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UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business TRẦN NGÂN HÀ ANTECEDENTS OF CHANGE READINESS IN BANKING INDUSTRY ID: 21110005 MASTER OF BUSINESS (Honours) SUPERVISOR: Lưu Trọng Tuấn, PhD Ho Chi Minh City – Year 2014 ii UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business TRẦN NGÂN HÀ ANTECEDENTS OF CHANGE READINESS IN BANKING INDUSTRY ID: 21110005 MASTER OF BUSINESS (Honours) SUPERVISOR: Lưu Trọng Tuấn, PhD Ho Chi Minh City – Year 2014 iii Abstract Banking system plays a role as super organization, usually have to cope with challenges to remain competitive and successful. Their strategies, structures, policies, operations and processes are re-evaluated regularly. One of the main challenge in the change management is managing change effectively because of large amount of human involvement. Therefore, all of managers want to know how to encourage and prepare employees for change scenario. The aim of this study was to examine the antecedents of employees for organizational change. The objective were to investigate the effect of communication, affective commitment and trust in top management on change readiness in banking industry where various change reforms has been happened lately. The study started with reviewing lots of literature to develop a model. Data collected from banking employees by launching survey questionnaire. Data analyzed by using statistical package for social sciences to test hypothesis. As results, independent variables (communication, affective commitment and trust in top management) were positive and significantly correlated to the dependent variable (change readiness). This study has limitations that applying a cross sectional study which research only in banking industry at a single point in time. This study provides empirical predictors that effect employee’s change readiness in banking sector, particular for Ho Chi Minh City, and may help the management and practitioners of human resources management and development in evaluating, adjusting and designing program for organizational change. iv Acknowledgement I would like to express my gratitude to many people for the support that I received during time I study at ISB International Institute – University of Economic Ho Chi Minh City. First of all, I would like to send great thanks to my direct supervisor, Dr. Luu Trong Tuan for his marvelous supervision and guidance. Sincere gratitude is extended to the way he show me how to do a research and explain things clearly and simply. I would like to extend my thanks to ISB International Institute – University of Economic Ho Chi Minh City and also many thanks to staff of ISB for kindly support during my master course. I greatly appreciate all friends, colleagues and participants for their time and assistance in participating and collecting empirical data for my thesis. I wish to thank my family and special to my husband for their love, support and encouragement during my work. TRAN NGAN HA Ho Chi Minh City, January 2014 v TABLE OF CONTENT Abstract iii Acknowledgement iv LIST OF TABLES viii LIST OF FIGURES ix Chapter 1 1 INTRODUCTION 1 1.1 Research background 1 1.2 Research problem 3 1.3 Research objectives 4 1.4 Delimitation and scope of this study 5 1.5 Structure of the thesis 6 Chapter 2 7 LITERATURE REVIEW 7 2.1 Theory about organizational change 7 2.1.1 Different views of organizational change 7 2.1.2 Individual perspective 8 2.1.3 Group based approach to organizational change 9 2.1.4 Change based difference in perceptions 11 2.2 Employee’s change readiness 11 2.3 Research model and hypothesis 15 2.3.1 Communication and change readiness 15 vi 2.3.2 Affective commitment and change readiness 17 2.3.3 Trust in top management and change readiness 20 Chapter 3 25 RESEARCH METHODOLOGY 25 3.1 Research process 25 3.2. Measurement scales 29 3.2.1 Change readiness 29 3.2.2 Communication 29 3.2.3 Affective commitment 29 3.2.4 Trust in top management 30 3.3. Draft questionnaire 33 3.4. Pilot study 33 3.5 Sampling method 34 3.6 Data analysis method 35 3.6.1 Cronbach’s alpha. 35 3.6.2 Exploratory factor analysis (EFA). 35 3.6.3 Multiple regression analysis. 36 Chapter 4 38 RESULTS AND DISCUSSION 38 4.1 Sample description 38 4.2 Evaluation of measurement scales 40 4.2.1 Cronbach Alpha Reliability Analysis 40 4.2.2 Exploratory Factor Analysis (EFA) 42 vii 4.3 Hypothesis testing 45 4.3.1 Testing assumptions of Multiple Regressions 45 4.3.2 Regression analysis 47 Chapter 5 49 DISCUSSIONS AND CONCLUSIONS 49 5.1 Discussion of findings 49 5.2 Conclusion 50 5.3 Managerial implications 51 5.4 Research limitations and recommendations for future research 53 References 55 Appendix 1 Survey Questionnaire ………………………………………………… 72 Appendix 2 Test the assumption of Multiple Regression ……………………… 76 viii LIST OF TABLES Table 4.1 Sample characteristics 45 Table 4.2 Cronbach’s alpha reliability test result 49 Table 4.3 KMO and Bartlett’s Test for independent variables 70 Table 4.4 Total Variance Explained 71 Table 4.5 Rotated Component Matrix 52 Table 4.6 Coefficients 54 Table 4.7 The summary of overall value 56 Table 4.8 ANOVA result 56 Table 4.9 Result of testing hypothesis 56 ix LIST OF FIGURES Figure 2.1 Research model 31 Figure 3.1 Research process 35 Figure 4.1 Histogram of SATIS dependent variable 76 Figure 4.2 Normal P-P Plot of regression standardize residual 77 Figure 4.3 Scatter plot 78 1 Chapter 1 INTRODUCTION 1.1 Research background Organizational change has become one of the significant aspects in organizations that help them to survive in the turbulent environment of organization. It is believed that change can enhance internal power and assist organization to adapt external factors. Guimaraes and Amstrong (1998) report that change is necessary for a business to survive and growth while Kotter and Schlesinger (1979) insist that larger organizations have to go through moderate organizational changes at least once a year, with major organizational change undertaken every five years. It can be said that employees have been influenced the most when change happens in organization. Their attitudes, behaviors and beliefs are impact because of transferring environment leading to confusion, anxiety and uncertainty among employees. Therefore, researchers take more concentration on how to persuade employees effectively in order get them to be involved in change program. According to Madsen et al (2005), an individual’s attitudes, beliefs, behaviors and reaction to change of organization is affected by change readiness factors. These factors consider related to individual’s psychological and financial predictors (Goulet & Singh, 2002). Many researchers argue that changes in organization have failed because managers do not take much consideration on the role of employees (George & Jones, 2001). During the time of planning and implementing change, employee reactions can be positive or [...]... continuously in order to maintain and lubricate banking operations Therefore, managing change effectively becomes a challenge in the change management because of enormous human issue involvement Managers also have more interesting in investigating how to support and carefully prepare employees for such change situation Indeed, change is always difficulty under any situation because it creates uncertainty... concept of readiness for change and examine factors affecting on it in organizations First, this research indicates that the readiness is generated from the resistance to chance basing on employees’ perception, beliefs and attitude Second, the readiness is influenced by the strategies through transferring persuasive information, managing external information and bringing new opportunities to change. .. Third, building change programs is very necessary for creating the readiness of employees The programs includes the problems and the time which employees need to prepare for change Fourth, the programs and strategies must match together Besides, Bernerth (2004) explains that Readiness is more than understanding the change, readiness is more than believing in the change, readiness is a collection of thoughts... do and think differently Almost managers and specialists take consideration on capital, procedure or legislation They may forget caring about employees who are dominant workforce helping operating organization When standing in front of change, the point of view of employee may differ from the view of top manager Because of the access of information and experience involving in the decision making process,... employees change readiness 3 The relationship of trust in top management and employees change readiness 1.4 Delimitation and scope of this study First, in this research, only three basic components (trust in top management, affective commitment and quality of communication) considered as constructs of this research and use to measure employee’s change readiness Therefore, other measurements of change readiness. .. dispersing complexity, and explaining the unfamiliar through the helps of others (McLain & Hackman, 1999) Therefore, the change readiness of employees is affected by trust in organization, especially in top management (Kotter, 1995) For example, if the behavior of leaders is inconsistent with their words, readiness for change will be strongly undermined So, management plays an important role in facilitating... for changing existing technology of works and production of organization by the new and up-to-date one The aim of this strategy is to increase productivity, decrease production cost and make operation smoothly Behavioral approach focus on switching in thinking, feeling and attitude of people in the organization Its expectation is that changes in motivating, skills and competency of people paying the... Therefore, an individual is ready for change when he or she understands, believes, and intends to change because of a perceived need He also reports that there are describe two ways of creating readiness for change in an organization First, communicating a message of discrepancy in which employees see the desired result in future and make them feel that the change is a right 12 thing Second, strengthening the... necessary factor of employee’s change readiness (Rousseau & Tijoriwala, 1999) After a long time of reviewing literature, this study aim to explore more about predictors of employee readiness related to individual and workplace specifically communication, affective commitment and trust in top management that may help increase positive employee’s attitude towards change in banking in Ho Chi Minh City 2.3... related to change readiness 2.3.3 Trust in top management and change readiness Trust has been defined in different ways According to Rousseau (1998) trust is “a psychological state comprising the intention to accept vulnerability based on the positive expectations of the intentions or behavior of another”, while Mayer and Davis (1999, p10) consider trust as a “willingness to engage in risk-taking with