ORGANIZATIONAL CHANGE – TRANSFORMATION PROGRAM AT VIETNAM
PROSPERITY BANK CASE STUDY
INTRODUCTION
Change is considered to be essential for every organization to develop at the new
stage. The need for change is either external or internal context. Managing change
can lead to the success of an organization but also can be a failure and become a
crisis. This essay will discuss the change management as the transformation
program of Vietnam Prosperity Bank (VPBank) in Vietnam. It will analyse on three
aspects as communication, pay and reward systems and resistance in the process
of change. It also provides the current practices of western countries.
COMPANY BACKGROUND
VPBank belongs to G12, top biggest banks in Vietnam. Its networks are spread all
over Vietnam with 209 branches and transaction points. VPBank has undertaken a
transformational change with a vision of being top 5 retail banks in Vietnam. The
transformation program follows the life cycle change model which changes are
broken down into small stages and managed by timeline (Boddy:2008). Thus, with
the consultation of Mckinsey&Company, the change is implemented with a best
practice regarding Kotter’s model but at some stage, there is still a lack of right
action that leads to the under-execrated change.
Kotter, J. (1996) Leading Change, Boston: Harvard Business School Press
COMMUNICATION
Change communication is a critical factor in change management. Rockel
suggests that communication needs to be involved during change process that
helps deliver the message and instruct the employees. Moreover, according to
Kotter’s model, communication is crucial as it is the first step to engage the whole
organization into the change. While Shaw (1978) suggested communication
through the complex tasks such as change management being carried out by
decentralized model, change communication in VPBank follows the opposite way
as the Y-centralized model (Shaw:1978). That means the message from Board of
Directors is delivered to the Director of Strategy Centre and he will spread the
messages to his middle managers and other managers from related units.
Furthermore, Shaw also pointed out that using centralized communication model
in complex tasks could lead to poor performance. In fact, communication is a
failure at VPBank. As the information of transformation program is considered to
be confidential, 90% staffs has no idea of what changes are happening or the
information they have is through word of mouth. No information about change was
informed officially by Board of management through email or speech. As the result
of poor communication, the front-line staff were surprised when a project team
came to the branch, guided them with new, different ways of sale attitudes. It is
successful, yet takes a lot of effort to implement the change and meet many
challenges and influence the staff. Also, with the wrong communication strategy,
VPBank faced with resistance problems when implementing the change.
RESISTANCE
Change managers also have to face with resistance problem. According to
Cunningham, people actually love change but they also avoid change. Markos
(1983) showed that there are four kinds of resistance: people-focused, systemfocused, organisation-focused and politic-focused. In VPBank case study, the
resistances are people and system-focused. The staffs resists change as they do
not trust the outcomes that changes bring back and change their working habit as
well. Being indicated above, communication is a failure in VPBank case; therefore,
it leads to the individual resistances. The staff has not been communicated about
the company vision, purpose and tools of change. Furthermore, they still receive
good results for the business performance with their old working style. As a result,
they are confused about the benefits they receive from change and the big picture
of transformational change. In order to overcome this problem, communication is a
crucial tool which explains to the staff about the need to change and their
contribution towards the change (Hooper and Potter) and therefore the staff will
accept the unavoidable change and get involved (Drucker). VPBank uses the
influencing communication from top management to the managers and the
transformational project team to the staff by giving examples of other
transformational bank competitors and how they contribute themselves in the
change as well as the benefits they will receive. Eventually, the resistance was
minimised.
Pay and Reward system
The pay and reward system in VPBank is divided into two main schemes: base
monthly salary and bonus for the year. The bonus can be paid out in quarterly
period. However, both the base salary and bonus in VPBank are lower than other
banks. According to Maslow’s model, the incentive is a tool that creates the
motivation for the staff. Hence, the organizational change has brought the new pay
and reward system for the front-line staff based on their performance monthly. Key
Personal Indicators is the tool used for paying the incentives based on the
individual calculation basis for the staff and group calculation basis for the
manager. This model is called performance-related pay (PRP) which is incentives
paid out based on their outstanding performance above the normal indicators and
be separated from salary (Foot and Hook:2004). The incentives scheme has
motivated the staff and in return, achieved high performance from the staff.
Learning points
As an international manager, I would like to suggest some points helping to
improve the change. Firstly, communication is a critical factor and needed to be
done right from the beginning of the change. The transformation information
should spread out to the whole system for everyone is aware. In addition, the type
of communication should be two-way communication. Therefore, both the
managers and their subordinates could know the vision and get involved in the
change. In this way, communication also helps to minimised the resistance.
Secondly, in order to cope with the resistance to change, a plan should be defined
first to identify what resistances may exist and how to solve that. Communication
is needed but will vary at different levels such as: explaining, negotiating and
threatening. Finally, as the change affects the whole organisation so the incentives
should cover all the department, not just focuses on one unit as it could be demotivated other unit staff and nevertheless, affect the change process as change
process involve the whole organisation.
CONCLUSION
VPBank has undertaken a transformational change and achieved some its results
at a certain stage. However, during the change process, there are still many
problems related to communication, resistance and pay and reward system. These
elements have affected the success of the change. Therefore, it is important that
communication is the first step taken to deliver the change message and also
helped to decrease the resistance and every staff in the whole organisation need
the fair pay and reward system.