Southern Luzon State University
Republic of Philippines
IMPACT OF HUMAN RESOURCE MANAGEMENT PRACTICES ON
ORGANIZATIONAL PERFORMANCE IN SMALL AND
MEDIUM ENTERPRISES IN THAI NGUYEN CITY A Dissertation
Presented to
The Faculty
Graduate School
Southern Luzon State University
Lucban, Quezon
In Partial Fulfillment
of the Requirements for the Degree
Doctor of Business Administration by


iii

ACKNOWLEDGMENT

Writing a doctoral dissertation is a gratifying but difficult and sometimes nerve
wrecking endeavor that only few engaged in because it requires a lot of sacrifices and hard
work from the researcher. However, at the end of the task, one experiences a wonderful
feeling of joy, happiness, relief and fulfillment.
The researcher would like to extend her sincerest gratitude and thanks to the following
people who were very instrumental in the fulfillment of this research study.
DR. CECILIA N. GASCON, President of the Southern Luzon State University in the
Republic of the Philippines, for her untiring effort and belief that this collaboration is possible
thus enabling us to pursue the DBA degree;
DR. DANG KIM VUI President of Thai Nguyen University in the Socialist Republic of
Vietnam, for his untiring effort and belief that this collaboration is possible thus enabling us
to pursue the DBA degree
DR. NGUYEN TUAN ANH, Ph.D., former Director of the International Training
Center, Thai Nguyen University of the Socialist Republic of Vietnam, for his enormous
pursuit to provide the Vietnamese people an opportunity to grow through education;
DR. ALICE T. VALERIO her adviser, for the guidance and endless support for the
improvement of this study.
PROFESSORS ………… , ………………., and ……………, who composed the Oral
Defense Committee, for their suggestions, comments and corrections to improve this study;
ITC STAFF, for providing the necessary research materials;
HER FAMILY and FRIENDS, for the love and support in one way or the other;
And TO ALL who have contributed to make this study a success.

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1
Background of the Study
1
Objectives of the Study
5
Hypothesis
6
Significance of the Study
6
Scope and Limitation of the Study
7
Definition of Terms
7
Chapter II. Review of Literature and Related Studies
10
Conceptual Framework
57
Chapter III. Methodology
58
Locale of the Study
58
Research design
58
Population and sampling
58
Instrumentation
59
Data gathering procedure
60
Statistical treatment

of Type of Industry and Ownership

2
Table 4.1.2. Percentage Distribution of Respondents’ Profile in Terms
of Business Characteristic

3
Table 4.3.1. The Assessment of Respondents on HRM in Terms of
Recruitment and Selection

4
Table 4.32. The Assessment of Respondents on HRM in Terms of
Training and Development

5
Table 4.3.3. The Assessment of Respondents on HRM in Terms of
Career Planning System

6
Table 4.3.4. The Assessment of Respondents on HRM in Terms of
Participation and Involvement

7
Table 4.3.5. The Assessment of Respondents on HRM in Terms of
Compensation and Benefits

8
Table 4.3.6. The Asessment of Respondent on HRM in Terms of
Performance Appraisal

ix Title:
IMPACT OF HUMAN RESOURCE MANAGEMENT
PRACTICES ON THE ORGANIZATIONAL
PERFORMANCE OF THE SMALL AND MEDIUM
ENTERPRISES IN THAI NGUYEN PROVINCE
Researcher:
LE KIM ANH
Degree
Doctor of Business Administration
Name/ Address of the
Institution
Southern Luzon State University
Graduate School
Lucban, Quezon
Date Completed
October, 2013
Adviser
DR. ALICE T. VALERIO

ABSTRACT
The study was conducted to assess impact of human resource management
practices on the organizational performance of the small and medium enterprises in Thai
Nguyen Province. A total of 290 managers of the small and medium-sized enterprises in
Thai Nguyen City were selected to be the respondents of the study. It specifically
explored on the profile of the respondents in terms of Types of enterprise; Form of owner

organization and employee wellbeing as also on appreciation strategy has significant
positive correlation with perceived organizational performance.

xi

Compensation system based on expectancy of employees, comparable with
market packages, competency based, performance based, profit sharing based
mechanism, covering both financial and non-financial dimensions, is positively
correlated with perceived organizational performance.
There is a significant relation between Perceived Organizational Performance and
performance appraisal system, that seems based on focused counseling, employee
feedback, transparent disbursement of bonuses, performance based promotions, training
selections and clarity of objectives.

1

CHAPTER I
INTRODUCTION
Introduction
Human Resource Management is the process of developing, applying and
evaluating policies, procedures, methods and programs relating to the employment,
motivation, maintenance, and management of people in the organization. Human
resources management include activities like strategic HRM, human capital
management, corporate social responsibility, human resource planning, recruitment,
selection, training and development, reward management, performance management,
employee relations, health safety and employee well-being as well as provision of
employee services. It comprises a set of practices and policies designed to maximize
organizational integration, employee commitment, flexibility and quality of work
(Armstrong, 2009).
Effective human resource practices relate to company performance by

Sixth, job description refers to the extent jobs are tightly and clearly defined so that
employees know what is expected of them. Finally, profit sharing reflects the concern for
overall organizational performance on a sustainable basis (Delery & Doty, 1996).
Over the years, researchers have suggested many HRM practices that have the
potential to improve and sustain organizational performance. These practices include
emphasis on employee selection based on fit with the company’s culture, emphasis on
behaviour, attitude, and necessary technical skills required by the job, compensation
contingent on performance, and employee empowerment to foster team work, among
others. Purcell et al., (2003) pointed out that the most successful companies had 'the big

3

idea', they had a clear vision and a set of integrated values. They were concerned with
sustaining performance and flexibility which reveals a clear evidence of positive attitudes
towards HR policies and practices, level of satisfaction, motivation and commitment, as
well as overall operational performance.
Background of the study
Small and Medium Enterprises (SMEs) have been recognized as important factor
of the economy of many countries and Vietnam is not an exception. According to the
data from the ministry of planning and investment of Vietnam SMEs occupied for nearly
85% of the total of enterprises in Vietnam and contribute nearly 45% of annual GDP of
the nation. There is no single theory, which can sufficiently explain growth of an SMEs.
The aim of this thesis is to investigate the effect as well as the ration between the growth
of business of SMEs and the policies, orientation, create advance condition for the
development of SMEs issued by the Government and local authority of Thai Nguyen
province. The research was conducted with aspiration to describe the role of the HRM
practices in helping SMEs in their business.
Based on a report by Thai Nguyen Office of Planning and Investment at the end
of June, 2012, there are more than 2,090 enterprises currently doing their business in
Thai Nguyen City, more than 98% of which are belonging to small and medium

between HRM and firm performance. In a recent review of the literature, Wright et al.,
(2005) found a total of 68 empirical studies looking at relationship between HRM and
some aspect of firm performance. The review focused specifically on published,
empirical studies testing a relationship between an HRM system and performance.
Notably, all of the review studies reported at least one significant relationship between

5

HRM system and performance. Clearly from this review of the literature, there is an
increasing agreement that a relationship does exist between HRM and firm performance.
While it is clear that past research on SHRM has consistently shown a positive
relationship between various conceptualization of HRM and firm performance (Wright et
al., 2005), this research has focused almost exclusively on large multidivisional, multi-
product, multinational corporation. Very little research has examined the generalizability
of these finding to SME is limited (Cardon & Stevens, 2004)
For all the reasons above, the researcher would like to conduct the study: “Impact
of Human Resource Management Practice on Organizational Performance in Small and
Medium Enterprises in Thai Nguyen City”
Objectives of the Study
This study aimed to analyze the “Impact of Human Resource Management
Practices on Organizational Performance in Small and Medium Enterprises in Thai
Nguyen City”. Specifically, it sought to answer the following questions
1. What is the profile of the enterprises, in terms of:
1.1. Types of enterprise;
1.2. Form of owner ship;
1.3. Time of operated; and
1.4. Amount of employees?
2. What are the SMEs’s HR practices as to:
2.1. Recruitment and Selection;
2.2. Training and Development;

The study was conducted to assess impact of human resource management
practices on the organizational performance of the small and medium enterprises in Thai
Nguyen Province. A total of 290 managers of the small and medium-sized enterprises in
Thai Nguyen City were selected to be the respondents of the study. It specifically

7

explored on the profile of the respondents in terms of Types of enterprise; Form of owner
ship; Time of operated; Number of employees. The study was limited to determine the
perception of the respondents on the human resource practices of the small and medium
enterprises in Thai Nguyen City which are classified in aspects namely: Recruitment and
Selection; Training and development; Career planning System; Participation and
Involvement; Compensation and Benefit; and Performance appraisal.
The 290 selected respondents (college teachers) were given a questionnaire designed by
the researcher and complete the questionnaires after being explained and instructed by
the researcher. The researcher floated the questionnaire to the respondents after it had
been validated by her advisor in June 2013.
Definition of terms
Compensation refers to the total cash and non-cash payment offered by the small
and medium enterprises to an employee in return for the services rendered to the
enterprises. Apart from salary and wages, compensation also includes: Sales commission,
Overtime pay, bonuses, Profit sharing, Recognition checks and rewards, Non-cash
benefits, such as company-paid accommodations, certain stock options, a company-
financed car and other non-cash taxable items. The value of compensation received by an
employee depends on a number of factors such as the availability of relevant skills, the
employer’s desire to retain the employee, the profitability of the enterprises, and salaries
for comparable jobs in the marketplace.
Financial capital refers to the money used by the small and medium enterprises to
buy what they need to make their products or provide their services or to that sector of
the economy based on its operation, i.e. retail, corporate, investment banking, etc.


9

against competition; and strengthening brand image.
Recruitment refers to the process of finding and hiring the best-qualified candidate
(from within or outside of an organization) for a job opening, in a timely and cost
effective manner. The recruitment process includes analyzing the requirements of a job,
attracting employees to that job, screening and selecting applicants, hiring, and
integrating the new employee to the organization. After the job description has been
approved, the recruitment begins. Each organization has a different recruitment process,
but it typically includes posting the job opening internally and externally. Jobs are posted
on the organization's Internet site, Internet job boards, newspapers and industry
professional organizations. Recruiting can also include representatives from the
organization attending college and career fairs.
Time of operated refers to the duration of time that the enterprises have
been being run since their foundation.
Training and development refers to the official and ongoing educational activities
within an organization designed to enhance the fulfillment and performance of employees.
Training and development programs offered by a business might include a variety of
educational techniques and programs that can be attended on a compulsory
or voluntary basis by staff. Training and development is one of the key HR functions.
Most organizations look at training and development as an integral part of the human
resource development activity. The turn of the century has seen increased focus on the
same in organizations globally. Many organizations have mandated training hours per
year for employees keeping in consideration the fact that technology is deskilling the
employees at a very fast rate.
Types of enterprise refers to specialization field that an enterprise is focusing on.

10


 the improvement of SMEs' access to markets;
 cutting red tape;
 the improvement of SMEs' growth potential, and;
 strengthening dialogue and consultation with SME stakeholders.
A special SME envoy has been set up in the European Commission Directorate -
General for Enterprise and Industry with the objective of better integrating the SME
dimension into EU policies.
In the United States, the Small Business Administration established small
business size standards on an industry-by-industry basis, but generally specifies a small
business as having fewer than 500 employees for manufacturing businesses and less than
$7 million in annual receipts for most non-manufacturing businesses. Size guidelines

12

define the maximum size that a firm (including its affiliates) can be to qualify as a small
business for most SBA programs. Size standards usually are a measure of a business's
number of employees or its average annual receipts. Based on those criteria, the SBA has
established the following common standards for a small business, depending on its North
American Industry Classification System (NAICS) code:
 500 employees for most manufacturing and mining industries, and
 $7 million in average annual receipts for most non-manufacturing industries.
There are many exceptions, but these are the primary size standards for most
industries.
The Vietnamese government, defines SMEs by Decree 56/2009/ND-CP as
follows: Small and medium-sized enterprises are business establishments that have
registered their business according to law and are divided into three levels: very small,
small and medium according to the sizes of their total capital (equivalent to the total
assets identified in an enterprise’s accounting balance sheet) or the average annual
number of laborers (total capital is the priority criterion), concretely as follows:


Deros, Yusof et al. 2006).
In his investigation, Ovidiu Nicolescu (2009) also found ten main features of
SMEs’ organization system as stated in the graph below.