Improving employees customer-oriented behavior at counter: a case of Agribank – To Hien Thanh branch

EXECUTIVE SUMMARY

Banking is the financial institution that provide the customers related financial services. In recent years, there are the development of several banking corporations in the market with the high amount and high increase of the Joint Stock Corporations Banking Institution. The growth in the volume of banking institution leads to the rise of the competition on banking market and this creates the motivation to the bank to change the way of operating to improve the competitiveness, especially the 100% state-owned banking such as Vietnam Bank of Agricultural and Rural Development (“Agribank”), one of the largest 100% state- owned banking institution with a long time operation but by customer service style of the government office.

Banking activities include all services associated to banking and financial such as loan, borrowing, deposit, transferring, etc., in which counter transactions that are usually take place at bank branches with frequent customer interaction requests. For that reason, the counter transactions can significantly affect customers’ awareness and satisfaction towards the image and quality of the bank branch. Hence, it is essential to enhance the customer service linked to direct transactions in all aspects to increase the competitiveness of the bank in marketplace.

Since the counter transactions have played a vital role in bank branch activities, especially for personal customers; the employees at bank branch have to know how to communicate and deal with customer issues in proper ways, from the procedure guide to interactive behaviors and other related skills. In refer to Agribank To Hien Thanh (“THT”) Transaction Office, the researcher has tried to learn about the problem of poor customer- oriented behavior of employees which is caused customer dissatisfaction about direct transactions. With deeper investigation, the author found that the main cause following this problem being low working motivation and suggest some alternative solutions as well as action plan to improve the situation of this Transaction Office.
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ACKNOWLEDGEMENTS

I would like to send special appreciation to my supervisor, Dr. Nguyen Thi Mai Trang, and all the other teachers of International School of Business, University of Economics Ho Chi Minh City. Without the help, the support and the guidance from Dr. Nguyen Thi Mai Trang and other teachers, I will not be able to complete my master-level course as well as this thesis. That is my pleasure to work with Dr. Nguyen Thi Mai Trang during the project.

Besides, I would like to say thanks to my family and my friends who are always delivering the encouragement toward my learning process including all the activities during this course and this thesis as well. Your patience, support, respect and all your understanding are greatly appreciated.
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TABLE OF CONTENTS

EXECUTIVE SUMMARY ……………………………………………………………………………………. 3

ACKNOWLEDGEMENTS …………………………………………………………………………………… 4

LIST OF FIGURES ………………………………………………………………………………………………. 7

LIST OF TABLES………………………………………………………………………………………………… 7

1 INTRODUCTION …………………………………………………………………………………………. 8

1.1 Agribank………………………………………………………………………………………………….. 8

1.2 Agribank, To Hien Thanh Transaction Office………………………………………………. 9

2 PROBLEM CONTEXT………………………………………………………………………………… 11

2.1 Global Banking Market……………………………………………………………………………. 11

2.2 Vietnam Banking Market…………………………………………………………………………. 12

2.3 Agribank Business Result ………………………………………………………………………… 14

3 PROBLEM IDENTIFICATION ……………………………………………………………………. 19

3.1 Symptoms………………………………………………………………………………………………. 19

3.1.1 Symptom 1: Complaint Rate……………………………………………………19

3.1.2 Symptom 2: Loss of loyal customers……………………………………………22

3.1.3 Problem awareness……………………………………………………………..23

3.2 Possible problems …………………………………………………………………………………… 25

3.2.1 Possible problem 1: Behavior of the employees……………………………….27

3.2.2 Possible problem 2: Complicated internal procedure…………………………..28

3.3 Problem Validation …………………………………………………………………………………. 29

4 CAUSE VALIDATION ……………………………………………………………………………….. 32

4.1 Possible cause 1: Lack of knowledge about the procedure and policy ……………. 33

4.2 Possible cause 2: Lack of employee empowerment ……………………………………… 35

4.3 Possible cause 3: Low working motivation…………………………………………………. 36

5 ALTERNATIVE SOLUTIONS …………………………………………………………………….. 38

5.1 Alternative solution 1: Building an incentives policy for good individual performance…………………………………………………………………………38
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5.2 Alternative solution 2: Applying performance appraisal: using MBO (Management by objectives) software……………………………………………………………..40
5.3 Main solution justification …………………………………………………………………………. 44

6 ORGANIZATIONAL ACTION ……………………………………………………………………. 46

7 CONCLUSION …………………………………………………………………………………………… 49

8 SUPPORTING INFORMATION ………………………………………………………………….. 50

APPENDIX ……………………………………………………………………………………………………….. 78

REFERENCES …………………………………………………………………………………………………… 80
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LIST OF FIGURES

Figure 1: Agribank Organizational Structure ……………………………………………………………. 8

Figure 2: Agribank To Hien Thanh Transaction Officer Organizational Structure ………. 10

Figure 3: New trends of global retail banking…………………………………………………………. 12

Figure 4: Industry Retail Loan Growth in Vietnam (2013 – 2020E)…………………………… 14

Figure 5: Networks of Banks in Vietnam……………………………………………………………….. 15

Figure 6: Total assets, Total Liabilities and Total Equity of Agribank via years …………. 16

Figure 7: Total Assets via years of 4 largest 100% state-owned banks ………………………. 16

Figure 8: Revenue and profit of Agribank via years ………………………………………………… 17

Figure 9: Return on total assets of 4 largest 100% state-owned banks (Total Profit After

Tax/Total Assets)………………………………………………………………………………………………… 18

Figure 10: Answer of Question 1: What do you think about the customer satisfaction toward counter transactions at To Hien Thanh Transaction Office ……………………………. 24
Figure 11: Answer Result of Questions 3: What do you think about the reasons of this situation …………………………………………………………………………………………………………….. 26
Figure 12: Initial cause-effect tree…………………………………………………………………………. 29

Figure 13: Complaints via box office …………………………………………………………………….. 30

Figure 14: Updated cause-effect tree……………………………………………………………………… 32

Figure 15: Main cause-effect tree………………………………………………………………………….. 38

LIST OF TABLES

Table 1: Number of complaints of customers at To Hien Thanh Transaction Office, Agribank ……………………………………………………………………………………………………………. 20
Table 2: Agribank To Hien Thanh branch compare to equivalent scale branch – Tan My about complaint rate ……………………………………………………………………………………………. 20
Table 3: Customers’ complaints via hotline ……………………………………………………………. 21

Table 4: Answer for Questions 2 with point of view about the situation of customers satisfaction toward counter transactions in Agribank ………………………………………………. 24
Table 5: Organizational Plan ………………………………………………………………………………… 47
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1 INTRODUCTION

1.1 Agribank

Agribank is one of the largest 100% state-owned banking institution on the market with a large organizational structure from the government, the state-owned to the small level of the corporations including the Transaction Office. The organizational structure of Agribank is as below:

Figure 1: Agribank Organizational Structure

(Source: Agribank website)
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According to the organizational structure of Agribank, To Hien Thanh Transaction Office is classified as the Transaction Office under Branch Type 1 and Type 2 and the Transaction Office is the office of Agribank performing direct transaction, business activities and the transaction office is the first impression of the customers about the services of Agribank and creating the customer satisfaction to the related services.
1.2 Agribank, To Hien Thanh Transaction Office

Agribank To Hien Thanh is a Transaction Office that is established under District 10

Branch at 175 To Hien Thanh, Ward 13, District 10, Ho Chi Minh City, Vietnam. The business activities of this Transaction Office including:
· Mobilizing short, medium and long-term capital in the form of time deposits, demand deposits.
· Providing short, medium and long-term loans.

· Payment services among customers, conducting foreign exchange, gold and international payment.
· Payment and transaction for the business corporations including transferring, payroll, payment, etc.,
· Cash withdraw, cash deposit and term deposits to the personnel customers.

Thus, the customers satisfaction is really vital to the branch since the business activities of the transaction office is mostly completed and provided toward the personnel customers. The organizational structure of Agribank To Hien Thanh Transaction office (District 10
Branch) is based on the standard structure of the Transaction Office of Agribank including the below people and department with 12 employees.

Figure 2: Agribank To Hien Thanh Transaction Officer Organizational Structure

(Source: Agribank To Hien Thanh Transaction Office)

Within the departments and the people of To Hien Thanh transaction office of Agribank, the members and the department that mostly connect to the customers including the Teller, the Treasurer, the Controller and the Loan Officer.
Improving employees customer-oriented behavior at counter: a case of Agribank – To Hien Thanh branch

2 PROBLEM CONTEXT

2.1 Global Banking Market

A bank is a financial institution on the financial market licensed to provide the agency services toward the other members of the economics including both the personnel and the organizations. The most frequent and important activities of the bank is receiving the deposits and making the loans to several members of the economics. Besides, banks also provide other financial services as well 2.

Due to the importance of the bank in the financial market, this sector plays a vital role in the modern age of development of international business. Banking activities will ensure the operation, international payment and the cycle of financial in the growth of the economics 3. In general, banking is separated into two (2) main types of banking services containing:

· Corporate Banking: Corporate Banking is the banking service with the services provides toward the corporations such as payment, letter of credit, letter of guarantee, account management, etc.,
· Personnel Banking (Retail banking): Retail banking is banking service with the services toward the personnel including payment, international payment, account management, saving, etc.,

In this research, the researcher will conduct the investigation about the satisfaction of the customers and mostly there are personal customers in To Hien Thanh Transaction Office of Agribank. Hence, the section that the research focus to understand is retail banking. Retail banking requires the bank increasing the quality of customer service to improve the satisfaction of the customers as retail banking involves high interaction between the banks and customers.

Global retail banking market has the CAGR at 6.5% annually forecasted till 2025 and still plays an important part for the development of the economics and banking industry in the future4. In the next years, retail banking is developing toward the new wave of the
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economics including fintech, improve customer experience and develop the personalized experience of the customers4.

Improving employees customer-oriented behavior at counter: a case of Agribank – To Hien Thanh branch

Figure 3: New trends of global retail banking

(Source: Business Wires)

Ultimately, the reason for all the improvement and renovation in retail banking is to enhance the satisfaction and experience of the customers when doing transactions with the banks. Customer satisfaction and customer experience is the key element for the development of retail banking activities globally6.

2.2 Vietnam Banking Market

Banking activities in Vietnam official started with the establishment of Vietnam National

Bank (Stage Bank of Vietnam) in 19517. Up to 2019, there are totaling 49 banks in Vietnam
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(do not includes the Branch of International Bank in Vietnam) including nine (9) 100%

state-owned banks8.

There are several banks that do retail banking and this segment is highly potential in Vietnam owning to the development of the population, the middle-age people and middle- income people in the country. This leads to the potential to boost the business activities in banking industry, especially retail banking in Vietnam with the improvement and increase in the number of banks in Vietnam, following by the rise of the competitiveness in banking industry generally and retail banking industry particularly.

Vietnam’s banking industry has shown significant development thanks to stable inflation and interest rates, a favorable environment for foreign direct investment and the transition from deficit to surplus of the country’s current account. This region has played a significant role in Vietnam’s economic development in recent years9.

The development of the banking sector generates more credits to contribute to domestic capital and total GDP10. On the other hand, the banking industry also witnessed innovation in banking technology such as electronic services, automatic teller machine (ATM), debit, credit cards and online transactions11. Total retail loan in Vietnam is growing every year with the growth rate at about 18% to 20% annually, raising from 37 billion USD in 2013 and forecast to go up to 134 billion USD in 202012.
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Figure 4: Industry Retail Loan Growth in Vietnam (2013 – 2020E)

(Source: The Asian Banker)

As the development of the economics in Vietnam, banking industry in Vietnam is developing quickly with the surge in the competition on the market in spite of the control of the SBV for this critical and sensitive sector. As the same as banking industry, retail banking is also enlarging. Totaling, there are 7 foreign banks, 35 Vietnam JSC banks and the branch of International banks in Vietnam, the competition of retail banking industry is really high which push and generate the pressure for the banks in Vietnam to foster the competitiveness of themselves on this market.

2.3 Agribank Business Result

Agribank is one of nine (9) 100% stated-owned banks in Vietnam. As registered, Agibank’s name is Vietnam bank of Agricultural and Rural Development. Agribank was established in 1988 with the mission to develop banking system and the economics of rural areas in Vietnam. Up to now, Agribank is still one of the largest banks in Vietnam with wide networks particularly in rural area. Till 2018, Agribank has more than 2000 branches and transaction offices, highest within Vietnam bank13.
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Improving employees customer-oriented behavior at counter: a case of Agribank – To Hien Thanh branch

Figure 5: Networks of Banks in Vietnam

(Source: CafeF.vn)

Improving employees customer-oriented behavior at counter: a case of Agribank – To Hien Thanh branch

Figure 6: Total assets, Total Liabilities and Total Equity of Agribank via years

(Source: Summary from Agribank’s Financial Statements)

Within the four (4) largest 100% state-owned banks in Vietnam including Agribank, Vietcombank, VietinBank and BIDV, Agribank is the 2nd largest banks in term of total assets.

 

Figure 7: Total Assets via years of 4 largest 100% state-owned banks

(Source: Summary from 4 Banks’ Financial Statements)
Improving employees customer-oriented behavior at counter: a case of Agribank – To Hien Thanh branch

However, despite the large scale of the bank compare to other 100% state-owned banks and also other JSC banks in Vietnam, the revenue and profit of Agribank is quite small and mostly caused by the low-quality of services comparing to other banks on the market. The good signal for Agribank is the revenue and the profit of the bank still going up through years but the development of the profit is much slower than revenue due to the lack of
controlling in the quality of credit as well as the increase of operation expenses of the bank.

igure 8: Revenue and profit of Agribank via years

(Source: Summary from Agribank’s Financial Statements)

On the other hand, in comparison with other four (4) largest 100% state-owned banks in Vietnam, Agribank has the lower return on total asset with the level at 0.44% in 2018. This result revealed the less effective of Agribank in managing their economics resources or assets to create profits as well as how the bank administers the customer service.

2015 2016 2017 2018

Agribank Vietcombank VietinBank BIDV

Figure 9: Return on total assets of 4 largest 100% state-owned banks (Total Profit After
Tax/Total Assets)

(Source: Summary from 4 Banks’ Financial Statements)

The advantage of Agribank on the market is the wide range of branches and transaction offices specifically in rural area to attract customers, particularly the famers and this create the ability to gain more customers to the bank. Nevertheless, the issue of Agribank is the customer services including the system, procedures and the attitude of the employees since Agribank was formed as the government bank.
Improving employees customer-oriented behavior at counter: a case of Agribank – To Hien Thanh branch

3 PROBLEM IDENTIFICATION

3.1 Symptoms

As the information collected from Agribank, To Hien Thanh Transaction Office about the complaint rate of customers via years and information from the discussion with Ms. Thuy
– Vice Manager of To Hien Thanh Transaction Office, the researcher noted about the two (2) signals including complaint rate and loss of loyal customers reflect the situation of the decrease in the customer satisfaction in To Hien Thanh Transaction Office of Agribank.

3.1.1 Symptom 1: Complaint Rate

Complaint should be considered as an indicator of an organization’s performance, signaling problems or failures in internal processes that need to recover quickly to avoid moving profitable customers. Organizations must know that the consequences of losing customers are both reduced profits and negative words. In this context, the aim of the present study is to highlight which are the key features of an effective complaint management process, as a less expensive system of diagnosing and learning a company’s weaknesses14. Customers become dissatisfied when product or service performances are not up to their expectations. Understanding the potential sources of dissatisfaction and customers’ reactions to negative situations are mandatory requirements in the design of effective service recovery strategies. Customer responses to various errors or unpleasant incidents are not unique15.

Hence, complaint rate can be judged as the sign about the customers satisfaction, the increase in the complaint rate of the customers may reflect the decrease in the level of customers satisfaction in organizations such as To Hien Thanh transaction office of Agribank.

The research shows the complaint rate of the customers that come to Agribank To Hien Thanh Transaction office and compare via times between the years. Agribank To Hien Thanh transaction office has the box office to collect the feedback from the customers and the bank members of the branch summarize the amount of complaints through years to understand the change in the customers satisfaction. Inspite of spending time quarterly to sum up the amount of complaints via Box Office, the branch does not attempt to solve the
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issue since this is not a compulsory requirement from both the leaders of the Transaction Office and from Head Office of Agribank as well. Thus, the employees only collect the amount of the feedback by box office and inform the management of the Transaction Office without further investigation to resolve the matter. Additionally, there are comments via hotline of the bank and mostly this is the critical issue with high level of dissatisfaction of the customers.

Table 1: Number of complaints of customers at To Hien Thanh Transaction Office, Agribank

Improving employees customer-oriented behavior at counter: a case of Agribank – To Hien Thanh branch

(Source: Agribank To Hien Thanh Transaction Office)

As noted by the members of To Hien Thanh transaction office, the complaints raised via years. This means the decrease in the customer satisfaction can be concerned as the issue of this transaction office, especially in the three recent years (2017-2019).

In addition, when comparing the amount of complaint at To Hien Thanh office to that of another branch having good performance and equivalent scale (in terms of employees and structure) in Ho Chi Minh City, the result shows that complaint rate at To Hien Thanh branch is really high.

Table 2: Agribank To Hien Thanh branch compare to equivalent scale branch – Tan My about complaint rate

Year 2019 By Box Office By hotline

To Hien Thanh 51 5

Tan My 14 2

(Source: Agribank Internal Report)

These complaints are mostly given by individual customers with counter transactions at To

Hien Thanh office; covering various personal banking services as mentioned by Ms. Trang