisfaction Survey (ESS) conducted by the Vietnam National Productivity Institute (VNPI) in May 2015 revealed that certain factors affecting employee satisfaction received notably low positive responses The survey, which included 79 participants from both management and staff, identified key areas of concern such as wages, workload, evaluation and promotion processes, interdepartmental relations, working hours, physical work environment, supervision, customer relations, motivation, job enrichment, job assignments, career development, understanding of the corporation, and relationships with colleagues Specifically, the lowest-rated factors were interdepartmental relations, evaluation and promotion, workload, and wages, as illustrated in Figure 4 Further analysis in Figures 5 to 7 provided insights into the details of these low-scoring dimensions, highlighting the need for improvements in these critical areas to enhance overall employee satisfaction.
Figure 4 Ranking of Positive responses to each dimension
Source: Report on Management Consultancy of Vietnam National Productivity Institute in 2015
Ranking of Positive responses to each dimensions
Figure 5 [Relation with other Department] dimension
Source: Report on Management Consultancy of Vietnam National Productivity Institute in 2015
Source: Report on Management Consultancy of Vietnam National Productivity Institute in 2015
The necessary information is shared well with the relevant departments
In the workplace, support for the relevant departments is provided enormously
The coordination of work between departments is smooth and appropriate
[Relation with other Department] dimension
Agree Slightly agree Neither agree nor disagree Slightly Disagree Disagree
I am satisfied with the mechanism of determination of my salaries and bonuses
My salary is appropriate level in the aspect of the job description
My salary is equal or more compared to the other companies of the same industry
Agree Slightly agree Neither agree nor disagree Slightly Disagree Disagree
Source: Report on Management Consultancy of Vietnam National Productivity Institute in 2015
Data from the Human Resources Department and the Vietnam National Productivity Institute reveal that Interlog has low employee job satisfaction, impacting retention over the years According to Anis, Rehman, Khan, and Humayoun (2011), job satisfaction reflects an employee's emotional state concerning their job, determined by the gap between actual and desired outcomes Additionally, job satisfaction is influenced by individual attitudes toward work, leading to varying satisfaction scores based on positive or negative perceptions (Buitendach & Rothmann, 2009) Furthermore, employee turnover is defined as the movement of personnel across the labor market, including transitions between firms and positions (Ongori, 2007).
I am satisfied with the mechanism of personnel evaluation
I am satisfied with the mechanism of promotion and pay hike
The staffing of our company is in accordance with the competencies and aptitude of the employees properly
By obtaining the qualification or enhancing the high level of knowledge and skills, opportunity for the highly specialized positions are available in my…
Agree Slightly agree Neither agree nor disagree Slightly Disagree Disagree
Turnover is defined as the process of replacing employees who leave an organization, as noted by Jang and Erdem (2006) Price (2001) explains that the turnover rate is calculated by dividing the number of employees who exit during a specific timeframe by the average number of employees in that period, then multiplying by one hundred Recent data from Interlog Company indicates a high turnover rate over the past two years, which poses a risk to the company’s image and growth The three lowest dimensions of employee satisfaction have been identified as critical issues that require immediate attention.
The findings presented in the table serve as a valuable resource for the writer to identify tentative issues and pinpoint the central problem at Interlog Company These results highlight the significant influence of antecedents on both turnover intention and job performance.
Table 4: List of literature reviews
No Author Antecedents Outcomes Research findings
This research highlights that personal characteristics, job satisfaction, and both distributive and procedural justice play a significant role in influencing organizational commitment Additionally, it investigates how organizational commitment affects job performance and turnover intentions.
- Distributive justice: employees' perceptions about the fairness of managerial decisions relative to the distribution of outcomes such as pay, promotions…
- Procedural justice: decision-making process
There was a significant positive correlation between Perceived Organizational justice and Job satisfaction whereas significant negative correlation was found between Perceived
Organizational justice and Turnover Intention; Job satisfaction and Turnover Intention
This study examined the effects of three human resource management (HRM) practices—compensation, performance evaluation, and promotion—on employee performance in public and private sector organizations in Pakistan The findings revealed that compensation and performance evaluation practices had a significant positive correlation with employee performance in both sectors Conversely, promotion practices were found to have an insignificant relationship with employee performance across public and private organizations.
This study investigates how the organizational environment, employee job satisfaction, and career growth opportunities influence employees' intentions to leave their jobs By examining these factors, the research aims to provide insights into the reasons behind turnover intentions within organizations.
Turnover Intentions in Public Sector of
Research in Business results of this study indicate significant negative correlations among three independent variables and turnover intentions
Source: Literature reviews of own collection
Human resources are a vital component for companies, serving as an "invisible asset" that contributes to long-term success (Itami & Roehl, 1987) This asset is integrated into the operational framework, enhancing the organization’s core competencies (Prahalas and Hamel, 1990) In the logistics service industry, where Interlog operates, the emphasis on a people-oriented approach means that human asset strategies significantly influence cost, quality, responsiveness, and customer satisfaction (Yew Wong & Karia, 2009).
In logistics, timely delivery of the right products and services is crucial for customer satisfaction and effective supply chain management Logistics companies face the challenge of providing optimal solutions while managing high costs, particularly in Vietnam, where competitive pricing is essential According to Chyn & Kalianna (2011), key issues such as collaboration, communication, and high employee turnover significantly impact both employee satisfaction and overall business performance Samad (2006) identifies various factors influencing an employee's decision to leave, including attitudinal, behavioral, and organizational elements, emphasizing that job satisfaction directly correlates with the likelihood of turnover.
Job satisfaction is defined as an employee's attitudinal response towards their organization (2008) Research by Brown and Leigh (1996) indicates that organizational climate positively influences employee satisfaction, customer satisfaction, financial performance, and staff turnover Key organizational factors include job stressors, culture, management relationships, and support systems Managers can enhance employee performance by fostering an effective work environment, promoting a philosophy that aligns employees with organizational goals, and clarifying strategic objectives (Avery, 2004) Conversely, Huselid (1995) highlights that high turnover rates can lead to detrimental outcomes for organizations, including decreased productivity, increased hiring and training costs (Rousseau, 1984), and weakened future performance (Baron, Hannan, and Burton, 2001).
Job satisfaction significantly influences turnover intention, as evidenced by secondary data from Interlog Company and the Vietnam National Productivity Institute This study employs a qualitative approach, utilizing in-depth interviews with five managers and experienced staff members at Interlog Company The findings reveal several potential issues contributing to the high turnover rate experienced by Interlog since 2013.
The inefficiency of internal coordination at Interlog Company
Interlog Company is currently facing a significant issue with internal coordination, which has resulted in ineffective communication and strained relationships between departments This lack of information sharing and limited empowerment in the workflow hinders overall operational efficiency According to Osifo (2012), effective coordination involves organizing individuals to work together towards organizational goals, making it a crucial managerial function that aligns various activities and employees Without proper internal coordination, the stability and flexibility of the organization are jeopardized, ultimately impacting its efficiency.
Poor coordination within organizations can lead to employee turnover, negatively impacting business performance and productivity The evolution of service practices has shifted the responsibility of selling and delivering customer solutions from individuals to coordinated team efforts (Cespedes, Doyle, & Freeman, 1989) Team effectiveness hinges on key components of organizational processes, including boundary management and intra-group communication (Gladstein, 1984) Employees serve as both the production force and brand ambassadors, directly influencing organizational performance and external stakeholder perceptions Fostering positive employee-organization relationships enhances productivity and cultivates a cost-efficient workforce that safeguards intangible assets like reputation (Berger, 2008) Additionally, workplace social network behaviors can significantly affect employees' decisions to stay or leave (Moynihan & Pandey, 2008), with positive perceptions leading to lower turnover intentions (Martin, Jones & Callan, 2005) Conversely, a lack of recognition in areas such as supervisory support, participative decision-making, and work autonomy can increase turnover intentions (Pare & Tremblay, 2000).
Mr Nguyen Duy Minh, CEO of Interlog, identifies conflict among functional department employees as a key issue affecting organizational efficiency He highlights that poor inter-departmental communication and a lack of understanding of shared goals lead to ineffective coordination, with departments often prioritizing their own objectives over the company's overall vision Monthly meetings intended to address these issues often devolve into arguments, particularly between the Sales and Customs Departments, further exacerbating tensions Past employee departures, such as those of Mrs Vu Thi Phuong Thao and Mrs Dao Thi Hoang Anh, underscore the detrimental impact of unresolved conflicts The low satisfaction rate of only 24.1% regarding inter-departmental coordination, as indicated by VNPI's ESS results, reflects the need for improved internal communication Research shows that effective interpersonal interactions significantly influence job satisfaction and commitment, suggesting that enhancing communication can foster better relationships and ultimately improve organizational performance.
Furthermore, according to Ms Nguyen Thi Hoang Linh who is Sales Executive of
The Interconsol Department faces significant challenges due to gaps and overlaps in inter-departmental procedures, particularly in the shipment handling process Employees express frustration over their limited decision-making power, which resides largely with the management board, leading to inefficiencies and reduced productivity The current process requires approval from multiple departments—Sales, Production, and Accounting—resulting in duplicated efforts and delays that negatively impact customer payments Empowering employees in the decision-making process is essential for enhancing efficiency and fostering better collaboration, as supported by human resource management theory (Ford & Fottler, 1995; Pardo del Val & Lloyd, 2003).
Mr Ho Phuoc Loc, Customs Manager, and Ms Vo Van Cat Duyen, Sales Executive, emphasize the existing knowledge gap between production and other departments.
The ongoing tension between the Sales Division and the Customs Department highlights a significant knowledge gap within the company Mr Phuoc Loc expressed his disappointment in the sales staff's lack of initiative to learn about import and export processes, emphasizing that their reliance on repeated inquiries hinders efficiency and productivity Conversely, Ms Cat Duyen argued that the Customs Department should provide the necessary expertise to support sales efforts, rather than complicating matters This disconnect stems from insufficient knowledge sharing and interaction between the two departments, as noted by Mr Nguyen Duy Minh, who indicated that the Board of Directors has acknowledged these issues in their meetings Addressing these limitations is crucial for fostering collaboration and enhancing overall performance.
The department's monopoly mindset in managing shipments has led to significant disappointment among employees This approach allows them to unilaterally decide whether to accept shipments from the Sales Department, resulting in confusion for Sales and leaving customers without crucial information.
Ms Dang Nguyen Thao Linh, a Human Resource executive, highlighted the challenges faced by Interlog Company in training its sales staff, most of whom are recent university graduates with little knowledge of the logistics industry The current training system is outdated and lacks a structured approach, relying heavily on existing employees to train newcomers, resulting in a significant knowledge gap The training process begins with general company information and is followed by department-specific training led by managers or supervisors The Managing Director provides fundamental logistics training twice a year, but this is often inconsistent and dependent on their schedule As a result, the training lacks timeliness and coherence, particularly in light of recent personnel changes.
Effective knowledge transfer is essential for firms to gain a competitive advantage and improve performance, as highlighted by Menon and Varadarajan (1992) and Kogut and Zander (1996) Interlog Company currently lacks a structured approach to information and knowledge sharing, which negatively impacts productivity and service quality Okhuysen and Eisenhardt (2002) emphasize that knowledge sharing occurs when individuals communicate their unique insights, and Strasser, Taylor, and Hanna (1989) found that the integration of individual knowledge among decision-makers positively influences group performance.
In summary, the internal coordination at Interlog is identified as the primary issue affecting employee satisfaction, stemming from low efficiency in working relationships, knowledge sharing, and empowerment during the work process This conclusion is supported by detailed reviews from personnel and the poor outcomes of the Employee Satisfaction Survey (ESS) Additionally, relevant theories indicate that these factors have a direct or indirect impact on Interlog's internal coordination.
The low satisfaction of salary and wages at Interlog Company
Interlog faces significant challenges in employee retention, particularly within its Sales Division and Documentation Department, as many employees leave for higher-paying positions in other logistics companies Despite gaining experience over one to two years, turnover remains high, with approximately 50% of sales staff leaving, as indicated by ESS results from VNPI The survey revealed that only 15.4% of employees felt their salaries were competitive within the industry, highlighting dissatisfaction with the compensation structure Additionally, Interlog's reward system lacks flexibility and variety, offering only annual rewards, which may not meet the diverse needs of employees seeking both tangible and intangible benefits.
Employees often seek a balance between salary and passion in their work Research indicates that an organization's reward structure significantly influences employee satisfaction Timely and sincere recognition of employee contributions enhances their satisfaction and engagement Furthermore, employees in stable jobs view wage increases differently than those with temporary career goals; for the latter, wage hikes serve primarily as short-term incentives amidst unstable employment conditions.
Despite employee satisfaction surveys indicating concerns about wages, the Board of Directors at Interlog Company has determined that salary increases are not the primary focus for improvement According to data from the Finance Division, the annual labor cost per employee, which includes salaries and benefits, rose from 99,167,613 VND in 2012 to 115,387,261 VND in 2015.
In 2014, Interlog Company reported an average salary of 118,502,135 Vietnam dong, reflecting a 16% increase from 2013, which aligns with the inflation rates of 4.09% in 2013 and 6.59% in 2014 This demonstrates the company's commitment to continually upgrading salaries and managing labor costs to maintain competitive compensation for its employees According to data from the Human Resource Department, the average salary at Interlog is reasonable and balanced within the logistics industry, with non-experienced employees earning between 4 to 5 million Vietnam dong, while experienced employees and mid-level managers earn an average of 7 million Vietnam dong.
17 million Vietnam dong in turns
Table 5: Vietnam Logistics Average Salary
EMPLOYEE POSITIONS AVERAGE SALARY PER MONTH
Non-experienced employees From 4 to 6 Million VND
Experienced employees From 7 to 10 Million VND
Mid-level manager From 15 to17 Million VND
Source: Data gathered from DHB International JSC Vietnam in year 2014
Low salary satisfaction at Interlog Company has emerged as a significant issue, ranking as the second most pressing concern according to the ESS results, which indicate it is the lowest scoring factor affecting job satisfaction The company's leadership has acknowledged this problem by comparing internal salary data to industry averages, concluding that the differences are not substantial enough to adversely impact employee satisfaction Consequently, addressing salary concerns is not viewed as an immediate priority for the company.
The limited evaluation and promotion system at Interlog Company
This situation of leaving employment is the general rule of the current competitive market
The survey results from VNPI reveal that the "Evaluation and Promotion" dimension ranks among the lowest in employee satisfaction, indicating a significant dissatisfaction regarding salary and wages at Interlog Company This reflects an inadequate environment for growth, limited opportunities, and a need for ongoing policy improvements.
More details, the employee satisfaction survey results from VNPI showed that
The "evaluation and promotion" dimension received a low satisfaction rate of only 31.6% among employees regarding the personnel evaluation mechanism Ms Nguyen Thi Van, Director of VNPI, noted that the Key Performance Index (KPI) at Interlog has not been effectively implemented across the company Additionally, the current KPI evaluation system is cumbersome and lacks alignment with the overall company objectives Furthermore, Interlog does not provide clear career paths for employees, such as managerial or specialized roles, which hinders their ability to recognize growth opportunities within the organization.
Employee evaluation significantly influences employee motivation, often serving as a more powerful incentive than salary alone Recognizing employees' efforts and commitment through promotions and appropriate evaluations can enhance their motivation and job satisfaction According to Bilal (2011), achieving higher promotions is a common aspiration among employees across various organizations Furthermore, many employees tend to compare their salaries with those of their peers in similar roles, as noted by Noe.
Many organizations today understand that motivating employees necessitates mutual respect between management and staff This respect is demonstrated by involving employees in decision-making, actively listening to their input, and implementing their suggestions when feasible Consequently, employees view fair evaluations and promotions as valuable opportunities that enhance both their tangible and intangible benefits As a result, they are more likely to showcase their skills and boost their commitment to the organization.
In the third quarter of 2015, Interlog Company's Board of Directors implemented a new salary structure featuring distinct functional branches: management and expert functions This change aims to provide clarity in employee development and assist managers in effectively guiding their teams The Board anticipates that this revised salary scale will enhance the promotion system within the company, ultimately boosting employee motivation and fostering professional growth.
Table 6: Salary scale according functional position
Management Function Salary Scale (VND) Expert Function
Trainee Statutory minimum wage Trainee
Source: Data sourced from Human Resource Department at Quarter 3 of Year 2015
In summary, the third issue identified at Interlog Company pertains to its inadequate evaluation and promotion system, which lacks clear connections to specific KPIs Employees are also uncertain about their potential career advancement opportunities To address this, the Board of Directors has implemented a structured salary scale system that differentiates between management and expert roles, aiming to motivate employees and clarify their career paths.
Causes and effect diagram
Interlog Company faces three primary issues—internal coordination, salary, and evaluation systems—that significantly affect employee satisfaction and contribute to a high turnover rate over the years Internal coordination challenges hinder effective communication, knowledge sharing, and empowerment, which are crucial for enhancing both employee satisfaction and overall business performance, as highlighted by Chyn & Kalianna (2011) While salary and evaluation system problems are not immediate priorities, the company has identified short-term solutions to address them.
In conclusion, the primary issue identified is the central problem that requires thorough analysis and prompt resolution Ineffective internal coordination can obscure disunity within the organization, potentially leading to significant repercussions for the company.
Figure 8 Fishbone diagram of the inefficiency of internal coordination in Interlog
High Turnover Rate Motivation and Evaluation
The real core problem
Based on secondary data from Interlog Company and insights gathered from in-depth interviews, the writer identifies three key issues: ineffective internal coordination, low wage satisfaction, and a restricted evaluation and promotion system.
Contrary to result of employee satisfaction about wages, the Board of Director of
Interlog Company emphasizes that salary increases are not the primary focus for achieving top rankings Instead, they implement annual salary increases at a reasonable rate that aligns with the overall growth of the company.
The basic salary in Vietnam is steadily increasing, ranging from 500,000 to 1,000,000 Vietnam Dong for various job positions Additionally, the unit price for specific jobs is being continuously adjusted alongside these salary increases Company leadership is actively comparing internal salary data with industry averages, ensuring that any discrepancies are minimal enough to maintain employee satisfaction.
The limited evaluation and promotion system at Interlog significantly impacts employee motivation, as opportunities for advancement can often outweigh financial incentives Currently, the evaluation process lacks clarity and direct connections to specific KPIs, leaving employees uncertain about their career progression To address this issue, the Board of Directors has implemented a structured salary scale system for both management and expert roles, providing employees with clear paths for development as either a skilled manager or an experienced expert This initiative aims to enhance motivation and resolve existing challenges in the long term.
The core issue facing Interlog Company revolves around business performance, a significant challenge for logistics service providers (Chyn & Kalianna, 2011) This problem is influenced by factors that affect employee satisfaction and turnover rates, including poor communication, strained working relationships, inadequate knowledge sharing, and a lack of empowerment in the workplace Effective communication strategies are essential for fostering positive employee engagement and enhancing overall organizational performance (Bakker, Albrecht, & Leiter, 2011; Bindl & Parker, 2010; Saks).
Poor communication and strained working relationships hinder effective information sharing and diminish professional skills among employees These issues create a cycle of negative effects that ultimately impact employee satisfaction, contributing to a high turnover rate over the years Therefore, addressing the inefficiencies in internal coordination is crucial for improving overall workplace dynamics and retaining talent.
TENTATIVE SOLUTIONS
The first alternative of enhancing communication and
Interlog Company aims to enhance workplace relationships through effective communication and internal knowledge sharing, which are essential for team effectiveness and organizational coordination Research indicates that knowledge transfer and communication are critical components of these processes (Gladstein, 1984) The characteristics of organizational relationships significantly influence information-seeking behavior, as individuals are more likely to share knowledge with those they have strong, direct connections with (Borgatti and Cross, 2003; Lai and Wong, 2002) Organizations function as knowledge systems encompassing knowledge creation, storage, transfer, and application (Alavin and Leidner, 2001), where structural, human, and technical factors can impact knowledge management Establishing an effective internal communication system is vital for fostering knowledge sharing and organizational coordination, ultimately enhancing competitive advantage (Welch & Jackson, 2007) Therefore, Interlog Company should explore both IT and non-IT solutions to improve communication and internal knowledge sharing.
To enhance IT solutions, companies should establish an expert system and a knowledge database that enables employees to easily access information Implementing a knowledge expert list or electronic library through an intranet can effectively address communication gaps and promote knowledge sharing This electronic library offers a centralized space for storing and retrieving important materials, such as memos, training manuals, and seminar resources, while also addressing the need for standardized work procedures Additionally, the IT department can create user manuals and tailor systems to meet specific departmental needs, thereby improving overall knowledge management within the organization.
To foster a culture of knowledge sharing, the company should actively encourage employees to take the initiative in sharing their expertise Implementing a compensation scheme for the time spent on knowledge contributions can incentivize participation Additionally, offering rewards for sharing knowledge will effectively motivate employees to engage in this collaborative effort.
Creating opportunities for private exchanges among employees, such as informal gatherings or coffee breaks, fosters trust and enhances relationships within the team Effective communication strategies, particularly from senior management, play a vital role in promoting positive employee engagement It is essential for communication to be a two-way process, where managers clearly communicate expectations while also encouraging employees to share their ideas and participate in decision-making Involving employees in this manner makes them feel valued and respected, ultimately improving employee relations and promoting cooperation across departments, which is crucial for organizational success.
IT solution helps improve direct communication through technology in order to access exactly necessary information for work
By means of interaction through technology, all employees can quickly find information and knowledge as well as update immediately as occurred to avoid being outdated
The server computer with strong capacity of memory to storage files and database costs 20.000.000 VND
Annual maintenance of server computer costs 7.000.000 VND
Distribution program to access electronic library costs 20.000.000 VND
Non-IT solution helps bring motivation of employees in sharing knowledge enthusiastically Moreover, they will feel their contributions are recognized and useful for the whole company
Reward for sharing knowledge related to each concept consists of:
- To handle existing shipment: 10% of basic salary
- Initiative of solving trouble or working process: cash bonus according to each initiative
The establishment of private exchange space contributes time and space to build trust among employees to enhance their connectivity
The private exchange space is set up such as the existing greenroom of the company
Therefore, of the cost will be minimal to office administrative costs.
The second alternative of standard working process
Interlog Company is dedicated to enhancing and standardizing its operational processes across all departments to optimize job performance However, existing gaps and overlaps in these processes lead to inefficiencies, particularly in transferal documentation, delegation systems, and decision-making, resulting in a lack of smooth interdepartmental collaboration Consequently, this disjointed workflow not only hampers effective human resource utilization but also contributes to hidden costs and a loss of overall control within the organization.
Meyer and Herscovitch (2001) suggest that enhancing effective commitment and efficient coordination requires management to involve employees in departmental decision-making and to foster a culture that recognizes value-added work Empowerment, as outlined in human resource management theory, emphasizes employee involvement and is linked to the participatory phase of the managerial decision-making process (Ford & Fottler, 1995; Pardo del Val & Lloyd).
2003) From these supportive theories, the Board of Director should complete the overall working process throughout the company by:
Establishing an independent council to oversee the building process is essential for ensuring a cohesive and efficient workflow This council will be
The council comprises professionals with expertise and analytical skills from various departments, including Sales, Production, and Accounting This diverse representation is essential for ensuring a seamless and comprehensive building process across all divisions.
To enhance the working process, it is essential to increase the delegation of authority from middle managers to their subordinates This strategy fosters trust and accountability among employees, encouraging them to take ownership of their tasks beyond mere completion of assigned duties As a result, management can focus on broader administrative responsibilities rather than getting bogged down in specific details.
A streamlined and efficient workflow enhances employee productivity and minimizes errors in collaborative tasks Additionally, this environment fosters self-motivation among employees, empowering them to take ownership of their responsibilities.
The wages for each member of this council cost approximately 10.000.000 VND/person
In summary, Interlog Company is currently grappling with inefficient internal coordination, primarily stemming from poor colleague relationships, inadequate knowledge sharing, and flawed working processes To address these issues, the company must evaluate tentative solutions that balance cost-effectiveness with high human resource efficiency A critical challenge lies in the misunderstanding of general objectives among various levels of staff, including the Board of Directors, mid-level managers, and employees Enhancing communication and clarity of objectives will strengthen working relationships and mitigate internal shortcomings Additionally, implementing detailed normative documents and structured approaches will serve as essential guidelines for various tasks Therefore, prioritizing the first tentative solution is crucial for Interlog Company, given its focus on improving internal human and technological capabilities.
Implementing an independent council for building work processes within each department is a challenging task that demands significant time and expertise to effectively integrate functions into a cohesive system While hiring high-cost consultants can streamline this process, it is essential for the company to maintain stable operations Consequently, the second proposed solution is more viable in the long term, as it allows for ongoing updates and adaptations to improve efficiency.
IMPLEMENTATION
To effectively execute the strategy, the Human Resource Department will collaborate with the Administrative section to establish a designated private space within the office This initiative, aimed at enhancing employee well-being, can be implemented within one week and will include features such as artificial walls and supportive equipment for designated break times.
The company will implement an IT system to establish an electronic library for effective knowledge and information sharing The IT department will set up a high-capacity server to store all databases and develop a distribution program for accessing the electronic library Furthermore, they will provide user manuals and training sessions for each department on a quarterly basis To ensure optimal operation of the electronic library, the IT department will also conduct regular maintenance, either annually or semi-annually.
To enhance employee motivation in knowledge sharing, the Board of Directors, Human Resource Department, and managers will hold meetings to discuss and develop a compensation scheme Following these discussions, the Human Resource Department will compile the ideas and disseminate a company-wide notice A structured reward system will be established to incentivize knowledge sharing, recognizing various types of contributions from employees.
- Sharing the latest information on business regulations by summarizing concise important ones with easily understanding This post-standardized information will be updated in the intranet system
- Propose the improvements of specific job or working process in department The proposals must be practical and approved through the direct Manager and the Board of Directors
- The proposal of changing is effectively applied within department as well as become learning model of other departments
- Participate in innovate the detailed work issues, information management at the company level in order to create the more efficient working system
To enhance internal coordination and address inefficiencies, the company should implement a biannual employee satisfaction survey This approach allows for ongoing evaluation of employee satisfaction levels and the effectiveness of solutions implemented to improve the workplace environment.
CONCLUSION
In conclusion, this thesis identifies the key issues currently facing Interlog Company and proposes potential solutions A critical review of the company's situation reveals that the high employee turnover rate is largely influenced by inadequate internal coordination, which stems from poor communication, insufficient knowledge sharing, weak working relationships, and a lack of empowerment in the workplace Notably, many employees expressed that low working relationships significantly impact their job satisfaction Addressing these internal coordination challenges is essential for improving overall company operations and employee performance.
SUPPORTING INFORMATION
Research methodology
The study utilized secondary data sourced from the annual report of the Human Resource Department at Interlog Company, the 2015 Management Consultancy report from the Vietnam National Productivity Institute, and statistical data from the Vietnam Logistics Association.
Traditional research methods can be categorized into two main types: quantitative and qualitative Quantitative research focuses on numerical data collection and analysis, while qualitative research emphasizes non-numerical data According to Saunders (2007), quantitative methods are typically employed for statistical analysis, whereas qualitative methods are used to explore cultural specifics, values, opinions, and social contexts In this study, the qualitative approach is selected for data collection and analysis due to its effectiveness in capturing complex human experiences and providing rich, descriptive insights into individuals' behaviors, beliefs, and emotions This method highlights the nuanced "human" aspects of research issues, revealing the often contradictory nature of personal experiences and social interactions.
The most common qualitative data-collecting methods include observation, in-depth interviews, documents, and audiovisual materials (Creswell, 2003), each with its unique advantages and limitations This thesis focuses on the realistic situations of Interlog Company, utilizing in-depth interviews as a key technique According to Boyce (2006), in-depth interviews involve intensive individual discussions with a small group of respondents, allowing researchers to delve into their perspectives on specific ideas or situations This qualitative research aims to explore the impact of working relationships, communication, knowledge sharing, and empowerment on internal coordination at Interlog A total of five managers and experienced staff members were interviewed for one hour each, using open-ended questions, covering roles in Director, HR, sales, and customs functions The insights gathered from these interviews, which were tape-recorded and transcribed, provide valuable perspectives on the current internal coordination challenges faced by Interlog Company.
Report transcript
This report provides a summary of in-depth interviews conducted with five employees at Interlog Company, including key positions such as the Deputy Manager of Human Resources, a Sales Executive from the Interconsol Department, the Manager of the Customs Department, the Managing Director, and the Team Leader of the Customer Services Group The interviewees discussed the high turnover rate at Interlog from 2013 to the present and shared their insights on the current challenges facing the company.
The interviewees outlined the roles of their respective departments and their interconnections The Sales Executive at Interconsol and the Team Leader of the Customer Services Group manage business interactions and maintain relationships with both domestic and international clients, including forwarding and logistics companies The Customs Department Manager oversees import and export procedures and customs declarations, supporting the Sales Department in meeting customer needs Additionally, the Human Resource Department is responsible for recruitment, training, and social insurance, collaborating with all departments to establish and develop a stable workforce.
Since 2013, Interlog has experienced a significant employee turnover rate, with the Sales Department facing the highest attrition at approximately 50% annually.
The current organizational structure at Interlog Company is overly complex, leading to a lack of decision-making power among employees and excessive involvement from the CEO and managers in minor departmental details, resulting in confusion and a lack of transparency in processes The reward and motivation system fails to attract and retain talented employees, prompting them to seek better opportunities elsewhere Additionally, ineffective communication between departments, particularly between sales and customs, has created internal conflicts, exacerbated by managers' limited leadership skills and employees' insufficient knowledge in the logistics industry The CEO has expressed dissatisfaction with unclear communication and a lack of focus on overarching company objectives The Deputy HR Manager highlighted the need for better employee utilization and leadership skills to address employee issues effectively Furthermore, the influx of fresh graduates with varying educational backgrounds poses challenges for training and development In summary, the primary issues identified include inadequate internal communication and coordination, a lack of knowledge sharing and empowerment, and an unappealing compensation and motivation system.
The interviewees
Interview transcript
Interviewer: Tran Bao Ngoc Interviewees:
- Interviewee 1: Dang Nguyen Thao Linh – Deputy Manager at HR Department
- Interviewee 2: Nguyen Thi Hoang Linh – Sales Executive at Interconsol Department
- Interviewee 3: Ho Phuoc Loc – Manager of Customs Department
- Interviewee 4: Nguyen Duy Minh – Managing Director
- Interviewee 5: Vo Van Cat Duyen – Team leader of Customer services group
Date: August 20 th , 2015 Place: Interlog Company’s meeting room
Located on the 5th floor of the Sai Gon Port building at No 3 Nguyen Tat Thanh Street, Ward 12, District 4, HCMC, I extend my gratitude for your time in meeting with me today.
Tran Bao Ngoc, a Master's degree student at ISB, is conducting dissertation research focused on employee turnover retention at Interlog Company The research aims to identify the factors contributing to the high turnover rate at Interlog since 2013, with the goal of developing effective solutions to address these issues.
The interview will last under an hour and will be recorded to ensure all your insights are captured accurately I want to emphasize that this recording is solely for research purposes and will not be shared with Interlog Company My goal is to discuss your experiences at Interlog to better understand the current challenges faced by the company Rest assured, your responses will remain confidential and will only be accessible to the research team Thank you for your valuable support in answering my questions.
Interviewer: Please tell us your full name and the position that you are holding in your company at the moment?
Interviewee 1: My full name is Dang Nguyen Thao Linh I am currently Deputy Manager at Human Resource Department I graduated from University of Education and I have been working at Interlog Company since 2010
Interviewee 2: My full name is Nguyen Thi Hoang Linh I have been with Interlog Company since 2010 and now I am a Sales Executive of Interconsol Department
Interviewee 3: My full name is Ho Phuoc Loc I have worked at Interlog since 2005 and now I am a manager at Customs Department since 2011
Interviewee 4: My full name is Nguyen Duy Minh I have been the Managing Director of Interlog Company since 2005
Interviewee 5: My full name is Vo Van Cat Duyen I have been as Sales Executive of Sales Department from 2007 From 2012 until now, I have been a team leader of customer services group
Interviewer: Could you please briefly describe the working process in your department particularly the connection with other departments?
Interviewee 1: I have to take responsibility on several issues such as HR, Social Insurance, Internal Marketing, recruitment and training That’s quite a very heavy workload for the HR Department Additionally, the request for human of each department is mostly different and unstable meanwhile we do not have enough labor force and resources to do everything properly Interviewee 2: My department was established at the end of 2012 and the main responsibility is dealing business with other forwarding and logistics companies and foregin agents in China, Singapore etc This is the newest department in the company so that we have to learn and set up a lot of things based on the instructions and guidelines of forgein agents such as: pricing calculation, sea routes etc The main jobs strongly require good import and export knowledge; and skills such as proficieny in English, negotiating and dealing with VIP customers etc Therefore, a new employee mostly takes around 2 years in order to work proficiently in my department
Interviewee 3: My department takes a responsibility in import and export procedures and custom declaration This is a very important task because if we make any mistake in paperwork, the goods of customers would get into trouble; and the company would receive a big loss in both reputation and finance Therefore, all of my subordinates have to regularly and carefully update the lastest decrees of government in order to do in a right way Additionally, we have to provide the sufficient information to the Sales Department before making contract with customers whethere their goods can be done or not
Interviewee 4: As the Managing Director, I am responsible for the entire operations of the company Interlog is a company operating in an extremely competitive and fierce Logistics sector In current, the Vietnam Logistics Company only accounts for a small market share in proportion of Logistics services in Vietnam Meanwhile, the major market share has been manipulated by the foreign multinational Logistics group Therefore, the difficulties of Logistics Company as Interlog are immediately great in the domestic, not to mention the international level In addition, our company has still faced with daily risks of technological backwardness, slowly changing knowledge and unstable human resources My mission is to concentrate on protecting the stability and profitability of the company through each fiscal year
Interviewee 5: I am responsible for serving customers, especially VIP customers Moreover, my department has worked with both domestics and foreign export customers Nowadays, the customers are fastidious with detailed and cautious requirements Correspondingly, each of sales staff has important tasks to find many of quality customers that make profit for the company We have faced a lot of pressure from the market and price competition of the opponent companies
Interviewer: Many small and medium-sized enterprises across various industries are struggling with high employee turnover rates Has Interlog Company experienced this issue, and which department is seeing the highest turnover?
Interviewee 1: Working in the HR department, I know clearly about the employee retention situation at the company Within company, the sales division has existed the highest turnover rate with approximately 50% each year
Interviewee 2: In my department, there were sales staff quit jobs every year In year 2014, three of my sales staffs left the job after receiving training Most of them had low commitments to the company Furthermore, they are lack of knowledge with this consolidation function that I have been hard to train and secure their acquirement
Interviewee 4: Of course, it does occur in our company almost 2 years from 2013 till now And the department that has the highest turnover rate is Sales Department which comprises four small divisions: Interconsol, Agents Development, Sales and Supply Chain Management
Interviewer: In your opinion, what are the main reasons that cause this symptom and why?
Interview 1: Personally, I thought everything in life has come from both sides and this issue also can be seen through both objective and subjective aspects Objectively, logistics industry in Vietnam contains many challenges and difficulties but this is a very lucrative field therefore many logistics companies recruit many new employees almost every year in order to match the rapid development of the market At Interlog, there are many fresh graduated students annually with different education backgrounds applying into the company After spending two or three months of probation period in different positions of different departments at different locations, some people can wisely adapt the working enviroment and be able to work meanwhile some people may not be suitable and they leave due to many reasons Conversely, the experienced employees are easy to adapt the jobs but they mostly request quite high salaries and benefits so it is not easy to retain them in the long period of time
The current organizational structure is overly complex, limiting employees' decision-making power as they must seek approval from multiple stakeholders The CEO, lacking an effective assistant, often becomes entangled in minor departmental details Additionally, his strong belief in Feng Shui and Chinese zodiac signs leads to a lack of trust in subordinates, particularly during the recruitment process; he prefers to conduct final job interviews himself rather than relying on recommendations from department and HR managers This approach can create misunderstandings in internal communication between the CEO and mid-level managers.
Interviewee 2: Personally, some of salesmen have to leave the company due to lacking of skills and knowledge in this industry Additionally, the connection between each department is quite loose because the role allocation is not clear and the transfer of employees make them feel uncomfortable and inconsistent in work For instance, the shipment handling process is too limited due to lack of decision making power of staffs while most of decisions belongs to management board and a lower-level empowerment from the manager to their staffs I am really confused about the process of waiting for shipments handled through every department, especially when trouble needs to be solved The result is that employees will waste time to connect together and their productivity will be also decreasing Last but not least, the sales team does not feel comfortable because they have to share the sales commision due to the new policy of the company They think they are strongly depended on other divisions in dealing with customers