The impact of quality of work life and organizational commitment on job performance of employees in the vietnamese banking sector

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business

Tran Ngoc Tuan

THE IMPACT OF QUALITY OF WORK LIFE AND ORGANIZATIONAL
COMMITMENT ON JOB PERFORMANCE OF EMPLOYEES IN THE VIETNAMESE
BANKING SECTOR

MASTER OF BUSINESS (HONORS)

Ho Chi Minh City Year 2017


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business

Tran Ngoc Tuan

THE IMPACT OF QUALITY OF WORK LIFE AND
ORGANIZATIONAL COMMITMENT ON JOB PERFORMANCE OF
EMPLOYEES IN THE VIETNAMESE BANKING SECTOR

MASTER OF BUSINESS (HONORS)
SUPERVISOR: Dr. TRAN PHUONG THAO

Ho Chi Minh City Year 2017


ACKNOWLEDGEMENT
Firstly, I would like to express my gratefulness to my supervisor Dr. Tran Phuong

Thaofor her professional guidance, intensive support, valuable suggestions, instructions
and continuous encouragement during the time of research and writing this thesis.
I would like to express my deepest appreciation to ISB Research Committee for
their valuable time as their insightful comments and meaningful suggestions were
contributed significantly for my completion of this research.
My sincere thanks also go to all of all of my lecturers at International Business
School- University of Economics Ho Chi City for their teaching and guidance during my
Master course.
Last but not least, I would like to thanks my family, whom were always supporting
me and encouraging me with their best wishes.


ABSTRACT
This study uses three components of quality of work life and three components of
organizational commitment to investigate the impacts of quality of work life and
organizational commitment to job performance in the Vietnam banking sector. This
research framework was tested through a survey on employees from banks in Ho Chi
Minh City. A total of 259 questionnaires collected and analysed using including sample
descriptive statistic, reliability analysis, exploratory factors analysis, CFA, and SEM.The
findings of this research showed significant and positive effects of quality of work life and
organizational commitment on job performance. Furthermore, the research found that
there is a positive relationship between quality of work life and organizational
commitment.

Key words:quality of work life, organizational commitment, job performance,
survival needs, belonging needs, knowledge needs, affective commitment, continuance
commitment, normative commitment.


i

TABALE OF CONTENTS
LIST OF TABLES........................................................................................................................................... iii
LIST OF FIGURES......................................................................................................................................... iv
CHAPTER 1 : INTRODUCTION.................................................................................................................... 1
1.1

Research background..................................................................................................................... 1

1.2

Research Problems......................................................................................................................... 2

1.3

Research Objectives....................................................................................................................... 4

1.4

Scopes of the study......................................................................................................................... 4

1.5

The significane of the study........................................................................................................... 4

1.6

Structure of the study..................................................................................................................... 5

CHAPTER 2 : LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT......................................7
2.1

Theoretical foundations................................................................................................................. 7

2.2

Overview on job performance, quality of work life and organizational commitment.........10

2.2.1

Job performance................................................................................................................... 10

2.2.2

Quality of work life............................................................................................................... 11

2.2.3

Organizational commitment............................................................................................... 13

2.3

Hypothesis development.............................................................................................................. 15

2.3.1

Quality of work life and job performance......................................................................... 15

2.3.2

Organizational commitment and job performance.......................................................... 16

2.3.3

Quality of work life and organizational commitment...................................................... 17

2.4

Research model............................................................................................................................. 18

2.5

Chapter summary........................................................................................................................ 19

CHAPTER 3 RESEARCH METHODOLOGY............................................................................................. 21
3.1.

Research process........................................................................................................................... 21

3.2.

Research design............................................................................................................................ 22

3.2.1.

Questionnaire design................................................................................................................ 22

3.2.2.

Measurement scale................................................................................................................... 23

3.3.

Qualitative method....................................................................................................................... 26

3.4.

Main survey................................................................................................................................... 26

3.4.1

Sampling.................................................................................................................................... 26

3.4.2

Data analysis method............................................................................................................... 27

3.5.

Chapter summary........................................................................................................................ 30


ii
CHAPTER 4 : DATA ANALYSIS AND DATA RESULTS.......................................................................... 31
4.1

Preliminaries of data analysis..................................................................................................... 31

4.2

Reliability analysis........................................................................................................................ 32

4.3

Exploratory Factor Analysis....................................................................................................... 34

4.4

Confirmatory Factor Analysis (CFA)........................................................................................ 35

4.5

SEM Testing and Bootstrap Method.......................................................................................... 38

4.5.1

SEM Testing........................................................................................................................... 38

4.5.2

Bootstrap method................................................................................................................... 40

4.6

Discussion...................................................................................................................................... 41

4.7

Chapter summary........................................................................................................................ 42

CHAPTER 5 CONCLUSION AND IMPLICATIONS................................................................................. 43

5.1.

Conclusions................................................................................................................................... 43

5.2.

Managerial implications.............................................................................................................. 44

5.3.

Directions for future research..................................................................................................... 45

REFERENCES............................................................................................................................................... 46


7

LIST OF TABLES
Table 4.1 Summary of employees’ profile............................................................................ 31
Table 4.2 Cronbach’s Alpha................................................................................................. 32
Table 4.3 KMO and Bartlett's Test....................................................................................... 35
Table 4.4 Standardized regression weights........................................................................... 37
Table 4.5 The AVE items...................................................................................................... 38
Table 4.6 Regression weights............................................................................................... 40
Table 4.7 Standardized Regression Weights (bootstrap standard error) n =1000..................40


LIST OF FIGURES

Figure 2.1 Conceptual framework of the study.................................................................... 19

Figure 3.1 Research Process................................................................................................. 21
Figure 4.1 CFA model.......................................................................................................... 35
Figure 4.3 Structural results................................................................................................. 39


9

CHAPTER 1 : INTRODUCTION

1.1

Research background
Human resource management plays critical role in modern business today

because of its impacts on organizational success as well as retaining talent people.
Human resource is denoted as an empathy factor and the employees’ attitude impacts
directly on customer satisfaction and perception which may lead to higher customer
loyalty as well as customer commitment (Parasuraman, Zeithaml and Berry, 1985).
Thus, human resource is considered as key factors impacting on service quality and
customer satisfaction.
Job performance leads to the performance of any organizations including banks.
Employee performance is according to their level of motivation, which encourages them
to come to work regularly, work diligently, flexibly. Besides, the level of motivation also
helps employees be willing to carry out the necessary tasks. When the employees are
not satisfied with their jobs, they will perform at their low contributions. So, it is
required to increase job performance of human resources in the banking sector.
Many prior studies show that job performance is affected by a number of factors
including quality of work life and organizational commitment. The impact of these
factors are investigated in a wide range of studies including Nguyen and
Nguyen(2012),Sirgy, Efraty, Siegel and Dong(2001),Fu and Deshpande (2014).

Accordingly, Mohan and Kanta (2013) showed that quality of work life influences on
efficiency and productivity of company. Moreover, creating quality of work life will


make employees feel satisfactory. Therefore, quality of work life plays a vital role in
attracting and keeping the genius. May, Lau and Johnson (1999) also showed that
organizations offering the better quality of work life has more advantages in hiring and
retaining good employees. In the meantime, organizational commitment is the
individual's psychological attachment to the organization among its employees (Murthy,
2013; Lamba & Choudhary, 2013). Organizations commitment may attract and retain
staff to have longer tenure.

1.2

Research Problems
The banking finance industrieshave existed for hundreds of years, and became

the heart of the modern economy.In recents years, with development of Vietnamese
banking system, workforce demand is rising. The banks also encounter many challenges
in the workforce competency environment. Therefore, the high quality workforces are
well focused in developing. To evaluate quality workforces, job performance is an
important criterion for outcomes and success of employees (Campbell, McCloy, Oppler,
Sager, Schmitt, & Borman, 1993). Therefore, it is necessary for bank’s managers to
investigate factors which affect job performance of their employees in the Vietnamese
banking sector.
This research focuses on explaining job performance by examing the effects
oftwo factors which are quality of work life and organizational commitment on job
performance.

Work is considered as an important part of life as we spend one-third of our each
day for it. What happens at the workplace has impacts and affects our individual
life.Therefore, quality of work life is an important part which brings a quality life for
each individual.Many studies emphasis on quality of work life in North America while
the concept in Asia has been less concerned(Chan, 2007).In Vietnam, there are a few
study researchesabout quality of work life and job performance (Nguyen & Nguyen,
2010; Nguyen & Nguyen, 2012). However, these researches only focused on the
marketing industry. Therefore, it is necessary to study the relationship between quality
of work life and job performance among employees in Vietnamese banking sector.
Besides developing quality workforce, workforce transition issue from banking
sector to more profitable industries became a big problem for banks. In hard times, banks
want their experienced and talented employees to stay on to share difficulties and
possess strong commitment to serving customers for the business interest. So, committed
staff is valuable human capital for the banks. Harter, Schmidt, and Hayes(2002) also
suggested that commitment is important for meaningful business results and due to
increasingly competitive business environment committed workforce has now become a
matter of survival for every organization. Therefore it is necessary toexplore the impact
of organizational commitment on job performance in Vietnamese banking sector.


1.3

Research Objectives
The objective of this study is to examine the impact of quality of work life

and organizational commitment on job performance among employees in the
Vietnamese banking sector.
More specifically, three research questions are given as follows:
Question 1: Doesquality of work life affect job performance of employees in the
Vietnamese banking sector?

Question 2: Does organizational commitment affect job performance of
employees in the Vietnamese banking sector?
Question 3: Doesquality of work life affect organizational commitment of
employees in the Vietnamese banking sector?
1.4

Scopes of the study
The object of this study is employees of banks in Ho Chi Minh City. The research

is conducted in Ho Chi Minh City which is known as one of the biggest economic
centers of Vietnam.
The research only approaches to factors concerning in organizational
commitment and quality of working life with job performance. Other factors impact on
job performance being out of the topic of this research.
1.5

The significane of the study
This research contributes to the understanding of quality of work life and

organizational commitment, and their impact on job performance within the context of


Vietnamese business organizations in generally and within Vietnamese banking sector in
particularly.
The findings provide a significant opportunity for managers perceives that some
aspects of employees’ quality of work life can have a positive impact on their job
performance as well as organizational commitment. Based on this finding, it is very
important for business organizational management to design work requirements, build
appropriate policy in order to improve employees’ quality of work life, so that
employees can enhance organizational commitment and job performance as well.

1.6

Structure of the study:
The structure of the study consists five chapters:
Chapter 1: Introduction
This chapter presents research background of the study, as well as, research

problems, research objectives, research methodology and scopes.
Chapter 2: Literature Review, Hypotheses, and Research model
This chapter, this study provides the literature review and presents the
fundamental ideas on two main constructs: quality of work life and organizational
commitment. In this chapter, the conceptual model of the study and the hypotheses of
the study are also presented.
Chapter 3: Research Methodology


Research process, measurement scales, questionnaire design, data collection
method, sampling design, and data analysis method are presented more details in this
chapter.
Chapter 4: Data Analysis
All of data collected from the survey are analyzed. The final model of the study
is built based on the results of those analyses. Depending on output results from the
analyzing, the relationship of those factors as mentioned in the study model will be
examined.
Chapter 5: Conclusions, Implication, and Limitation
Conclusions present the findings in the study. The researcher suggests managerial
implementations based on the result of previous chapters, and give limitations that impact
on the finding as well as future direction.

CHAPTER 2 : LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

This chapter mainly introduces the theories, which are proposed by many
scholars in academic field and are related to all the concepts and research model. At
first, it introduces the definition of quality of work life, organizational commitment, and
job performance. Next, the previous research of these concepts and their related
discussion are mentioned. Finally, based on these theories and the relation of previous
research, the hypotheses of relationship among these constructs and conceptual model
are proposed.
2.1

Theoretical foundations
Quality of work life
Sirgy et al. (2001) stated that “there are two main theoretical approaches in the
Quality of work life literature; it is need satisfaction and the other is spillover”. The need
satisfaction approach to quality of work life is based on need-satisfaction models
developed by Maslow, Frager and Cox (1970). The main idea of this approach to quality
of work life is that people have basic needs which they can be satisfiedby their jobs.
Employees acquire satisfaction from their jobs to the scope that their jobs can meet
these needs. Porter (1961) developed a quality of work life to measure need satisfaction
in the organizational context based on Maslow Hierarchy of needs. Porter (1961) stated
that quality of work life measure objectives were to assess employees levels of needs
according to their job, the level of organizational resources related to employees
experiences and the congruence between a person’s needs and organizational resources
that reflect organization needs fulfilment. Four needs, including seven needs based on


Maslow’s hierarchy were covered by the Porter (1961) measure, namely survival needs,
social needs, ego needs, and self-actualization needs.

Another approach to quality of work life is spillover. Sirgy et al. (2001) supposed
that “the spillover approach to quality of work life states that satisfaction in one area of
life may influence satisfaction in another. For example, satisfaction with one’s job may
influence satisfaction in other life domains such as family, leisure, social, health,
financial, etc”.
Organizational commitment
Organizational commitment was, in general terms, an employee’s sense of
attachment and loyalty to the work organization with which the employee is associated.
This section reviews the dominant theories of organizational commitment from the
1960s to present day.
The side-bets theory
The side-bet theory was introduced by Becker (1960). This term referred to
accumulation of investments valued by the individual that would be lost or deemed
worthless if he or she were to leave the organization.Basically, side-bet refer to anything
of importance that an employee has invested, such as time, effort or money (Meyer &
Allen, 1990) that would be lost or devalued at some cost to the employee, if he or she
left the organization or occupation. Becker (1960) argued that over a period of time
certain costs accrue which make it more difficult for the person to change his or her job.
The person who hesitates to take a new job may be deterred by a complex of side-bets:
the


financial costs connected with a pension fund he would lose if he moved; the loss of
seniority and his relationship in his present company.
Becker (1960)’s approach claimed that a close connection between
organizational commitment and employees’ voluntary turnover behavior. According to
Becker (1960) organizational commitment should be measured by evaluating the
reasons, if any that would cause a person to leave his organization. Becker (1960)’s
approach and the scales that were assumed to represent it were adopted by later
research as the approach toconceptualize and examine commitment to theorganization

and/or to the occupation.
The influence of the side-bet approach is evident in Meyer and Allen’s Scale (1991),
which might be named as the continuance commitment. This scale was advanced as a
tool for the better testing of the side-bet approach and is one of the three dimensions of
organizational commitment outlined by Meyer and Allen (1991).
Meyer and Allen theory
Meyer and Allen’s (1984) approach started with a paperthat argued that the sidebet approach was inappropriatelyoperationalized.They argued that the scales developed
byBecker (1960) do not really measure side-bets but measure attitudinal commitment.
Might the better way to measure side-bets is to use measures that more directly assess
individuals' perceptions regarding the number and magnitude of the side-bets they have
made. In order to test this contention, they compared the interrelationships among
several common scales of commitment and two scales they had developed, one
representing Affective commitment and the other Continuance commitment. Meyer and
Allen proposed the continuance dimension as a better representation of Becker's side-bet


approach. It was designed to assess the extent to which employees feel committed to
their organizations by virtue of the costs that they feel are associated with leaving.
A few years later, a third dimension was added, the normative commitment (Allen
& Meyer, 1990). Normative commitment was defined as a feeling of obligation to
continue employment. Employees with a high level of normative commitment feel that
they ought to remain within the organization (Meyer &Allen, 1990). Normative
commitment is affected in the main by socialization and/or culture prior to entry into an
organization.

2.2

Overview on job performance, quality of work life and organizational
commitment
2.2.1 Job performance

Borman and Motowidlo (1993) defined “job performance as work-related

behaviors that can be measured by the individual’s level of contribution toward meeting
organizational goals. Job performance measures whether a person performs a job well”.
As Razek (2011) mentioned that “job performance is one of the most important
activities that reflect both the goals and the means necessary to achieve them and
represents the specialist efficiency or an organization's achievement expectation. It is the
effort made by the employee within the organization in order to achieve a particular
goal. The actual results that companies desire objectively measure.”
Daniel and Harris (2000) defined “job performance in terms of whether
employees’ behaviors contribute to organizational goals”. Job performance can be


defined as an employee ability to accomplish tasks assigned to him or her in an
organizational context (Arverty & Murphy, 1998).
Briefly, job performance indicates the effectiveness of employee’s specific actions
that contribute to attain organizational goals.
2.2.2 Quality of work life
Ever since the concept of quality of work life (QWL) was first used over 30 years
ago there are some different definitions of QWL (Martel &Dupuis, 2006). Feldman
(1993) defined QWL is the quality of relationship between employees and the total
working environment. According to Bowditch and Buono (2005), the concept of QWL
has been provided since 1960s, and this term is defined as “concentration of the
organization on the employees’ health and general well-being in order to ensure that the
employees feel happy at work and the quality of on-the-job experiences.”
Recently, Kashani (2012) asserted that many organizations today conduct the
studies about quality of work life of employees, and they also involve their employees
into evaluation process. The reason of this involvement is that employees will provide
basic information about how the employers can improve human resource management
and related policies in order to improve the quality of work of the employees. It also

refers to how working environment affects employees as well as their participation to
problem solving process as well as and the rewards mechanism to motivate the
employees.


Quality of work life defined by Mohan and Kanta (2013) means “supporting
good working conditions to employees to express their best performance. Motivating
workplace makes staffs to have positive attitude towards their job and organization.”
Sirgyet al.(2001) stated that “quality of work life is about the wellbeing of
employees or satisfaction with a variety of needs through resources, activities, and
outcomes stemming from participation in the workplace”.
According to Sirgy et al. (2001), the concept of quality of life in this research was
developed by the need theories of Maslow, Frager and Cox (1970) as well as the spillover
theories. Four need categories, including seven needs based on Maslow’s hierarchy were
covered by Porter (1961), which includes survival needs, social needs, ego needs and
self- actualization needs.
Recently, the concept of quality of work life are extended to the seven major
needs, namely satisfaction of health and safety needs, satisfaction of economic and
family needs, satisfaction of social needs, satisfaction of esteem needs, satisfaction of
actualization needs, satisfaction of knowledge needs, satisfaction of aesthetics needs
(Nguyen

& Nguyen, 2010)

In a recent study, Nguyen and Nguyen (2010) used the concept “Survival needs”
to present both the satisfaction of health and safety needs as well as satisfaction of
economic and family needs. The satisfaction of social needs and satisfaction of esteem
are presented by the concept “Belonging needs”. The satisfaction of actualization needs,
satisfaction of knowledge needs and satisfaction of aesthetics needs are presented by the
concept “Knowledge needs”. These three terms “survival needs” “belonging needs” and

“knowledge needs” are accepted by several researchers including Nguyen and Nguyen
(2012) and Sirgy et al. (2001).
The quality of working life (the satisfaction of the employees) has implied to
have the positively impact on job performance. However, the satisfaction of the
employee depends on the level of job that supports to their human needs.
In the Vietnamese market, Nguyen and Nguyen (2012) defined quality of work
life as marketers’ satisfaction with a set of human needs when participating in the
workplace. The set of human needs includes health and safety needs, economic and
family needs, social needs, esteem needs, actualization needs, knowledge needs and
aesthetics needs. The study result showed that there were only three variables clearly
explaining human demands in the workplace including survival needs, belonging needs,
and knowledge needs.
In short, quality of work life also refers to the satisfaction of employees with
survival needs, belonging needs, and knowledge needs based on the definition of
Nguyen and Nguyen (2012).
2.2.3 Organizational commitment
According to Mowday,Steers and Porter (1979) “organizational commitment was
defined as the relative strength of an individual’s identification with and involvement in
a particular organization.” Later, this term was defined O’Reilly and Chatman (1986) as
“individual's psychological attachment to an organization - the psychological bond
linking the individual and the organization.”


Although numerous differences in the approach to organizational commitment
research exist, definition of organizational commitment of Meyer and Allen (1991) was
being used in popular. Accordingly, they stated that“a psychological state characterizes
an employee’s relationship with an organization and has implications for the decision to
continue membership of the organization”. Meyer and Allen (1991) also proposedthreecomponent model of commitment including: affective commitment, continuance

commitment, and normative commitment. In fact, people who have a high level of
organizational commitment show a higher level of adaptability, satisfaction,
productivity, greater accountability, and a strong sense of loyalty to the organization and
they are less expensive as well.
Affective commitment
Affective commitment refers to the employee’s emotional attachment to,
identification with and involvement in the organization and its goals. The attachment is
reflected in one’s role, task management and social interaction in relation to the
organizational goals and values (Lee, Allen, Meyer & Rhee, 2001). According to
Hofstede (1980), people coming from more individualistic cultures tend to be more
idiocentric and more calculative on self-achievement (Randall, 1993). They feel
committed due to the job itself or the compensation system provided by their employer
(Boyacigiller &Adler, 1991). In other words, employees with low affective commitment
will choose to leave banks, while employees with a high affective commitment will stay
for longer periods, as they believe in the organization and its mission.
Continuance commitment


Meyer and Allen (1991) stated that “Continuance commitment refers to
commitment based on the costs and risk the employees associate with leaving the
organization. As such, the fewer alternative employment opportunities an employee has
the higher the continuance commitment is perceived”. Continuance commitment is
willing to stay in the organization because of the costs or benefits of leave to remain in
the organization.
Normative commitment
Normative commitment refers to employees’ feelings of obligation, duty or
loyalty to remain with the organization, even when the organization suffers some
problems. It is believed that this type of commitment will be influenced by an
individual’s experiences both prior to cultural socialization and following organizational
socialization entry into the organization (Meyer & Allen, 1991).Normative commitment

is defined as a sense of obligation and duty to remain as an organization’s member
2.3

Hypothesis development
2.3.1 Quality of work life and job performance
Quality of work life and job performance both are organizationally based (Beh

&Rose, 2007). In the paper of testing the relationship between quality of work life and
job performance by using questionnaires to survey a sample of 475 managers in a
manufacturing industry in Malaysia, Beh and Rose (2007) indicated the results that
there was a positive relationship between quality of work life and job performance.
In the paper ofKorunka, Christian, Peter Hoonakker, and Pascale Carayon
(2008),Regoand Cunha(2008), quality of work life has a positive impact on employee’s


productivity, loyalty and performance. In Vietnamese market, Nguyen and Nguyen
(2010) found these factors explaining human demands in work place, including survival
needs, belonging needs, and knowledge needs; however, these study did not explain the
relationship between quality of work life and job performance in the Vietnamese
banking sector. As such, this study proposes the positive relationship between quality of
work life and job performance as below hypothesis.
H1: Quality of work lifeimpacts positively on job performance among employees
in the Vietnamese banking sector.
2.3.2 Organizational commitment and job performance
The literature shows a wide range of evidence supporting for the relationship
between organizational commitment and job performance. Specifically, the findings of
study ofJaramillo, Mulki, and Solomon(2005) indicated that organizational commitment
was a significant predictor of job performance.Khan,Ziauddin, Jam, and Ramay (2010)
investigate the relationship between organizational commitment and employees’ job
performance in the oil and gas sector of Pakistan.The results revealed a positive

relationship between organizational commitment and employees’ job performance. In the
comparative analysis of three dimensions of organizational commitment, normative
commitment has a positive and significant correlation with employees’ job performance.
The Vietnamese banking sector has developed in recent years. Many international
banks have opened their branches and merger between different banks were seen. Our
research will concentrate on bank employees how much they are committed to their
work and what level of performance they are giving in their designated position. The
research


will help us to understand the potential aspects that would lead better performance and
factors which would lead high commitment of employees with organization.
Another study by Memari,Mahdieh and Marnani(2013) founded that positive
relationship between organizational commitment and employees’ job performance. In
three dimensions of organizational commitment namely: affective commitment,
continuance commitment, and normative commitment among employees in Meli Bank
in Iran and found several positive relationship between organizational commitment and
job performance.
Observation on previous studies (Fu & Deshpande, 2014) showed that
organizational commitment had a significant direct impact on job performance.
Therefore, the second hypothesis is proposed as follows:
H2: Organizational commitment impacts positively on job performance among
employees in the Vietnamese banking sector.
2.3.3 Quality of work life and organizational commitment
In the paper of Gupta (2013) has showed that the employees with favorable quality
of work life are more committed and maintain a long term relationship with their
organizations as compared to those with unfavorable quality of work life. Quality of work
life in the organization is better, even higher levels of organization commitment is high
too.Fattahi, Kazemian, Damirchi, Kani and Hafezian (2014) also provide evidence
supporting for positive impacts between quality of work life and organizational

commitment.