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, system-focused, 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 isa 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 de-motivated 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.