State management for State-owned enterprises

There are many concepts of State-owned enterprises (SOEs), but there is no consensus because it changes over time and depends on conditions, circumstances, and the economy of countries. Schiavo-Campo & Sundaram showed that SOEs are enterprises in which the State holds more than half of their total assets4. In the OECD guidelines on corporate governance, SOEs are enterprises in which the State controls through full, majority, or significant minority ownership5. Based on economics theory, SOEs are organizations involved in goods and services products but not owned by any individual but belonging to society6.

In Vietnam, depending on the stage of economic development, the concept of SOEs has changed to be consistent with the actual requirements. According to Law on Enterprises 2020, “SOEs are enterprises in which the State holds more than 50 percent of the charter capital and has the right to vote as prescribed in Article 88 of this Law”. Thus, the research on SOEs is approached in the direction of ownership, not in the way of management.

The term “State management” was born at the same time as the formation and existence of the State, described as a specific management method of the State. The World Bank defined State management as the exercise of political powers by an organization to manage a country and manage socio-economic resources for the development of that country7.

In closing, State management is the use of management tools containing a system of policies, regulations, and legal documents to manage relationships in the socio-economic fields of the country. To maintain a stable situation and develop and achieve the highest operational efficiency in each specific environmental condition and period.

Based on the above views, State management for State-owned enterprises is the use of the jurisdiction by State management agencies to impact purposefully, systematically, and synchronously. To make the most effective use of resources for SOEs to develop in the right direction, meet the goals, and be consistent with each diverse period.

Evaluation criteria of State management for State-owned enterprises

There are many different methods to evaluate state management for research fields. However, the widely used method is based on evaluation criteria. Developing evaluation criteria plays an important role in the management of the State8. Evaluation is the systematic and objective assessment of an on-going or completed policy implementation and outcomes to determine the relevance and fulfillment of objectives, management efficiency, effectiveness, and sustainability8.

This study synthesized theories and summarized the studies of Schiavo-Campo & Sundaram4, Dao9, and Le10 and combined with the theory of “Good Governance”, the evaluation criteria of State management for State-owned enterprises comprise of effectiveness, efficiency, relevance, sustainability, and equity. The content of the evaluation criteria is explained as follows:

Effectiveness is the power and authority of the management subject to influence, control, or dominate the managed objects in the system through legal tools, policies, decisions and orders consistent with objective laws to achieve management goals and meet the practical needs of society. The effectiveness of State management for State-owned enterprises is a social category that shows the relationship between the State and SOEs or is based on the extent to which the State exercises power with the degree of law observance and obedience of the SOEs. The effectiveness of State management for SOEs is the ultimate goal of the State in the management process of SOEs. It is evaluated by comparing results obtained in performing management functions and duties to accomplish the requirements for SOEs.

Efficiency is the management subject to optimally use input resources so that the managed objects achieve maximum operational results with minimum costs. The efficiency of State management for SOEs is the degree of fulfillment of requirements in the state management process based on good management of input resources so that SOEs can get the best performance results at the lowest cost.

Moreover, the efficiency of State management for SOEs is different from that of ordinary enterprises. Not only are SEOs achieving profits, but they also perform public tasks such as creating jobs and incomes for citizens, supporting the private sector, leading the economy to develop, exploring new fields, creating a corporate culture or business morality, and ensuring national security. Hence, evaluating the efficiency of State management for SOEs needs to consider the completed results of both aspects above.

Relevance is the reasonable, feasible, and consistent level between the contents in management activities and the objectives and orientations of the management subject to the managed objects. The relevance of State management for SOEs contains (i) the relevance between the system of legal documents and the objectives, orientations, and strategies for the development of SOEs; (ii) the relevance between socio-economic development policies and the activities of SOEs; (iii) the relevance between activities of SOEs and international practices. In other words, the activities of SOEs must be compatible with legal regulations, meet State management requirements and receive consensus among stakeholders in the economy. Additionally, it is also relevant to the content, method, form, inspection, and supervision of the operation process of SOEs.

Sustainability is the level of stability and sustainability overtime of the management subject in directing, operating, and managing the activities of the managed objects. The sustainability of State management for SOEs is the long-term stability of the system of policies and strategies combined with a long-term vision in the development orientation of SOEs. It is also structural stability at state agencies to be flexible and adaptive in management to changes in the integrated economy. In addition, documents related to the operation of SOEs must be open and flexible to meet the requirements of SOEs over a long period of time in order to realize two goals to ensure the process of production and business combined with the performance of public duties assigned by the State.

Equity is the level of balance in the implementing management requirements of the management subject in the exercise of rights and obligations of the managed objects. The equity of State management for SOEs is to ensure that all requirements and contents in the management process are distributed equitably without discrimination in terms of size, form, and type of business among SOEs. The promulgation of management documents must ensure the balance of rights and obligations, combined with the performance of assigned public utility tasks to meet the State’s requirements in stabilizing the market and orienting the country’s socio-economic development.

The IPA model

This study uses the Importance Performance Analysis model of Martilla & James based on the difference between the opinions of managers about the importance and performance of the evaluation criteria of State management for SOEs, forming a two-dimensional chart to simplify the interpretation of the collected data11. The IPA model is widely used in research on management and marketing11, hotel and tourism services12, 13, dentistry, health care14, 15, education16, 17and banking18.

When applying the IPA model, there are significant limitations. Hence, to overcome them , researchers have formed new methods such as IPA-IGA, integrated Kano - IPA, and IGA-PRCA19. With the methods using IGA (a more advanced version of IPA), the researchers believe that IGA does not have a strict theoretical basis and attributes of importance are a function of the performance attributes19. PRCA is applied to a limited number of elements or attributes of a product or service19.

Applying the IPA-Kano integration method to assess the importance and performance per criterion is the most appropriate and feasible. The integrated model allows for the measurement of management activities based on the difference between the managers’ views and management objects and researchers about the importance and performance of the fisheries public service management agencies in coastal regions and islands in Vietnam.

In the IPA model, if P – I 0, State management for SOEs is good. In contrast with, if P – I < 0 is badly (see Figure 1).

Quadrant I: The criteria in quadrant I are very important in the State management for SOEs, but the performance is low. Therefore, the State management agencies should promote the development of these criteria.

Quadrant II: The criteria in quadrant II are important in the State management for SOEs, and the State management agencies have performed well. Therefore, the State management agencies will maintain, preserve and promote those criteria.

Quadrant III: The criteria in quadrant III are not important as well as their performance is also low. And so, the State management agencies don’t need to concentrate resources to develop these criteria.

Quadrant IV: The criteria in quadrant IV are not important in the State management for SOEs, but performance is good. Therefore, the State management agencies don’t need to use additional resources to develop these criteria because it will create waste.

Scale design

The preliminary scale contains four criteria with 34 indicators; evaluation of State management for SOEs is synthesized from the theories from the studies of Dao9, Le10 combined with the empirical survey.

To be relevant to the field of study, the authors discussed with twenty managers working at the SOEs to carefully review the content related to criteria and adjust the indicators to meet the research objectives and the actual situation. In addition, in-depth interviews were conducted with five experts on economics management to unify the selection of evaluation criteria, better understand the content related to the research topic and solve problems arising during the discussion. The discussion and interview questions used are open-ended, exploratory questions to serve as a basis for supplementing and adjusting the indicators in the preliminary scale. Since the COVID-19 pandemic, group discussions and in-depth interviews were executed online on MS Teams in February 2022 and recorded in 60 minutes. The authors use Nvivo 11 software to store, encode and analyze qualitative data.

The results obtained through in-depth interviews and discussions showed that 100% of the participants agreed with five evaluation criteria of State management for SOEs and the content of the indicators. Moreover, the authors adjusted words to be consistent with the education level of survey participants. The survey items for all the criteria used in the study are presented in Table 1.

Data Source

Hoang and Chu stated that the minimum sample size to use exploratory factor analysis is 50, preferably 100 or more20. The ratio of observations on an analytic variable of 5:1 or 10:1 will provide the minimum sample size of the study to ensure reliability. In this study, the authors use the 10:1 rule. The study has 34 indicators, so the number of samples needed is 34*10 = 340. To limit the case of invalid answer sheets, the authors carried out a survey of 440 managers.

The study used a convenient sampling method for managers working at the Commission for the Management of State Capital at Enterprises (30 votes) and SOEs (410 votes) containing Vietnam Posts and Telecommunications Group (VNPT), Vietnam National Petroleum Group (Petrolimex), Vietnam Electricity (EVN), Vietnam National Coal and Mineral Industries Holding Corporation Limited, Vietnam National Chemical Group (Vinachem), Vietnam Aviation Corporation (AVIAVIETNAM), Vietnam National Shipping Lines (VINALINES), Vietnam Southern Food Corporation (JSC), Vietnam Railways (VNR), Vietnam Expressway Services Engineering Joint Stock Company (VECE).

The authors divided equally among 10 SOEs to show an objective and fair assessment among them. The survey forms were sent directly and through email to managers from March, 2022 to April, 2022.

After cleaning the data, the study collected 425 valid answers (25 votes at the Commission for the Management of State Capital at Enterprises and 390 votes at the SOEs) with a return of 96.6 percent. Male respondents constituted 71.6% of the sample. 91.8% of respondents were middle-aged (above 35 years old). The respondents with an education level of a university bachelor (28.3%), Master’s degree (69.6%), and Doctor of Philosophy (2.1%). The characteristics of the survey sample are consistent with the situation at the SOEs in Vietnam. Figure 2 shows the results of sample characteristics.