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Training and development
6
Training and development
6.1 Introduction At the macro-level, a well-trained workforce contributes to the competitive advantage of a country and enhances its economic growth (Russell, Terborg & Powers, 1985; Kamoche & Mueller, 1998). At the firm level, the investment in human development results in continual innovation and increased productivity, efficiency and profitability (Lucas, 1988; Mathews, 2002; Taylor & Davies, 2004; Huselid, Jackson & Schuler, 1997). Furthermore, employees expect their companies to provide them with learning opportunities to further their personal development and improve their employability. The training and development (T&D) of employees is extremely important in a developing country like Vietnam. The Vietnamese government recognises the importance of developing an educated and trained workforce to meet the demands of the evolving market economy (Le & Morgan, 2001). However, the current education and training (E&T) system, which has been described as ‘backward and obsolete’ (MOET, 2001), fails to meet this demand. Thus, the task of equipping the workforce with adequate skills and knowledge falls on companies’ shoulders. This chapter is structured as follows. Section 6.2 examines some key weaknesses of the educational and vocational training system that lead to a mismatch between the system outputs and the company’s human resource inputs. Sections 6.3 and 6.4 analyse T&D activities in SOEs and MNCs, respectively, under three categories, namely the extent and nature of training, training programmes and the comprehensiveness of training programmes. Finally, some conclusions close the chapter.
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6.2 Factors influencing companies’ training and development strategies The Vietnamese E&T system can be classified as a unitary system (Maurice, Sellier & Silvestre, 1986), where achievement in formal education is regarded as a crucial indicator of competence and ability, and only ‘failures’ enter the state’s practical training, which suffers from low prestige and a scarcity of funding. Education has long been seen as a means of achieving higher income and upward social mobility and of gaining respect. There is strong resistance to undertaking vocational and technical education and training (VOTECH) where instead, continuing the general education is preferred, as it opens the door to university entrance (Beresford, 1988). VOTECH is considered widely inferior to university education in the Vietnamese society. Although government’s investment in VOTECH is improving slowly, the fact remains that it is extremely poor. In 2002, the budget for VOTECH accounted for only about 5 per cent of the total budget for E&T. In 2003, it increased to 6 per cent, and in 2004, to 6.5 per cent (Nguyen, 2006: 8). The weak vocational training system has become a constraint to the sustainable development of the country, as the majority of jobs most needed in Vietnam’s transitional economy require technical skills (Nguyen, 2007). Furthermore, a chronic mismatch exists between the output of the education system and the input of the companies (Duoc & Metzger, 2007; Hargreaves et al., 2001). Three main factors contribute to this problem. First, graduates from the E&T system lack practical experience and skills, and thereby fail to meet companies’ selection requirements (MOET, 2001). Up to 80 per cent of graduate students have to be retrained by employers to match the requirements of labour inputs (Nguyen & Truong, 2007: 142). Although Vietnamese students are wellversed in theory, their ability to apply theory to the work situation is extremely limited. Graduates from the Foreign Trade University, for example, during their four-and-a-half-year course, were exposed to reallife experience only once at the end of their course in the form of company visits to write their graduation thesis. As the current curriculum is not related to practical training needs (Hargreaves et al., 2001), students must be re-trained before actually being assigned the work. Secondly, the labour market data in Vietnam is scarce (Duong & Morgan, 2001). As a result, training and education providers are not fully aware of the types and number of workers in demand. Thirdly, there is a total lack of formal and professional career guidance and counselling for students.
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Vietnamese students get career guidance from their parents, relatives and friends. Decisions are based on general perceptions of what are considered as prestigious careers (such as lawyers, medical doctor) or ‘in fashion’ careers, rather than on realistic occupational information, the needs of the industry, personal abilities and employment expectations. This results in the widespread situation where graduates choose fields of study that are not suitable for them, and later switch their career path and work in fields that are different from their university degrees. When the economy develops along a new direction towards a marketoriented one, the old management style becomes inadequate; instead of that, there is increasing demand for competent business managers. Until the 1990s, business and management education was almost non-existent and the experience of Vietnamese enterprises with market mechanisms was extremely limited. Now, more than two decades after Doi Moi, the shortage of appropriate managerial expertise still exists in the country as a whole, but is felt most acutely in SOEs. In their surveys with leading MNCs operating in Vietnam, William Mercer identified that management and person-related skills continue to be the weakness of Vietnamese employees. Kim (1996) describes this as a defect in the ‘human factor’ and predicts it could be the biggest obstacle to Vietnam’s economic progress. Due to the weaknesses in the E&T system, the workplace is expected to be the other major source of skill formation and training in Vietnam. Incentives are offered to enterprises in the form of tax exemption to encourage in-house training for their employees (Education Law, 1998; Labour Law, 1992). In theory, the law provides scope for the integration of training into business strategies and HRM systems. However, without imposing a floor level of training budget and a proper inspection, monitoring and enforcing mechanisms in place to ensure a consistent implementation of the law, ultimately, the level of investment on human development is still dependent on each company.
6.3 Training and development in SOEs This section looks at T&D activities in the state sector. It argues that under increasing pressure to improve organisational efficiency, SOEs have introduced some fundamental changes into their HR function; however, T&D systems in SOEs have not advanced far from the old days of the centrally planned economy. Their activities suffer from limited financial resources, low-quality training courses, out-of-date training methods and a lack of systematic approach to training.
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Prior to the economic reform, the concept of an external labour market was non-existent and employees were assigned to enterprises by the government, in many cases, without regard to the match between an employee’s skill and knowledge and the firm’s demands. At the workplace level, bounded by the centrally control system, bureaucratic rules and procedures and secured by the lifetime employment system, SOE employees were not motivated to learn and develop new skills and knowledge. The training offered to workers was mainly on the job, focusing on enhancing productivity and improving organisational health and safety. Meanwhile, short courses to strengthen employees’ political beliefs were widely available, and employees were required to attend these courses if they wished to be promoted. This bureaucratic system created a gap that was expected to be filled by three main channels of education, namely in-service training (dao tao tai chuc), specialised training (chuyen tu) and supplementary studies (bo tuc van hoa). These national training programmes were the only sources available to SOE employees from which to gain the extra education they needed to fulfil their tasks and/or were a prerequisite for future promotion. As far as T&D for managers is concerned, the opportunities were extremely limited. This was because SOEs were considered merely as production units, whereas any necessary management function was centralised and controlled by the government. SOE managers therefore were not trained in business management, as the skills were deemed unnecessary. Furthermore, overseas training opportunities, mainly within the old communist system, were very rare and granted to top cadres as a reward for their contributions rather than on the basis of training needs. On those rare occasions, the selection criteria for training opportunities were mainly based on the cadres’ position, seniority and political attitude. The economic reform has challenged the operation of Vietnamese SOEs. The companies have realised that poor T&D systems lead to poor employee attitude, low commitment and high levels of employee turnover, which can be critical to business operations (see also Neupert, Baughn & Dao, 2005). Recently, the training and re-training of employees at the workplace level have witnessed some slow yet fundamental changes. First, the role of training provider has shifted from the central government to enterprises. Secondly, the selection criteria for the training of an employee now emphasises less on position, seniority and political attitude, and is instead more in-line with job demands and requirements. Thirdly, a much wider range, and higher quality, of training programmes
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are offered to employees. However, the legacies of the past, together with the fact that T&D remains a low priority on the list of ‘pressing issues’ that management must attend to, have resulted in low training budgets and a weak T&D function in SOEs.
6.3.1 The extent and nature of training To start with, workforces with low skill levels seem to be common in SOEs. SOE FMCG4’s labour profile can be used to illustrate this point. According to the company’s statistics on the quality of its labour force, SOE FMCG4 had 324 employees in 2004. Only 17.6 per cent of the workforce had university or college degrees, the remaining 82.4 per cent had medium or below-medium skills level (see Table 6.1). Although all managerial staff members and professionals have university or college degrees, the majority of blue-collar workers have lower degrees (high school or vocational ones). Interestingly, more than 20 years after Doi Moi, political training is still considered very important, with 83 per cent of professionals and upper level personnel having attended and achieved certificates for these courses. This figure reveals the importance of political training and attitude, in general, in promotion and career development opportunities in the state sector. Language ability (mostly English) has become a new requirement, not only in the foreign-invested sector but also in the state sector. New recruits in SOEs now need to have at least a B-level English certificate (intermediate level) even though their jobs have little, if any, to do with language. However, only 4.9 per cent of the workforce actually has any English language certificates. Noticeably, none of the managerial staff have any kind of business administration degree. Interviews with other SOEs reveal that the situation of the low skills level is common in the state sector and may be worse in smaller and lesswell-resourced enterprises. Most Vietnamese SOEs recognise the importance of employee T&D; however, they are faced with the chronic problem of having very limited financial resources for these activities. HR managers report difficulties in obtaining funds and getting approval for training courses. The average training cost per employee ranges from USD 14 to USD 21 per annum, which is about 7–19 times lower than the cost incurred by MNCs operating in the same industries. This suggests that although there has been an improvement in training activities, currently SOEs still lack commitment to employee development and pay little attention to nurturing and retaining talents through T&D opportunities (see Table 6.2).
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Table 6.1
Educational attainment of SOE FMCG4’s workforce Educational level
Position
Total Postgraduate
Political training University/ college
High school
Vocational and lower
Language
Advanced level
Middle level
Lower level
Business administration
Managing director (MD)
1
0
1
0
0
1
0
1
0
0
Vice MD
2
0
2
0
0
1
0
0
2
0
39
0
39
0
0
9
1
6
25
0
Professionals Staff
32
0
0
4
12
2
0
0
5
0
Workers
250
0
15
4
231
3
0
0
8
0
Total
324
0
57
8
243
16
1
7
40
0
Training and development
Table 6.2
Training budget in 2006
Company
Training expenditure/employee (USD)
SOE Auto1
19
SOE Auto2
16
SOE Auto3
14
SOE Auto4
N/A
SOE FMCG1
18
SOE FMCG2
>10
SOE FMCG3
21
SOE FMCG4
N/A
6.3.2 Training programmes On-the-job training, the majority of which is conducted in the workplace as part of the normal experience of employees, is the most popular training method in SOEs. On-the-job training mainly focuses on technical workers and involves learning through the assistance and supervision of an experienced and senior employee, normally the production line leader, who helps the trainee learn some useful knowledge and skills that are directly applicable to the trainee’s production lines. This type of training has benefits in that it is customised and encompasses real work experiences. Relying on in-house resources, on-the-job training is also cost-effective and is thus preferred in SOEs. Workers, in general, are ranked in terms of technical skills from first to seventh grade, the latter being the highest skill level. They are expected to upgrade their skills gradually, by passing the ‘Upgrading Technical Skills Examinations’ that are held regularly. To pass these examinations, SOEs provide their workers, especially those who hold pivotal positions in the production lines, with some short in-class training courses (1–2 days) which are specially designed to cover some theoretical aspect of production. These examinations motivate workers to develop and improve their skills and raise their employability. However, no penalty is charged if workers fail the examinations; in fact, those who fail are still allowed to remain in their positions. Thus, upgrading skills is left to each individual’s endeavour.
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The Transformation of HRM/IR in Vietnam
SOEs recognise that their severe shortage of qualified managers is posing a serious problem at present and will continue to do so in the immediate future. As a result, professional and managerial staff members are offered more training opportunities than workers. Across the case studies, around 60–65 per cent of the training budget is invested in training professionals and managers. Training programmes cover the following fields: business administration, government policy studies (e.g. tax policies), English, informatics and political training. Training courses are not offered on a regular basis but are dependent on the availability of trainees, trainers and, most importantly, funding. They are organised either by the company or by their General Corporation. Training is conducted by trainers from universities, external consultants or relevant governmental agencies (e.g. tax policies courses are taught by the Tax Policy Research Institute, and business administration courses by the Vietnam Chamber of Commerce and Industry). The majority of these courses are reserved for department heads and upper-level employees. Overseas training opportunities are very rare and mostly restricted for directorial and top managers. Often, these managers are sent on business tours to visit foreign enterprises and learn from their operations. The duration is about 7–10 days. In many cases, the cost is covered in equipment selling/buying contracts with the foreign partners, in which training is a part of the deal. Overseas travelling/training opportunities are highly sought after and still considered as ‘rewards’ to key employees. Therefore, the selection criteria are highly subjective and are set at the sole discretion of the top executives of the company and their General Corporation (see also Truong & Ha, 1998). To limit training budgets, SOEs encourage their employees to embark on self-study. Companies provide support by partly reimbursing their tuition fees (normally 50 per cent). The most popular methods still are in-service training and specialised training for graduate and postgraduate levels and supplementary studies for high school and lower levels. Employees attend these classes in the evening after work. Companies might allow their employees to take leave for studying purpose. However, in general, the understanding is that studies must not interfere with their obligations at work. Although coordinated and implemented by universities, these training programmes suffer serious deficiencies and learning quality is greatly neglected (Truong & Ha, 1998). In practice, programmes are shortened to reduce learning time as much as possible, teachers are overpowered by the studentmanagers and examination results can be corrupted. The quality has become so low that it has given rise to a popular adage ‘as ignorant as
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specialised training students, as stupid as in-service training ones’. However, these training programmes are still very popular as they provide employees the chance to attain the minimum level of education required for their positions or an extra degree, which would be viewed favourable in promotion competitions, at a low cost, in terms of both finance and time investment. In many cases, obtaining a degree/ certificate is the main objective, rather than upgrading one’s skills and knowledge. As discussed in Section 6.3, in-service training, specialised training and supplementary studies were popular prior to Doi Moi. Recently, with the renovation and expansion of the educational system, more options are now available to the public. Employees can invest on high quality E&T programmes, offered either by local educational institutions or by foreign-invested ones. Some choose to undertake a second university degree or master degree. Management degrees, such as Master of Business Administration, have been very popular. Compared to the cost of in-service or specialised training, tuition fees for these degrees are much higher. However, enrollments have been increasing steadily, evidencing the real demand for business and managerial skills. Finally, re-training is an important part of T&D activities in the state sector. In the old centrally planned economy, the compulsion imposed on enterprises by the government to employ more than the necessary number of staff led to over-employment in SOEs. Since Doi Moi, SOEs’ restructuring has led to mass redundancies. Most of the redundant employees have low-level, outdated and over-specialised skills, which hinder their mobility and employability in the new labour market. The government requires all downsizing SOEs to provide retraining to their laid-off workers so they can be redeployed to other functions in the same company or can regain employment somewhere else. On the one hand, re-training successfully preserves the state sector’s reputation in securing jobs for their employees. However, on the other hand, it causes stagnation and prevents the injection of ‘new blood’ into the SOEs’ labour force, as revealed by SOE Auto3’s HR manager: Many of these employees have managed to retain employment relationships with the enterprise. We put people on the re-training schemes with the view that their skills will be upgraded and more importantly, relevant to our company. Afterwards they might still work for us on non-permanent contracts or they will find a job somewhere else nearby. . . . We see all the old faces.
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The Transformation of HRM/IR in Vietnam
6.3.3 Comprehensiveness of training programmes More often than not, when financial resources are limited, especially in the state sector, employee training is seen as part of the non-core business, so employers prioritise other investment areas, such as new technologies and marketing expenses, rather than T&D programmes (Nguyen & Truong, 2007). The studied firms also demonstrate a lack of systematic approach to training. A formal analysis process that is required to identify training needs is absent in SOEs. This leads to a waste of the already limited training resources. For example, trendy courses, such as English and computing skills, are offered to employees regardless of their job tasks. At the training design and implementation steps, there is a lack of coordination between employees and their direct supervisors, between and among departments and a lack of senior management involvement throughout the training process. The focus of T&D activities in SOEs is not customised to meet the particular needs of different groups of employees. Further, the contents of training courses are conveyed through the old method of training (e.g. classroom-style training, one-way communication), and are thus often complained about being repetitive, boring and irrelevant. Furthermore, the training process lacks an evaluation phase to measure the effect that various T&D activities have on employees’ and firm’s performance. Evaluation, if at all it exists, is done informally by direct supervisors and does not follow any prescribed procedure or standard. This prevents managers from realising that investing in T&D programmes is worthwhile and reinforces the vicious circle in which managers view T&D activities as non-essential to the organisation’s success. Thus, training in SOEs continues to be a weak HR area, which receives little investment and remains ad hoc, fractured and poorly coordinated. Finally, a gap exists between employee learning and organisational results. This finding is in agreement with Kamoche’s (2001) research. The ‘traditional administrative attitude’ (Kamoche, 2001), where employees work under bureaucratic rules and procedures, and are not able to change their work practices to more efficient manners to suit the current demand, is still embedded in the mindset of SOE workforce. Although managers are eager to learn and indeed gain new knowledge, many are reluctant to apply their knowledge to their workplace. A psychological hurdle amongst the Vietnamese workforce is an unwillingness to express independence and take risks.
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6.4 Training and development in MNCs This section looks at T&D activities in MNCs. It argues that foreign investors recognise the lack of skills and qualifications in Vietnam’s labour force and, especially, the need for management training. They provide more training to their employees than their SOE counterparts. MNCs intensify their training efforts and develop strategies to achieve a higher return on their investment in training, especially for managerial staff. To obtain a higher return, in the context of high turnover rates and poaching, companies develop counterstrategies such as legally binding their staff for a certain number of years after providing them training or firmspecific programmes. A more comprehensive and systematic T&D approach has been recorded in non-Asian MNCs compared with a production-focused T&D approach in Asian MNCs.
6.4.1 The extent and nature of training In general, T&D is centrally controlled, especially during the early years of establishment. All companies run regular courses, which follow the international format developed by the global corporations. The subsidiaries’ training activities are monitored and backed up by experts from headquarters (HQ) or other countries, who irregularly visits for a quick ‘check up’, which is followed by an annual audit. Training is one of the 10 components of the MNC Auto1 Production System, which is audited annually on a global scaled score.1 It is certainly one of the most crucial components of quality control from HQs. The use of ‘coercive comparisons’ (Ferner & Edwards, 1995) tightens the coordination process from HQs and prevents subsidiaries from diverging themselves from the global mould. A score of 4.3 (out of a maximum 5.0) reveals that the training process is identified as one of MNC Auto1’s strengths, as stated in the global audit report dated 17 April 2002. The average training fund per employee ranges from USD 96 to USD 342 per annum. Overall, operating in the same industry, non-Asian MNCs spend more in training and offer more training programmes to their local employees than Asian MNCs. However, industrial effect is recorded when observing the trend across industries. Some Asian companies in the automotive industry (i.e. MCN Auto3 and MNC Auto5) have invested a similar amount in employee training as the non-Asian firms in the FMCG industry. Firm size is also significantly correlated with the total training expenditure (see Table 6.3).
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The Transformation of HRM/IR in Vietnam
Table 6.3
Training budget in 2007
Company
Training expenditure/employee (USD)
MNC Auto1
342
MNC Auto2
127
MNC Auto3
140
MNC Auto4
N/A
MNC Auto5
>120
MNC FMCG1
>200
MNC FMCG2
273
MNC FMCG3
200
MNC FMCG4
87
MNC FMCG5
160
MNC FMCG6
>250
Notes: 1. The training budget in any particular year may not accurately reveal the T&D long-term strategy of a company. The budget can fluctuate, influenced by a company’s short-term business strategy. For example, MNC FMCG1’s training time in 2002 was not more than 1 per cent of working time. However, their HR manager revealed that a much higher percentage was decided during the setting-up period, but the focus of the company’s business strategy in 2002 was less on training. 2. Companies are hesitant to reveal budget data, so the figures should be considered as indicative and approximate.
MNCs make a significant effort and investment in training their management staff. Although most of the companies do not keep separate statistics on training for blue-collar and white-collar workers, interview data reveals that each management staff member spends around 5–10 per cent of their working time annually on training programmes. As staff are under heavy pressure during work hours in Vietnam, more than 5 per cent of working time per year devoted to training is considered a lot of time away from work. These companies, however, believe that the longterm investment is worthwhile. Most importantly, they understand that training is the key to retaining local managers. All interviewed Vietnamese managers, without exception, acknowledge that the opportunities for further T&D in the form of training by ‘foreign invested
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companies’ and overseas training are one of the strongest reasons for their decision to work for those companies. Interviews conducted by companies with the group of regretted turnover also proves this – the most cited reason for leaving the companies was the lack of training or the feeling of receiving less T&D opportunities than expected. This again re-confirms that there is a skilled labour shortage in Vietnam, and overall in Asia (Stahl & Zheng, 2002; Zheng, 2005). A lower proportion of the companies’ training budget is devoted to the training of blue-collar workers. Furthermore, the number of training programmes provided to white-collar workers is much higher and consists of a wider range of topics compared with those provided to clerical and production staff. This is especially the case in the FMCG industry, where the simplicity of the production process requires very little training. Line workers in MNC FMCG3, MNC FMCG4 and MNC FMCG5 are virtually only trained for basic production techniques during their induction programme.
6.4.2 Training programmes Training programmes in MNCs often start with the very basics of business education in the curriculum. Employers provide broad-based foundation training for their staff as a basis for further training provided later. MNC Auto1, for instance, has implemented a ‘learning tree’ training scheme with roots (basic business skills: stage 1), trunks (functional skills and advanced business skills: stage 2) and leaves (management and leadership skills: stage 3). In the first stage of this programme, 100 per cent of staff is required to participate to ensure that all employees have basic business awareness and speak the same business language. In the next stages, the company seeks to develop potential managers only, where intensive training programmes are tailored to prepare them to assume managerial posts. Similarly, MNC Auto3 developed a model of on-the-job training in six steps, which covers the company’s whole workforce. Step one is for the lowest level of employees, while step six is for managerial staff members. The six steps aim to upgrade employees’ skills and knowledge from the very basic level, such as to complete routine repeatable jobs under detailed instructions and regular supervision, through to using their own judgement and creativity to complete tasks with limited supervision. Managers and professional/technical staff undertake more external training programmes than internal ones. Internal training mode is mainly
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The Transformation of HRM/IR in Vietnam
on-the-job training for clerical, sales and production employees. Normally, companies establish a regular relationship with training providers to cater for basic training needs. Employees are required to actively pursue training by choosing courses to suit their personal development needs (courses are available on a ‘first come, first served’ basis) or taking them as a compulsory requirement for their current or new posts. Many of these programmes are taught overseas or by foreign experts so that Vietnamese managers can gain international exposure and experience. Some of them are required to take international assignments as part of their training programmes. Non-Asian MNCs, such as MNC Auto1, MNC FMCG1 and MNC FMCG2, also offer ‘shadowing opportunities’, where high potential local employees tag along and observe expatriate managers from HQ full time. Mentoring is also used as a training strategy. However, effective formal mentoring relationships may not be formed easily in Vietnam due to the lack of expatriate managers and the cultural differences that form a gap between mentors and mentees. In addition, the demand in terms of time for mentoring programmes has a negative effect on expatriate managers’ business effectiveness. Thus, the popularity and success of mentoring programmes are limited in the studied firms. This finding complements the argument that Western mentoring policies have trouble being transferred to the Asian context, and mentoring relationships that are developed naturally are more effective than mentoring that is created by formal means (Weldon & Vanhonacker, 1999). Compared to their SOE counterparts, training methods in MNCs are more diverse and advanced. One of the most recent approaches adopted by MNCs is e-learning and blended learning. E-learning uses company intranet to deliver training courses to employees, and thus allows Vietnamese employees to gain access to a well of knowledge available to the company’s global workforce. However, as a type of education where the medium of instruction is computer technology without personal interaction, e-learning has certain weaknesses, such as the lack of instructor interaction (Bouhnik & Marcus, 2006; Flamholz & Cheung, 2007). In the Vietnamese context, e-learning might not be optimal as the workforce does not have a strong knowledge platform to make good use of the company’s global resources. Blended learning aims to overcome the inadequacies that evolve from e-learning, by incorporating two or more methods for delivering training (Bersin, 2004; Mackay & Stockpot, 2006). Typically this would include e-learning along with a mixture of other training methods such as on-the-job training or classroom-style training. One increasingly
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popular style of a blended learning programme involves combining both e-learning and manager-led on-the-job training. This style of training has proven to be liked by Vietnamese employees and to be more efficient than a singular classroom or e-learning program. Employees can learn and apply their training more immediately in a real work environment and can gain increased levels of motivation as the relevance of training to the job is clearly demonstrated. Blended learning also transfers the responsibility of learning to the individual, provides more immediate feedback from the supervisor and offers greater flexibility in the pace and timing of delivery (De Jong & Versloot, 1999; Lewis, 1997; Holton et al., 1997). Besides the formal T&D channels, companies are aware of and use informal cultural aspects of management development to create a common language and shared attitudes across their operations globally. NonAsian companies focus on policies such as an in-house top management programme and management forum, where participants are executives from all regions of the world and have contributed greatly to a strong global culture. By contrast, Asian corporations encourage employees to identify themselves within the corporation by emphasising the company’s philosophy. In addition, e-forums, e-networks and e-learning, which are very popular in the studied firms, contribute greatly to creating a global culture and transferring ‘soft skills’. In the Vietnamese market, companies are faced with a dilemma – they could spend a fortune on training and developing their management staff only to see them leave the company (newly equipped with skills that make them more desirable in the market) for higher paying employers, in many cases a competitor company. As skills are scarce within and across industries, job-hopping to accelerate salary is popular. While some companies have a practical viewpoint on this matter, others think twice before determining their training budget. The MNC FMCG2 HR manager said: When talented and ambitious people are equipped with new knowledge and skills that they learnt in a multinational company, they become a precious commodity in the labour market, you should expect that they might want to move on. On the other hand, MNC Auto3 claims they are unwilling to bear the training costs for managers because of the perception that such employees are highly individualistic and inclined to switch jobs whenever a more attractive opportunity becomes available. Moreover, each industry is
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The Transformation of HRM/IR in Vietnam
narrow enough, so the list of talents within it is widely known to insiders. The production manager of MNC Auto1 can easily name top/key performers in MNC Auto2 or MNC Auto3. The competition for highquality staff is fierce. MNC Auto1’s regional sales and marketing manager used to be MNC Auto3’s sales and marketing manager. He was one of the pioneers in assisting the country director in setting up MNC Auto3’s operations in Vietnam. MNC FMCG3’s production manager used to work for MNC FMCG4. Furthermore, there is clear evidence of spillover effects caused by employees who used to work for foreign MNCs and then subsequently moved to local firms. In some other cases, possessing local connections and newly acquired knowledge, Vietnamese managers leave MNCs and start their own businesses in the same or related industry, providing services to their former employers. Preventative strategies have been applied to keep trained managers with the companies and reduce the regretted turnover rate. Some companies provide training and education programmes and/or financial support to managers’ education only on the condition that they are bound by a legal contract with the company to stay for at least three to five years after the programme, otherwise, hefty fines would be applied. MNC Auto3, on the other hand, offers highly firm-specific training courses (such as the company’s New Circle Leader, Training Within Industry, Company Philosophy higher level, etc.), which greatly improve the chance of getting acknowledged and promoted within MNC Auto3 but are of little help in seeking jobs elsewhere. No ‘normal’ degree or certificate has ever been given. The company thus limits the ability of their employees to use the knowledge gained in the company to advance their positions in other companies.
6.4.3 Comprehensiveness of training programmes In general, non-Asian MNCs tend to invest more in training their managers than Asian firms. Moreover, a well-structured and systematic approach to T&D is evident in non-Asian MNCs. Training needs are identified as a cycle which requires close cooperation between supervisors and subordinates. They are discussed annually in performance appraisal meetings, based on several factors: the company’s and the department’s business objectives and an analysis of the person’s performance targets, achievements, performance gaps and career aspirations. Managers analyse the actual and required skills level of the employees to outline
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skill deficiencies and determine whether training is the most appropriate way to solve the deficiencies, and if so, to decide the training priority order. The main goal of the needs analysis is to lay out the foundation for the implementation and evaluation stages. The areas of training cover a wide range of issues and subjects, which also emphasise human-related skills. The training results are monitored to allow a continuously improving training cycle. Employees are provided with adequate regular feedbacks and opportunity to use their newly learnt skills. Interviewed managers express their content with the T&D that they receive, and most judge the system to be effective or very effective. A second feature that non-Asian MNCs share is their commitment to job rotation. The arrangement for job rotation is fairly formal, at least on paper, even though the results do vary significantly and are limited in general. Job rotation takes place every two or three years and continues in a manager’s career. Managerial staff members are required to select the area of expertise they wish to move into in the near future, while their supervisors are responsible for providing them with the relevant training to make them capable in their new jobs. MNC FMCG1 industries report no difficulty in the inter-functional mobility of their staff – indeed they report an impressive 25 per cent of their management staff qualified for a second area of mastery. However, other companies admit limitations in this activity at the present. For instance, MNC Auto1 states that ‘meaningful rotation is rather limited at the top levels’. The requisite special knowledge would be too high, while the knowledge and skills of managers are still limited. This does not allow cross-functional mobility without deterioration in performance. Due to the workload and the endeavour for high performance ratings, sections/departments/firms tend to resist rotation. Nonetheless, non-Asian MNCs are making an effort to develop interdisciplinary skills. The long-term perspective is to develop a highly competent local management staff which has been trained in a wide variety of functional skills and is able to replace expatriate managers, which is in line with their management localisation strategy. This is in marked contrast to a number of Asian MNC cases. Training in these firms is merely based on production needs and the availability and convenient timing of courses offered by the company or training providers from outside. A departmental manager in MNC FMCG4 pointed out that when he was appointed as the factory HR manager in 2001, he had received no preparatory training to equip him to take on the challenges of the post. He reports that he therefore needed to embark on several months of hard self-study to undertake his current job effectively. He, along with many others, says that he feels there are gaps in the areas
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of ‘leadership’ training as well as in marketing and sales, information technology, planning, labour law, health and safety law, and so on. Training programmes in Asian MNCs focus heavily on technical knowledge and neglect people management skills, while a more balanced approach is taken in non-Asian MNCs. Furthermore, in all Asian subsidiaries in Vietnam, job rotation is not a popular practice. Even though some limited movement has been recorded, for example shifting staff from HRM to public relations department, it is reckoned that the movement is designed more to fill the human resource gap and for the convenience of the company, rather than for intended rotation. Rotation for workers in production lines is much more popular. Vietnamese managers in these companies are often seen as stuck in narrow specialisms. MNC Auto3 serves as an example in this context. An ethnocentric approach in global staffing strategy restrains the subsidiary from developing their local management staff. The company’s ‘Rotation Rule’, which requires that a person does not remain longer than three years at the same post, is applied to senior managers and upper-level staff only. In effect, this eliminates the possibility of rotation for the local managerial staff. The training programmes show a strong trend towards developing Vietnamese managerial ‘specialists’ rather than ‘generalists’.
6.5 Conclusions This chapter has briefly examined the educational and vocational training system in Vietnam, with a focus on its impacts on companies’ T&D systems. The overal picture is that the E&T system, despite the government’s vigorous attempt to renovate it, remains unable to deliver a welleducated and skilled workforce. A chronic mismatch exists between the E&T system’s outputs and the company’s human resource inputs. Thus, the social demand on companies to provide T&D opportunities for their employees is paramount. In the state sector, although there has been an increase in training activities (e.g. increased training budget, more training courses offered and widening training fields), T&D systems in SOEs have not advanced far from the old days of the centrally planned economy. There is little evidence to suggest that T&D forms part of an HR strategy proactively pursued by SOEs. The activities suffer from limited financial resources, low-quality training courses, out-of-date training methods and lack of systematic training systems. High-quality training opportunities are
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mostly only offered to top executives and managers – those who are already privileged with a higher level of skills and qualifications. Coordination is lacking between employees and their direct supervisors, and between and among departments, and there is also a lack of involvement by senior management in the training processes. At present, T&D achievements are heavily reliant on each individual employee’s will and commitment. In order to foster company training, the state needs to promote enterprise training by implementing stronger, and clearly enforceable, economic, legislative and administrative mechanisms. There is also a need for a closer linkage to be established among enterprises and educational and training institutions. On the other hand, in the foreign-invested sector, for MNCs that do not focus on exploiting cheap labour, the training and re-training of the Vietnamese labour force are seen as imperative. In general, MNCs provide much more T&D programmes for employees than their SOE counterparts. Modern training techniques, various and relevant training programmes, including overseas programmes, are utilised. Training quality is also greatly enhanced by the use of up-to-date, technologydriven methods such as e-learning and blended learning. A more comprehensive and systematic T&D approach, which includes a full circle of training need analysis, training design, implementation and evaluation, is recorded in some companies in this sector. The main issue in managerial T&D in the Vietnamese context is the conflict between the need to intensify T&D for local managers versus the risk that, in the chaotic Vietnamese labour market, this will worsen the turnover rate and poaching. Companies have intensified their training efforts to keep up with the global standard and at the same time develop counterstrategies to get a higher return on their investment on training in Vietnam. Limited training which focuses on production needs and neglects people management skills is recorded in some Asian MNCs.
Note 1. MNC Auto1’s Production System’s 10 components consist of managing, training, work groups, administration, machine, safety, total inventory, manufacturing, engineering design and material flow.
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6.1 Introduction At the macro-level, a well-trained workforce contributes to the competitive advantage of a country and enhances its economic growth (Russell, Terborg & Powers, 1985; Kamoche & Mueller, 1998). At the firm level, the investment in human development results in continual innovation and increased productivity, efficiency and profitability (Lucas, 1988; Mathews, 2002; Taylor & Davies, 2004; Huselid, Jackson & Schuler, 1997). Furthermore, employees expect their companies to provide them with learning opportunities to further their personal development and improve their employability. The training and development (T&D) of employees is extremely important in a developing country like Vietnam. The Vietnamese government recognises the importance of developing an educated and trained workforce to meet the demands of the evolving market economy (Le & Morgan, 2001). However, the current education and training (E&T) system, which has been described as ‘backward and obsolete’ (MOET, 2001), fails to meet this demand. Thus, the task of equipping the workforce with adequate skills and knowledge falls on companies’ shoulders. This chapter is structured as follows. Section 6.2 examines some key weaknesses of the educational and vocational training system that lead to a mismatch between the system outputs and the company’s human resource inputs. Sections 6.3 and 6.4 analyse T&D activities in SOEs and MNCs, respectively, under three categories, namely the extent and nature of training, training programmes and the comprehensiveness of training programmes. Finally, some conclusions close the chapter.
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6.2 Factors influencing companies’ training and development strategies The Vietnamese E&T system can be classified as a unitary system (Maurice, Sellier & Silvestre, 1986), where achievement in formal education is regarded as a crucial indicator of competence and ability, and only ‘failures’ enter the state’s practical training, which suffers from low prestige and a scarcity of funding. Education has long been seen as a means of achieving higher income and upward social mobility and of gaining respect. There is strong resistance to undertaking vocational and technical education and training (VOTECH) where instead, continuing the general education is preferred, as it opens the door to university entrance (Beresford, 1988). VOTECH is considered widely inferior to university education in the Vietnamese society. Although government’s investment in VOTECH is improving slowly, the fact remains that it is extremely poor. In 2002, the budget for VOTECH accounted for only about 5 per cent of the total budget for E&T. In 2003, it increased to 6 per cent, and in 2004, to 6.5 per cent (Nguyen, 2006: 8). The weak vocational training system has become a constraint to the sustainable development of the country, as the majority of jobs most needed in Vietnam’s transitional economy require technical skills (Nguyen, 2007). Furthermore, a chronic mismatch exists between the output of the education system and the input of the companies (Duoc & Metzger, 2007; Hargreaves et al., 2001). Three main factors contribute to this problem. First, graduates from the E&T system lack practical experience and skills, and thereby fail to meet companies’ selection requirements (MOET, 2001). Up to 80 per cent of graduate students have to be retrained by employers to match the requirements of labour inputs (Nguyen & Truong, 2007: 142). Although Vietnamese students are wellversed in theory, their ability to apply theory to the work situation is extremely limited. Graduates from the Foreign Trade University, for example, during their four-and-a-half-year course, were exposed to reallife experience only once at the end of their course in the form of company visits to write their graduation thesis. As the current curriculum is not related to practical training needs (Hargreaves et al., 2001), students must be re-trained before actually being assigned the work. Secondly, the labour market data in Vietnam is scarce (Duong & Morgan, 2001). As a result, training and education providers are not fully aware of the types and number of workers in demand. Thirdly, there is a total lack of formal and professional career guidance and counselling for students.
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Vietnamese students get career guidance from their parents, relatives and friends. Decisions are based on general perceptions of what are considered as prestigious careers (such as lawyers, medical doctor) or ‘in fashion’ careers, rather than on realistic occupational information, the needs of the industry, personal abilities and employment expectations. This results in the widespread situation where graduates choose fields of study that are not suitable for them, and later switch their career path and work in fields that are different from their university degrees. When the economy develops along a new direction towards a marketoriented one, the old management style becomes inadequate; instead of that, there is increasing demand for competent business managers. Until the 1990s, business and management education was almost non-existent and the experience of Vietnamese enterprises with market mechanisms was extremely limited. Now, more than two decades after Doi Moi, the shortage of appropriate managerial expertise still exists in the country as a whole, but is felt most acutely in SOEs. In their surveys with leading MNCs operating in Vietnam, William Mercer identified that management and person-related skills continue to be the weakness of Vietnamese employees. Kim (1996) describes this as a defect in the ‘human factor’ and predicts it could be the biggest obstacle to Vietnam’s economic progress. Due to the weaknesses in the E&T system, the workplace is expected to be the other major source of skill formation and training in Vietnam. Incentives are offered to enterprises in the form of tax exemption to encourage in-house training for their employees (Education Law, 1998; Labour Law, 1992). In theory, the law provides scope for the integration of training into business strategies and HRM systems. However, without imposing a floor level of training budget and a proper inspection, monitoring and enforcing mechanisms in place to ensure a consistent implementation of the law, ultimately, the level of investment on human development is still dependent on each company.
6.3 Training and development in SOEs This section looks at T&D activities in the state sector. It argues that under increasing pressure to improve organisational efficiency, SOEs have introduced some fundamental changes into their HR function; however, T&D systems in SOEs have not advanced far from the old days of the centrally planned economy. Their activities suffer from limited financial resources, low-quality training courses, out-of-date training methods and a lack of systematic approach to training.
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Prior to the economic reform, the concept of an external labour market was non-existent and employees were assigned to enterprises by the government, in many cases, without regard to the match between an employee’s skill and knowledge and the firm’s demands. At the workplace level, bounded by the centrally control system, bureaucratic rules and procedures and secured by the lifetime employment system, SOE employees were not motivated to learn and develop new skills and knowledge. The training offered to workers was mainly on the job, focusing on enhancing productivity and improving organisational health and safety. Meanwhile, short courses to strengthen employees’ political beliefs were widely available, and employees were required to attend these courses if they wished to be promoted. This bureaucratic system created a gap that was expected to be filled by three main channels of education, namely in-service training (dao tao tai chuc), specialised training (chuyen tu) and supplementary studies (bo tuc van hoa). These national training programmes were the only sources available to SOE employees from which to gain the extra education they needed to fulfil their tasks and/or were a prerequisite for future promotion. As far as T&D for managers is concerned, the opportunities were extremely limited. This was because SOEs were considered merely as production units, whereas any necessary management function was centralised and controlled by the government. SOE managers therefore were not trained in business management, as the skills were deemed unnecessary. Furthermore, overseas training opportunities, mainly within the old communist system, were very rare and granted to top cadres as a reward for their contributions rather than on the basis of training needs. On those rare occasions, the selection criteria for training opportunities were mainly based on the cadres’ position, seniority and political attitude. The economic reform has challenged the operation of Vietnamese SOEs. The companies have realised that poor T&D systems lead to poor employee attitude, low commitment and high levels of employee turnover, which can be critical to business operations (see also Neupert, Baughn & Dao, 2005). Recently, the training and re-training of employees at the workplace level have witnessed some slow yet fundamental changes. First, the role of training provider has shifted from the central government to enterprises. Secondly, the selection criteria for the training of an employee now emphasises less on position, seniority and political attitude, and is instead more in-line with job demands and requirements. Thirdly, a much wider range, and higher quality, of training programmes
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are offered to employees. However, the legacies of the past, together with the fact that T&D remains a low priority on the list of ‘pressing issues’ that management must attend to, have resulted in low training budgets and a weak T&D function in SOEs.
6.3.1 The extent and nature of training To start with, workforces with low skill levels seem to be common in SOEs. SOE FMCG4’s labour profile can be used to illustrate this point. According to the company’s statistics on the quality of its labour force, SOE FMCG4 had 324 employees in 2004. Only 17.6 per cent of the workforce had university or college degrees, the remaining 82.4 per cent had medium or below-medium skills level (see Table 6.1). Although all managerial staff members and professionals have university or college degrees, the majority of blue-collar workers have lower degrees (high school or vocational ones). Interestingly, more than 20 years after Doi Moi, political training is still considered very important, with 83 per cent of professionals and upper level personnel having attended and achieved certificates for these courses. This figure reveals the importance of political training and attitude, in general, in promotion and career development opportunities in the state sector. Language ability (mostly English) has become a new requirement, not only in the foreign-invested sector but also in the state sector. New recruits in SOEs now need to have at least a B-level English certificate (intermediate level) even though their jobs have little, if any, to do with language. However, only 4.9 per cent of the workforce actually has any English language certificates. Noticeably, none of the managerial staff have any kind of business administration degree. Interviews with other SOEs reveal that the situation of the low skills level is common in the state sector and may be worse in smaller and lesswell-resourced enterprises. Most Vietnamese SOEs recognise the importance of employee T&D; however, they are faced with the chronic problem of having very limited financial resources for these activities. HR managers report difficulties in obtaining funds and getting approval for training courses. The average training cost per employee ranges from USD 14 to USD 21 per annum, which is about 7–19 times lower than the cost incurred by MNCs operating in the same industries. This suggests that although there has been an improvement in training activities, currently SOEs still lack commitment to employee development and pay little attention to nurturing and retaining talents through T&D opportunities (see Table 6.2).
115
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Table 6.1
Educational attainment of SOE FMCG4’s workforce Educational level
Position
Total Postgraduate
Political training University/ college
High school
Vocational and lower
Language
Advanced level
Middle level
Lower level
Business administration
Managing director (MD)
1
0
1
0
0
1
0
1
0
0
Vice MD
2
0
2
0
0
1
0
0
2
0
39
0
39
0
0
9
1
6
25
0
Professionals Staff
32
0
0
4
12
2
0
0
5
0
Workers
250
0
15
4
231
3
0
0
8
0
Total
324
0
57
8
243
16
1
7
40
0
Training and development
Table 6.2
Training budget in 2006
Company
Training expenditure/employee (USD)
SOE Auto1
19
SOE Auto2
16
SOE Auto3
14
SOE Auto4
N/A
SOE FMCG1
18
SOE FMCG2
>10
SOE FMCG3
21
SOE FMCG4
N/A
6.3.2 Training programmes On-the-job training, the majority of which is conducted in the workplace as part of the normal experience of employees, is the most popular training method in SOEs. On-the-job training mainly focuses on technical workers and involves learning through the assistance and supervision of an experienced and senior employee, normally the production line leader, who helps the trainee learn some useful knowledge and skills that are directly applicable to the trainee’s production lines. This type of training has benefits in that it is customised and encompasses real work experiences. Relying on in-house resources, on-the-job training is also cost-effective and is thus preferred in SOEs. Workers, in general, are ranked in terms of technical skills from first to seventh grade, the latter being the highest skill level. They are expected to upgrade their skills gradually, by passing the ‘Upgrading Technical Skills Examinations’ that are held regularly. To pass these examinations, SOEs provide their workers, especially those who hold pivotal positions in the production lines, with some short in-class training courses (1–2 days) which are specially designed to cover some theoretical aspect of production. These examinations motivate workers to develop and improve their skills and raise their employability. However, no penalty is charged if workers fail the examinations; in fact, those who fail are still allowed to remain in their positions. Thus, upgrading skills is left to each individual’s endeavour.
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SOEs recognise that their severe shortage of qualified managers is posing a serious problem at present and will continue to do so in the immediate future. As a result, professional and managerial staff members are offered more training opportunities than workers. Across the case studies, around 60–65 per cent of the training budget is invested in training professionals and managers. Training programmes cover the following fields: business administration, government policy studies (e.g. tax policies), English, informatics and political training. Training courses are not offered on a regular basis but are dependent on the availability of trainees, trainers and, most importantly, funding. They are organised either by the company or by their General Corporation. Training is conducted by trainers from universities, external consultants or relevant governmental agencies (e.g. tax policies courses are taught by the Tax Policy Research Institute, and business administration courses by the Vietnam Chamber of Commerce and Industry). The majority of these courses are reserved for department heads and upper-level employees. Overseas training opportunities are very rare and mostly restricted for directorial and top managers. Often, these managers are sent on business tours to visit foreign enterprises and learn from their operations. The duration is about 7–10 days. In many cases, the cost is covered in equipment selling/buying contracts with the foreign partners, in which training is a part of the deal. Overseas travelling/training opportunities are highly sought after and still considered as ‘rewards’ to key employees. Therefore, the selection criteria are highly subjective and are set at the sole discretion of the top executives of the company and their General Corporation (see also Truong & Ha, 1998). To limit training budgets, SOEs encourage their employees to embark on self-study. Companies provide support by partly reimbursing their tuition fees (normally 50 per cent). The most popular methods still are in-service training and specialised training for graduate and postgraduate levels and supplementary studies for high school and lower levels. Employees attend these classes in the evening after work. Companies might allow their employees to take leave for studying purpose. However, in general, the understanding is that studies must not interfere with their obligations at work. Although coordinated and implemented by universities, these training programmes suffer serious deficiencies and learning quality is greatly neglected (Truong & Ha, 1998). In practice, programmes are shortened to reduce learning time as much as possible, teachers are overpowered by the studentmanagers and examination results can be corrupted. The quality has become so low that it has given rise to a popular adage ‘as ignorant as
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specialised training students, as stupid as in-service training ones’. However, these training programmes are still very popular as they provide employees the chance to attain the minimum level of education required for their positions or an extra degree, which would be viewed favourable in promotion competitions, at a low cost, in terms of both finance and time investment. In many cases, obtaining a degree/ certificate is the main objective, rather than upgrading one’s skills and knowledge. As discussed in Section 6.3, in-service training, specialised training and supplementary studies were popular prior to Doi Moi. Recently, with the renovation and expansion of the educational system, more options are now available to the public. Employees can invest on high quality E&T programmes, offered either by local educational institutions or by foreign-invested ones. Some choose to undertake a second university degree or master degree. Management degrees, such as Master of Business Administration, have been very popular. Compared to the cost of in-service or specialised training, tuition fees for these degrees are much higher. However, enrollments have been increasing steadily, evidencing the real demand for business and managerial skills. Finally, re-training is an important part of T&D activities in the state sector. In the old centrally planned economy, the compulsion imposed on enterprises by the government to employ more than the necessary number of staff led to over-employment in SOEs. Since Doi Moi, SOEs’ restructuring has led to mass redundancies. Most of the redundant employees have low-level, outdated and over-specialised skills, which hinder their mobility and employability in the new labour market. The government requires all downsizing SOEs to provide retraining to their laid-off workers so they can be redeployed to other functions in the same company or can regain employment somewhere else. On the one hand, re-training successfully preserves the state sector’s reputation in securing jobs for their employees. However, on the other hand, it causes stagnation and prevents the injection of ‘new blood’ into the SOEs’ labour force, as revealed by SOE Auto3’s HR manager: Many of these employees have managed to retain employment relationships with the enterprise. We put people on the re-training schemes with the view that their skills will be upgraded and more importantly, relevant to our company. Afterwards they might still work for us on non-permanent contracts or they will find a job somewhere else nearby. . . . We see all the old faces.
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6.3.3 Comprehensiveness of training programmes More often than not, when financial resources are limited, especially in the state sector, employee training is seen as part of the non-core business, so employers prioritise other investment areas, such as new technologies and marketing expenses, rather than T&D programmes (Nguyen & Truong, 2007). The studied firms also demonstrate a lack of systematic approach to training. A formal analysis process that is required to identify training needs is absent in SOEs. This leads to a waste of the already limited training resources. For example, trendy courses, such as English and computing skills, are offered to employees regardless of their job tasks. At the training design and implementation steps, there is a lack of coordination between employees and their direct supervisors, between and among departments and a lack of senior management involvement throughout the training process. The focus of T&D activities in SOEs is not customised to meet the particular needs of different groups of employees. Further, the contents of training courses are conveyed through the old method of training (e.g. classroom-style training, one-way communication), and are thus often complained about being repetitive, boring and irrelevant. Furthermore, the training process lacks an evaluation phase to measure the effect that various T&D activities have on employees’ and firm’s performance. Evaluation, if at all it exists, is done informally by direct supervisors and does not follow any prescribed procedure or standard. This prevents managers from realising that investing in T&D programmes is worthwhile and reinforces the vicious circle in which managers view T&D activities as non-essential to the organisation’s success. Thus, training in SOEs continues to be a weak HR area, which receives little investment and remains ad hoc, fractured and poorly coordinated. Finally, a gap exists between employee learning and organisational results. This finding is in agreement with Kamoche’s (2001) research. The ‘traditional administrative attitude’ (Kamoche, 2001), where employees work under bureaucratic rules and procedures, and are not able to change their work practices to more efficient manners to suit the current demand, is still embedded in the mindset of SOE workforce. Although managers are eager to learn and indeed gain new knowledge, many are reluctant to apply their knowledge to their workplace. A psychological hurdle amongst the Vietnamese workforce is an unwillingness to express independence and take risks.
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6.4 Training and development in MNCs This section looks at T&D activities in MNCs. It argues that foreign investors recognise the lack of skills and qualifications in Vietnam’s labour force and, especially, the need for management training. They provide more training to their employees than their SOE counterparts. MNCs intensify their training efforts and develop strategies to achieve a higher return on their investment in training, especially for managerial staff. To obtain a higher return, in the context of high turnover rates and poaching, companies develop counterstrategies such as legally binding their staff for a certain number of years after providing them training or firmspecific programmes. A more comprehensive and systematic T&D approach has been recorded in non-Asian MNCs compared with a production-focused T&D approach in Asian MNCs.
6.4.1 The extent and nature of training In general, T&D is centrally controlled, especially during the early years of establishment. All companies run regular courses, which follow the international format developed by the global corporations. The subsidiaries’ training activities are monitored and backed up by experts from headquarters (HQ) or other countries, who irregularly visits for a quick ‘check up’, which is followed by an annual audit. Training is one of the 10 components of the MNC Auto1 Production System, which is audited annually on a global scaled score.1 It is certainly one of the most crucial components of quality control from HQs. The use of ‘coercive comparisons’ (Ferner & Edwards, 1995) tightens the coordination process from HQs and prevents subsidiaries from diverging themselves from the global mould. A score of 4.3 (out of a maximum 5.0) reveals that the training process is identified as one of MNC Auto1’s strengths, as stated in the global audit report dated 17 April 2002. The average training fund per employee ranges from USD 96 to USD 342 per annum. Overall, operating in the same industry, non-Asian MNCs spend more in training and offer more training programmes to their local employees than Asian MNCs. However, industrial effect is recorded when observing the trend across industries. Some Asian companies in the automotive industry (i.e. MCN Auto3 and MNC Auto5) have invested a similar amount in employee training as the non-Asian firms in the FMCG industry. Firm size is also significantly correlated with the total training expenditure (see Table 6.3).
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Table 6.3
Training budget in 2007
Company
Training expenditure/employee (USD)
MNC Auto1
342
MNC Auto2
127
MNC Auto3
140
MNC Auto4
N/A
MNC Auto5
>120
MNC FMCG1
>200
MNC FMCG2
273
MNC FMCG3
200
MNC FMCG4
87
MNC FMCG5
160
MNC FMCG6
>250
Notes: 1. The training budget in any particular year may not accurately reveal the T&D long-term strategy of a company. The budget can fluctuate, influenced by a company’s short-term business strategy. For example, MNC FMCG1’s training time in 2002 was not more than 1 per cent of working time. However, their HR manager revealed that a much higher percentage was decided during the setting-up period, but the focus of the company’s business strategy in 2002 was less on training. 2. Companies are hesitant to reveal budget data, so the figures should be considered as indicative and approximate.
MNCs make a significant effort and investment in training their management staff. Although most of the companies do not keep separate statistics on training for blue-collar and white-collar workers, interview data reveals that each management staff member spends around 5–10 per cent of their working time annually on training programmes. As staff are under heavy pressure during work hours in Vietnam, more than 5 per cent of working time per year devoted to training is considered a lot of time away from work. These companies, however, believe that the longterm investment is worthwhile. Most importantly, they understand that training is the key to retaining local managers. All interviewed Vietnamese managers, without exception, acknowledge that the opportunities for further T&D in the form of training by ‘foreign invested
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companies’ and overseas training are one of the strongest reasons for their decision to work for those companies. Interviews conducted by companies with the group of regretted turnover also proves this – the most cited reason for leaving the companies was the lack of training or the feeling of receiving less T&D opportunities than expected. This again re-confirms that there is a skilled labour shortage in Vietnam, and overall in Asia (Stahl & Zheng, 2002; Zheng, 2005). A lower proportion of the companies’ training budget is devoted to the training of blue-collar workers. Furthermore, the number of training programmes provided to white-collar workers is much higher and consists of a wider range of topics compared with those provided to clerical and production staff. This is especially the case in the FMCG industry, where the simplicity of the production process requires very little training. Line workers in MNC FMCG3, MNC FMCG4 and MNC FMCG5 are virtually only trained for basic production techniques during their induction programme.
6.4.2 Training programmes Training programmes in MNCs often start with the very basics of business education in the curriculum. Employers provide broad-based foundation training for their staff as a basis for further training provided later. MNC Auto1, for instance, has implemented a ‘learning tree’ training scheme with roots (basic business skills: stage 1), trunks (functional skills and advanced business skills: stage 2) and leaves (management and leadership skills: stage 3). In the first stage of this programme, 100 per cent of staff is required to participate to ensure that all employees have basic business awareness and speak the same business language. In the next stages, the company seeks to develop potential managers only, where intensive training programmes are tailored to prepare them to assume managerial posts. Similarly, MNC Auto3 developed a model of on-the-job training in six steps, which covers the company’s whole workforce. Step one is for the lowest level of employees, while step six is for managerial staff members. The six steps aim to upgrade employees’ skills and knowledge from the very basic level, such as to complete routine repeatable jobs under detailed instructions and regular supervision, through to using their own judgement and creativity to complete tasks with limited supervision. Managers and professional/technical staff undertake more external training programmes than internal ones. Internal training mode is mainly
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on-the-job training for clerical, sales and production employees. Normally, companies establish a regular relationship with training providers to cater for basic training needs. Employees are required to actively pursue training by choosing courses to suit their personal development needs (courses are available on a ‘first come, first served’ basis) or taking them as a compulsory requirement for their current or new posts. Many of these programmes are taught overseas or by foreign experts so that Vietnamese managers can gain international exposure and experience. Some of them are required to take international assignments as part of their training programmes. Non-Asian MNCs, such as MNC Auto1, MNC FMCG1 and MNC FMCG2, also offer ‘shadowing opportunities’, where high potential local employees tag along and observe expatriate managers from HQ full time. Mentoring is also used as a training strategy. However, effective formal mentoring relationships may not be formed easily in Vietnam due to the lack of expatriate managers and the cultural differences that form a gap between mentors and mentees. In addition, the demand in terms of time for mentoring programmes has a negative effect on expatriate managers’ business effectiveness. Thus, the popularity and success of mentoring programmes are limited in the studied firms. This finding complements the argument that Western mentoring policies have trouble being transferred to the Asian context, and mentoring relationships that are developed naturally are more effective than mentoring that is created by formal means (Weldon & Vanhonacker, 1999). Compared to their SOE counterparts, training methods in MNCs are more diverse and advanced. One of the most recent approaches adopted by MNCs is e-learning and blended learning. E-learning uses company intranet to deliver training courses to employees, and thus allows Vietnamese employees to gain access to a well of knowledge available to the company’s global workforce. However, as a type of education where the medium of instruction is computer technology without personal interaction, e-learning has certain weaknesses, such as the lack of instructor interaction (Bouhnik & Marcus, 2006; Flamholz & Cheung, 2007). In the Vietnamese context, e-learning might not be optimal as the workforce does not have a strong knowledge platform to make good use of the company’s global resources. Blended learning aims to overcome the inadequacies that evolve from e-learning, by incorporating two or more methods for delivering training (Bersin, 2004; Mackay & Stockpot, 2006). Typically this would include e-learning along with a mixture of other training methods such as on-the-job training or classroom-style training. One increasingly
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popular style of a blended learning programme involves combining both e-learning and manager-led on-the-job training. This style of training has proven to be liked by Vietnamese employees and to be more efficient than a singular classroom or e-learning program. Employees can learn and apply their training more immediately in a real work environment and can gain increased levels of motivation as the relevance of training to the job is clearly demonstrated. Blended learning also transfers the responsibility of learning to the individual, provides more immediate feedback from the supervisor and offers greater flexibility in the pace and timing of delivery (De Jong & Versloot, 1999; Lewis, 1997; Holton et al., 1997). Besides the formal T&D channels, companies are aware of and use informal cultural aspects of management development to create a common language and shared attitudes across their operations globally. NonAsian companies focus on policies such as an in-house top management programme and management forum, where participants are executives from all regions of the world and have contributed greatly to a strong global culture. By contrast, Asian corporations encourage employees to identify themselves within the corporation by emphasising the company’s philosophy. In addition, e-forums, e-networks and e-learning, which are very popular in the studied firms, contribute greatly to creating a global culture and transferring ‘soft skills’. In the Vietnamese market, companies are faced with a dilemma – they could spend a fortune on training and developing their management staff only to see them leave the company (newly equipped with skills that make them more desirable in the market) for higher paying employers, in many cases a competitor company. As skills are scarce within and across industries, job-hopping to accelerate salary is popular. While some companies have a practical viewpoint on this matter, others think twice before determining their training budget. The MNC FMCG2 HR manager said: When talented and ambitious people are equipped with new knowledge and skills that they learnt in a multinational company, they become a precious commodity in the labour market, you should expect that they might want to move on. On the other hand, MNC Auto3 claims they are unwilling to bear the training costs for managers because of the perception that such employees are highly individualistic and inclined to switch jobs whenever a more attractive opportunity becomes available. Moreover, each industry is
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narrow enough, so the list of talents within it is widely known to insiders. The production manager of MNC Auto1 can easily name top/key performers in MNC Auto2 or MNC Auto3. The competition for highquality staff is fierce. MNC Auto1’s regional sales and marketing manager used to be MNC Auto3’s sales and marketing manager. He was one of the pioneers in assisting the country director in setting up MNC Auto3’s operations in Vietnam. MNC FMCG3’s production manager used to work for MNC FMCG4. Furthermore, there is clear evidence of spillover effects caused by employees who used to work for foreign MNCs and then subsequently moved to local firms. In some other cases, possessing local connections and newly acquired knowledge, Vietnamese managers leave MNCs and start their own businesses in the same or related industry, providing services to their former employers. Preventative strategies have been applied to keep trained managers with the companies and reduce the regretted turnover rate. Some companies provide training and education programmes and/or financial support to managers’ education only on the condition that they are bound by a legal contract with the company to stay for at least three to five years after the programme, otherwise, hefty fines would be applied. MNC Auto3, on the other hand, offers highly firm-specific training courses (such as the company’s New Circle Leader, Training Within Industry, Company Philosophy higher level, etc.), which greatly improve the chance of getting acknowledged and promoted within MNC Auto3 but are of little help in seeking jobs elsewhere. No ‘normal’ degree or certificate has ever been given. The company thus limits the ability of their employees to use the knowledge gained in the company to advance their positions in other companies.
6.4.3 Comprehensiveness of training programmes In general, non-Asian MNCs tend to invest more in training their managers than Asian firms. Moreover, a well-structured and systematic approach to T&D is evident in non-Asian MNCs. Training needs are identified as a cycle which requires close cooperation between supervisors and subordinates. They are discussed annually in performance appraisal meetings, based on several factors: the company’s and the department’s business objectives and an analysis of the person’s performance targets, achievements, performance gaps and career aspirations. Managers analyse the actual and required skills level of the employees to outline
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skill deficiencies and determine whether training is the most appropriate way to solve the deficiencies, and if so, to decide the training priority order. The main goal of the needs analysis is to lay out the foundation for the implementation and evaluation stages. The areas of training cover a wide range of issues and subjects, which also emphasise human-related skills. The training results are monitored to allow a continuously improving training cycle. Employees are provided with adequate regular feedbacks and opportunity to use their newly learnt skills. Interviewed managers express their content with the T&D that they receive, and most judge the system to be effective or very effective. A second feature that non-Asian MNCs share is their commitment to job rotation. The arrangement for job rotation is fairly formal, at least on paper, even though the results do vary significantly and are limited in general. Job rotation takes place every two or three years and continues in a manager’s career. Managerial staff members are required to select the area of expertise they wish to move into in the near future, while their supervisors are responsible for providing them with the relevant training to make them capable in their new jobs. MNC FMCG1 industries report no difficulty in the inter-functional mobility of their staff – indeed they report an impressive 25 per cent of their management staff qualified for a second area of mastery. However, other companies admit limitations in this activity at the present. For instance, MNC Auto1 states that ‘meaningful rotation is rather limited at the top levels’. The requisite special knowledge would be too high, while the knowledge and skills of managers are still limited. This does not allow cross-functional mobility without deterioration in performance. Due to the workload and the endeavour for high performance ratings, sections/departments/firms tend to resist rotation. Nonetheless, non-Asian MNCs are making an effort to develop interdisciplinary skills. The long-term perspective is to develop a highly competent local management staff which has been trained in a wide variety of functional skills and is able to replace expatriate managers, which is in line with their management localisation strategy. This is in marked contrast to a number of Asian MNC cases. Training in these firms is merely based on production needs and the availability and convenient timing of courses offered by the company or training providers from outside. A departmental manager in MNC FMCG4 pointed out that when he was appointed as the factory HR manager in 2001, he had received no preparatory training to equip him to take on the challenges of the post. He reports that he therefore needed to embark on several months of hard self-study to undertake his current job effectively. He, along with many others, says that he feels there are gaps in the areas
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of ‘leadership’ training as well as in marketing and sales, information technology, planning, labour law, health and safety law, and so on. Training programmes in Asian MNCs focus heavily on technical knowledge and neglect people management skills, while a more balanced approach is taken in non-Asian MNCs. Furthermore, in all Asian subsidiaries in Vietnam, job rotation is not a popular practice. Even though some limited movement has been recorded, for example shifting staff from HRM to public relations department, it is reckoned that the movement is designed more to fill the human resource gap and for the convenience of the company, rather than for intended rotation. Rotation for workers in production lines is much more popular. Vietnamese managers in these companies are often seen as stuck in narrow specialisms. MNC Auto3 serves as an example in this context. An ethnocentric approach in global staffing strategy restrains the subsidiary from developing their local management staff. The company’s ‘Rotation Rule’, which requires that a person does not remain longer than three years at the same post, is applied to senior managers and upper-level staff only. In effect, this eliminates the possibility of rotation for the local managerial staff. The training programmes show a strong trend towards developing Vietnamese managerial ‘specialists’ rather than ‘generalists’.
6.5 Conclusions This chapter has briefly examined the educational and vocational training system in Vietnam, with a focus on its impacts on companies’ T&D systems. The overal picture is that the E&T system, despite the government’s vigorous attempt to renovate it, remains unable to deliver a welleducated and skilled workforce. A chronic mismatch exists between the E&T system’s outputs and the company’s human resource inputs. Thus, the social demand on companies to provide T&D opportunities for their employees is paramount. In the state sector, although there has been an increase in training activities (e.g. increased training budget, more training courses offered and widening training fields), T&D systems in SOEs have not advanced far from the old days of the centrally planned economy. There is little evidence to suggest that T&D forms part of an HR strategy proactively pursued by SOEs. The activities suffer from limited financial resources, low-quality training courses, out-of-date training methods and lack of systematic training systems. High-quality training opportunities are
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mostly only offered to top executives and managers – those who are already privileged with a higher level of skills and qualifications. Coordination is lacking between employees and their direct supervisors, and between and among departments, and there is also a lack of involvement by senior management in the training processes. At present, T&D achievements are heavily reliant on each individual employee’s will and commitment. In order to foster company training, the state needs to promote enterprise training by implementing stronger, and clearly enforceable, economic, legislative and administrative mechanisms. There is also a need for a closer linkage to be established among enterprises and educational and training institutions. On the other hand, in the foreign-invested sector, for MNCs that do not focus on exploiting cheap labour, the training and re-training of the Vietnamese labour force are seen as imperative. In general, MNCs provide much more T&D programmes for employees than their SOE counterparts. Modern training techniques, various and relevant training programmes, including overseas programmes, are utilised. Training quality is also greatly enhanced by the use of up-to-date, technologydriven methods such as e-learning and blended learning. A more comprehensive and systematic T&D approach, which includes a full circle of training need analysis, training design, implementation and evaluation, is recorded in some companies in this sector. The main issue in managerial T&D in the Vietnamese context is the conflict between the need to intensify T&D for local managers versus the risk that, in the chaotic Vietnamese labour market, this will worsen the turnover rate and poaching. Companies have intensified their training efforts to keep up with the global standard and at the same time develop counterstrategies to get a higher return on their investment on training in Vietnam. Limited training which focuses on production needs and neglects people management skills is recorded in some Asian MNCs.
Note 1. MNC Auto1’s Production System’s 10 components consist of managing, training, work groups, administration, machine, safety, total inventory, manufacturing, engineering design and material flow.
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