Factors Affecting Organizational Commitment: An Empirical Study of Information Technology Sector in Vietnam

Abstract

This study was conducted to determine the factors affecting employees' engagement in Information Technology (IT) enterprises in Vietnam. Quantitative method was used to test the research model. Research data is collected through a survey of 205 employees working in Ho Chi Minh City - Vietnam IT enterprises. The research results show that all seven factors affecting OC are ability, remuneration, training/development, challenging work, teamwork relationship, company policy, and culture, and work environment all make sense. In which, WOE, TER, REM factors are the three most influential factors, while company CPC, T&D, CHW, ABI have a lower impact. The proposed management implications include building, providing, ensuring a good working environment for employees, building/developing relationships within the company, having a policy of salary, bonus, support, and incentives. In addition, appropriate, competitive remuneration, adequate incentives, and rewards for the efforts that the employee has made, training and development of skills and soft skills suitable for each type of work, development orientations for employees, as well as frequent rotation of positions and jobs, in addition to improving employees' capacity, also avoid causing boredom and loss of motivation at work, thereby increasing OC of employees in IT enterprises in Vietnam.

1. Introduction

Employees are always the most valuable asset for any organization and enterprise. The 4th industrial revolution or the trend of digitization, the digital transformation is taking place exceptionally fast and the demand for human resources has grown in high-tech fields such as Information Technology. According to information technology human resource reports of VietnamWorks and TopDev (2021), the turnover rate increased to 24% in 2019. The information technology field is one of the four sectors with the highest growth rate. The average time that an employee works for a specific company is only 1.67 years (~20 months). Moreover, the total loss can be worth from 1 to 2 years’ salary of the person who leaves yehe job.

This study identifies and analyzes the factors that affect the OC in IT enterprises in Ho Chi Minh City, Vietnam. From there, some management implications are proposed to improve the organizational commitment of employees.

2. Literature Review

2.1. Organizational Commitment

O’Reilly and Chatman (1986) conceptualized organizational commitment as the interaction, connection, and attachment between individuals or individuals with the organization to devote themselves fully, commit to goals and values of their organization, and drive their contribution to the organizational success.

According to Mowday et al. (1979), organizational commitment is the intention or desire to maintain membership in the organization. Mowday’s definition is similar to the concept of Retention in Aon Consulting Institute studies: employees intend to stay with the organization or business for a long time: they will stay in the organization or enterprise although elsewhere offer more attractive salary (Stum, 2001). However, Johnson et al. (2009) suggested that today employees are more loyal to their profession than to their employers, and the nature of employee-employer relations has undergone fundamental changes. Therefore, it is necessary to reevaluate the concept of loyalty.

Organizational commitment is one of the essential elements in achieving an organization’s goals (Suryani, 2018). Tran (2003) defines employee loyalty as when employees work enthusiastically for the organization’s success, and they believe that working for the organization is the best choice. They have a plan to stay with the organization for a long time, and they have no intention of looking for other jobs and are not responding to requests to work from other places (Nguyen et al., 2020).

2.2. Hypothesis and Conceptual Model

According to Chew (2009, organizational factors influencing employee’s organizational commitment and intention to stay consists of eight factors: ability, salary/ bonus, empowerment, training, and career development, challenging employment assignments and opportunities, organizational leadership, teamwork relationship, organizational policies/ cultures, working environment. Bui and Le (2016) carried out about factors affecting employees’ loyalty at LILAMA Corporation. This study analyzed and evaluated information from 165 employees in LILAMA. The results showed that employee loyalty is affected by six influencing factors arranged in priority: remuneration, corporate culture, empowerment, organizational brand, organizational support and conformity. Nguyen et al. (2020) investigated the factors affecting organizational commitment among 312 employees working in Foreign Direct Investment enterprises in Vietnam. The result indicates that the leadership style has the strongest effect on organizational commitment, job satisfaction, and working performance. Based on previous studies, the proposed research model includes the seven factors: personal ability, remuneration, training and development, teamwork relationship, challenging work, company policies/cultures, and working environment.

2.2.1. Ability Impacts on Organizational Commitment - ABI

The fit between individual and job is based on perception, skill, or the ability of individual for the job which he or she undertakes. The fit between the individual and the organization is considered as the fit between the individual’s beliefs and the organization or the personal goals with the organizational goals. Both Chew (2009) and Bui and Le (2016) suggest that personal ability impacts organizational commitment. Based on the discussion above, the study created the following hypothesis:

H1: Person organizational fit is positively correlated with OC.

2.2.2. Remuneration Impacts on Organizational Commitment - REM

When employees contribute their labor to the enterprise, they will receive salaries, rewards, and justice (Hoa et al., 2020). The compensation policy helps employees have financial resources to reproduce their labor power and satisfy other needs. When employees perceive the company’s remuneration as satisfactory and fair, employees will also be more engaged with the business (Chew, 2009; Suryani, 2018). Therefore, the study created the following hypothesis:

H2: Remuneration is positively related to OC.

2.2.3. Training and Development Impacts on Organizational Commitment - TD

According to Chew, training opportunities satisfy the development needs of employees (Chew, 2009). As a result, employees are equipped with the necessary professional skills to stimulate employees to perform better, achieve more, and employees are ready to receive more challenging tasks with more promotion opportunities. Based on the discussion above, the study created the following hypothesis:

H3: Training and development are positively correlated with OC.

2.2.4. Teamwork Relationship Impacts on Organizational Commitment - TER

In technology companies, the success of projects depends a lot on collaboration between individuals and groups. Team relationship is understood as the relationship between an individual employee and the rest of members and other teams (including the relationship between colleagues and the relationship with superiors such as team leaders, project leaders). If team relationships become not good, it can affect the results of projects and employee engagement with the organization (Chew, 2009; Suryani, 2018). Therefore, the study created the following hypothesis:

H4: Teamwork relationship is positively correlated with OC.

2.2.5. Challenging Work Impacts on Organizational Commitment - CHW

In the IT field, employees are always interested in new things, learning new things, and solving challenging problems. However, if the nature of their work is not satisfactory change such as regularly update new trends or tedious and easy work, employees will gradually lose motivation to work (Bui & Le, 2016; Chew, 2009; Suryani, 2018). Since then, the desire to maintain organizational commitment will also decrease. Therefore, the study created the following hypothesis:

H5: Challenging work is positively correlated with OC.

2.2.6. Company Policies/ Cultures Impacts on Organizational Commitment - CPC

According to Overell (2009), five key dimensions of corporate culture that affect loyalty include: building internal brands, communicating organizational values, demons trating exemplary leadership, creating a working environment interesting and challenging, performance management, and constant improvement. Based on the discussion above, the study created the following hypothesis:

H6: Company policies/ cultures are positively correlated with OC.

2.2.7. Working Environment Impacts on Organizational Commitment - WOE

Working environmental uncertainty is one of the main contingency factors facing companies. The environmental uncertainty factor is one of the organizational factors in adjusting to the environment’s organizational conditions (Dwirandra & Astika, 2020). Factors that support employees in working at the organization to increase employees’ affection and love for the organization, include facilities at work, health, and safety concerns of workers. If employees are comfortable and love the working environment, they will also maintain organizational commitment; therefore, the study created the following hypothesis (Figure 1):

Figure 1: Conceptual Model

H7: Working environment is positively related to OC

3. Methodology

3.1. Measurement Scale

There are 7 concepts in the proposed research model, including (1) Ability, (2) Remuneration, (3) Training and career development, (4) Teamwork relationship, (5) Challenging assignments, (6) Company policies/ cultures, and (7) Working environment. This study used the scale of Chew (2009), Bui and Le (2016), and Suryani (2018). Observations were adjusted to suit the Vietnamese context and used a 5-point Likert scale from “strongly disagree” to “strongly agree.” Table 1 shows the origin of the research scale.

Table 1: Origin of Research Scale

3.2. Sample

The sample is selected according to the convenience (non-probability) sampling method, in which the researcher approaches the research subjects by the conventional method. The reason for choosing this sampling method is because it is easy for respondents to access. They are ready to answer the research questionnaire. It is less expensive in terms of time and cost to collect the information to be researched.

According to Hair et al. (2006), the sample size must be at least 5 times the number of observed variables for exploratory factor analysis. There are 43 observed variables in the above study, so the minimum sample size is N = 5 × 39 = 195.

3.3. Methods of Processing Survey Data

All collected data will be processed using SPSS 20.0 software. After being encrypted and cleaned, all data goes through the following analysis steps:

Step 1: To evaluate the reliability of the scale. The reliability of the scale is assessed through Cronbach’s alpha coefficient and the total variable correlation coefficient. In this study, variables with a total correlation coefficient < 0.3 will be removed (Hair et al., 2006), and the scale is acceptable in terms of reliability if Cronbach’s alpha coefficient > 0.6 (Hoang & Nguyen, 2008).

Step 2: Exploratory factor analysis. Exploratory factor analysis is used to test the discriminant value of the component variables. Variables with a total correlation coefficient < 0.3 are removed from the scale. The scale will be accepted when Kaiser-Meyer-Olkin coefficient (KMO): 0.5 ≤ KMO ≤ 1.0; Bartlett’s test has statistical significance (Sig. < 0.05); Eigenvalue ≥ 1; total value of deviation > 50%; factor loading ≥ 0.45 (for the case of sample number from 150 to 200).

Step 3: Correlation and regression analysis. Correlation and regression analysis is used to confirm the suitability of the research model, testing the hypotheses to determine the degree of influence of each factor on the dependent variable. The normalized regression equation is:

\(\begin{aligned} Y=& \beta_{1} \times \mathrm{ABI}+\beta_{2} \times \mathrm{REM}+\beta_{3} \times \mathrm{T} \& \mathrm{D}+\\ & \beta_{4} \times \mathrm{CHW}+\beta_{5} \times \mathrm{TER}+\beta_{6} \times \mathrm{CPC}+\\ & \beta_{7} \times \mathrm{WOE}+\varepsilon. \end{aligned}\)

4. Results

4.1. Sample Descriptions

With 205 votes sent through Google Form, 205 answers were collected, the number of valid votes was 205 votes (100%). Therefore, the number of samples collected is larger than the minimum sample size of 195. Thus, the sample of the study is valid. The structure of the study sample is presented in Table 2.

Table 2: Personal Characteristic Description

4.2. Result of Cronbach’s Alpha

The results show that the Cronbach’s alpha coefficient the scales has the following values: ability (0.778), remuneration (0.852), training and development career (0.814), challenging work (0.828), teamwork relationship (0.850), company policies/cultures (0.751), working environment (0.778). Furthermore, considering the correlation coefficient of the total variable, it shows that the observed variables all have the correlation coefficient of the total variable greater than 0.30. Thus, the above scales are reliable and continue to analyze EFA.

4.3. Result of Exploratory Factor Analysis (EFA)

The independent variables of the scale were included in the exploratory factor analysis by principal component extraction with Varimax rotation. The result of EFA for the first time showed an observed variable REM5 that was excluded because the loading factor is smaller than the standard load factor. The result of EFA in the second time is shown in Table 3. The results of Bartlett’s test have Sig = 0.000, and KMO coefficient = 0.868 (> 0.5) and Eigenvalues is 1.424, and the total value of deviation is 60.628%. Table 4 shows that the factor loading coefficient has a relatively high value (from 0.634 to 0.807). This result indicates that exploratory factor analysis is appropriate. Therefore, there are seven factors, including: teamwork relationship, remuneration, training and development, challenging work, ability, working environment, and company policies/cultures.

Table 3: Result of EFA For Independent Dimensions

Result of EFA for the dependent variable

The factor of organizational engagement has 5 observed variables included in the EFA. The result showed high convergence; these variables all have satisfactory factor loading coefficients and have quite high values (from 0.789 to 0.844), the total variance extracted is 66.621%, Sig. = 0.000 and KMO coefficient = 0.88, Eigenvalues = 3.331 (>1). This result indicates that the scale of organizational commitment has convergent value.

4.4. Results of Hypotheses Test

The results of the correlation analysis between the independent variables and the dependent variable showed that the independent variables (ABI, REM, TD, WOE, CHW, TEA, CPC) were all correlated with the dependent variable (OC). The lowest Pearson correlation coefficient is 0.447; the highest is 0.584. On the other hand, the correlation coefficients are statistically significant at 0.01 (Sig. < 0.01). Therefore, it shows that there is a close correlation between the independent and dependent variables in the model. Furthermore, between the independent variables, there is also a correlation with each other. To evaluate the influence of these factors on the organizational commitment of IT staff in enterprises in Ho Chi Minh City and consider the appropriateness of the theoretical research model and test the hypotheses. Linear regression results are presented in Tables 4, 5, and 6.

 Table 4: Model Summary

Table 5: ANOVA Analysis

Table 6: Result Linear Regression

Table 4 shows that the regression model has an R square is 0.695, with an adjusted R square is 0.684. The adjusted R square indicates that the model explains 68.4% of job satisfaction. Table 8 shows, the value of F = 64, 155, Sig = 0.000. The sum of squares of the regression (44, 210) is larger than the sum of squares of the residuals (19, 394), indicating that the model explains most of the variance of the dependent variable. Table 8 shows that the independent variables ABI, REM, TD, WOE, CHW, TER, CPC are valid with Sig < 0.05. In addition, the independent variables all have VIF < 2, which proves that there is no multicollinearity in the model.

This result shows that four factors used to conduct the analysis affect employees’ organizational engagement in IT enterprises in Ho Chi Minh City, and all these 7 factors affect organizational commitment. These factors are all significant and positively correlated with organizational engagement. Working environment factors (β = 0.302) have the strongest influence on organizational engagement, followed by factors of teamwork relationship (β = 0.280), remuneration (β = 0.239), company policies/ cultures (β = 0.143), training and career development (β = 0.116), challenging work (β = 0.100) and ability (β = 0.112).

4.5. Discussion

From the results of regression analysis in Table 6, the results of hypothesis testing are analyzed in detail as follows:

H1: Ability is positively correlated with organizational commitment. The regression analysis results show that the β = 0.112 (t = 2.135, Sig = 0.034) means that the relationship between personal ability and organizational commitment is positive. Therefore, H1 is accepted with 95% confidence.

H2: Remuneration is positively related to organizational commitment. The regression analysis results show that the β = 0.239 (t = 4.675, Sig = 0.000) means that the relationship between remuneration and organizational commitment is positive. Therefore, H2 is accepted with 99% confidence.

H3: Training and development have a positive correlation with organizational commitment. The regression analysis results show that the β = 0.116 (t = 2.499, Sig = 0.013) means that the relationship between training and career development and organizational commitment is positive. Therefore, H3 is accepted with 95% confidence.

H4: Teamwork relationship has a positive correlation with organizational commitment. The regression analysis results show that β = 0.302 (t = 7.084, Sig = 0.000) means that the relationship between team relationship and organizational commitment is positive. Therefore, H4 is accepted with 99% confidence.

H5: Challenging work is positively correlated with organizational commitment. The results of the regression analysis show that the β = 0.100 (t = 2.1364, Sig = 0.032) means that the relationship between challenging assignments and organizational commitment is a positive relationship. Therefore, H5 is accepted with 95% confidence.

H6: Company policies/cultures have a positive correlation with organizational commitment. The regression analysis results show that the β = 0.280 (t = 6.285, Sig = 0.000) means that the relationship between company policies/ cultures and organizational commitment is a positive relationship. The H6 is accepted with 95% confidence.

H7: Working environment is positively correlated with organizational commitment. The results of the regression analysis show that the β = 0.143(t = 3.091, Sig = 0.02) means that the relationship between the working environment and organizational commitment is a positive relationship. Therefore, H7 is accepted with 95% confidence.

In case to determine the representativeness of the sample, the study tests the characteristics of the research sample through the control variables: gender, age, experience, education level, position, income (excepting for the gender with Sig value = 0.651 > 0.05). Although there is no difference in terms of gender and organizational commitments, the remaining characteristics have differences in organizational commitment.

5. Conclusion and Recommendations

The research results showed that all 7 hypotheses, H1, H2, H3, H4, H5, H6, H7, are accepted: the factors of ability, remuneration, training/vocational development, teamwork relationship, challenging job, company policies/ cultures, and working environment positively impact employees’ organizational commitment. The level of impact of each factor is determined through the regression equation below:

\(\begin{aligned} \mathrm{OC}=& 0.302 \times \mathrm{WEO}+0.280 \times \mathrm{TER}+0.239 \times \mathrm{REM} \\ &+0.143 \times \mathrm{CPC}+0.116 \times \mathrm{TD}+0.112 \times \mathrm{ABI} \\ &+0.100 \times \mathrm{CHW} \end{aligned}\)

Therefore, the factors of person-organization fit, remuneration, training/career development, teamwork relationship, challenging assignment, company policies/ cultures, and working environment affect the organizational commitment of employees in IT enterprises in Ho Chi Minh City. Therefore, when a company increases these factors, it will increase the organizational commitment of employees. Therefore, the implications for corporate governance to improve these factors to increase organizational commitment are as follows:

Firstly, the research results show that the working environment has the most significant influence on organizational engagement. When the working environment increases by 1 point, organizational commitment will increase by 0.302 points. In the IT field, employees don’t work at a fixed location only; they often change between the company’s offices or work at the customer’s office. Therefore, working conditions/environment has a certain influence on the organizational commitment of employees. The working environment needs to create conditions for employees to work in a convenient and comfortable environment. In addition, the company needs to provide the necessary equipment for work, support tools to facilitate the development of IT projects.

Secondly, the teamwork relationship has the second impact on organizational commitment (β = 0.28). Jobs in the IT field are usually done with small teams/groups, so employees are often assigned to teams under the guidance of project leaders and team leaders. The relationship between individuals in the organization is shown in the individual relationship with the team they belong to, the relationship between the individual and his immediate superior, and each relationship between teams and groups. These relationships not only affect the success or failure of IT projects and the future development of the company but also significantly impact the organizational commitment of employees. In order to build and improve these relationships, IT businesses organize exchange sessions for team members and groups, team-building sessions..., organizing exchanges for all levels of management, company events with the participation of all employees. The implementation of exchanges and events strengthens team relationships and contributes to the formation of company culture.

Third, compensation has the third-largest impact on labor productivity. This is always one of the top concerns of every employee, affecting the employee’s organizational commitment. In order to increase the organizational engagement of employees, enterprises can develop a more suitable and competitive salary policy with the increasing demand for human resources in the IT field. There are practical allowances for employees or supporting employees to complete their work well. In addition to adjusting the salary policy, businesses can also provide a safe and secure workplace for employees, such as the full implementation of the overtime allowance regime. Moreover, appropriately, fairly, and timely evaluate the efforts and achievements of employees (through the development of a clear and transparent reward and punishment policy).

Fourth, the factor of company policies/ cultures also has a relatively strong impact on organizational commitment. Enterprises need to develop policies and procedures so that employees can easily access the company’s operating processes. These policies should also be updated and adjusted regularly to suit the change of dynamic market as well as public policies.

Finally, factors such as training/career development, challenging work, and person-organization fit are not the most influential. However, enterprises need to consider these factors. Enterprises should pay attention to be able to enhance employee’s organizational commitment through training and development policies, creating conditions to challenge employees such as: providing short-term/periodic/ continuous courses; regularly organize working experience sharing sessions between teams/groups in the organization; encourage employees to participate in seminars; improve hard skills, soft skills. As a result, employees are well trained, increasing organizational engagement and helping employees complete their assigned tasks and meet their satisfaction. Furthermore, with the increasing demands of the rapidly changing IT market, the company should develop and have a clear employee career path. This roadmap is fair and transparent to all employees, regularly rotating employees between teams, changing the essence of work, and doing new and challenging jobs.

This study has shown the difference in the factors affecting employees’ organizational commitment in IT enterprises in Ho Chi Minh City, decreasing influence from working environment, remuneration, teamwork relationship, company policies/ cultures, training/development, ability, and challenging assignments. However, the sample size just stopped at just enough for the survey, as well as the scope of the survey conducted on many IT enterprises are the limitations of this study. Therefore, it is necessary to have studies expand the research scope, replicate the sample size to make the results more representative-oriented, and verify the research model.