Dealing with low intrinsic motivation of functional employees in pepsico foods vietnam company

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Hoang Thi Thanh Lam

DEALING WITH LOW INTRINSIC
MOTIVATION OF FUNCTIONAL EMPLOYEES IN
PEPSICO FOODS VIETNAM COMPANY.
ID: 22140025

MASTER OF BUSINESS ADMINISTRATION
SUPERVISOR: DR. NGUYEN PHONG NGUYEN

Ho Chi Minh City - 2016


Executive summary
Vietnam has recently been regarded as a prospective destination of foreign
investment presented with its high-speed development, especially for Fast Moving
Consumer Goods (FMCG). As one of the leading producers in the FMCG market, PepsiCo
Foods Vietnam Co., Ltd (PepsiCo) is following towards the development of the industry and
improving its execution to gain higher performance results. However, there are potentially
existing problems in the company which may reduce the competition edge of organization
and harm to its culture. This research was commissioned to examine what problem in
PepsiCo, the causes leading to problem are and to suggest the validated solutions to deal
with problem, which are in line with company’s policy and resources.
Method of the analysis is combination between theory-informed and validated data,
collected through interview and survey to identify and confirm existence of the problem as
well as causes and alternative solutions.
From the general diagnosis of potential problem at PepsiCo, findings suggest the

existence of low intrinsic motivation of functional employees as the main problem. Problem
scope to work is including Finance, Planning, Human Resources, Procurement and Legal
Department. Low intrinsic motivation is analyzed in terms of its existence, antecedents,
consequences, and solutions are proposed to tackle such a problem. Finally, this report
indicates organization of actions to deal with problem in the lead time of one year and
limited budget approved by the company.

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Recommendations discussed focus on two main causes of low intrinsic motivation of
functional employees in PepsiCo, which are job characteristic and lack of verbal recognition
and rewards. The report also investigated three accordant solutions:
-

Re-assessing and launching detail job description

-

Offering functional employees extracurricular sub-task to develop their
interpersonal skills

-

Improving verbally recognition and rewards activities.

Total estimated cost to implement these 3 solutions is approximately 234mil VND,
which is in line with company’s approved budget of 250 mil VND while benefit brought is
453 mil VND. Annual net saving is calculated as 219 mil VND.
Since there is finiteness of time and resources constrain, limitation of the research

exist such as the current company conditions data did not provide enough information and
only sample of interviews are performed. However, the report provides diversified and
validated data in conjunction with theory to propose meaningful suggestion for PepsiCo to
strengthen its personnel resources and organization behaviors.

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List of tables and graphs:
Table 1: PepsiCo Organization Health Survey condition (Pepsico, 2015) - page 11
Table 2: PepsiCo Organization Health Survey result 2016 (PepsiCo) - page 12
Table 3: Summary of interview result – Potential problems - page 19
Table 4: Summary of problem existence interview - page 29
Table 5: Cost – benefit of alternative solutions – page 50
Graph 1: PepsiCo new POM (PepsiCo) - page 5
Graph 2: Fast Moving Consumer Goods dynamic (Total 6 cities) (Nielsen, 2016) page 6
Graph 3: Growth of Beverage, Food and Milk based product (Nielsen, 2016) - page
7
Graph 4: Causes – effect map - page 39

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Table of content
Executive Summary .................................................................................................... 1
1. Problem identification ............................................................................................. 5
1.1. Problem conceptualization ................................................................................ 5
1.1.1. Company overview ..................................................................................... 5
1.1.2. Business overview ...................................................................................... 7
1.1.3. Symptoms ................................................................................................... 8

1.2. Problem identification ..................................................................................... 14
1.3. Problem definition ........................................................................................... 23
1.4. Justify problem in term of existence................................................................ 26
1.5. Justify problem in term of importance ............................................................ 30
1.6. Potential causes ................................................................................................ 34
1.7. Causes validation ............................................................................................. 38
2. Solutions ................................................................................................................ 40
2.1. Proposal of Solutions ....................................................................................... 41
2.2. Evaluation of solutions .................................................................................... 44
3. Organizations of actions ........................................................................................ 50
Conclusion ................................................................................................................. 54
References ................................................................................................................. 55
Appendices

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1.

Problem identification

1.1.

Problem conceptualization

1.1.1. Company overview
Established through the merger of Pepsi-Cola (1890s) and Frito-Lay (1961) in 1965,
PepsiCo is a global food and beverage leader with twenty two mega brands, whose annual
retail revenue is more than $1 billion for each. The group’s mission is clear that to provide
consumers around the world diversified range of foods and beverages to satisfy their

demand to enjoy, from healthy products to for - fun ones. PepsiCo's people are united by
commitment “Performance with Purpose” to provide a wide range of products, which
included both fun and healthy characteristics to consumers, respect the environment people
are living in and commit to hold a great working place for associates.
PepsiCo Foods Vietnam Ltd. (PepsiCo), who has operated in Vietnam for 9 years,
became one of the leading food manufacturers in the country with main brand “Poca” and
300 employees throughout the country. The local company inherited the morale and mission
from PepsiCo Group to deliver sustained value by providing diversified products portfolio
and taking the role to protect environment. Understanding that the success of the business
also thanks to the contribution of people in the company, PepsiCo has developed its working
environment based on talent sustainability criteria, clear vision and strong business ambition
toward future.

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In order to be well – prepared for globalization and localization process, PepsiCo has
changed the structure to new PepsiCo Operating Model (POM). In which, the organization
has been arranged into vertical multi-layer chart rather than horizontal in the past. In that
new POM, every operational department will be managed through one concept and direction
from global, sector, region, commercial unit to market unit while General Manager will take
the lead role as managing local operating concept. Therefore, in the new POM, the active
involvement of employees in company operation is the most important factor.

Graph 1: PepsiCo new POM (PepsiCo, 2016)

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1.1.2. Business overview

In 2016, Vietnam has been rated as top 3 destination of investment together with
China and Indonesia, where foreign investors tend to expand their operations. In addition,
Vietnam is one of Top 5 Optimistic Countries in the world and our consumer confidence
index (CCI) was in Top 10 globally for six consecutive quarters since quarter 4 of 2014 as
report of Nielsen.1 However, drought and fish crisis recently has hurt the agriculture and
thus GDP growth by achieving growth rate of 5.5% in the first half of 2016, lower by 0.8%
versus 2015 as Trading Economic 20162 researched. Fast-moving consumer goods are
dynamic market but it is recorded that the nominal growth rate was decreased in Quarter 1
of 2016 after the strong recovery in quarter 4 of 2015.

Graph 2: Fast Moving Consumer Goods dynamic (Total 6 cities) (Nielsen, 2016)

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Even beverage was a shining star in the FMCG market with the nominal value
growth of 39% in 2015, foods business was in recovering trend with positive nominal value
growth rate in quarter 1 and 4 of 2015.

Graph 3: Growth of Beverage, Food and Milk based product (Nielsen, 2016)

In the first half of 2016, PepsiCo has achieved volume of 3,800 tons, which is 28%
higher compared with prior year. However, in order to achieve volume of 8,000 tons for full
year 2016, there is much more obstacles that PepsiCo need to overcome to fulfill the target
by keeping driving topline while consciously maintaining low cost structure.
1.1.3. Symptoms
Initial interviews with 5 stakeholders including Finance Director, Planning Manager,
general accountant, former planning analyst and Human Resources director were performed
to investigate the current symptoms in the organization.

Finance team is the biggest

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functional team in the company, including Commercial Finance, Plant Finance, Agro
Finance and Finance team in Head office, located at all branches of the company. As they
take care of the most important and spread parts in business operation and have direct
communication with all other functions but operating separately as back office, their idea are
general and unbiased. For planning team, their activities are as similar as Finance team but
in a deeper level and stressful as they will provide strategic advice to management team for
their business decision. Therefore, they may have incisive judgment to the problem
occurring in the company. Last but not least, HR manager will be the one standing at
company’s overview to provide the information in the general and proven way. The
qualitative questions have been used to investigate the interviewees’ point of view about
what the concerns exist in the organization are. The detail interview is showed as Appendix
1.
According to Planning manager, recently his team faced the biggest problem of very
“high turnover rate” as 80%, increased by 100% versus last year. Team members have
decided to take new challenges outside of PepsiCo after average 3-year commitment. It
brought company a personnel shortage and increased workload for the remaining people. As
a result, working quality was decreased during a period of time. Company was facing
resource constrain since the experience employees decide to leave while the new one cannot
catch the working pace and satisfy all stakeholder’s requirement perfectly. In addition, it is
hard to find out the suitable candidate for the vacancy as the labor supplies for analyzing job

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is not copious. Therefore, planning team has to fulfill business core requirement and

prioritize some of the requests while refusing tasks which they cannot take over all. In
general, there is a gap in operation in this period of time since Planning take an important
role in analyzing all company scenario before launching products, pricing set up or giving
business decision. In addition, he insisted that his business partner’s awareness is not high.
They are usually late for meeting or sending back inputs when being requested and have not
got much preparation for appointment. These behaviors may be known as a passive
involvement in group work as employees tended to reject new task and protect their benefit.
Stressful work load and long working – hours, especially in the peak season, make
employees be lacking of work – life balance but there is not much effort from the employees
to investigate and suppose the simplification as shared by Finance Director. Besides, there is
poorly-run meeting as lack of preparation and members’ contribution. Employees intend to
keep silence during the presentation and question and answer session, even the meeting
outcome can directly affect to their performance and benefit. There is not active feedback
and activities of functional employees in daily work to upper lever/ line manager and they
tend to do what their managers supervise them. In conjunction with the high turnover rate of
finance team, efficiency and effectiveness of the business action have been decreased.
Interview with former planning analyst have been performed to get the experience of
an ex-employee. He mentioned about the low promotion and the unchanged benefit even he
needed to work for 2 persons’ jobs when PepsiCo faced personnel shortage problem in long

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period. In addition, there is sympathy in Planning analyst’s idea compared with Planning
manager when he commented about the cooperative attitude and actions of his business
partner. That means people just want to maintain the current working way rather than
actively improve and perform the new and better one.
Another interview was performed with a general accountant. He wants to keep a
stable work rather than take a new challenge to get a promotion opportunity. Therefore, he
just completed his task as acceptable level rather than taking time to investigate the new

things. The commitment to the organization is low as he intended to search for another job
outside of PepsiCo.
The comment from HR Director gave a general view as she got the results from
PepsiCo Organization Health Survey (OHS), which is a survey that company send to all
PepsiCo employees to get their answers on the level of job satisfaction, job engagement,
agility, commitment, alignment, jobs and career, management and group work. Based on
this data, the company will have the basic evidence to investigate the weakness remaining in
the organization. The survey includes 50 questions and is performed every year to get the
employees’ concern on current organization behavior following the structure that Corporate
team gave. Local HR team has corporated with management team and regional HR to design
list of the questions to discover the information from employees and ensure that the
questions are suitable for local market, especially for questions expressed. Survey has been

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done by all employees, from frontlines, operation to functional team to get the widen data of
the local company.
Survey’s condition is as below:

Table 1: PepsiCo Organization Health Survey condition (Pepsico, 2015)

Based on the result, board of directors need to have action plans to reduce problems
that have bad rating. The results of professional group (back office) for job satisfaction, job
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engagement, agility, alignment, jobs and career, management and group work are higher
than floor rate of 50% while commitment is very low at 36%. It is quite similar for frontline
group (sales and operation) with high level of job satisfaction, job engagement, agility,

alignment, jobs and career, management and group work while there is low level of
commitment at 26%.
Survey elements

Result of Frontline Group

Result of Functional Group

Job satisfaction

56%

75%

Job engagement

64%

76%

Agility

54%

64%

Alignment

70%

72%

Commitment

26%

36%

Job & Career

55%

70%

Management

50%

71%

Work Group

61%

69%

Table 2: PepsiCo Organization Health Survey result 2016 (PepsiCo)

In conclusion, from the answers of 5 respondents in in-depth interview and internal
survey result, there are some general symptoms that are happening in PepsiCo currently:

high turnover rate intention or low level of commitment, passive job involvement (lack of
fully corporation with other departments), job stress, tardiness in working performance and
reduction of enthusiasm. These symptoms lead to the common consequence of late or wrong

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decision making affecting to company sales and benefit, which decreased both company and
employees’ working quality.
1.2.

Problem identification

Interviews were performed with 5 stakeholders including Finance Director, Planning
Manager, General accountant, Distributor Representative and HR director to identify the
potential problems. As initial interview, Finance Director and general accountant were
chosen due to their widen performance in many aspects of company, which are related to
finance service. Planning manager was the one who has deep understanding on company
business because he is major in doing analysis to support for any business decision making.
Another informant is Distributor Representative, who takes responsibility for sales in a
district of Ho Chi Minh city. Since the symptoms indicated that frontline team has the
highest turnover rate in 2016, the in-depth interview should be performed with a member
from sales team to have multidimensional perspectives on the problem identification.
Finally, HR director was interviewed to confirm the problem due to her diversified
information as mentioned in previous part. Qualitative questions are used, including what,
yes/no, how term and opened question to help interviewees easily express their idea in
personal ways. From the defined symptoms, interviewees gave their own opinions about
what the existing problems in the company are. Generally, there are some results from the
interview (detail can be referred as Appendix 2):

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From the managers’ point of view, symptoms discovered from interviews are
accumulated results after long time of not being interested in work. Firstly, higher turnover
rate of around 20% are recorded in year – to – date 2016, increased by 5% compared with
2015. Sales teams accounted the biggest part in high turnover-intention, the second position
is functional employees. Exit interview showed that frontline employees faced difficulties in
maintaining their enthusiasm with work after average two years since their personal result of
Go – To – Market strategy implementation is not effective, they also cannot get familiar
quickly when they moved to other territory due to assignment. FMCG market is on
resuming trend, therefore, competition from other company is very strong. Salesman is
under pressure to achieve the volume growth of 20% per year. That’s the reason why
despondency feeling is raising as a part of job characteristic. Secondly, some functional
teams in plants and office got obstacles in defining their goals and directedness to link their
personal goal to organizational ones. As a general expression, if employees cannot confirm
the necessary of their position in the growth of organization, opportunity for a promotion
does not easily come.
In another way, functional staffs are facing problems in developing themselves, or
innovate working way to have more effectiveness in job outcomes. In reality, the number of
productivity projects reduced by 10% compared with last year (55 projects vs. 61 last year),
and so were the saving amount (23bil VND vs. 27bil last year). Most of the productivity
projects came from commodity compressible (54%), which are successful in dealing for a

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lower price range of production inputs, raw materials and other indirect service, rather than
value engineering, which are savings come from effort of operation as reforming plants
KPIs (utilities and energy usages, innovate product formula to require lower raw materials

usage,…). Employees are satisfied with their current jobs and behaviors, or in another way,
they tends to maintain their current working style without any significant improvement. The
initial comment is that staffs currently have low intrinsic motivation, which is required not
only during organization change but also in daily work to make sure for sustainable
development. As Finance Director has revealed, her staffs “want to maintain their stable life,
do not want to take change which is similar to take risk. If that, they cannot show their
power or strength, or they even cannot know their weakness to improve it. Work and life
continue day by day and there is not much fluctuation. That’s why they feel boring at work
and do not want to be involved in anything new”, or Planning Manager’s comment is that
his employees maintained their current working style, which they have built in the time of
Vietnam beverage company existed, without improvement even the growth of snacks
business is not as much as beverage business. The low intrinsic motivation prevented
employees to devote and develop themselves even their benefit requirement is unchanged.
That’s reason why there is a gap between the actual benefit and ideal package in employees’
expectation.
From the employees’ point of view, employees feel embarrassed when they are
assigned a high target while they need to face attacks from other competitors. Sales team got

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difficulties in finding the way to overcome challenge, therefore they did not enjoy the
feeling of winners. Instead of that, they only feel job stress and being late in performing
other task as reporting and building up sales strategy as Distributor Representative has
shared. Sales team’s target is 20% growth in sales volume, 10% increase in market share of
salty snacks, which will help PepsiCo win the second position in the savory market.
However, sales development strategy is another target since sales team needs to develop
distributor network, especially for rural area, in the situation that sales man headcount is
maintained unchanged. That means sales man will have harder challenges in their daily
work. For functional team, it is not easy for them to work under high pressure of cost saving

while performance quality is required to be improved. For example, PepsiCo are performing
Oracle upgrading program, which affect all functional departments in company. However,
as General accountant’s comment, the schedule is so tight and in order to minimize effects
to daily sales performance, all departments need to suffer a hard time, from sales ordering,
operation at plants to accounting department. The target was considered as a challenge for
back office team to overcome.
The second problems employees claimed is that they are not fully satisfied since
recognition system did not performed well and reward package is low compared with other
company. It affected to employees’ desire to work, or in another explanation, functional
employees are having low extrinsic motivation as they have shared. Former Planning
Analyst commented that he has covered multiple task in the time of personnel constrain but

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the benefit received is unchanged. In this period, he has to surf his work’s challenges
himself while the external treatments did not get him well. He also mentioned about
undefined career growth map for employee level or development calendar which they
should have. Currently only manager level have budget “Development Bank Account” for
specific training following their career development intention. Those are main reasons that
he decided to find out other opportunity outside of PepsiCo. There is also comment about
compensation and benefit package. Employees have concerned about the different annual
increase percentage for each department. Since benefits are the motivation to foster
employees to have positive performance, they admitted that they themselves are not actively
get involved in job and usually feel unmotivated when going to work.
There are confessions that employees did not feel interested in work as they need to
do similar job day by day. It decreased their enthusiasm with current work and created
barrier to accept new thing. Current workload is quite high then they are facing difficulties
in setting up work-life balance and job stress comes as a result. In addition, the job is
becoming challenges if employees cannot receive the improvement in work or fail in

overcoming the obstacles. For more detail, comment from Distributor Representative
indicated that high target and pressure to implement useful go-to-market strategy bring him
anxiety. From time to time, commitment with work is affected as they did not feel good
when devoting to company.

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In conclusion, there are duplications in managers and employees’ interview result,
which may indicate three potential problems occurring in PepsiCo. They are company’s
high business target, problem in employees’ low extrinsic motivation and low intrinsic
motivation. Some main and impressed interview result from 4 stakeholders was summarized
in the table below:
No

01

Position

Company’s high target

Employee’s low

Employee’s low intrinsic

extrinsic motivation

motivation

Finance

“The company’s target

“Staffs, they did not feel

Director

this year is very harsh, for

motivated in work, just want

both

to maintain their stable life,

frontline

and

functional team.”

do not want to take change
which is similar to take
risk.”
“No

ambition,

less

motivation to achieve higher
level”
02

Planning

“Some managers in sales

“I did not feel enthusiasm

Manager

team have complained

from my team and the

with us about too high

business

target which was set for

corporated with.”

their team.”

“Sales

partners

team

did

I

not

investigate more for other

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sales

strategy;

team

did

actual

not

operation

operation
improve
(KPIs,

Productivity)”
03

General
accountant

“Overload working and

“There

is

not

full

high target”

recognition

and

no

chance for promotion.”
“Lower merit increase
percentage compared
with average rate of
company benefit

growth.”
04

Distributor

“High target leads to

Representative stressful work and tardy

“Not interested in work due
to obstacles.”

performance.”

Table 3: Summary of interview result – Potential problems

Interviewing with HR director have been performed to define the problem in PepsiCo
and whether it could be easily proposed to change in conjunction with company’s current
resources and general target.
Discussion about company’s high business target clarified the importance and
mandatory of a high growth rate in sales volume and profit that PepsiCo Vietnam must

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achieve in conjunction with Indochina market’s target. Aiming to achieve the second
position in savory market and be the first one of salty snacks producer in 2020, PepsiCo
Vietnam is developing a firm sales back ground by setting up a distributor and agency
network along the country, focusing on rural markets. However, sales volume growth target
in rural areas need to be maintained as 2 digits numbers. In addition, general target for

operation and functional team is that productivity projects saving need cover 90% total
inflation in operation expenses. Therefore, as a member of PepsiCo Vietnam, it is mandatory
for each employee to try their best to achieve their personal target, which was aligned with
Line Manager and Board of Director. Furthermore, it is required a strong collaboration
between departments to win the organization objectives. Because of strong competition in
FMCG market, the pressure is quite high for not only frontline but also back office
employees. That is reason why the amendment in business target allocation is not applicable
at this period of time.
About extrinsic motivation, especially recognition program, HR director revealed that
currently PepsiCo have operated a system for all employees to set their target, doing midyear and full year review. In which, the personal target is allocated from line manager
including both business and people objective to ensure that employees’ working result are
assessed in both aspects. Every target need to be built based on SMART rule (specific,
measurable, agreed upon, realistic and timely) to ensure that the assessment can be done
easily based on a defined scale. In addition, PepsiCo is recorded as top 10 employers as

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CareerBuilder survey 2015, top 7 employers as Alphabe and Nielsen survey 2014 is
considered as result of a good employer in FMCG market. The insurance policy have been
fixed as Government’s regulation plus Health insurance 24/7 package, which allow
employee to have health check in a wide range of hospital. Salary budget is revised every
year to ensure that PepsiCo is in the top 50 of the best players in the local job market. In
addition, the reward policy is unified for Asia – Pacific Region and it cannot be proposed to
change from local requirement. Total-rewards committee will take responsible for the
guideline every year to identify the same policy for similar geography areas. Then, it leads
to clear mission assigned to HR team to communicate with employees and to solve the
problem between company and employees. Changing employees’ mindset is one of the most
important steps in order to build up one voice for the whole organization.
Moreover, the informal recognition from Line Manager is assessed as not being on

time and has not specific effect. Making a choice between verbal and physical rewards is
also in consideration to leverage its biggest effect. Due to HR Director, PepsiCo care of
personal development by having “People plan” for core talent employees in Management
level, besides functional training course that every employee has, the talent people will have
other soft skill courses to develop their ability as inherited class. However, this program is
not a mass application for all employees mainly due to company’s resource constrain.
Recent Organization Health Survey result also showed that employees detected low intrinsic
motivation themselves, which leads to low score in commitment.

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Through the interview with HR director and analyzing results of interview with 4
stakeholders, it is reasonable to confirm and choose “low intrinsic motivation” to do deeper
investigation and find out the solutions to solve this problem in term of company resource
limitation. From the investigation, low intrinsic motivation is affecting directly to company
working quality and employee’s daily emotion, which lead to necessary to solve it timely
from both company and employees’ perspective. It is also in line with management team’s
requirement to improve organization health for new challenge coming. In addition, from the
interview, “low intrinsic motivation” is recognized greatly in functional team with initial
evidence to prove for the existence and damage to work quality. Taking consideration of the
biggest concern from the interview, the researcher will focus on dealing with low intrinsic
motivation of functional team.
1.3. Problem definition:
Being a critical aspect in investigating employees’ behavior, Ismail et al3 has stated
that motivation is important element contributing to job performance enhancement. It helps
promoting people to maximize their abilities and accomplish satisfaction of needs as Hee et
al4 informed. In addition, “motivation is determined by goal directedness, human volition or
free will, and perceived needs and desires, sustaining the actions of individuals in relation to
themselves and to their environment” according to Moody et al5. This definition is built

from a general view but it contributed basic idea for psychological research on people’s
behavior, especially in working environment. As Moynihan et al6 identified, the main

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mission and challenge of company is "inducing their employees to work toward
organizational goals". The stronger the connection between company and employees is, the
more effective performance is since the similar target is set. Work motivation is defined as
"the degree to which a person wants to work well in his or her job, in order to achieve
intrinsic satisfaction" as Reychav et al7 researched. It is very clear to guide human behavior
“in response to self, other, and environment, supporting intrinsic satisfaction and leading to
the intentional fulfillment of basic human drives, perceived needs, and desired goals" stated
as Moody et al5. Pfeffer8 has justified that the key to long-term success of company is
certainly the way to manage their employees. Employee motivation is becoming an
important part in improving organization’s operation or it is called as a strong predictor to
job performance because creating a high quality working environment through an
enthusiastic team is a main step toward organizational effectiveness.
However, having deep dive research on how should organizations do to motivate
their people or encourage them to actively commit to the organization is very complicated.
Because motivation is a psychology-based and multidimensional concept linked to
employees’ interaction with company, for a similar goal. Therefore, motivation has
moderate effects to employees’ awareness and behaviors which linked to job performance
with the level depended to specific context. “Motivation that drives behavioral action
decisions influences an individual's cognition, learning, and productivity in his or her
personal and professional lives” as Moody et al6. In Self-Determination Theory informed by

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