The Corporate Culture and Its Effect on Managerial Effectiveness in Vietnamese Companies

Transcription

1 The Corporate Culture and Its Effect on Managerial Effectiveness in Vietnamese Companies Nguyen Thanh Phuong, Member of Graduate Student Support Project, Dai Nam University, Vietnam, Candidate, Asia E University, Malaysia. nguyenthanhphuong.ceo@kangaroo.vn Nguyen Quang Vinh, Research and International Corporation Department, Dai Nam University, Vietnam. quangvinh191081@gmail.com Nguyen Viet Anh, Research and International corporation Department, Dai Nam University, Vietnam. nguyenvietanh79@gmail.com Abstract The concept of corporate culture has received increasing attention in recent years both from academics and practitioners. In the process of international economic integration, corporate culture is the sharp weapon for Vietnamese enterprises to obtain the competitive advantage and managerial effectiveness. The main aim of this study is to explore the influence of Corporate Culture on Managerial Effectiveness in Vietnamese Companies. This study proposes a structural model of the relationships among corporate culture (CC), managerial effectiveness (ME), Randomly-selected respondents from the population of three types of enterprise in Vietnam including: Private Company, State Own Company, and Joint Venture Company. Initially, the exploratory factor analysis (EFA) was performed to test the validity of constructs, and the confirmatory factor analysis (CFA), using AMOS, was used to test the significance of the proposed hypothesizes model. The results show that the relationships among CC and ME appear significant in this study. The results also indicate that corporate culture could improve the managerial effectiveness. Finally, implications of the findings for Vietnamese companies and limitation are also discussed in this study. Keywords: Corporate culture, managerial effectiveness, Vietnamese companies 56

2 1. Introduction Corporate culture is intangible and priceless of every business. In the process of international economic integration and the development of the socialist oriented market economy of Vietnam, the construction of corporate culture is a challenging but critical task for businesses. In an enterprise, especially the large ones, the diversity of workforce in various aspects such as qualifications, education level, the level of awareness, social and geographical characteristics, or ideological culture... is the main difference creating a diverse work environment and complexity (Schein, 004). Besides, the fierce competition of the market economy and globalization trends are forcing businesses to constantly explore new things and boost creativity and adaptability to changes in order to survive and develop (Giri, and Kumar, 007). This requires businesses to build and maintain culture-specific routines to promote the capacity and promote the contribution of everyone to achieve the overall objectives of the organization - which is Corporate Culture (CC) (Guiso, Sapienza & Zingales, L., 014). In Vietnam, after Doi moi policy in 1986, there are only a few businesses that have built themselves a strong culture. However, as the effects of the economic reforms keep spreading, the so-called equalization process has become a growing phenomenon in the Vietnamese economy s transition from a centralized to a market-based economy, which was introduced in 199 with the expectation that the performance of state-owned enterprises (SOEs) would be improved once they were equalized. Previous researches have extensively examined the effects of privatization on organizational change in former SOEs worldwide (Tsamenyi et al., 010; Forster, 006; Daniel et al., 004; Cunha, 000). Overall, they find that the performance of SOEs significantly improved after privatization, and these improvements were accompanied by certain organizational changes, including changes in the corporate governance practices and accounting and control systems (Ushakov, Dmitrieva & Surova, 014). Little is however known about the Vietnamese experience. The main objectives of this study are to investigate the relationship between corporate culture and, managerial effectiveness, and the difference between managers of private and public undertakings on the variables under study. The specific objectives of the present study are as follows: - Provide a theoretical framework for understanding the completed concept of corporate culture and its effect on managerial effectiveness. - To examine the influence Organizational Culture on Managerial Effectiveness among Vietnamese companies 57

3 . Literature review.1 Definition of Corporate Culture The culture of an organization is not simply a cultural communication and business culture as we often think. For a long time, culture has played an important role in life of human beings (Aarons and Sawitzky, 006, Hiller and Verdier, 014)). Nowadays in particular, in the age of modern civilization when the human factor has been considered as the engine as well as the objective of all social reforms, culture has become an inevitable part and been regarded as the measure to assess every activity and a thorough understanding of culture, together with its role in social life, therefore, it is being paid much attention to. To summarize the concept of corporate culture, Table.1 shows that although organizational culture has been defined in many ways by various researchers, most of them agree that corporate culture can be referred to as a set of values, beliefs, and behavior patterns that form the core identity of organizations, and help in shaping employee behavior. Accordingly, the values and beliefs underlying organizational culture probably reflect what is most important to the company s leaders, since they are responsible for the vision and purpose of the organization, and reinforce the core values and beliefs through their own behavior. Throughout this paper we follow this concept to gauge the multidimensional aspects of the organizational culture of Vietnamese firms. Table 1: Organizational Culture Definitions Author Definitions ( (Schein, 199) Organizational culture is commonly referred to as the values, beliefs and basic assumptions that describe the essence of an organization and that guide employee behavior. (Desphande & Corporate culture is defined as the pattern of shared values and beliefs that Webster, 1989) help individuals understand organizational functioning and thus provide them with norms for behavior within the organization. The extent to which members perceive and accept the values and assumptions of the organization determines the strength of organizational culture in gui ding and coordinating member behavior. (Cunha & Coope, Corporate culture represents the way things are done in the organization, 00) reflecting the beliefs of organization members as to what are appropriate behaviors and procedures. (Schein, 004) Organizational culture as a pattern of shared basic assumptions that the group learns as it solves problems of external adaptation and internal integration and that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in the relation to those problems. (MacIntosh & Doherty, 010, Hiller & Verdier, 014)) Organizational culture is a shared understanding and acceptance among staff members of what is valued and expected in an organization; thus it may be directed, but is not ultimately determined, from above.. The Relationship between Corporate Culture and Managerial Effectiveness The topic of managerial effectiveness assumes paramount importance especially in developing countries like Vietnam. If inefficient managers would be at the helm of affairs in 58

4 organizations, pace of development would slow down. Hence, there is an increasing need to identify predictors of managerial effectiveness. Do effective managers demonstrate distinctive competencies and if so, which competencies distinguish effective managers from lesseffective ones (Hill, Jones & Schilling, 014)? The definition of Margerison (1981) stressed that managerial effectiveness appears when a manager behaves appropriately in tune with the situation. Mullins (1995) considered it as doing the right things, attainment of objectives, increasing profitability and optimizing use of resources. While individual provides his services to the organization through intrinsic abilities and competence, the organization on the other hand provides constraints and facilities. The research of Zhang (010) investigated the characteristics of organizational culture and its effects on organizational variables. His research showed that organizational culture has significant main effects on human resources management effectiveness such as turnover intention, job satisfaction and work efficacy; organizational culture also has significant main effects on organization effectiveness like staff members organization commitment and collective identity. Catherine and Cherly (007) revealed that organizational culture was strongly perceived as being related to both leadership effectiveness (explaining 40% of the variance) and personal effectiveness (4% of the variance). Aspects of organizational culture promoting employee fulfillment and satisfaction were uniformly viewed as positively related to leadership and personal effectiveness (Chhokar, Brodbeck & House, 013). The perceived relationship across samples was stronger between organizational culture and leadership effectiveness than between organizational culture and personal effectiveness. Organizational culture is important because shared beliefs and norms affect employee perceptions, behaviors, and emotional responses to the workplace. For example, culture has been found to influence organizational climate and provider attitudes including work attitudes (Aarons & Sawitzky, 006; Carmazzi & Aarons, 003), as well as employee behaviors that contribute to the success or failure of an organization (Ashkanasy, Wilderom, & Peterson, 000; Schneider, Ehrhart, & Macey, 013). However few studies have point out the effect of organizational culture on specific sub variables with the different type of enterprise. For example, Morris and Bloom (00) examined the effects of culture and climate on job satisfaction and organizational commitment, and then defined culture and climate as a combined construct. Other researchers have examined culture and climate as simultaneous predictors of work attitudes. For example, Glisson and James (00) analyzed two separate models: one that tested the relationship between organizational culture and climate on work attitudes and one that tested the effects of organizational culture and climate on staff turnover. In the former study, culture and climate 59

5 were merged, while in the latter study the potential mediation of culture by climate was not examined. Neither of the studies noted above allow disentangling the direct effects of culture on managerial effectiveness (Simberova, 015). This suggests the proposition that these sets of correlates are inter-related in some way, and consequently this issue is worthy of empirical investigation. Therefore, this study will be designed to examine how managerial effectiveness is being influenced by organizational culture by examining the linkages with the sub-variable of corporate culture in correlates with managerial effectiveness..3 Research Frame Work and Hypothesis Performance orientation People orientation Organization integration Managerial Effectiveness Market orientation Hypothesis H1 H H3 H4 Figure 1: Research Model Table : Research Hypothesis Description There is a relationship between performance orientation as a sub-variable of Corporate Culture and Managerial Effectiveness. There is a relationship between People orientation as a sub-variable of Corporate Culture and Managerial Effectiveness. There is a relationship between Organization integration as a sub-variable of Corporate Culture and Managerial Effectiveness. There is a relationship between Market orientation as a sub-variable of Corporate Culture and Managerial Effectiveness. 3. Research Methodology Quantitative research was conducted to test the scale of the research model. This is a detailed analysis of the data collected through questionnaires sent to the client to determine the logical correlation of these factors together and then give specific results of this research. This study used the questionnaire (in the level of Likert from 1- strongly disagree to 5 - strongly agree) to collect data to test hypotheses quantitative approach is applied to the test the hypothesis of this study. Questions will be distributed to the leaders of three type of enterprise in Vietnam includes: Private company, State Own Company, Join Venture Company. The goal is to collect 500 samples of the survey questions different units in

6 Determining how many appropriate sample size remains controversial and many different perspectives. MacCallum, Widaman, Zhang and Hong (1999) have summarized the views of the previous studies on the minimum standards of the sample size for the analysis of factors. MacCallum and colleagues said that the sample size should be about five times the number of questions. This study has a total of 8 questions in the questionnaire. Therefore, a minimum standard for the sample size of this study is 8 x 5 = 140. Organizational culture variables were developed based on four cultural constructs, suggested by (Cunha & Cooper, 00). The culture dimension ratings were measured on 5- level Likert scale with a choice of 1 means strongly disagree with the statement and choose the number 5 is strongly agree with the statement. The contents of the variables observed in the composition are adjusted to suit the objective of research and the context of Vietnam companies. For the managerial effectiveness scale, this study is going to develop new questionnaire for collecting the data from managers. This scale will consist of 5 dimensions. These dimensions are: (1) Managing and leading, () Interpersonal relationships, (3) Knowledge and initiative, (4) Success orientation and (5) Contextually adept. The structure variables are presented in Table 3.1 Structural equation modeling (SEM) method is used in this study. SEM is a general term that has been used to describe a large number of statistical models used to evaluate the validity of substantive theories with empirical data. Statistically, it represents an extension of general linear modeling (GLM) procedures, such as the ANOVA and multiple regression analysis. One of the primary advantages of SEM (vs. other applications of GLM) is that it can be used to study the relationships among latent constructs that are indicated by multiple measures. It is also applicable to both experimental and non-experimental data, as well as cross-sectional and longitudinal data. SEM takes a confirmatory (hypothesis testing) approach to the multivariate analysis of a structural theory, one that stipulates causal relations among multiple variables. The causal pattern of inter variable relations within the theory is specified a priori. The goal is to determine whether a hypothesized theoretical model is consistent with the data collected to reflect this theory. The consistency is evaluated through model-data fit, which indicates the extent to which the postulated network of relations among variables is plausible. SEM is a large sample technique (usually>00; e.g., Kline, 005, pp. 111, 178) and the sample size required is somewhat dependent on model complexity, the estimation method used, and the distributional characteristics of observed variables (Kline, pp ). SEM has a number of synonyms and special cases in the literature including path analysis, causal modeling, and covariance structure analysis. In simple terms, SEM involves the evaluation of two models: a measurement model and path model. 531

7 4. Result analysis 4.1 Respondent Demographic The survey was distributed to all respondent directly, interviews and personal voluntary and answers questions based on their knowledge and experience of their own working. All of 88 questionnaires were sent to respondent, 57 questionnaires were returned. After the reject the invalid questionnaires, there are 5 were input as valid sample and considered for analyzed inversion 0.0 of SPSS software, count of 87% value rate. Within the respondent profile, through the research, we find that there is 56% of male and 44% of female (see Table 3). Concerning the age of the respondents, there is 1.8% of respondents are less that 30 years old, 46.7% are 31 to 40 years old, the age of years old and above 51 years are 39.1% and 1.4% of total respondents. From the aspect of working experience, all respondents has at least one year of experience; most respondent in this survey have 11-0 years of work experience (less than 10 years: 0% and years: 5.3% and 16-0 year: 4.9%), while 9.8% of respondents already own working experience in current position of over 0 years. Cross-sectional study was also carried out in this study. Among the respondents, 6.% are vice head of department, 11.1% are Head of department while Deputy Director and Director count for 15.6% and 13.3%. In this study, the CEO respondent is count for 53.8% confirm the good quality of respondent (table 3). Table 3: Respondent Profile Demographic N=5 Frequency Percent (%) Gender Male Female Total Age Less than to to More than Total Working experience Under 10 year year year Over 0 year Total Position Vice head of department Head of department Deputy director Director CEO Total Education Below Bachelor.9 Bachelor Master Phd Total Total

8 Referring to level education of respondents, there are only 0.9% do not have the bachelor degree, 5.3% have completed bachelor. There are 58.7% of respondents who get the master degree. The respondents who have got the PhD. degree of this study are 35.1%. This result shows the well-educated of respondent with almost respondent got the master and PhD. degree. 4. Reliability Analysis In this study, principle component method is used for explorative factor analysis. Four main factors with 0 items are loaded into the system (Table 4). Component Factor /item Organizational integration orientation Table 4: Factor Analysis People orientation Performance orientation ORG1.849 ORG.738 ORG3.879 ORG4.916 ORG5.889 PEO1.788 PEO.877 PEO3.911 PERF1.803 PERF.796 PERF3.777 PERF4.757 MAR1.845 MAR.859 Eigenvalue Variance explained (%) Cronbach α Total variance explained=73.403; KMO=.890; p =.000 Market orientation The result indicates that the Kaiser-Meyer-Olkin value was.890, and the Bartlett s Test of Sphericity was statistically significant at.000 level. The factor eigenvalues greater than or equal to 1.0 and motivation variables with factor loadings greater than.5 were reported..6 items of the loading factor are less than 0.5, which are deleted from the scale (Job rules and regulations, Promotion based on individual skill rewarded based on task, Rewarded fairly, Competitiveness, New products developed). The result of factor analysis revealed 4 factors of corporate culture, which accounted for ( > 50%) of the total variance. To test the reliability and internal consistency of each factor, the Cronbach s alpha of each was determined. The results showed that the alpha coefficients range from Therefore, it demonstrates that all factors were accepted and reliable as recommended by Nunnally (1978). 533

9 4.3 Structure Model Fit and Model Coefficients A CFA of the constructs of model were also performed in this study. The fit indices of the model are summarized in Table 5. x - test Table 5: Goodness of Fit Indices of Model Criteria Indicator x /d.f. <3.6 ( /71) Fit indices CFI > NFI > TLI > RFI > RMSEA < PCFI > PNFI > The overall model indicates that x is / 11 = 1.97 (d.f.) (p= 0.000). Technically, the p-value should be greater than 0.05, statistically insignificant. However, in practice the x -value is very sensitive to sample size and frequently results in the rejection of a well-fitting model. Hence, the ratio of x over d.f. has been recommended as a better fit than x (Hair et al, 006). A common level of the better). The x /d.f. ratio is below 5 (though below 3 is x d.f. ratio of the model is 1.9 (i.e., is 38/11), indicating an acceptable fit. Furthermore, CFI=0.951, TLI=0.938 both important index is higher than 0.95 and 0.9, and RMSEA is <0.08 indicating the model fit. The other indices (NFI=.907 and RFI=.905 >0.9, PCFI=0.75 and PNFI=0.717 >0.5) are all within acceptable ranges. The model is a reasonable presentation of the data. 534

10 Figure : Model CFA Result 4.4 Hypothesis Testing For testing the relationship of for factors of corporate culture and managerial effectiveness, the result indicates that the estimate for the relationships of the organization integration orientation and managerial effectiveness is consistent with the proposed in the hypothesis (H1: β=0.109, t=1.636, p<.0.05). The people orientation is positively related to the managerial effectiveness (H: β=0. 468, t=5.839, p<.0.01). The effect of performance orientation on managerial effectiveness is also strong (H3: β=0.643, t= 6.568, p<0.01). However, the prediction of market orientation is not positively related to the managerial effectiveness, so hypothesis 4 is not supported as proposed (H4: β=-.055, t= -.69, p<0.01). (See table 5). The results show that the relationships among corporate culture managerial effectiveness appear significant in this study. The results also indicate that corporate culture could improve the managerial effectiveness Managerial effectiveness Managerial effectiveness Managerial effectiveness Managerial effectiveness *** P <0.01 <--- <--- <--- <--- Table 5: Regression Weights Estimate S.E. T-value P-value Result Organizational integration Supported People orientation *** Supported Performance orientation *** Supported Market orientation Unsupported and 535

11 5. Concluding Remarks and Future Work This study provides a framework for understanding the interrelationships between corporate culture and managerial effectiveness in Vietnamese companies. It is motivated from the lack of studies on the organizational culture of firms in Vietnam (Vo and Duc, 011). The study found the following results: There is a relationship between the organization integration orientation and managerial effectiveness, the people orientation is positively related to the managerial effectiveness and the effect of performance orientation on managerial effectiveness is strong. However, this study can not found any relationship between market orientation and managerial effectiveness. As Cunha & Cooper, (00) state that changes in market conditions can lead to significant changes in the organizational cultures, this study highly recommend that Vietnamese company have to develop more market-oriented cultures. The supported hypothesis point out that performance orientation factor of corporate culture has strongest influence on managerial effectiveness the second is people orientation and the third is organizational integration. This result is consistence with the study of Vo and Duc (011) in a study of culture in a transition economy in Vietnam. Since culture is an abstraction, yet the forces that are created in social and organizational situations that derive from culture are powerful. If we don t understand the operation of these forces, we become victim to them. To illustrate how the concept of culture helps to illuminate organizational issue, this study is conducted to describe the construct of corporate culture and its influence on managerial effectiveness that may help Vietnamese companies in developing their own business culture and benefiting from it. The results show that the relationships among corporate culture and managerial effectiveness appear significant in this study. The results also indicate that corporate culture could improve the managerial effectiveness. Although the theoretical contribution and managerial implication, some limitations of the research to be considered. The first limitation is that the number of questionnaire is just reasonable; therefore, the future research should perhaps be conducted with bigger number. Secondly, the model should be more developed in regard to other factors. A third limitation is related to sample characteristics that may limit the generalization of the results to some degree. Future studies with larger samples could allow for a comparison among type of business (SEO, PEs, JVC) as well as among age, sex and working experience. Reference Aarons G.A. & Sawitzky A.C. (006). Organizational culture and climate and mental health provider attitudes toward evidence-based practice. Psychological Services, 3(1), Ashkanasy, N.M., Wilderom, C.P.M. & Peterson, M.F. (000). Handbook of organizational culture and climate. Thousand Oaks, CA: Sage. 536

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