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

Vo Thi Ngoc Linh

KEY ORGANIZATIONAL FACTORS
CONTRIBUTING TO EMPLOYEE SATISFACTION:

An examination of small-medium sized enterprises
in Ho Chi Minh City

MASTER OF BUSINESS (Honours)

Ho Chi Minh City – Year 2014


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

VoThi Ngoc Linh

KEY ORGANIZATIONAL FACTORS
CONTRIBUTING TO EMPLOYEE SATISFACTION:

An examination of small-medium sized enterprises
in Ho Chi Minh City

ID: 22110084


rivals in Vietnam’s market as well as expending to international markets.
The purpose of this study, therefore, tries to examine key organizational characteristics
contributing to employee satisfaction in Vietnam’s SMEs. In detail, it surveys seven
organizational factors that influence employee satisfaction in enterprises. It includes factors
as purpose, structure, relationships, rewards, helpful mechanism, leadership, and attitude
toward change. The results form data survey of SMEs in Ho Chi Minh City and using data
analysis methods may support finding out key organizational factors impacting on employee
satisfaction. This thing can support enterprises to identify and apply the best strategies to
improve and develop labor productivity.

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TABLE OF CONTENTS

ACKNOWLEDGEMENT ..................................................................................... i
ABSTRACT ..........................................................................................................ii
TABLE OF CONTENTS .................................................................................... iii
LIST OF TABLES ..............................................................................................vii
LIST OF ABBREVIATIONS ........................................................................... viii
CHAPTER 1. INTRODUCTION ......................................................................... 1
1.1 Research background ................................................................................................... 1
1.2 Research objectives and questions ............................................................................... 2
1.3 Research contribution ................................................................................................... 3
1.4 Research scope ............................................................................................................... 4
1.5 Overview of research .................................................................................................... 4

CHAPTER 2. LITERATURE REVIEW .............................................................. 5
2.1 Definition of small-medium sized enterprise in Vietnam .......................................... 5
2.2 Employee Job satisfaction ............................................................................................ 6

4.2.3 The mean and standard deviation of independent and dependent variables. 27
4.3 Reliability analysis ...................................................................................................... 27
4.3.1 Reliability of Purpose .......................................................................................... 28
4.3.2 Reliability of Structure ........................................................................................ 28
4.3.3 Reliability of Leadership ..................................................................................... 29
4.3.4 Reliability of Relationship ................................................................................... 29
4.3.5 Reliability of Reward ........................................................................................... 30
4.3.6 Reliability of Helpful Mechanisms ..................................................................... 30
4.3.7 Reliability of Attitude toward Change ............................................................... 31
4.3.8 Reliability of Overall Satisfaction....................................................................... 31
4.4 Exploratory Factor Analysis (EFA) .......................................................................... 32
4.4.1 Assessing the scale measurement of independent variables ............................. 32
4.4.2 Assessing the scale measurement of dependent variable ................................. 35
4.5 Correlation Analysis ................................................................................................... 36
4.6 Multi-Linear Regression Analysis for testing hypotheses ....................................... 37
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4.7 Hypotheses testing ....................................................................................................... 38

CHAPTER 5. RECOMMENDATION AND CONCLUSION .......................... 42
5.1 Introduction ................................................................................................................. 42
5.2 Summary of the study results..................................................................................... 42
5.3 Managerial Implications ............................................................................................. 43
5.4 Conclusion and future research recommendation ................................................... 45

References ........................................................................................................... 46
APPENDICES .................................................................................................... 49

v

Table 19- Correlations ........................................................................................ 36
Table 20- Model Summary ................................................................................. 38
Table 21- Anova Result ...................................................................................... 38
Table 22- Coefficients Result ............................................................................. 39
Table 23- Research results .................................................................................. 41

vii


LIST OF ABBREVIATIONS
SMEs:

Small-medium Enterprises

EFA:

Exploratory Factor Analysis

KMO:

Kaiser-Meyer-Olkin

PUR:

Purpose

STR:

Structure


When employees satisfy with their job and organization, they are easy to accept change
conditions and are quite willing to contribute to organizational initiatives to bring profits for
enterprise. In addition, labor cost can be decreased. The costs of recruiting and training are
significantly reduced because employees are willing to stay with job. For example, in HP
Corporation, managers have allowed employees to arrange their working hours. With flexible
time work plan, workers have had reasonable period of time for job and enjoyed the holidays
with relatives. This helped HP reduce 36% overtime cost and costs of recruiting and training
were also noticeably decreased (Weekly Saigon Entrepreneur, 2013).
According to VTV News, SMEs in Vietnam face many challenges in international
competition since Vietnam opened its economy to the world. SMEs are lack of strategic
competitiveness because of poor management and labor capacity, small scale, limited capital,
and backward technology that forces price to increase while making product quality
decreasing (Da Thao, 2013; PhanThanh Hai, 2013). Facing tough competition from both
domestic and international competitors, SMEs in Vietnam need to redefine their resources,
capabilities, and core competences and have strategic plans to be able to win the market.
Furthermore, as SMEs contribute greatly to the economy, it is strategically crucial to develop
this sector to achieve the country’s sustainable growth.

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Among the top strategic directions to help SMEs gain competitive advantage and achieve
strategic competitiveness, building a high performance work system that produces superior
employee performance is perhaps the most important initiative. One of the ways to
accomplish this mission is to increase employee satisfaction and their commitment to the
organization.
In previous research, many authors studied the impact of organizational characteristics on
employee satisfaction. Because most people spend almost a lifetime for work, understanding
of the factors that help increase satisfaction is important to improve the well-being of
individuals (Grunneberg, 1997). Recent research results have shown that the level of

toward change is tested. The study reports influence of these seven factors on employee
satisfaction. For the purpose of the research, research questions to survey key organizational
factors contributing employee satisfaction are as follows:
- Is there a relationship between each of the seven factors of organizational characteristics
and employee satisfaction?
- How strong is the relationship between each of the seven factors of organizational
characteristics and employee satisfaction?
1.3 Research contribution
As stated earlier in this study, the level of employee satisfaction in local companies in
Vietnam was low (Duong & Swierczek, 2008; Yu & Lyons, 2012). This may be because of
the lack of skilled workers at these companies (Henderson & Tullock, 2008). In reality, there
are many different reasons and factors contributing to employee satisfaction. At the
theoretical level, this research contributes to previous studies in the literature of
organizational study by shedding more light in understanding how organizational

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characteristics can impact on employee satisfaction. At the practical level, this research can
help managers of SMEs in Ho Chi Minh City have an overview on key organizational factors
that impact on employee overall satisfaction. It also helps them recognize how each key
factor can strengthen the level of employee satisfaction. The research has implications for not
only Vietnamese managers but also for organization development practitioners, as to how to
increase the employee satisfaction in SMEs in Ho Chi Minh City.
1.4 Research scope
This study is limited to the investigation of SMEs in Ho Chi Minh City only. It focuses on a
few referential enterprises in Ho Chi Minh City. Thus, it is not necessarily representative
other enterprises from different areas in Vietnam. The population of this study is staff and
supervisor level.
1.5 Overview of research

and attitude toward change). It focuses on previous research concerning the seven factors of
organizational characteristics, employee satisfaction and the impact of organizational
characteristics to employee satisfaction.
2.1 Definition of small-medium sized enterprise in Vietnam
Based on regulations of Vietnam government, a small-medium sized enterprise is a business
that it registered in accordance with law statements. SMEs are regularly divided into three
groups of micro, small and medium enterprise’s size according to size of total fund or the
average labor. Besides sizes, they can be categorized by locations, technological development
or types of organization. Table 1 below presents the classification of Vietnamese SMEs
(Nguyen, H.L. 2011).

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Table 1- SMEs Definition according to Decree 56/2009/ND-CP.
Size

Micro

Small enterprise

enterprise

Field
I. Agriculture,
forestry and

Less than 10

fisheries

million

200

Less than 10

From 10 to

million

50

Medium enterprise
Capital
(VND)
From 20
million to
100 billion
From 20
million to
100 billion
From 20
million to 50
billion

Employees

From 200
to 300


construct which can be impacted by many factors such as wages, work environment,
supervisors and co-worker relationships (Lane at al., 2010). Parvin and Kabir (2011)
indicated a link between how employees regard their jobs and their resulting feelings. When
supervisors show support, it can positively influence employee satisfaction.
Many researchers theorize that the employee satisfaction leads to commitment to the
organizations (DeCotiis & Summers, 1987; Mathieu, 1988; Mathieu & Hamel, 1989). Luddy
(2005) defined employee satisfaction as the emotional reaction and feelings towards different
aspects at work of the staff. The author emphasized the causes of employee satisfaction
including job title, level of supervision, relationships with colleagues, job content,
compensation, and rewards consisting of promotion, physical conditions of working
environment, as well as the structure of the organization.
Employee satisfaction and productivity are the two criteria of organizational effectiveness
(Meltzer & Salter, 1962). Employee satisfaction is an important outcome of organizational
activity and is among the measures of attitude and motivation that are related to
organizational study (James & Jones, 1976; Meadow, 1980).
In general, when people satisfied with their work, they tend to have positive feeling and
attitude related to their jobs. This helps increase employee performance. Sometimes

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employees think that the present job may be better than other jobs because they love their job.
Furthermore, in order to retain their existing satisfied jobs, employees try to perform work
more effectively. This helps to increase benefit for the enterprise. Therefore, to increase
working effect, enterprises should try to enhance employee satisfaction inside their
organization (Karim & Rehman, 2012).
Base on the review of the literature of job satisfaction as well as its influence on the company
bottom line, this research studies impact of organizational characteristics to employee
satisfaction. There are total of


organization’s purposes (Preziosi, 1980). When employee can understand organization goals,
they will associate with organization more easily. So purpose influences level of employee
satisfaction, this study developed the following hypothesis:
H1: There is a positive impact of organizational purpose on employee satisfaction.
2.3.2 Structure
Drucker (1998) concludes that there are two universal principles of organization. First, the
organization needs to be transparent so that people can understand clearly how their work is
structured and what expect from them. Second, the organization needs to be as flat as
possible. The more layers there are, the more opportunity for miscommunication and poor
management.
According to James and Jones (1976), they define organizational structure as the enduring
characteristics of an organization reflected by the distribution of units and positions within
the organization and their systematic relationships to each other. Priziosi (1980) defines
organizational structure as the division of labor and as the manner in which work tasks are
divided. From this statement, this study developed the following hypothesis:
H2: There is positive impact of organization structure on employee satisfaction.

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2.3.3 Leadership
Leadership plays important role in influence employee satisfaction. From the Hawthorn
experiment and the behavior research that followed, focused and placed on dynamic leaders
and the meaning, nature and origins of leadership. Liker suggested that leadership people was
the central and the most significant aspect of all the tasks of management that encouraged a
sense of participative or consultative management (James Carlopio & Graham Andrewartha,
2008).
According to Priziosi (1980), the definition of leadership includes both immediate
supervisors and organizational leaders. It involves in the leadership norms. Leadership
requires an understanding of the environment in addition to behavior skills. The leaders

facilitate the organizational efforts (Priziosi,1980). They are coordinating factors that bind the
organization together to make it more than a sum of individuals with separate needs. Thus,
this study developed the following hypothesis:
H6: There is a positive impact of organization helpful mechanisms on employee
satisfaction.
2.3.7 Attitude toward change
Change in today’s information is a constant and will increase. Access to more information in
increasing amounts leads to increased turbulence and complexity for managers. Attitude
toward change is an individual psychological tendency that is expressed by recognizing,
evaluating the change and behavior toward it with some degree of favor or disfavor (Eagly &
Chaiken, 1998; Elizur & Guttman, 1976). It indicates how changeable the organization is. It
is the ability to change of the organization (Preziosi, 1980). It includes both organization and

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individual attitude toward change. With above literature, this study developed the following
hypothesis:
H7: There is a positive impact of attitude toward change on employee satisfaction.
2.4 Research model
This study uses Preziosi’s (1980) Organizational Diagnosis Questionnaire (ODQ), an
extension Six-Box Organizational Model of Weisbord’s (1976). It used the same items
appearing in Weisbord model, together an additional factor “attitude to change”. Weisbord’s
model establishes a systematic approach for analyzing relationship among variables that
influence how an organization is managed.

Purposes:
What business are
we in?


This model provides for assessment in six areas of organizational activity: purpose, structure,
relationship, rewards, leadership and helpful mechanisms. The outer circle determines an
organizational boundary that it clarifies the functioning of the internal environment is to be

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analyzed to the exclusion of the external environment.
Preziosi argues that in attempting any planned change effort in an organization, it is
necessary to know how changeable an organization is (Lok& Crawford, 2000). Putting
together the additional component suggested by Preziosi’s (1980), the author studied
organizational components that impact to employee satisfaction. It has seven key
organizational factors including purposes, structure, leadership, relationships rewards, helpful
mechanisms, and attitude toward change as figure 2 follows.

Helpful Mechanisms

Relationships

Structure

Organizational
Effectiveness

Leadership
Purposes

Reward
s


 Hypothesis 6: Helpful mechanisms have a positive impact on employee overall
satisfaction.

 Hypothesis 7: Attitude toward change has a positive impact on employee overall
satisfaction.

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Figure 3- The proposal research method

H1
Purpose

Structure
Leadership

Relationships

H2
H3

H4

Employee Overall
Satisfaction

H5
Rewards
Helpful