Academic journal article The South East Asian Journal of Management

Organizational Characteristics and Employee Overall Satisfaction: A Comparison of State-Owned and Non State-Owned Enterprises in Vietnam

Academic journal article The South East Asian Journal of Management

Organizational Characteristics and Employee Overall Satisfaction: A Comparison of State-Owned and Non State-Owned Enterprises in Vietnam

Article excerpt

(ProQuest: ... denotes formulae omitted.)


The year 1986 is recognized as one of the most memorable and historical turning points in Vietnam's economy. This was the year the Vietnamese government committed to an extraordinary change: reforming the State-Owned Enterprise (SOEs) sector. The SOEs sector is a key element in the economic program called Doi Moi, or renovation, under which its economic mechanism would shift to a market economy from a centrally planned one (Nguyen, 2003; Painter, 2003). During this Doi Moi process, the Vietnamese government had created several economic policy goals including shifting to the market economy with a socialist orientation, creating and developing a multi-sector economy, and integrating Vietnam into international and global economy.

There are two main reasons, both subjective and objective, for SOE reform. The rst reason is the internal weaknesses of SOEs. Irrational structure, failure to focus on key areas of the economy, backward technology, and weak management capacity with low levels of autonomy and accountability in business and production, are a few weaknesses that have rendered SOEs unproductive for decades. Another issue is the continuous challenges which are a result of requirements put forth by international agreements and agencies such as the Asian Free Trade Area (AFTA), the Asia-Pacic Economic Cooperation (APEC), and the WTO (Tran, 2001).

Despite the gradual shift in reform from 1986, SOEs in Vietnam still remain inefcient and ineffective (Seiler, et al., 2005). However, they continue to play a leading role in the economy, dominating important industries such as steel, chemicals, petroleum, and electrical goods. Managerial discretion is low, leaving business goals and criteria to be set by bureaucratic and political forces (e.g., Seiler et al., 2005; Kamoche, 2001). Wages paid by SOEs are based on the standard tables rather than on performance or outcome results. Government ofcials or local authorities often intervene in major business decisions such as investment, personnel, and strategy.

As a result of the unproductivity of SOEs, there are some unique challenges that may not exist in the Western contexts that SOEs in Vietnam may have to face (Nguyen, 2003). They face a certain dilemma: converting themselves into a more market oriented, innovative and entrepreneurial mechanism while being heavily influenced by the socialist ideology (Nguyen, 2003). This dilemma makes it difcult for them to change their traditional organization structure.

Literature Review

State-Owned Enterprises (SOEs)

According to the State-Owned Enterprise Law, SOEs in Vietnam include SOEs of 100% state capital and SOEs in which the state holds controlling stake. SOEs in Vietnam are governmental organizations aiming at both political and developmental goals (Hickson and McMillan, 1981). Under the centrally planned economic system, SOEs were considered the only legitimate economic form. This planned system did not take into account the environmental uncertainties, thus hindering the organizations' ability to cope with these uncertainties. Seniority and loyalty were highly regarded and usually used as the standard for reward, in place of value creation capability. The performancebased reward was bureaucratically applied when it was time to report activities to the supervisors. These reports usually did not represent the actual performance, and in addition, most SOEs used the standard wage tables rather than the performancebased tables. Government ofcials regularly intervened in the investment and personnel decisions of SOEs (Painter, 2003).

The dominant values in most SOEs are those associated with bureaucracy, as Kamoche (2001) described as the "traditional administrative [attitudes]." This means employees obey bureaucratic rules and procedures and have not been able to change their working practices to meet the current demands for efciency. In accordance with traditional Vietnamese culture and society that represent strong collectivism and high power distance, employees in SOEs were totally dependent on their companies and their supervisors (Scott, Bishop and Chen, 2003). …

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