Leadership and development of leadership human resources in Vietnam state-owned enterprises

TRADE SCIENCE REVIEW 1 Trade Science Review ISSN 1859-3666 Volum 4, Number 1 June 2016 Editor in chief Nguyen Bach Khoa Vietnam University of Commerce Deputy Editor in Chief Editorial Boad Le Xuan Ba Central Institude for Economic Managerment Nguyen Dinh Huong Union of Science and Technology Associations Nguyen Hoang Long Vietnam University of Commerce Nguyen Mai Vietnam Economist Association Luong Xuan Quy Vietnam Economist Association Do Minh Thanh Vietnam University of Commerce Tran Dinh Thien Vietnam Institute of Economics Nguyen Thi Doan The Office of State President Nguyen Thi Bich Loan Vietnam University of Commerce Pham Vu Luan Ministry of Education and Training Bui Xuan Nhan Vietnam University of Commerce Dinh Van Son Vietnam University of Commerce Dinh Van Thanh Trade Research Institute Nguyen Quang Thuan Vietnam Social - Humanity Academia Contributors in abroad H. Eric Boutin Toulon Var University - France Nguyen The Tam California State University - USA ZHANG Yujie Tsinghua University - China WASHIO Tomoharu Kwansei Gakuin University - Japan HAASIS Hans Dietrich - Institute of Shipping Economics and Logistics (ISL) Bremen - Germany 1. Introduction State-owned enterprises (SOEs) have an important role in Vietnam's economy. In recent years, the process of SOE equitization and restructuring has significantly reduced the number of SOEs. By the end of Daecember 2013, there were 3,199 State- owned enterprises, accounting for only 0.86% of the total number of enterprises in Vietnam, attracting 14.35% of workers, con- tributing 29.01% of the national GDP (General Statistics Office of Vietnam, 2014). On the basis of the importance and contribu- tions of SOEs, Vietnam State always consid- er these enterprises as a leading sector in the economy. For successfully integrate, leaders in the enterprises in general and in SOEs in particular play a major role, so they should have both capacity and morality. However, in practice, leadership in SOEs currently has many shortcomings in recruit- ment and appointment of public officials. This results weak capacity of some SOE lead- ers and leading to Vietnam State's huge finan- cial losses. In addition, some leaders are cor- rupt and do not comply with the regulations on the SOE management. Weak leadership capacity decreases SOE's business perform- ance, so results insolvency and even bank- ruptcy of a number of SOEs, including Shipbuilding Industry Corporation (Vinashin). 24 Trade Science Review 4:1 (2016) 24 - 29 TRADE SCIENCE REVIEW ’S TSR LEADERSHIP AND DEVELOPMENT OF LEADERSHIP HUMAN RESOURCES IN VIETNAM STATE-OWNED ENTERPRISES Nguyen Thanh Hai Vietnam Commercial University Email: haint@dhtm.edu.vn Received: 28th August 2015 Revised: 29 th February 2016 Vietnam economy is in recovery from the economic crisis; inflation is under control; sta-ble economic growths in recent year strength the integration of the country into the global economy. The state-owned enterprises (SOE) plays a key role in Vietnam economy; but this sector is actually poor. Its business performance is out of expectation and its potential. To improve the performance of public sector, recently, Vietnam government has taken several measures such as support policies, equitization, SOE restructuring. Actually, many new issues of SOEs emerge and should be further studied and resolved. Among them, the subject of this study focusses on the leadership in the SOEs in the new business integration period. Keywords: leadership, leadership capacity, state-owned enterprises, Vietnam For those reasons above, my research focuses on leadership in Vietnam State- owned enterprises. On the basis of theoreti- cal background and Vietnam SOE's actual situation, we will propose some recommen- dations for improving SOE leadership capacities and contributing to the State econ- omy development in the context of interna- tional integration. 2. Theoretical framework 2.1. Leadership There are several definitions of leadership. Generally, leaders are those who have qualifi- cations and the ability of creating certain con- ditions to carry out an organization's the activities. More importantly, they can gather people and encourage them to actively partic- ipate in implementing the goals outlined. According to Stogdill (1948), leaders must always be referred to the characteristics of personality and behavior as well as their influence on the management activities, espe- cially people around's judgement on them. This definition includes personal characteris- tics and perspectives of other individuals for the subject. This is a new definition on lead- ership and is applied in many countries, in which leaders is evaluated through referen- dum, vote, election campaign ... Bass (1990) analyzed in detail by provid- ing multiple perspectives on leadership in an enterprise. Especially, he stressed leadership style that were considered leaders' distinctive characteristic and affected their behavior in business governance. Bass (1990)'s basic leadership model in an organization is as fol- lows (Figure 1): The model above focuses on assessing leadership capacity and leadership style as well as individual and organization perform- ance. All of these factors are the basis of assessing the success or failure of a leader- ship model or a leader. Within the scope of this article, we focus on 02 contents, includ- ing leadership capacity and leadership style in SOEs. 2.2. Leadership in SOEs In SOEs, leaders may be in all levels of the organizational structure, such as: CEO, direc- tors, managers, team leaders ... The higher their position is, the greater their responsibil- ity is. However, in the literature, leadership in the public sector is not more interested in than that in the private sector. Leadership in the public sector is mentioned mainly in matters related to public administration. After 1992, leadership in State-owned enterprises was discussed by several scholars around the world. The ones focused on local policy mak- ers as well as leaders in corporations and State-owned enterprises (Wright, Moynihan and Pandey, 2011). Among researches on leadership in SOEs, the most interesting content is leadership style. Lewis (1980) synthesized 3 leadership 25 Trade Science Review TRADE SCIENCE REVIEW ’S TSR Source: Bass (1990) Figure 1: Leadership model in an organization according to Bass (1990) Leaders assess organization and environment, then set goals for individuals and organization Leaders use their capacities Leaders use a variet y of leadership styles Leaders are in charge of missions, human resource and organization Leaders assess the organization and individual performanc styles in SOEs, including: autocratic, demo- cratic and liberal. Autocratic leadership style is the way that leaders give orders according to his own opinion, so information is received from top to down without discus- sion with staff. Democratic leadership style is the way that leaders solve business prob- lems involving discussion with staff, this provides a two-direction exchange of ideas and information between leaders and staff in SOEs. Liberal leadership style is the way that leaders only give ideas without using his power to intervene in the process of imple- menting the work. Guyot (1962) analyzed the differences between leadership styles in SOEs and leader- ship style in non-state owned enterprises. He pointed out that, in SOEs, leadership style was mainly autocratic. This means leaders give their orders to subordinates and the subordi- nates have to implement. There is no discus- sion with subordinates, so information is received mainly in one direction, subordinates carrying out orders of their superiors. This leadership style is popular in Vietnam SOEs. Following Guyoy (1962), many scholars emphasize the importance of leadership capacities in SOEs. Leaders have a huge impact on individuals and organization that they manage. An outstanding leader is that who has power "to attract and arouse" other people's enthusiasm and dedication. Van Wart Montgomery (2003) said that leaders have to have leadership capacities and meet the requirements of market changes by establish- ing business strategy consistent with enter- prise's the objectives for improving enter- prise's competitiveness. In Vietnam, recently, many researchers have studied on leadership in SOEs, such as Nguyen Huu Lam (2007), Tran Thi Van Hoa (2012), Chen Shui (2012), Do Tien Long (2013) ... The ones point out that leaders have to apply flexible leadership styles according to current economic situation and enterprise conditions. A successful leader is that who demonstrates his assertiveness in work and takes responsibility for his decisions. More importantly, leaders must offer timely solu- tions to deal with the enterprise problems. Democratic and liberal leadership styles are encouraged to apply to Vietnam SOEs. Accordingly, leaders must listen to subordi- nates' the opinions and enable their staff to contribute ideas. This way, SOEs will be the ideal environment representing democracy as well as maximizing each individual's strengths for the enterprise success. 3. Research methodology In this research, we collected information from various sources, such as: mass media, legal documents, reports and research proj- ects on leadership style in SOEs. Also, we refer to the documentation related to leader- ship of the domestic and overseas researchers. By collecting information, we present an overview of leadership and leader- ship style through the different stages in the countries around the world as well as in Vietnam. For further information, we conducted the interviews to find the characteristics, role and nature of leadership in State-owned enterpris- es. The information collected through a vari- ety of sources will be the basis of designing interview questions. We conducted interviews with 11 leaders of some SOEs, 8 economists, about the leaders' activities in SOEs. The quantitative information collected through the statistics and the interview will be the basis of proposing recommendations for existing problems related to leadership style in SOEs. 4. Research results On the basis of the literature and interviews, as well as the reports of the Corporations and 26 Trade Science Review TRADE SCIENCE REVIEW ’S TSR State-owned enterprises, we attained the impor- tant results of leadership in Vietnam SOEs. The results indicate an overview of leadership in Vietnam SOEs, leadership's the role and impor- tance; economic policies in recent years; the current selection and appointment process of leadership, ... There is no denying the outstanding achievements that leaders in SOEs have obtained by achieving the economic objec- tives that Vietnam Government set. According to the Report of Vietnam Executive Committee of State-owned enter- prises, in the period 2010-2015, the Corporations and the banks ... in the SOE sec- tor reached a total turnover of more than 6.4 million billion dong and contributed to the national budget of more than 1 million billion dong. This success is the result of the SOE efforts, Vietnam Government's the support and the contribution of the leaders who launched the business policies. Leadership in Vietnam SOEs have obtained some achievements by contributing to Vietnam's GDP. However, there are still some limitations. By assessing leadership style in SOEs, according to the interviews with the SOEs leaders, they are trying to change leadership style towards democracy, this means directors make decisions on the basis of discussion with staff. However, according to economists, decision makers are still the senior leaders (presidents, directors); and the departments only receive information and implement mis- sions, so employees do not want or have few opportunities to demonstrate their capacity. This is the main mechanism of SOEs at pres- ent and results the weakness of some SOEs. This situation requires leaders to find a flexi- ble and creative leadership style appropriate to their enterprise and domestic and interna- tional economic situation. By assessing leadership capacities in SOEs, the economists said that the ones in SOEs were still limited, failing to meet the professional requirements. At present, num- ber of leaders who are really talented and enthusiastic in SOEs is not great; particularly the ones in senior management positions. Leadership structure is unbalanced and not reasonable. In addition, a number of leaders are corrupt causing the State asset loss in the amount of up to thousands of billions, such as: some leaders in Vietnam Vinashin Group, Construction Company PMU 18 ... This reduces the confidence of Vietnam Communist Party and Vietnamese Socialist regime. 5. Policy implications On the basis of leadership in Vietnam SOEs, this research suggests several recom- mendations in order to improve leadership in SOEs and improve their competitiveness in the integration process of Vietnam economy. 5.1. Recommendations for leaders in SOEs The SOE leaders should clearly identify their roles and responsibilities in their enter- prise. The leaders need to run the enterprise with heart and talent, this means they not only have knowledge of economics, but also must have communication skills. Also, they should apply flexible leadership styles in specific cir- cumstances. The SOE leaders need to change the lead- ership style and raise the awareness about the role and importance of directors and building Board of directors. They must be aware that along with the innovation of Science and Technology, leaders have an important role in the SOEs. They have to clearly understand the market, the laws and the policies of Vietnam State by establishing scientific management organizational struc- ture and efficiently using of enterprise 27 Trade Science Review TRADE SCIENCE REVIEW ’S TSR resources ... Therefore, leaders must have a very disciplined way of life and work. This is an important factor contributing to the enterprise success. 5.2. Recommendation for Vietnam State management agencies Establishing standards for key leaders: These standards are as a basis for the State leadership appointment in SOEs. Specific cri- teria of directors include: political quality, qualification, capacity, management experi- ence, virtue, age, health ... In order to assess these criteria, the State can assess through production and business results, workers' income in the enterprise, vote of confidence, expert opinions, ... In addition, The State needs to build Board of directors meeting the requirements of SOE restructuring process. Ensuring selection and appointment process in accordance with law: It can be said that the senior official appointment in Vietnam SOEs is quite negative. Promotion by money and relationship is still pretty pop- ular. Therefore, this requires strict supervi- sion and strict discipline of the State. Leadership appointment has to base on the standards mentioned above. In addition, lead- ership recruitment must be transparent to ensure democratic principles. Thus, Vietnam SOEs will get the great leaders. They are an important factor for the SOE success. Constantly and permanently improving the training quality of leaders: The State needs to clearly know leadership in SOEs, training needs ... to give the training contents and forms. Training forms include short-term courses, seminars, director club, visiting enterprises with high business performance. Training methods are through consultation, exchange of experience and enhancing skills of handling the situation, ... Especially, lead- ership training needs to encourage the leaders to self-learn by improving the ability of adapting to risks in the current competitive economic environment. 6. Conclusion The domestic and international economy with many changes requires the leaders to identify the difficulties of their enterprise, so that they can determine appropriate leader- ship direction. The support of Vietnam gov- ernment through the legal documents helps Vietnam SOEs to gradually overcome the dif- ficulties. Through the above analysis, it can be said that the recommendations for SOEs associate with SOE equitization and restruc- turing. Because SOE equitization and restruc- turing have many difficulties, the recommen- dations focus on not only policies, but also awareness innovation, and improving leader- ship capacities and training quality. Besides, SOEs should concentrate on reforming Public Private Partnerships (PPP). This is the matter that should be carefully considered and could be studied in the future. Summary Neàn kinh teá Vieät Nam ñang trong quaù trình phuïc hoài sau khuûng hoaûng kinh teá, laïm phaùt ñöôïc kieåm soaùt, kinh teá daàn oån ñònh taïo ñaø taêng tröôûng vaø hoäi nhaäp maïnh meõ vaøo neàn kinh teá toaøn caàu. Caùc doanh nghieäp nhaø nöôùc (DNNN) giöõ vai troø chuû ñaïo trong neàn kinh teá nhöng coøn nhieàu yeáu keùm, keát quaû hoaït ñoäng saûn xuaát kinh doanh chöa töông xöùng vôùi tieàm naêng vaø söï hoã trôï, ñaàu tö cuûa Nhaø nöôùc. Ñeå naâng cao hieäu quaû kinh teá cuûa caùc DNNN, thôøi gian qua Nhaø nöôùc ñaõ coù nhöõng bieän phaùp hoã trôï tích cöïc thoâng qua caùc chính saùch, quy ñònh veà coå phaàn hoùa, taùi cô caáu DNNN. Nhieàu vaán ñeà môùi veà DNNN caàn ñöôïc tieáp tuïc nghieân cöùu, giaûi quyeát, trong ñoù coù vaán ñeà laõnh ñaïo trong caùc DNNN nhaèm ñaùp öùng yeâu caàu cuûa thôøi kyø coâng nghieäp hoùa, hieän ñaïi hoùa vaø 28 Trade Science Review TRADE SCIENCE REVIEW ’S TSR hoäi nhaäp kinh teá quoác teá cuûa ñaát nöôùc. Reference: 1. Bass Bernard M. (1990), Bass and Stogdill's Handbook of Leadership, New York: Free Press. 2. Do Tien Long (2013), Business Restructuring in Vietnam, Science Journal, Vietnam National University, Hanoi, Economics and Trade, Volume 29, No. 4 (2013) 54-62. 3. Guyot James F. (1962), Government Bureaucrats Are Different, Public Administration Review, 22(4): 195-202. 4. Lewis Eugene. (1980), Public Entrepreneurship: Toward a Theory of Bureaucratic Political Power, Bloomington, IN: Indiana University Press. 5. Nguyen Huu Lam (2007), The Art of Leadership, H?ng ??c Publishing House. 6. Stogdill Ralph M. (1948), Personal Factors Associated with Leadership: A Survey of the Literature, Journal of Psychology, 25(1): 35-71. 7. General Statistics Office (2014), Statistics Book 2014, General Statistics Office 8. Tran Thi Van Hoa (2012), Managerial Skills for Business Leaders, Ha Noi Publishing House. 9. Tran Thuy (2012), Changing SOE Leaders for Restructuring, VietNamNet, 29 Trade Science Review TRADE SCIENCE REVIEW ’S TSR NGUYEN THANH HAI 1. Personal Profile: - Name: Nguyen Thanh Hai - Date of birth: March, 7th, 1976 - Workplace: Vietnam University of Commerce - Title: Doctor of Economics - Position: Postgraduate Falcuty 2. Major research directions: Trading Policies, Management enterprise, Human resource management 3. Publications the author has published his works: - Trade Science Review - Journal of Economic Development - Journal of Economic Management - Business Review