UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business LE ANH HUNG ANTECEDENTS OF EMPLOYEES' LOYALTY TO THE ORGANIZATION THROUGH THE MEDIATING ROLE OF JOB SATISFACTION ID: 22120125 MASTER OF BUSINESS (Honours) SUPERVISOR: DR PHAM QUOC HUNG Ho Chi Minh City - Year 2015 i Acknowledgements Firstly, I would like to express deep gratitude to my supervisor who has given me great supervision and advice in this process His feedback and guidance as well as knowledge in this field were very valuable and useful throughout the all process of research Secondly, I have a high grateful to all respondents who spent their valuable time to answer my questionnaire Especially, I feel many thanks by my support of friend who delivered my questionnaires to others and helped me collect data as well as assisted many sources for my task Thirdly, I express my gratitude to my colleague at AMECO Ltd, they assumed my work when I must have finished every stage of this research At last, my sincere thanks owe to my family who supported me both of physical and mental conditions to complete this study July 01, 2015 Le Anh Hung ii ABSTRACT Labor force is a vital factor to contribute the successful of organization But retention of loyalty employees are challenging The purpose of the study is to determine the factors impact on the employee loyalty The research model included dependent variable "employee loyalty" and mediator variable "employee satisfaction" as well as four independent variables, namely: relationship with immediate supervisor, supportive management style, training and honest communication It means that the study carried out to know how the impact of independent variables on employee loyalty and employee satisfaction Secondly, this study is also find out how the relationship between employee satisfaction and employee loyalty The research used the quantitative approach to collect data Data was collected from 350 employees who worked for five companies at Ho Chi Minh city, Dong Nai province, Vung Tau and Binh Duong Province In data analysis, the result showed that independent variables has impact on dependent variable For example: relationship with immediate supervisor, training and honest communication had impact on employee satisfaction Secondly, relationship with immediate supervisor, training and honest communication had impact on employee loyalty That is a pity, there was not relationship between employee satisfaction and employee loyalty Moreover, the research had some of hypothesis that satisfied So, the model research had some change Based on the research result, it will suggest manager understand the relationship between employer and employee, deeply KEYWORDS: Relationship with immediate supervisor, supportive management style, training and honest communication, employee satisfaction and employee loyalty iii Contents Acknowledgements i ABSTRACT ii LIST OF TABLES v LIST OF FIGURES v LIST OF ABBRVATION vii CHAPTER 1: INTRODUCTION 1.1 Background 1.2 Statement of the problem 1.3 Research objectives 1.5 The Scope and Limitation 1.6 Chapter Layout 1.7 Chapter summary CHAPTER 2: LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENTS .7 2.1 Theoretical background 2.1.1 Employee Loyalty 2.1.2 Employee satisfaction 2.1.3.Factors affecting both employee satisfaction and employee loyalty 10 2.1.4.Impact of Employee satisfaction toward loyalty 15 2.2 Research Model 16 2.3 Chapter summary 18 CHAPTER 3: RESEARCH METHODOLOGY 19 3.1 Research method and procedure 19 3.2 Measurement scales 21 3.2.1 Employee Loyalty 21 3.2.2 Employee Satisfaction 21 3.2.3 Relationship with immediate supervisor 22 3.2.4 Training 23 3.2.5 Supportive management style 24 iv 3.2.6 Honest communication 25 3.3 Main survey 26 3.4 Sampling 27 3.5.Data analysis method 27 3.6.Chapter summary 29 CHAPTER 4: DATA ANALYSIS 29 4.1 Descriptive Analysis 30 4.2 Scale measurement 31 4.3 Correlations coefficient 34 4.4 Confirmatory Factor Analysis (CFA) 35 4.5 Multiple Regression Analysis 37 4.6 Chapter Summary 41 CHAPTER 5: DISCUSSION 42 5.1 Conclusion 42 5.2 Contributions and implications 43 5.3 Limitations 44 5.4 Recommendations for the future research 44 References 45 APPENDICES 53 Appendix 1: English Questionnaire 53 Appendix 2: Vietnamese Questionnaire 54 Appendix 3: Result of the descriptive analysis 55 Appendix 4: Result of the reliability test 58 Appendix 5: Pearson correlation Coefficient 60 Appendix 6: Result of CFA 61 Appendix 7: Result of multiple regression analysis 68 v LIST OF TABLES Table 4.1.1: Gender of respondent 24 Table 3.1: Scales items for employee loyalty 32 Table 3.2: Scales items for employee satisfaction 33 Table 3.3: Scales items for relationship with immediate supervisor 33 Table 3.4: Scales items for training 34 Table 3.5: Scales items for supportive management style 35 Table 3.6: Scales items for honest communication 36 Table 3.7: Main measure of CFA 39 Table 4.1: Characteristic of Sample 42 Table 4.2: Result of reliability test 44 Table 4.3: Pearson correlation Coefficient 45 Table 4.4: Validity and Reliability 47 Table 4.5: Model Summaryb 48 Table 6: ANOVAa 48 Table 4.7: Coefficientsa 49 Table 4.8: Model Summaryb 50 Table 4.9: ANOVAa 50 Table 4.10: Coefficientsa 51 vi LIST OF FIGURES Figure 2.1: Research Model 29 Figure 3.1: The research process 31 Figure 4.1: Amos Model 46 vii LIST OF ABBRVATION WTO : WORRLD TRADE ORGANNIZATION APEC : ASIA-PACIFIC ECONOMIC COOPERATION AFTA : ASEAN FREE TRADE AREA ASEM : THE ASIA-EUROPE MEETING VAM : VIET NAM ASSOCIATION OF MECHANICAL INDUSTRY CFA : CONFIRMATORY FACTOR ANALYSIS CHAPTER 1: INTRODUCTION 1.1 Background In the 21 century, the countries undergo many huge problems in the world One of them was financial issue Caudron (as cited in Kelli, 2001) agreed that there have been many companies that are downsizing due to slow periods in recent years Viet Nam is also affected more or less Simultaneously ,Viet Nam is affected by financial crisis storm and Economic recession from 2008 It took many people to lose job, companies were bankruptcy In 2012, there were 54.261 dissolution enterprises (Xuan Than, 2013), it increased 60.737 by 2013 ( Thanh Trung, 2014) It jumped 67.823 enterprise in 2014 (Trung Ninh, 2014) Viet Nam Joins the WTO and APEC which made trade more dynamic Thus, it excited domestic firms more and more interested Enterprise want to improve their competitiveness in order to occupy the market Enterprise should update many things to respond real situation For example management systems, business strategy, human resource management, financial management, internal controls Tran Van Hung (2011a) stated that Conditions created a competitive advantage that was investment and development of human resources with high quality Thereby, this study only focused on human resource management field Human management is an important aspect of organizational processes A well-managed business organization normally considers the employees as the primary source of productivity gains These organizations consider employees rather than capital as the core foundation of the business and contributors to develop firm To ensure the achievement of firm goals, the organization creates an atmosphere of commitment and cooperation for its employees through policies that facilitate employee satisfaction Satisfaction of human resource finds close links to highly motivated employees Motivating employees and developing loyalty or commitment to increase productivity and reduce turnover rates Frederick F (2001) referred that "Loyalty is the key to success in today's economy"(p 01).Loyalty will be defined as the tendency of an employee to continue working for the same employer Nighat Naeem (2013) stated that" Employee satisfaction is one of the main and important issues of all time Employees are the key player in organization so their commitment with organization is very important"(p 01) To get more achieving in the world market and domestic market is becoming an difficult more than it has been ever Hence, maintaining the stable labor force is very important of enterprise which is also unvalued asset."Employees are more loyal and productive when they are satisfied" ( Hunter & Tietyen, as cited in Bulent Aydin & Adnan Cevlan, 2008, p.4) The purpose of this study is to examine the relationship between employee loyalty and employee satisfaction The study also find out the impact of other factor toward employee loyalty with employee satisfaction Such as relationship with immediately supervisor, training program, supportive management style and honest communication The research only discover in Engineering company because there are following reason Firstly, mechanical engineering is one in eight key industry at Vietnam Engineering industrial is a brand of economic that has particularly important position for the development of the economy because it is a produce industry which creates machinery and equipment supply for the other industry In fact, the world does not has any country to implement the successful of industrialization and modernization process so that does not has a strong mechanical industry, the development of mechanical industry is both foundation and driving for the development of the different professions in society, it also has a positive impact on the services sector through the development of the distribution network Secondly, researcher want to interest in mechanical engineering Because researcher passion this field so long 57 Education level chart Experience level chart 58 Appendix 4: Result of the reliability test Item statistics of satisfaction Item Statistics SF1 SF2 SF3 Item statistics relationship with immediate supervisor Item Statistics RWIS1 RWIS2 RWIS3 RWIS4 Item statistics training Item Statistics TRA1 TRA2 TRA3 TRA4 TRA5 TRA6 TRA7 TRA8 TRA9 TRA10 TRA11 59 Item statistics supportive management style Item Statistics SMS1 SMS2 SMS3 SMS4 Item statistics honest communication Item statistics loyalty 60 Appendix 5: Pearson correlation Coefficient Correlations SF1 SF1 SF2 SF3 RWIS1 RWIS2 RWIS3 RWIS4 TRA1 TRA2 TRA3 TRA4 TRA5 TRA6 TRA7 TRA8 TRA9 TRA10 TRA11 SMS1 SMS2 SMS3 SMS4 HC1 HC2 Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N SF2 307 ** 577 000 307 ** 324 000 307 ** 508 000 307 ** 356 000 307 ** 407 000 307 ** 370 000 307 ** 406 000 307 ** 332 000 307 ** 417 000 307 ** 413 000 307 ** 401 000 307 ** 364 000 307 ** 401 000 307 ** 327 000 307 ** 342 000 307 ** 314 000 307 ** 346 000 307 ** 374 000 307 ** 397 000 307 ** 476 000 307 ** 418 000 307 ** 370 000 307 ** 308 000 307 577 ** 000 307 307 ** 355 000 307 ** 529 000 307 ** 416 000 307 ** 413 000 307 ** 379 000 307 ** 526 000 307 ** 414 000 307 ** 446 000 307 ** 386 000 307 ** 443 000 307 ** 429 000 307 ** 354 000 307 ** 469 000 307 ** 408 000 307 ** 359 000 307 ** 407 000 307 ** 374 000 307 ** 424 000 307 ** 457 000 307 ** 432 000 307 ** 423 000 307 ** 405 000 307 SF3 324 ** 000 307 ** 355 000 307 307 ** 306 000 307 ** 328 000 307 ** 406 000 307 ** 289 000 307 ** 394 000 307 ** 359 000 307 ** 363 000 307 ** 382 000 307 ** 389 000 307 ** 371 000 307 ** 337 000 307 ** 307 000 307 ** 313 000 307 ** 392 000 307 ** 367 000 307 ** 391 000 307 ** 319 000 307 ** 329 000 307 ** 287 000 307 ** 365 000 307 ** 292 000 307 RWIS1 RWIS2 RWIS3 RWIS4 TRA1 TRA 508 356 407 370 406 33 ** 000 307 ** 529 000 307 ** 306 000 307 307 ** 535 000 307 ** 603 000 307 ** 540 000 307 ** 550 000 307 ** 322 000 307 ** 500 000 307 ** 342 000 307 ** 416 000 307 ** 471 000 307 ** 378 000 307 ** 394 000 307 ** 524 000 307 ** 385 000 307 ** 426 000 307 ** 448 000 307 ** 478 000 307 ** 474 000 307 ** 443 000 307 ** 509 000 307 ** 475 000 307 ** 000 307 ** 416 000 307 ** 328 000 307 ** 535 000 307 307 ** 542 000 307 ** 488 000 307 ** 355 000 307 ** 317 000 307 ** 358 000 307 ** 338 000 307 ** 419 000 307 ** 375 000 307 ** 369 000 307 ** 421 000 307 ** 430 000 307 ** 382 000 307 ** 312 000 307 ** 376 000 307 ** 416 000 307 ** 427 000 307 ** 385 000 307 ** 437 000 307 ** 442 000 307 ** 000 307 ** 413 000 307 ** 406 000 307 ** 603 000 307 ** 542 000 307 307 ** 567 000 307 ** 441 000 307 ** 344 000 307 ** 443 000 307 ** 375 000 307 ** 467 000 307 ** 392 000 307 ** 428 000 307 ** 415 000 307 ** 362 000 307 ** 437 000 307 ** 395 000 307 ** 498 000 307 ** 444 000 307 ** 459 000 307 ** 392 000 307 ** 452 000 307 ** 390 000 307 ** 000 307 ** 379 000 307 ** 289 000 307 ** 540 000 307 ** 488 000 307 ** 567 000 307 307 ** 461 000 307 ** 447 000 307 ** 431 000 307 ** 505 000 307 ** 390 000 307 ** 414 000 307 ** 347 000 307 ** 440 000 307 ** 345 000 307 ** 412 000 307 ** 414 000 307 ** 455 000 307 ** 461 000 307 ** 452 000 307 ** 408 000 307 ** 532 000 307 ** 414 000 307 ** 000 307 ** 526 000 307 ** 394 000 307 ** 550 000 307 ** 355 000 307 ** 441 000 307 ** 461 000 307 307 ** 604 000 307 ** 735 000 307 ** 566 000 307 ** 592 000 307 ** 617 000 307 ** 533 000 307 ** 443 000 307 ** 500 000 307 ** 417 000 307 ** 557 000 307 ** 425 000 307 ** 429 000 307 ** 468 000 307 ** 456 000 307 ** 456 000 307 ** 388 000 307 41 35 32 31 34 44 60 3 61 67 51 52 47 41 36 37 47 41 33 38 32 39 33 HC3 HC4 LOY1 LOY2 LOY3 LOY4 Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N Pearson Correlation Sig (2-tailed) N ** 321 000 307 ** 290 000 307 ** 363 000 307 ** 340 000 307 ** 333 000 307 ** 343 000 307 ** 413 000 307 ** 348 000 307 ** 404 000 307 ** 479 000 307 ** 447 000 307 ** 424 000 307 ** 305 000 307 ** 344 000 307 ** 281 000 307 ** 225 000 307 ** 308 000 307 ** 266 000 307 ** 423 000 307 ** 362 000 307 ** 482 000 307 ** 501 000 307 ** 461 000 307 ** 477 000 307 ** 390 000 307 ** 292 000 307 ** 343 000 307 ** 417 000 307 ** 320 000 307 ** 337 000 307 ** 407 000 307 ** 315 000 307 ** 391 000 307 ** 355 000 307 ** 357 000 307 ** 442 000 307 ** 427 000 307 ** 333 000 307 ** 392 000 307 ** 401 000 307 ** 321 000 307 ** 357 000 307 ** 393 000 307 ** 411 000 307 ** 438 000 307 ** 549 000 307 ** 425 000 307 ** 438 000 307 39 41 32 37 28 32 61 Appendix 6: Result of CFA Standardized Regression Weights: (Group number - Default model) RWIS4 RWIS3 RWIS2 RWIS1 SMS4 SMS3 SMS2 SMS1 HC4 HC3 HC2 HC1 TRA11 TRA10 TRA9 TRA8 TRA7 TRA6 TRA5 TRA4 TRA3 TRA2 TRA1 SF2 SF1 LOY4 LOY2 LOY1 SF3 62 CMIN Model Default model Saturated model Independence model RMR, GFI Model Default model Saturated model Independence model Baseline Comparisons RMSEA 63 Regression Weights: (Group number - Default model) RWIS1 SMS4 SMS3 SMS2 SMS1 HC4 HC3 HC2 HC1 TRA9 TRA8 TRA7 TRA6 TRA5 TRA4 TRA3 TRA2 TRA1 SF2 SF1 LOY4 LOY2 LOY1 SF3 64 Covariances : (Group number - Default model) RWIS < > RWIS < > RWIS < > RWIS < > RWIS < > SMS HC TRA TRA SMS SMS SMS HC HC SF E7 E8 E19 E16 E1 E1 E13 65 Correlations: (Group number - Default model) RWIS < > RWIS < > RWIS < > RWIS < > RWIS < > SMS HC TRA TRA SMS SMS SMS HC HC SF E7 E8 E19 E16 E1 E1 E13 66 Variances: (Group number - Default model) RWIS SMS HC TRA SF LOY E4 E3 E2 E1 E19 E18 E17 E16 E23 E22 E21 E20 E15 E14 E13 E12 E11 E10 E9 E8 E7 E6 E5 E25 E24 E28 E27 E26 E29 67 Squared Multiple Correlations: (Group number - Default model) SF3 LOY1 LOY2 LOY4 SF1 SF2 TRA1 TRA2 TRA3 TRA4 TRA5 TRA6 TRA7 TRA8 TRA9 TRA10 TRA11 HC1 HC2 HC3 HC4 SMS1 SMS2 SMS3 SMS4 RWIS1 RWIS2 RWIS3 RWIS4 68 Appendix 7: Result of multiple regression analysis a Coefficient Correlations Coefficient Correlations a Model Correlations Covariances a Dependent Variable: SF Residuals Statistics a Predicted Value Residual Std Predicted Value Std Residual a Dependent Variable: SF Coefficient Correlations a Model Correlations Covariances a Dependent Variable: LOY Residuals Statistics a Predicted Value Residual Std Predicted Value Std Residual a Dependent Variable: LOY ... factor to contribute the successful of organization But retention of loyalty employees are challenging The purpose of the study is to determine the factors impact on the employee loyalty The. .. knowledge and skills or to modify the attitudes and behaviors of employees in order to 11 make them consistent with the goals of the organization and the requirements of the job Employee training... business organization normally considers the employees as the primary source of productivity gains These organizations consider employees rather than capital as the core foundation of the business