Attractingand retaining the talents in Vietnam Bank for Agriculture and Rural Development – Soc Son branch

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TABLE OF CONTENT

TABLE OF CONTENT...........................................................................................i
LIST OF TABLES AND FIGURES......................................................................iv
LIST OF ABBREVIATIONS..................................................................................v
PREFACE................................................................................................................1
CHAPTER 1: INTRODUCTION..........................................................................3
1.1 Rationale of the research 3
1.2 Research scope

4

1.3 Research questions 5
1.4 Research objective 5
1.5 Research method

5

1.6 Structure of the research 6
CHAPTER 2: LITERATURE REVIEW...............................................................7
2.1 General knowledge about human resource management

7

2.1.1 Definitions of human resource and human resource management 7
2.1.2 Core functions of human resource management
2.2 Attracting and retaining the talents
2.2.1 Attracting the talents

9

2.2.2 Retaining the talents

9

7

9

2.2.3 Important role of attracting and retaining the talents in a company
10
2.3 Factors affecting attraction and retention process
2.3.1 Recruitment and selection process

11

11

2.3.2 Compensation scheme 16
2.3.3 Leadership skills 25
2.3.4 Corporate culture

26

2.4 Link between talent management and business outcome

26

CHAPTER 3: RESEARCH METHODOLOGY................................................29

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3.1 Research philosophy
3.2 Case study

29

29

3.3 Data collection methods

30

3.3.1 Qualitative and quantitative methods 30
3.3.2 Sources of data 32
3.4 Data analysis 36
CHAPTER 4: EMPIRICAL FINDINGS ON ACTIVITIES OF ATTRACTING
AND RETAINING THE TALENTS AT AGRIBANK SOC SON......................38
4.1 Introduction to Agribank Vietnam and Agibank Soc Son
4.1.1 Agribank Vietnam

38

4.1.2 Agribank Soc Son

39

38

4.2 Characteristics of current workforce at Agribank Soc Son 41
4.2.1 Labor structure by gender

43

4.2.2 Labor structure by qualification

44

4.2.3 Labor structure by foreign language level

45

4.2.4 Labor structure by age 46
4.2.5 Change in labor force 46
4.3 Recruitment and selection at Agribank Soc Son

48

4.3.1 Job description 48
4.3.2 Recruitment policies

49

4.3.3 Recruitment process

51

4.3.4 Selection methods

52

4.3.5 Labor contract 53
4.4 Compensation scheme at Agribank Soc Son

53

4.5 Corporate culture 58
4.6 Result of survey

59

CHAPTER 5: DISCUSSION AND RECOMMENDATION FOR AGRIBANK
SOC SON AND AGRIBANK VIETNAM............................................................66
5.1 Evaluation on activities of attracting and retaining talents at Agribank
Soc Son

66

5.1.1 Strengths and weaknesses

66


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5.1.2 Opportunities and challenges of Agribank Soc Son in attracting and
retaining the talents

68

5.2 Development plan of Agribank Soc Son 69
5.2.1 Business plan

69

5.2.2 Human resource plan

71

5.3 Recommendation and suggested solutions to improve the effectiveness of
attracting and retaining the talents at Agribank Soc Son 72
5.3.1 Improving employee satisfaction with Pay
5.3.2 Diversifying forms of compensation

72

73

5.3.3 Improving employee satisfaction with Opportunities for promotion and
training 74
5.3.4 Completing job description

75

5.3.5 Diversifying recruitment sources

76

5.3.6 Innovating selection criteria 77
5.3.7 Improving selection methods

77

5.3.8 Evaluating recruitment results 79
CHAPTER 6: CONCLUSION.............................................................................81
REFERENCES......................................................................................................84
APPENDIX 1.........................................................................................................88
APPENDIX 2.........................................................................................................90
APPENDIX 3.........................................................................................................96
APPENDIX 4.........................................................................................................97
APPENDIX 5.........................................................................................................98
APPENDIX 6.........................................................................................................99
APPENDIX 7........................................................................................................100


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LIST OF TABLES AND FIGURES
Figure 2.1 Human resource management practices..................................................8
Figure 2.2 Human resource planning.......................................................................12
Figure 2.3 Selection process....................................................................................16
Figure 2.4 Maslow’s hierarchy of needs..................................................................23
Figure 4.1 Organisation structure............................................................................41
Figure 4.2 Labor structure by gender......................................................................44
Figure 4.3 Labor structure by qualifications............................................................44
Figure 4.4 Labor structure by foreign language level..............................................45
Figure 4.5 Labor structure by age............................................................................46
Table 2.1 Financial and non-financial compensation...............................................17

Table 3.1 Qualitative and Quantitative method.......................................................30
Table 4.1 Report in June, 2014................................................................................40
Table 4.2 Change in labor force...............................................................................47
Table 4.3 Recruitment criteria.................................................................................50
Table 4.4 Satisfaction level with “Pay”...................................................................60
Table 4.5 Satisfaction level with “Co-worker”........................................................61
Table 4.6 Satisfaction level with “Training and Promotion”...................................61
Table 4.7 Satisfaction level with “Supervision”......................................................62
Table 4.8 Satisfaction with “Work”.........................................................................63
Table 4.9 Testing on Job satisfaction level..............................................................64
Table 4.10 Adjusted model......................................................................................65


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LIST OF ABBREVIATIONS
HRM
HR
Agribank Vietnam
Agribank Soc Son

Human resource management
Human resource
Vietnam Bank for Agriculture and rural development
Vietnam Bank for Agriculture and rural development –

JDI
SPSS

Soc Son branch

Job descriptive index
Statistical Package for the Social Sciences


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PREFACE
One of the most important things which contribute to the success of an
organisation is human resource. An organisation cannot build a good team of
working professionals without good human resources. People always plays an
important role in planning, operating and controlling almost all activities of a
company. It can only function effectively when its employees perform their job
well, constantly develop their ability to work and try their best for overall
development of the company. To have a high quality workforce, the organization
must ensure the implementation of good human resource management,
organizatinal strategy from reasonable recruitment, work assignment, performance
evaluation and remuneration policies.
The key functions of the Human Resources Management (HRM) department
include recruiting people, training them, performance appraisals, motivating
employees as well as workplace communication, workplace safety, etc. In which,
the very first step deciding who will be selected to fill in vacancies is recruitment.
How to attract excellent candidates, select the right people and retain them, this
depends on the recruitment process, compensation policies and the way a company
motivates its employees. Hiring exceptional talent is critical to company’s business
success. Whether the position is the executive who offers visionary leadership, the
manager who decides on business plans, or just the worker who operates the
machines, a business needs great people to thrive.
Why attracting and retaining the talents in a company becomes more and more
important? Today, the competitive advantage not only comes from cheap materials
or labor but also the highly-skilled employees who create differentiated products

with high quality, good design, whole-hearted service which leads to customer
loyalty. Moreover, the talents know how to take advantage of strengths and
overcome obstacles of a company in right way, which is very critical for long-term
development. Seemingly, the excellent people hold the key to define success or
failure of a company.


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In fact, many enterprises, especially state-owned companies, have not been
fully aware of the important role of human resource as well as recruitment and
retention activities, which lead to lack of effectiveness and efficiency in human
resource management and lost of talents. They do not go in the right direction or
they are reluctant to change the policies which is no longer appropriate. Normally
this problem is ignored when the enterprise just focus some key areas such as
accouting, credit or customer service. The case I want to discuss here is about a
state-owned bank called Vietnam Bank for Agriculture and Rural Development
which think little of the role of human resource and have the imbalance of human
resource among branches. This issue inspires me to choose the topic: “Attracting
and retaining the talents in Vietnam Bank for Agriculture and Rural
Development – Soc Son branch”
In this thesis, I want to tackle two main problems. Firstly, I will review general
knowledge about some basic definitions and theories of recruitment and retention
process to provide an overview for readers. Secondly, I will focus on the case of
Agribank – Soc Son branch to describe and analyse the policies of attracting and
retaining the talents in this branch. After that, I hope to make a small contribution to
find out some solutions for future development of Agribank in general and Soc Son
branch in particular.
I am greatly indebted to Ms. Tran Minh Thu, MA who has inspired me to
choose this topic and encouraged me from the first step of this work. Because of my

limited knowledge and experience, the shortcoming is unavoidable. Therefore, I
sincerely appreciate all the comments and adjustment from teachers to help me
fulfill this thesis.


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CHAPTER 1: INTRODUCTION
1.1 Rationale of the research
Human resource can be valued as one kind of capital which brings competitive
advantage to a company’s bottom line. Although information technology
increasingly grows day by day and machines gradually replace postions of people in
many aspects, we cannot deny the irreplaceable role of human resource in any
organization due to the fact that a company can only start with at least one member
or a group of members, more or less, it is inevitable. There is nothing which can
take on the role of people in managing all activities of a company and dealing with
company’s problems which are unavoidable. Human resources conducts needs
assessments for the organization's current workforce to determine the type of skills
training and employee development necessary for improving skills and
qualifications. An efficiently run human resources department can provide an
organization with structure and the ability to meet business needs through managing
the company's most valuable resources - its employees.
While human resource is known as essential capital of a company, the talents in
that workforce can be seen as core value of this capital source. Attracting and
retaining the talent is becoming increasingly critical to an organization’s bottom line
and future success. The economic slowdown is one of main factors responsible for
placing a new level of importance on talent management programs as they exist
within an organization. Globalization is another factor; with many organizations
viewing the entire world (not just a single country or region) as the situation in
which they conduct business, it requires them to learn how to optimally manage

talent on a global level.
Today, a strong emphasis on effective talent management can produce the right
supply of quality talent and future leadership. It can also improve productivity,
increase retention and link workforce plans to the organization’s strategic
directions. And research shows that organizations with leading talent management
have significantly outperformed other organizations across four key financial
metrics: return on assets; return on equity; net profit margin; and earnings before
interest, taxes, depreciation and amortization.


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The stories about failure in attracting and retaining the talents of Vietnam
Airlines Corporation when talented pilots quit their job and move to other
companies because of poor compensation scheme, or many talents do not come
back to contribute to Vietnamese enterprises after going abroad for further study tell
us the fact that if we have poor talent management practises, we are losers in
business world. For many state-owned companies, especially state banks where
human resource department is placed after other departments like credit and
accounting, talent retention seems to be ignored because of stagnant policies and
reliance on support from state. Actually, I have just had a chance to do research on a
state bank named Vietnam Bank for Agriculture and Rural Development (Agribank
Viet Nam) – Soc Son branch and I realized that this bank in general, and Soc Son
branch in particular, do not care about attracting and retaining the talents, which
leads them to the lag behind other banks. Some actions should be taken to improve
effectiveness and efficiency of the bank and this branch. And this problem inspired
me a lot to do a profound research on actual situation of attraction and retention
process at Soc Son branch. The analysis on recruitment process and motivation
policies will be basis for this issue and further suggestions.
1.2 Research scope

In theory, the author has studied some textbooks and materials which directly
relate to human resource management, recruitment and selection policies,
compensation scheme, especially some theories about attracting and retaining
talents or talent management of a company to build a basis for the whole research.
In reality, the author has focused on the history, the operation scope, the
business results as well as characteristics of workforce of Agribank Soc Son in
2014. At the same time, the author has mentioned the business and human resource
plan of this branch up to 2020 along with data from reports and internal materials
which are collected by the author during the period of doing this research through
survey and interview.


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1.3 Research questions
The findings of this thesis aim at answering the main question: What should
Agribank Soc Son do to improve attracting and retaining the talents. To find out a
profound answer for this big question, the author intends to answer other questions:





What is talent management and its important role?
What are factors that affect attraction and retention activities?
What is the status of attraction and retention of talents in Agribank Soc Son?
What are the most important factors that encourage employees to continue
their jobs in Agribank Soc Son?

1.4 Research objective

The main objective of this thesis is to find out the way suitable for Agribank
Soc Son to improve its talent management. However, this purpose is reached only
when the case of this branch is analysed deeply. Therefore, this work also aims at
defining actual status of recruitment process, compensation scheme and forms of
work motivation at Agribank Soc Son. After that, the author hope to find some key
factors which can attract and retain the talented staff so that the author can give
some recommendations as a small contribution to future development of this bank.
This thesis is expected to be helpful not only for Agribank Soc Son but also
Agribank Vietnam in general.
1.5 Research method
The study uses both qualitative and quantitative methods, as well as a
theoretical study where empirical findings and theories has been compared. The
intention of investigating and using Vietnam Bank for Agriculture and Rural
Development (Agribank Viet Nam) – Soc Son branch as a case company, is to
make the information from the theories more detailed and valid, also the interest in
how attraction and retention management works in practice. An in-depth interview
and online survey will be conducted to collect both quanlitative and quantitative
data. The detail of research methodology will be deeply mentioned in chapter 3.


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1.6 Structure of the research
The thesis is broken down into six chapters: chapter 1, 2, 3, 4, 5 and 6 which are
listed below:
Chapter 1: Introduction
Chapter 2: Literature review
Chapter 3: Research methodology
Chapter 4: Empirical findings on activities of attracting and retaining the
talents at Agribank Soc Son

Chapter 5: Discussion and recommendation for Agribank Soc Son and
Agribank Vietnam
Chapter 6: Conclusion


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CHAPTER 2: LITERATURE REVIEW
2.1 General knowledge about human resource management
2.1.1 Definitions of human resource and human resource management
Human resources is the set of individuals who make up the workforce of
an organization, business sector, or economy. "Human capital” is sometimes used
synonymously with human resources, although human capital typically refers to a
more narrow view (Thomas O. Davenport, 1999). In a company, human resources is
a department which deals with finding, screening, recruiting and training job
applicants, as well as controlling employee-benefit programs. In other words,
human resource is the people who can staff and operate an organization, as
contrasted with the financial and material resources of an organization (Raymond A.
Noe et al., 2011).
Human resource management is the organizational function charged with the
people and issues related to people such as compensation, hiring, performance
management, and training. Human resource management is also the policies,
practices, and systems that influence employees’ behavior, attitudes, and
performance (Raymond A. Noe et al., 2011, p. 39). HRM is also a strategic and
comprehensive approach to manage people and the workplace culture and
environment. Effective HRM enables employees to contribute effectively and
productively to the overall company direction and the accomplishment of the
organization's goals and objectives.
2.1.2 Core functions of human resource management
Some of the major functions of human resource management are: planning,

organizing, leading and controlling. To get things done through the subordinates, a
manager must plan ahead. Planning is necessary to determine the goals of the
organisation and lay down policies and procedures to reach the goals. For a human
resource manager, planning means the determination of personnel programs that
will contribute to the goals of the enterprise, i.e., anticipating vacancies, planning
job requirements, job descriptions and determination of the sources of recruitment.
Once the human resource manager has established objectives and developed plans


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and programs to reach them, he must design and develop organisation structure to
carry out the operations. In other words, the manager has to put the plan into reality.
To encourage people to work effectively, the manager should guide and motivate as
well as help them to solve conflicts. To make sure that subordinates go into right
way and comply with plans, the manager must keep his eyes on employees’
performance to evaluate their results, give feedback and decide on performance
appraisal.
Many companies refer to HRM as involving “people practices.” (Raymond
A.Noe et al., 2011). These practices which give support to organisation’s stategy are
given below:
Figure 2.1 Human resource management practices

Source: Raymond A. Noe et al., 2011
Figure 2.1 indicates that HRM should begin with analysing and designing
specific work to decide how many vacancies should be filled and which specific
skills and knowledge are needed (HR planning). After that, HR manager thinks of
the way to attract potential candidates (Recruiting) and build up criteria to select
right people (Selection). Then, employees are taught how to perform their jobs well
to reach organisation’s goals. HR manager also consider the way to mativate

employees and manage their performance as well as create a good relationship
among employees, between employee and manager.


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2.2 Attracting and retaining the talents
2.2.1 Attracting the talents
Attracting is activities which aim at causing someone to have a liking for or
interest in something, to come to a place or participate in a venture by offering
something of interest, favorable conditions, or opportunities. Attracting also means
making something outstanding compared to others. In a company, attracting the
talents is directly linked to recruitment process at which the candidates look and
evaluate to make comparison among choices (Susan M. Heathfield, 2013). The job
seekers will appreciate companies with attractive recruitment policies, a welldesigned website for application, explicit selection system, special corporate culture
or other good offers. The company should answer the question what are reasons for
which potential candidates should choose this company instead of others to draw a
clear plan to attract people.
The effectiveness of attraction process also depends on sources of recruitment
where employers can find out and select the talents. For many state banks including
Agribank Vietnam, they often seek for candidates from leading universities and give
staffs’ offsprings priority over other applicants, which reduces opportunities for
talents from other sources. The culture of companies can be affected by this
problem and some negative situations may occur. In short, attracting talents can be
associated with art of breaking into minds of people to create a good impression on
their thoughts and lead them to our organizations (Susan M. Heathfield, 2013).
2.2.2 Retaining the talents
If finding the best people is essential to a company’s success, keeping them is
even more important. Retaining the talents is an effort of a company to maintain a
good working condition which support current staff in remaining with the company.

Many employee retention policies focus on satisfying various needs of talented
employees to enhance their performance, gain competitive advantages and reduce
substantial costs involved in hiring and training new staff (David G. Allen, 2004).
One of the most critical issues facing organizations today is how to retain the
employees they want to keep. That is why organizations have to think of strategy to


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minimize job turnover rate and absenteeism of employees. There are many reasons
for which employees leave companies. Some are fed up with current position and
look for another company, some are not content with their wages, some leave
because of retirement and some are dismissed. We can divide these factors into two
groups: voluntary turnover and involuntary turnover. Voluntary turnover is initiated
by the employee; for example, a worker quits to take another job. Involuntary
turnover is initiated by the organization; for instance, a company dismisses an
employee due to poor performance or an organizational restructuring. In fact, an
organization cannot retain all its valued employees (David G. Allen, 2004), Even if
it invested heavily in keeping every key employee on board, some of those
individuals would still leave. This is the reason why an organization has to reduce
this rate and try to attract more and more talents to fill in vacancies.
2.2.3 Important role of attracting and retaining the talents in a company
For most of the 20th century, the primary concerns of mangers in the workplace
were tangible resources, such as land, equipment, and money as well as intangibles
such as brands, image, and customer loyalty (Dess & Picken, 1999). This situation
seems to change now. People are an increasingly valuable source of sustainable
competitive advantage for organisations operating in a global economy. Getting and
keeping the right people in the right places at the right time has never been more
challenging. If a company is not prompt and sensible enough to recognise and
attract the talents, it may become loser in global competition. Success in attracting

and retaining the talents can be regarded as a perfect beginning for any organization
to run business, especially start-up companies. Talents not only work as managers or
supervisor but also highly-skilled workers who directly involve in production
process which create value and profits. What does your organization look like
without gifted staff? It will be stagnant and go downhill. Moreover, bad managers
cost businesses billions of dollars each year, and having too many of them can bring
down a company. The only defense against this problem is a good offense, because
when companies get these decisions wrong, nothing fixes it. Businesses that get it


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right, however, and hire managers based on talent will thrive and gain a significant
competitive advantage.
Finding the right people to help you get the right products to market especially
before your competitors is harder than ever. If organisations do not transform
themselves to ensure they can attract, inspire, motivate, manage, develop and
reward their people appropriately, they may lose their most valuable assets.
2.3 Factors affecting attraction and retention process
2.3.1 Recruitment and selection process
The main function of human resource recruitment is to create a supply of
potential new hires to satisfy the need of organization. After that, selection begins
with the candidates recognised through recruitment and tries to find out the best
qualified individuals who are the most suitable to perform the available jobs. At the
end of the process, the selected individuals are placed in jobs with the organization.
Recruiting consists of any practice or activity carried on by the organization
with the primary purpose of identifying and attracting potential employees. And
through personnel selection, organizations make decisions about who will or will
not be allowed to join the organization (Raymond A.Noe et al., 2011).
2.3.1.1 Planning for and recruiting human resources

The first step in human resource planning is forecasting. This step aims at
identifying which areas of the organization face with labor shortages or surpluses.
The second step in human resource planning is goal setting and strategic planning.
The objective of setting goals is to keep an eye on the problem and create a basis for
evaluating and controlling the organization’s performance in finding and attracting
candidates or carrying out down-sizing. The goals should come directly from the
analysis of labor supply and demand. After taking all possible strategies into
consideration, the final stage of human resource planning is implementing the
strategies and evaluating the outcomes. When the HR strategy comes into reality,
the organization should assign some individuals to be in charge of achieving the
goals. It is also important that these people issue regular progress reports, so the


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organization can be sure that all activities occur on schedule and that the early
results are as expected (Raymond A.Noe et al., 2011).
Figure 2.2 Human resource planning

Source: Raymond A. Noe et al., 2011
One of the most important factor in this step is to plan job description which
helps candidates know exacly which skills and abilities they need and what tasks
they should try to complete with this position. The employers should give
information about position purposes, essential functions

with minimum

requirements and preferred qualifications as well. With position purposes, the
employer will indicate description of departments’s functions with role and tasks
required. Once the employer have identified the position purpose, essential

functions and qualifications, he needs to check, review the description and answer
question that whether it is written to attract an individual who is a top performer or
not? The minimum requirements or “basic qualifications” are those qualifications or
criteria which was established in advance and advertised to potential applicants.
These requirements must be relevant and relate to the duties and responsibilities of
the job. It can be degree in international business administration, required
experiences, good soft skills or a certificate of a foreign language. After that, the


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employers will notice preferred qualifications which are in favor of candidates to
help them become outstanding among applicants. It can be a special skill that
candidates possess or advanced degree which candidates gain in various fields.
2.3.1.2 Recruitment sources
The finding of potential candidates and bringing them to an company is one of
the most important factors of recruitment process. The candidates may be available
inside or outside the organisation. Basically, there are two sources of recruitment,
internal and external sources (Raymond A.Noe et al., 2011).
Internal Sources
An employer can search for best employees within his organization. When a
vacancy needs to be filled in the organisation, it may be given priority to an
employee who is ready for a new task. Internal sources can be promotion, transfer
and in certain cases demotion. When employees have chance to be promoted, they
will work hard and try their best to perform their tasks. Organizations can notice
employees about recruitment by job posting, or communicating information about
the vacancy on company bulletin boards, in employee publications, on corporate
intranets, and anywhere else the organization communicates with employees (Smriti
Chand, 2015). Employees from one position can be transfer to another position or
promoted to higher responsibility with better salary. This source of recruitment not

only reduces the expenditure of company on recruitment but also minimize the cost
for training new staff. However, using internal sources can discourage talents from
other sources, limit capability of creativity and innovations.
External Sources
When existing employees are not the best choice for vacancies, a company will
search for candidates externally. For entry-level positions and perhaps for
specialized upper-level positions, the organization has no internal recruits from
which to draw (Raymond A.Noe et al., 2011). Also, recruiting people outside the
company can help the organization enhance its creation or innovate the way of
doing business. Actually, the company has to spend more money on this method of
recruitment. However, it can bring higher return and effectiveness.
 Direct Applicants and Referrals


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As defined by Raymond A.Noe et al (2011), direct applicants are people who
apply for a vacancy without prompting from the organization. Referrals are people
who apply because someone in the organization prompted them to do so. In other
words, referrals can come from recommendation of existing employees or managers
who undersatand the situation of their company and also the need of applicants.
 Job Fairs
Before the development of social network which gets access to the internet, job
fairs were known as popular way for reaching candidates face-to-face. Job fairs
were used as a mean to develop organizations by spreading out the organization’s
image and brand. Job fairs can attract a lot of potential candidates for many fields of
work. These are not only places for job hunters but also ideal places for people who
have difficulty in choosing a suitable job because when taking part in job fair, they
can find the direction to select desired job (Smriti Chand, 2015).
 Social media

A candidate seeking for a job can search information from online or “offline”
advertisement in newspaper, magazine for careers or on websites for job hunters. By
keeping track of recruitment information, a job seeker can update information and
apply for desired job. Nowadays, social network has experienced a speedy
development. The information not only reach readers faster but it can also reach a
very large number of people inside and outside a country (Smriti Chand, 2015). For
instance, Facebook is now an ideal heaven for advertisment of many aspects. Once
recruitment information is uploaded on Facebook, it will be rapidly shared among
social network at extremely high speed. A person looking for a job can sit at home
in front of his computer and read the information and respont quickly by comments
or send email. This can be regarded as a new approach to recruitment sources,
which can save time for employers and job seekers. This method require a good
preparation for advertisement to express a good message and depict an attractive
image of company. Using adverts can attract a wide range of people. However, the
costs may be higher than direct applicants and referrals due to the fact that this
method does not focus on any specific group of people (Smriti Chand, 2015).
 Public Employment Agencies


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Private agencies are companies known as link between employment need of
employers and people who are seeking for a job. Employers can register their job
vacancies with their local state employment office, and the agency will try to find
someone suitable, using its computerized inventory of local unemployed individuals
(Raymond A.Noe et al., 2011). When the agency finds out some candidates who are
suitable for the positions required, it will inform the company. The employers of
company then carry out recuitment steps to make decision on these candidates. This
method is not only cheap but also effective as well.
 Private Employment Agencies

In contrast to public employment agencies, which primarily serve the labor
market for manual wokers who work physically, private employment agencies
provide much the same service for the intellectual wokers who use their intelligence
and high skills to create high-quality produtcs of wisdom . Workers who are finding
a job can register with a private employment agency whether or not they are
currently holding another job.
 Colleges and Universities
Nowadays, there are a lot of colleges and universities have placement services
which aims at giving their graduates chance to get a job more easily. On-campus
interviewing is the most important source of recruits for entry- level professional
and managerial vacancies (Raymond A.Noe et al., 2011). Direct recruitment from
educational institutions for certain jobs which require technical or professional
qualification has become a common way of recruitment. A close cooperation
between the company and universities or colleges bring benefit for both parties. The
universities can help their students get a desired job from which reinforce image of
these universities. On another hand, this helps organizations find potential
candidates more effectively.
2.3.1.3 Selecting employees and placing them in jobs
After attracting targeted number of candidates, an orgaization will carry out
selection process to choose right people for righ job. While recruitment is seen as
process of motivating more and more candidates, selection process will reject
candidates with poor performance to find the best ones in a pool of applicants. The


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process of selecting employees can be different between companies and depends on
characteristics of the job. However, it should include five basic steps illustrated in
Figure 2.3. Firstly, a recruitment commitee screen the application forms and
candidates’ resumes received to see which meet the minimum requirements of the

job. After this step, candidates selected will be tested by giving work samples and
the committee will observe their performance. Those with the best abilities are
invited to the organization for one or more interviews. Actually, candidates in this
round can be divided into groups to make it easier for employers to evaluate
performance of each member. The best candidates who pass three previous stages
will be chosen as official employees of company after the recruitment committee
check their references and background one more time.
Figure 2.3 Selection process

Source: Raymond A. Noe et al., 2004
2.3.2 Compensation scheme
Beside the important role of recruitment and selection process, compensation is
another factor that should not be ignored if a company really want to attract and
retain their talented workforce. According to R. Wayne Mondy (2010),
compensation is the total of all rewards provided to employees in return for their
services. Compensation can be defined as the total amount of the monetary and nonmonetary pay provided to an employee by an organization in return for their
performance as required. Compensation scheme can be adjusted based on
employees contributions and accomplishments; the availability of employees with
required skills in the marketplace to decide whether they are scarcie or not; the
expectation of the organization to attract and retain a particular employee for the


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value they receive from employee’s contribution to reinforce

the employment

relationship, and the profitability of the company or the funds available in a nonprofit or public sector setting, and thus, the ability of an employer to pay marketrate compensation. The market research may be also reference for making decision
on what and how to compensate. In this section, the author will specify some

categories that directly relate to the term “compensation”: financial compensation,
non-financial compensation and work motivation. In financial compensation, the
author will cover two smaller categories: direct financial compensation and indirect
financial compensation. The following table will show out some kinds of
compensation included in financial compensation and non-financial compensation:
Table 2.1 Financial and non-financial compensation
FINANCIAL
DIRECT
INDIRECT

NON-FINANCIAL
THE JOB
WORK

Equitable wages

Insurance Plans:

POSITION
Interesting Duties

and Salaries

Life,

and Responsibilities

Supplementary

ENVIRONMENT

Fair and Consistent
Practices and
Policies

Market

Health, Dental,

Challenges

Adjustments or

Vision, Disability

Cost of Living

Coverage,….

Authority

Supervision

Social Security

Autonomy

Fun and Effective

Competent

Increases
Merit Increases

Benefits:

Co-workers

or Performance

Retirement plans,

Opportunity for

Bonuses

Employment

Recognition

insurance, Worker

Comfortable and
Safe Working

Fair

Compensation,

Feeling of

Commissions

Educational

Achievement

services,

Environment
Flexible Scheduling

Employee

Advancement

services….

Opportunity

Alternative Working


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Arrangements
Paid Absences:
Vacations,

Modified Retirement

Holidays, Sick
Leave,
Educational
Leave, Jury Duty,
Compassionate
Leave
Source: />2.3.2.1 Financial compensation
 Direct financial compensation
The most well-recognized form of compensation, and probably the first type of
compensation that most workers look forward to, is direct compensation. Direct
compensation is the money directly paid to employees in exchange for their labor.
Direct compensation includes wages, salaries, bonuses, tips and commissions
provided at regular and consistent intervals (Shawn Grimsley, 2014).
For many people who want to support their family or satisfy their needs of
accomodation, vehicles or some necessities of life, the first reason why they work is
salary. Salary is a fixed amount of money or compensation paid to an employee by
an employer in exchange for their work performance. The salary system is included
in pay structure which can have several grades or levels, career bands, or job
families with each having a minimum or maximum salary associated. In Viet Nam,
there are some methods for calculating the salary. For example, if the salary is based
on working days, the general formula is:
Salary = (Base pay + allowances)/total workdays of a month x number of real
working days
One of the most common ways to motivate employees is changing the base
pay. Base pay is a fixed regular payment made to an employee in exchange for
performance of the duties and responsibilities of their role (Shawn Grimsley, 2014).


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When an employee receives an increase to their base pay, it is considered a pay
increase. There are various reasons and methods for determining an increase, but
the common factor is that the increase changes the level of ongoing base pay. When
the cost of living increases, the company intends to increase the base pay by a set of
percentage which accounts for this increase as a motivator for its employees.
Moreover, the change in pay structure can derive from a market adjustment
following a compensation review against pre-established criteria. Market
adjustments are typically made following the receipt of market survey data. This
data is usually received and evaluated towards the end of either your fiscal or
calendar year. Organizations will evaluate their salaries against market data and, if
required, adjust base salaries for roles that are below the market. Or when a
company decides on advancement of an employee to a higher position, then it is
called a promotional increase. Promotion is usually based on availability of
opportunities and preparedness of employees to advance. The increase in base pay
can result from a merit increase which are awarded to recognize employees’
contribution and to compensate them for their high level of performance.
A direct financial compensation can take the form of bonus pay which is
compensation over and above the amount of pay specified as wages or salary and it
is only distributed as the organization is able to pay or as outlined in an employment
contract. Bonus pay is used by many organizations to improve employee morale,
motivation, and productivity or as a thank you to employees who achieve a
significant goal (HR Council for the Nonprofit Sector).
When compensation is based on volume or some form of performance, this is
known as commission based remuneration. Other terms used include piecework or
piecemeal. Many industries used this type of remuneration to get a minimum
standard of production in exchange for compensation. It is used to shift risk from
the employer to the employee. There are two methods to calculate commission.
One is based on volume of services and the other is based on sales.
 Indirect Financial Compensation
Another tool available to a company is indirect financial compensation.

Indirect compensation is a benefit given to an employee that has financial value,


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but is not a direct monetary payment (R. Wayne Mondy, 2010) . It is often referred
to as a noncash benefit. In certain circumstances, these noncash benefits may be
more valuable to an employee than a high salary or wage. Indirect financial
compensation including all financial rewards that are not included in direct
compensation and can be understood to form part of the social contract between the
employer and employee such as benefits, leaves, retirement plans, education, and
employee services. Such benefits may include Insurance plans, which may in turn
include Life, Supplementary Health, Vision, Dental, etc., Indirect financial
compensation can also include Social Security benefits, Retirement Plans,
Employee Insurance Workers compensations, and can also include paid absence like
vacations, sick leaves, holiday leaves, educational leave.
Medical insurance coverage is often a coveted benefit. Employer-sponsored
medical insurance may be the only way an employee with a sick spouse can afford
health insurance and offers quite an inducement to come aboard and stay with the
company (ibid).
Retirement plans can also offer an attractive incentive. If a company offers a
defined benefit plan, it's promising to pay a certain amount of retirement benefits to
an employee upon the employee's retirement. You can think of it like a privatesector social security payment - a set amount each month for life (Shawn Grimsley,
2014).
Stock options and profit sharing programs are not only an incentive for
employees to stay but also provide an incentive for employees to be more
productive because employees share in the gains. An employee stock option is the
right to buy company stock at a certain price during a certain period of time (ibid).
2.3.2.2 Non-financial compensation
The compensation scheme of a company not only cover monetary rewards. In

fact, to gain employees’ satisfaction and inspire them to greater efforts, an
organization need to use some intangible motivators rather than pay base.
According to the McKinsey Journal, for individuals who are relatively satisfied with
their salary, it is the non-financial rewards that tend to be more effective in
contributing to long-term employee engagement. Non-financial rewards refer to