Effectiveness of human resource management practices in small and medium enterprises in Thai Nguyen province

EFFECTIVENESS OF HUMAN RESOURCE MANAGEMENT

PRACTICES IN SMALL AND MEDIUM ENTERPRISES

IN THAI NGUYEN PROVINCE

A DISSERTATION PAPER

Presented to

School of Graduate Studies

Central Philippine University, Philippines

In Collaboration with

Thai Nguyen University, Vietnam

In Partial Fulfillment

Of the Requirements for the Degree

DOCTOR OF MANAGEMENT

PHAM THI THANH PHUONG

JUNE 2020

i

ACKNOWLEDGMENT

This dissertation has been conducted in the Doctoral Program in Business

Management in the framework of academic cooperation between Central Philippine

University and Thai Nguyen University. During the period of writing my dissertation, I

have gained the precious knowledge for my job as well as my scientific research works.

First and foremost, I would like to express my sincere appreciation to my

supervisors Prof. Lee Song Kun and Assoc. Prof. Dr. Do Anh Tai for giving me

considerable time and guiding me enthusiastically through the completion of this research.

I would like to express my gratitude to officials who freely gave me their time for

the interviews. The interviews that were granted to me at the enterprises with managers

that provided managers' perspective to the purpose of this study. I am very thankful to

Officials of Thai Nguyen province for providing me number of secondary information and

much help to the interviews at the agencies.

I would like to thank to all of my professors of the Doctor Program in Business

Management, managers and staffs of International Cooperation Center for Training and

Study Abroad for their enthusiastic help in my research and dissertation.

I also would like to thank my interview partners who conducted the survey with

me. I would like to mention all of my colleagues who encouraged me to do the dissertation

Last but not least, I specially would like to give inmost thanks to my family who

always encouraged and helped me through the time doing the dissertation.

Thai Nguyen, June 2020

Pham Thi Thanh Phuong

ii

LỜI CẢM ƠN

Luận án này được thực hiện trong khuôn khổ hợp Chương trình hợp tác học thuật

giữa Đại học Cetral Philippines và Đại học Kinh tế và Quản trị Kinh doanh, Đại học Thái

Nguyên. Trong thời gian viết luận văn, tôi đã có được nhiều kiến thức quý giá cho công

việc cũng như các công trình nghiên cứu khoa học của tôi.

Đầu tiên, tôi muốn bày tỏ sự cảm ơn chân thành của tôi đến Giáo sư Lee Song Kun

và Phó giáo sư, Tiến sĩ Đỗ Anh Tài đã dành thời gian hướng dẫn tôi rất nhiệt tình trong

quá trình hoàn thành nghiên cứu này.

Tôi muốn bày tỏ lòng biết ơn đến lãnh đạo, nhân viên công tác tại các cơ quan, ban

ngành, doanh nghiệp tỉnh Thái Nguyên đã dành thời gian cung cấp cho tôi thông tin thứ

cấp. Các nhà quản lý đã cung cấp những quan điểm của nhà quản lý cho mục đích của

nghiên cứu này.

Tôi xin cảm ơn tất cả các giảng viên, chuyên gia của Chương trình đào tạo về

Quản trị kinh doanh, các lãnh đạo và nhân viên của Trung tâm Hợp tác Đào tạo Quốc tế vì

sự giúp đỡ nhiệt tình của họ trong nghiên cứu luận án của tôi.

Tôi cũng muốn cảm ơn các đối tác phỏng vấn đã thực hiện khảo sát với tôi.

Tôi muốn gửi lời cảm ơn đến tất cả các đồng nghiệp đã khuyến khích động viên tôi

trong suốt quá trình học tập cũng như làm luận án này.

Cuối cùng nhưng không kém phần quan trọng, tôi đặc biệt muốn gửi lời cảm ơn sâu

sắc đến gia đình tôi, những người luôn khuyến khích và giúp đỡ tôi trong suốt thời gian

làm luận án.

Thái Nguyên, tháng 6 năm 2020

Phạm Thị Thanh Phương

iii

COMMITMENT

I assure you that the data and research findings in this dissertation are honest and

have not been used for publication in any other research.

I would like to assure you that all helps for the implementation of the dissertation

has been thanked and the information cited in the dissertation is clearly indicated.

Thai Nguyen, June 2020

Author of dissertation

Pham Thi Thanh Phuong

iv

LỜI CAM ĐOAN

Tôi xin cam đoan rằng, các số liệu và kết quả nghiên cứu trong luận án này là trung

thực và chưa được sử dụng để công bố cho bất kỳ một nghiên cứu nào khác.

Tôi xin cam đoan rằng, mọi sự giúp đỡ cho việc thực hiện luận án đã được cảm ơn

và các thông tin trích dẫn trong luận án đều được chỉ rõ nguồn gốc.

Thái Nguyên, tháng 6 năm 2020

Tác giả luận án

Phạm Thị Thanh Phương

v

TABLE OF CONTENTS

ACKNOWLEDGMENT........................................................................................... i

LỜI CẢM ƠN ........................................................................................................... ii

COMMITMENT ..................................................................................................... iii

LỜI CAM ĐOAN .................................................................................................... iv

TABLE OF CONTENTS..........................................................................................v

LIST OF TABLES ................................................................................................. vii

LIST OF FIGURES ................................................................................................ ix

ABSTRACT ...............................................................................................................x

CHAPTER 1. THE PROBLEM AND ITS SETTING...........................................1

1.1. Background and Rationale of the Study...............................................................1

1.2. Objectives.............................................................................................................4

1.3. Hypotheses ...........................................................................................................5

1.4. Theoretical Framework ........................................................................................6

1.4.1. Human Resources (HR) and Human Resource Management (HRM) ..............6

1.4.2. The model of human resource management and performance .........................7

1.5. Conceptual Framework ........................................................................................9

1.6. The operational definitions.................................................................................12

1.6.1. The definition of HRM practices ....................................................................12

1.6.2. HRM outcomes variables................................................................................14

1.6.3. Organizational Performance............................................................................14

1.6.4. Effectiveness of Human Resource Management Practice ..............................15

1.7. Scope and Limitation .........................................................................................17

1.8. Significance of the Study ...................................................................................17

CHAPTER 2. REVIEW OF RELATED LITERATURE AND STUDIES .......19

2.1. Related Literature ...............................................................................................19

2.1.1. Definitions of SMEs........................................................................................19

2.1.2. Human resource management .........................................................................21

2.1.3. Organizational performance of enterprises and relationship with HRM ...30

2.2. Related Studies...................................................................................................33

CHAPTER 3. METHODOLOGY .........................................................................39

3.1. Research Design.................................................................................................39

vi

3.2. Population, Sample Size and Sampling Techniques..........................................41

3.3. Research Instrument...........................................................................................42

3.4. Data Gathering Procedure ..................................................................................46

3.4.1. Secondary data ................................................................................................46

3.4.2. Primary data ....................................................................................................46

3.5. Pilot Test.............................................................................................................46

CHAPTER 4. DATA PRESENTATION, ANALYSIS AND INTERPRETATION50

4.1. The profile of the respondents............................................................................50

4.2. The Method of Data Analysis ............................................................................51

4.3. Scale Purifications..............................................................................................52

4.3.1. Item Purification for Recruitment and Selection Scale...................................52

4.3.3. Item Purification for Training and Developing Scale .....................................55

4.3.4. Item Purification for Job Evaluation Scale .....................................................56

4.3.5. Item Purification for Employee Commitment Scale .......................................57

4.3.6. Item Purification for Organizational Performance Scale ................................58

4.3.7. Scale Reliability ..............................................................................................60

4.4. Measurement Model...........................................................................................60

4.5. Hypothesis Testing.............................................................................................66

4.6. Summary of Hypothesis Testing........................................................................70

4.7. Evaluate the effectiveness of Human Resource Management ...........................72

4.7.1. Effectiveness of Recruitment and Selection ...................................................72

4.7.2. Effectiveness of Salary and Welfare ...............................................................73

4.7.3. Effectiveness of Training and Development...................................................74

4.7.4. Effectiveness of Job Evaluation ......................................................................75

4.7.5. Effectiveness of Employee Commitment........................................................76

4.7.6. Effectiveness of Organizational Performance.................................................77

CHAPTER 5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS79

REFERENCES ........................................................................................................94

APPENDIX ............................................................................................................100

vii

LIST OF TABLES

Table 2.1: Classification of enterprises by total capital and number of laborers in

VietNam............................................................................................................ 21

Table 2.2: Outcome of research on the link between HR and oragnizational performance 34

Table 3.1. The Sampling Tecknique by type of enterprise.................................................. 41

Table 3.2. Items used for Measuring Variables........................................................................ 42

Table 3.3. The Scale and Standard to Evaluate the Effectiveness of Human Resource

Management Practice........................................................................................ 44

Table 3.3. The Criteria to Evaluate the Effectiveness of Human Resource Management

Practice.............................................................................................................. 44

Table 3.4. The EFA Results for Pilot Test........................................................................... 47

Table 4.1. Frequency and Percentage Distribution of the Respondents in Terms of the

Business Organization Affiliated With............................................................. 50

Table 4.2. Characteristics of Sample ................................................................................... 51

Table 4.3. Values of Cronbach’s Alpha............................................................................... 51

Table 4.4. Descriptive Statistics of Recruitment and Selection Scale ................................. 52

Table 4.5. Item Purification for Recruitment and Selection Scale ...................................... 53

Table 4.6. The Descriptive Statistic Results of Salary and Welfare Scale .......................... 54

Table 4.7. Item Purification for Salary and Welfare Scale .................................................. 54

Table 4.8. The Descriptive Statistic Results of Training and Developing Scale................. 55

Table 4.9. Item Purification for Training and Developing Scale......................................... 56

Table 4.10. The Descriptive Statistic Results of Job Evaluation Scale ............................... 56

Table 4.11. Item Purification for Job Evaluation Scale....................................................... 57

Table 4.12. The Descriptive Statistic Results of Employee Commitment Scale................. 57

Table 4.13. Item Purification for Employee Commitment Scale ........................................ 58

Table 4.14. The Descriptive Statistic Results of Organizational Performance Scale.......... 59

Table 4.15. Item Purification for Organizational Performance Scale.................................. 59

Table 4.16. Scale Reliability................................................................................................ 60

Table 4.17. Measurement Model Results for Recruitment and Selection Scale................. 61

Table 4.18. Measurement Model Results for Salary and Welfare Scale ............................. 62

Table 4.19. Measurement Model Results for Training and Development Scale................. 62

Table 4.20. Measurement Model Results for Job Evaluation Scale .................................... 63

Table 4.21. Measurement Model Results for Employee Commitment Scale...................... 63

viii

Table 4.22. Measurement Model Results for Organizational Performance Scale............... 64

Table 4.23. Measurement Model Results ............................................................................ 65

Table 4.24. Construct Correlation Matrix............................................................................ 66

Table 4.25. The Regression Values from Structural Equation Modeling............................ 69

.Table 4.26. Results of hypothesis....................................................................................... 71

Table 4.27. The effectiveness of Recruitment and Selection .............................................. 72

Table 4.28. The effectiveness of Salary and Welfare .......................................................... 73

Table 4.29 The effectiveness of Training and Development............................................... 74

Table 4.30. The effectiveness of Job Evaluation ................................................................. 75

Table 4.31. The effectiveness of Employee Commitment................................................... 76

Table 4.32. The effectiveness of Organizational Performance............................................ 77

ix

LIST OF FIGURES

Figure 1.1: The Human Resource Cycle.............................................................................. 7

Figure 1.2: The relationship between strategic HRM and performance................................ 8

Figure 1.3: HRM - performance linkage model .................................................................... 8

Figure: 1.4: HRM activities, HRM outcomes and performance............................................ 9

Figure 1.5: Research Paradigm............................................................................................ 10

Figure 1.6: Research Model................................................................................................. 11

Figure 3.1. The Research Procedure .................................................................................... 40

Figure 4.1. Structural Equation Modeling for Research Model .......................................... 70

x

ABSTRACT

Many small and medium enterprises in Thai Nguyen province face with difficulty

that the ineffectiveness of human resource management is low. It's very hard to complete

the creation incentives for employees to be able to attract and retain talented people who

can help organization to compete and win in the dynamic and constantly changing market

economy. So, understanding the effect of Human Resource Management practices on

organizational performance may help many small and medium enterprises in Thai Nguyen

province increase their organizational performance.

The general objective of this study is to analyze the impact of human resource

management practices to the performance of small and medium enterprises in Thai Nguyen

province, to find solutions to improve performance by helping small and medium

enterprises overcome the limitations in human resource management and improve the

quality of human resources. This study attempted to examine the effectiveness of Human

Resource Management practices in Thai Nguyen SMEs. Research on Human Resource

Management practices and their outcomes such as commitment and organizational

performance have rarely been conducted in SMEs in Thai Nguyen. Data were collected on

managers’ perceptions about Human Resource Management practices and their outcomes,

organizational performance through structured questionnaire. Sample consisted of 400

managers or people in managerial board who are working in Thai Nguyen SMEs. Multiple

Regression, Cronbach alpha, Pearson correlation coefficient and descriptive statistics, EFA

and SEM were used for various analyzes of this study. The findings of the research

revealed that Human Resource Management practices are significant predictors of

organizational performance.

This study contributed to the theoretical knowledge about Human Resource

Management practices as an important factor affecting employee’s commitment and

organizational performance. The study also offers some useful managerial implications for

SMEs to improve human resource quality. The results from data analysis show that four

factors of human resource management (welfare and salary, training and developing,

recruitment and selection, job evaluation) affect employee’s commitment, and in turn,

employees’ commitment affect organizational performance. The results from data analysis

also show that employees evaluate the effectiveness of recruitment and selection, welfare

and salary, training and development and job evaluation at average level. It means that

these activities need to be improved.