(LUẬN văn THẠC sĩ) performance measurement by applying balanced scorecard the case of maritime banks branches

VIETNAM NATIONAL UNIVERSITY, HANOI HANOI SCHOOL OF BUSINESS Vu Viet Dung PERFORMANCE MEASUREMENT BY APPLYING BALANCED SCORECARD THE CASE OF MARITIME %$1.¶6%5$1&+ ES Major: Master of Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisor: PhD Dao Thi Thanh Lam Hanoi ±2012 TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGMENTS This thesis would not have been possible without the support and encouragement of many people I would like to express, first and foremost, my sincere gratitude to my supervisor, PhD Dao Thi Thanh Lam, who has supported me throughout my study with her patience and knowledge Her encouragement, supervision and support enabled me to complete this thesis successfully Special thanks to all of the lectures and staff at Hanoi School of Business I am very grateful for my time at the school There is not enough word to describe their excellent works , DP GHHSO\ JUDWHIXO WR 0DULWLPH %DQN¶ support that they sent me the opportunities to carry out this research, and for their interest in my writing I am also highly thankful to the Maritime Bank people for their valuable insights and perceptive comments It has been really interesting to apply the knowledge learnt in school in a real case scenario The last but not the least, I want to say thanks for my friends, my families, who have participated in this MBA course with me, for their encouragement and invaluable assistance Hanoi, August 2012 Vu Viet Dung i TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT PERFORMANCE MEASUREMENT BY APPLYING BALANCED SCORECARD 7+(&$6(2)0$5,7,0(%$1.¶6%5$1& Vu Viet Dung MBA Candidate, 2008 - 2010 School of Business Vietnam National University, Hanoi Supervisor: PhD Dao Thi Thanh Lam August 2012, 90 pages Performance measurement is always the most important thing in banking management The assessment and measurement the working result of a bank is made from each individual to the departments, and especially the branches which make profits for the bank The assessment associated with the personal/branch ranking Especially, with employees, it relates to salaries and bonuses, which are always the most they expected every end of the year At Maritime Bank, one of the 12 largest banks Vietnam at present, a bank has been having the large and significant steps forward, the evaluation are highly valued However, like some other banks in the market, the assessment at MSB just stop in the evaluation of business indicators, financial indicators, but not emphasis on nonfinancial indicators such as: people, business processes, training and customer So the assessment was not really objective and accurate It has not been shown to be in accordance with the core values that banks are pursuing For this reason, the study of this subject is the need to fill gaps in the assessment at Maritime Bank ii TIEU LUAN MOI download : skknchat@gmail.com The first section is the initial introduction of topics including: necessity, objectives, analyzing, synthesizing data, scopes and limits of the subject The first chapter is in order to systematize the theories, knowledge related to the assessment, the basic definition and especially the detailed introduction of the BSC model, which has been applied in the implementation of the research The second chapter includes: brief introduction about MSB after conducting discussions with a number of key personnel related to the assessment at MSB, in order to get their opinions on the current system and proposals that should or should not apply BSC for MSB From the results obtained after discussion, the writer made the criteria corresponding to the four aspects of BSC, then conducted survey in 02 branches of MSB and analyzed data, evaluated and proposed the most appropriate criteria Third chapter provides the results, the suggestions of the writer and eventually a new system of assessment criteria based on the BSC model iii TIEU LUAN MOI download : skknchat@gmail.com TểM TT 2/1*.7487+&+,1&é1*9,& 1*' 1*0é+ẻ1+7+,0&ặ1%1* 1*+,ầ1&87,&+,1+ẩ1+1*ặ1+ơ1*+ơ1 99LW'QJ Sinh viên MBA, 2008 - 2010 KRD4XҧQWUӏ.LQKGRDQK ĈҥLKӑF4XӕFJLD+j1ӝL *LҧQJYLrQKѭӟQJGүQ7LӃQVƭĈj 8/2012, 90 trang ĈROѭ ӡng kӃ t quҧthӵc hiӋ n công viӋ c luôn mӝt vҩ Qÿ Ӆquan trӑng nhҩ t quҧ n trӏngân hàng ViӋ F ÿiQK JLi ӡng kӃ t Yj quҧhồn ÿR thànhOѭ cơng viӋ c cӫa mӝWQJkQKjQJÿѭ ӧc thӵc hiӋ n tӯFiFFiQKkQFKRÿ Ӄ QFiFSKzQJEDQY һ c biӋ t chi nhánh ±nhӳQJQѫLV ҧ n sinh lӧi nhuұ n cho ngân hàng &{QJWiFÿiQKJLiJ ҳ n liӅ n vӟi viӋ c xӃ p hҥ ng cá nhân, xӃ p hҥ QJFKLQKiQK һ c biӋ Wÿ ӕi vӟLQJѭ ӡLODRÿ ӝQJÿyOjY ҩ Qÿ ӅOѭѫQJWKѭ ӣQJÿL Ӆ u mà cӭmӕi dӏ p cuӕi QăPOX{Qÿѭ ӧc hӑmong chӡnhҩ t Tҥ i Maritime Bank, mӝt 12 ngân hàng lӟn nhҩ t ViӋ t Nam hiӋ n nay, mӝt ngân KjQJÿDQJFyQK ӳQJEѭ ӟc chuyӇ n lӟQYjÿiQJN Ӈ F{QJWiFÿiQK ҩ t ÿѭ ӧc coi trӑQJ7X\QKLrQFNJQJJL ӕQJQKѭP ӝt sӕngân hàng khác thӏWUѭ ӡng, viӋ F ÿiQK Ӄ t quҧ JLi thӵc hiӋ N n kӃhoҥ ch tҥ i MS% FNJQJ ӟi chӍdӯ Png lҥ i ӣviӋ c ÿiQKJLiFiFFK Ӎtiêu kinh doanh, chӍWLrXWjLFKtQKÿѫQWKX ҫ QPjFKѭDFK ӑng ÿ Ӄ n chӍWLrXSKLWjLFKtQKNKiFQKѭFRQ ӡi, quy trình nghiӋ p vө, phát triӇ n ÿjRW ҥ RYjNKiFKKjQJGRÿyYL Ӌ FÿiQKJLiFKѭDWK ӵc sӵkhách quan xác, FKѭD ӇhiӋ WK Qӧ ÿѭ F ÿ~QJ ӟi nhӳ WKHR ng giá trӏ Y cӕW O}L Pj QJkQ KjQ ÿX әi VӟLOêGRÿyYL Ӌ FUDÿ ӡLÿ Ӆtài vҩ Qÿ Ӆcҫ n thiӃ Wÿ Ӈkhӓ a lҩ p nhӳng thiӃ u VyWWURQJF{QJWiFÿiQKJLiW ҥ i Maritime Bank iv TIEU LUAN MOI download : skknchat@gmail.com Phҫ Q ҫ uÿcӫD Ӆtài ÿ nhҵ m giӟi thiӋ X EDQ ҫ u vӅÿ ÿ Ӆtài bao gӗm: sӵcҫ n thiӃ t phҧ LFyÿ Ӆtài, mөc tiêu nghiên cӭu, cách thӭc phân tích, tәng hӧp dӳliӋ u, phҥ m vi giӟi hҥ n cӫ Dÿ Ӆtài &Kѭ ӡQJ ҫ uÿ tiên nhҵ m hӋthӕ ng hóa lҥ i nhӳng lý thuyӃ t, kiӃ n thӭF OLHQ Ӄ n TXDQ F{QJWiFÿiQ KJLiFiFÿ ӏ QKQJKƭDFѫE ҧ QYjÿ һ c biӋ t giӟi thiӋ u chi tiӃ t vӅmơ hình %6&P{KuQKÿѭ ӧc áp dөng viӋ c thӵc hiӋ Qÿ Ӆtài &KѭѫQJWK ӭhai bao gӗm: giӟi thiӋ XVѫOѭ ӧc vӅ06%VDXÿyWL Ӄ QKjQKWUDRÿ әi vӟi mӝt sӕcán bӝchӫchӕWFyOLHQTXDQÿ Ӄ n cônJWiFÿiQKJLiW ҥ i MSB, nhҵ m thu nhұ n ÿѭ ӧFÿiQKJLiF ӫa hӑvӅhӋthӕng hiӋ n tҥ i cӫa hӑÿ Ӆxuҩ t nên hay không nên áp dөng BSC Tӯnhӳng kӃ t quҧthu thұ Sÿѭ ӧFVDXNKLWUDRÿ әLQJѭ ӡi viӃ WÿѭDUD chӍWLrXWѭѫQJ ӭng vӟi khía cҥ nh cӫ D%6&VDXÿyWL Ӄ n hành tәchӭc survey tҥ i 02 chi nhánh cӫa MSB phân tích sӕliӋ u gӱi, tӯÿy SKkQ WtFK Ӆ ÿi xuҩ t chӍtiêu phù hӧp nhҩ t &KѭѫQJWKӭ ÿѭDUDNӃWTXҧQKӳQJÿӅ[XҩWFӫD QKӳQJWLrXFKtÿiQKJLiPӟLGӵD mô hình BSC v TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS ACKNOWLEDGMENTS i ABSTRACT ii TÓM TҲT .iv LIST OF FIGURES viii LIST OF TABLES ix ABBREVIATION x INTRODUCTION 1 Rationale Research objectives Research questions Data collection Research process Data processing Research scope Thesis structure Limitation CHAPTER 1: LITERATURE REVIEW 1.1 Performance measurement 1.1.1 The importance of performance measurement 1.1.2 Performance measurement classification 1.1.3 Performance measurement level 1.1.4 Performance measurement models 1.1.5 Deciding the right metrics 1.2 Balanced Scorecard Model 10 1.2.1 Financial perspective 14 1.2.2 Customer perspective 17 1.2.3 Internal Business Perspective 20 vi TIEU LUAN MOI download : skknchat@gmail.com 1.2.4 Learning & Growth Perspective 22 1.3 The Balanced Scorecard: Measurement System 24 1.4 The Balanced Scorecard development 30 1.5 The Balanced Scorecard implementation 36 CHAPTER 2: FINDINGS & DEVELOPMENTS 40 2.1 Introduction about MSB 40 2.1.1 Establishment and development history 40 06%¶V9LVLRQ 41 06%¶V0LVVLRQ 42 06%¶V&RUHYDOXHV 42 06%¶VRUJDQL]DWLRQFKDUW 43 2.2 Analysis of findings & developments 44 2.2.1 Findings 44 2.2.2 Developments 48 2.3 Finding summarization 52 2.3.1 General review 52 2.3.2 Perspectives review 62 CHAPTER 3: RECOMMENDATION 70 3.1 Key results 70 3.2 Recommendation 70 3.2.1 BSC Performance measurement 70 3.2.2 Recommendation 72 REFERENCES 75 APPENDIXES 78 vii TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 1.1: Four perspectives 13 )LJXUH06%¶V2UJDQL]DWLRQ&KDUW 43 Figure 2.2: Relation with the bank 54 Figure 2.3: Qualification 55 Figure 2.4: Age 56 Figure 2.5: Gender 57 Figure 2.6: Income 58 Figure 2.7: Experience 61 viii TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Table 1.1: Commonly Used Financial Measures 15 Table 2.1: Result of Questionnaire 45 Table 2.2: Variables and indicators of BSC 49 Table 2.3: The significance of the answers 52 7DEOH&URQEDFK¶V$OSKD5HVXOW 52 Table 2.5: Relation with the bank 53 Table 2.6: Qualification 54 Table 2.7: Age 55 Table2.8: Gender 56 Table 2.9: Income 57 Table 2.10: Relation with the bank * Income Crosstabulation 58 Table 2.11: Experience 60 Table 2.12:Relation with the bank * Experience Cross tabulation 61 Table 2.12: Customer perspective 62 Table 2.14: Internal business perspective 64 Table 2.14: Learning and Growth perspective 66 Table 2.15: Financial perspective 69 Table 3.1: BSC performance measurement 71 ix TIEU LUAN MOI download : skknchat@gmail.com - Geography: two branches in Hanoi, Vietnam - Timing: at the end of 2011 and 2010 Thesis structure Introduction Chapter 1: Literature Review Chapter 2: Findings & Developments Chapter 3: Recommendation Limitation The study has several potential limitations: - The study was conducted only with branches and may not representative of the bank; - The questionnaire and survey was answered by officers and manager in branches: Hanoi branch and Dong Da branch, so their perceptions may or may not reflect the actual situation - The other possible limitation of the study may be that the indicators in the questionnaire and survey are not easy to understand for some respondents, so the answers might be not correct TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 1: LITERATURE REVIEW 1.1 Performance measurement Performance measures or indicators are measurable characteristics of products, services, processes and operations which the company uses to track and improve performance The goal of making measurement permits managers to see their company more clearly, from many perspectives, and hences to make wiser longterm decisions (Arveson, 1998) 1.1.1 The importance of performance measurement Since it is not possible to improve what is not measured, metrics must be developed based on the priorities of the strategic plan, which provides the key business drivers and criteria for metrics that managers most desire to watch (Arveson, 1998) Performance metrics play a crucial role in four of the most significant leadership activities: Reporting: Reports are prepared for different work areas to show consumed resources and the created value and ensure that people in the company get full credit for what they have accomplished Making decision: It enables the manager to practice fact-based management Implementing strategy: The performance metrics must be directly based on the organization's strategic direction Improving performance: It is one of the most important components of the leader's job, so it is necessary to exploit metrics to specify the right tasks and align efforts behind them (Frost, 2000: pp 14-16) 1.1.2 Performance measurement classification Performance measures can be put into the following categories: - Qualitative or subjective - When numbers on a scale are assigned by human judgment This does not necessarily imply there is any bias in the measure TIEU LUAN MOI download : skknchat@gmail.com - Quantitative or objective - When measures are derived from physical measurements or countable units - Attribute - When a characteristic, such as a defect, is measured as either being present or not - Variable or continuously variable - When the degree or extent of a variable is measured on a continuous scale The dimensions of a table top are variables; dents are attributes since they are counted as either being present or not Anything can be measured to a useful degree, especially in a business environment If something can't be measured directly, it must have an effect, which can be measured If a process has no intended effect, it is clearly not worth measuring in the first place (Kaydos, 1999: pp 19-20) 1.1.3 Performance measurement level Performance measurement has levels: Organizational, Team/Unit and Individual/Personal level To distinguish with Organization/Unit level, below are some characteristics of Personal level based on Balanced Score Card (Personal Balanced Scorecard ± PBSC): - Personal BSC is a method to complement traditional indicators with ILQDQFLDODQGQRQILQDQFLDORQHVW in key areas - Measurements are developed in the same four areas with objectives consistent and aligned with our own personal life vision and mission - The base of the Personal BSC is a strategic mapping of the cause and effect governed by the relationship between these four perspectives TIEU LUAN MOI download : skknchat@gmail.com - The integral achievement of the objectives is part of a continuous improving and growing cycle This is the basic pillar of the PBSC methodology In limitation of this thesis, I have just mentioned about Organizational level 0DULWLPH%DQN¶VE ranch 1.1.4 Performance measurement models Traditional models In traditional industrial activities, "quality control" was the watchword In order to shield the customer from receiving poor quality products, aggressive efforts were focused on inspection and testing at the end of the production line That means the company loose of the bad products and services, and in the same time, the cause of defect will stay unknown Total Quality Management The Deming philosophy emerged in the US government in 1987 via two initiatives, one military and one civilian Under defense Secretary Frank Carlucci, the Total Quality Management (TQM) program was introduced to create a new focus on total ownership cost in acquisitions Deming saw that variation had been created at every step in a production process, and the causes of variation needed to be identified and fixed If this could be done, there would need a way to reduce the defects and improve product quality indefinitely To establish such a process, Deming emphasized that all business processes should be part of a system with feedback loops The feedback data should be examined by managers to determine the causes of variation, what are the processes with significant problems, and then they can focus attention on fixing that subset of processes (Arveson, 1998) The Performance Prism TIEU LUAN MOI download : skknchat@gmail.com The Performance Prism is a framework jointly developed by the Centre for Business Performance at Cranfield School of Management and Accenture It is a three dimension model It has two ends, the stakeholder wants and needs and the stakeholder contribution as well as three faces, strategies, processes and capabilities Prism works as follows: - Satisfying the wants and needs of stakeholders (SWANS) is the starting point - Strategies an organization adopts should be related to achieving the needs of the key stakeholders - The key business processes which may enable the organization to deliver its strategy need to be identified, developed and measured - The key capabilities that may underpin the performance of the organization processes should be identified - Identifying the wants and needs of the organization (Our wants and needs OWANS) takes in account the contributions of the stakeholders The prism framework has been put as an alternative model for the Balanced 6FRUHFDUGWRPHHWRQHRILWVVKRUWDJHV needs (Bourne, 2002: pp 90-93) Service Quality model Service quality is the difference between what a customer expects and what is provided The expectations/perceptions conceptualization has been extended to incorporate "desires" in evaluating customers' perception of service quality The SERVQUAL model is used as a diagnostic tool for the measurement of customer service and the satisfaction of service perception The framework has been developed by Parasuraman and others and subsequently refined between 1985 and 1994 to have a final condensed list consisted of five correlated major categories: (1) Tangibles (2) Reliability TIEU LUAN MOI download : skknchat@gmail.com (3) Responsiveness (4) Assurance (5) Empathy (Van der Wal,et.al,2002) 1.1.5 Deciding the right metrics Many different measurement models could be applied, but none of them can decide exactly what to measure Haward Rohm (2001) suggested three different models to be used in specifying the measures that matter the most: The logic model: This model depend on exploring the relationship among four types of performance measures: inputs (What we use to produce value), processes (How we transform inputs into products and services), outputs (what we produce), and outcomes (what we accomplish) This model reinforces the logic of the strategy map by showing the relationship among the activities that produce good outcomes Process flow: It is applied to build a better scorecard performance system, as flow charting processes helps identify the activities (and measures) that matter most to produce good outcomes Causal analysis: Causal analysis identifies the causes and effects of good performance It could be started with the result (the effect) that the company wants to achieve and then to identify all the causes that contribute to the desired result The causal model is most useful for identifying input and process measures that are leading indicators of future results (Rohm, 2001) Bob Frost (2000) has added the Three-Steps Method to decide what to measure which involves three distinct steps by translating a general performance topic into specific performance indicators: Examine the business strategy to find crucial performance topics (e.g., customer service) TIEU LUAN MOI download : skknchat@gmail.com Determine where and how the company must succeed on each topic (for "customer service" may include: quick access, accurate information, and friendly manners) Consider each Critical Success Factor and define specific performance indicators that will track success on it (for "quick access" factor these might include Telephone wait time and Number of rings to answer) Paul Arvesson (1998) saw that the value of the metrics is in their ability to provide a factual basis for defining: - Strategic feedback to show the present status of the organization from many perspectives for decision makers; - Diagnostic feedback into various processes to guide improvements on a continuous basis; - Trends in performance over time as the metrics are tracked; - Feedback around the measurement methods themselves and metrics should be tracked; - Quantitative inputs to forecasting methods and models for decision support system As a measurement tool and a strategic management system the BSC approach may help in specifying the competitive advantage of the company and the lead objectives that drive to achieve its goals 1.2 Balanced Scorecard Model In the 1980s, many academics and consultants became concerned that too much emphasis was being put on financial and accounting measures of performance Management accounting systems had been perfected to produce detailed cost breakdowns and extensive variance reports but these were seen as not being useful for managing a business because they were too internally focused and were backward looking To overcome these shortcomings various academics and consultants started to consider the concept of balance (Bourne, 2000: p 11) In 1990, Robert Kaplan and Davis Norton developed the Balanced Scorecard to understand how organizations create value in the information age The BSC 10 TIEU LUAN MOI download : skknchat@gmail.com measures the company's performance from four major perspectives: Financial, customer, internal processes, and learning and growth Briefly, Balanced Scorecard provides the knowledge, skills, and systems that the employees will need (Their Learning and Growth) to innovate and build the right strategic capabilities and efficiencies (the Internal Process) that deliver specific value to the market (the customer) which will eventually lead to higher shareholder value (the financial) (Kaplan, 2000) The idea of Kaplan and Norton was that these four perspectives represent a balanced view of any organization and that by creating measures under each of these headings no important area would be missed "It is important to remember that the scorecard itself is just a framework and it does not indicate what the specific measures should be"(Bourne, 2002: p.12) That is a matter for people within the organization to decide, so the set of measures for each organization will be different The Balanced Scorecard is a system in which the procedure of applying it is a critical part of it Some measures may give real picture about the performance of the company If they have been designed by a team of planners without the contribution of the different levels of business units and departments and without using the scorecard as a mean of communication, cascading, and alignment, it would give the same results of any traditional performance measurement model "Much of the success of the scorecard depends on how the measures are agreed, the way they are implemented and how they are acted upon So the process of designing the scorecard is just as important as the scorecard itself" (Bourne, 2002: p 12) Today, The complexity of managing an organization requires that manager is able to view performance in several areas at once The balanced scorecard allows managers to look at the business from four perspectives as it provides answers to the following four questions: - How customers see us? (Customer perspective) 11 TIEU LUAN MOI download : skknchat@gmail.com - What must we excel at? (Internal business perspective) - Can we continue to improve and create value? (Innovation and learning perspective) - How we look to shareholder? (Financial perspective) (Kaplan, 1992) The four-perspective framework of a business unit's Balanced Scorecard describes how the unit creates the shareholder value through enhanced customer relationships driven by excellence in internal processes These processes are continually improved by aligning people, systems and culture Each of these four perspectives is lined in a chain of cause- and- effect relationships When the BSC designed in the highest-level management, it passes it down to the lower levels in order to decompose it to more specific objectives and targets linked to the main scorecard "The four-perspective framework of business unit strategies turns out to extend naturally for developing an enterprise Balanced Scorecard" (Kaplan & Norton, 2006: pp.6-7) In Balanced Scorecard language, vision, mission, and strategy at the corporate level are decomposed into different views, or perspectives, as seen through the eyes of business owners, customers and other stakeholders, managers and process owners, and employees (Figure 1) The owners of the business are represented by the financial perspective; customers and stakeholders (customers are a subset of the larger universe of stakeholders) are represented by the customer perspective; managers and process owners by the Internal Business Processes Perspective; and the employees and infrastructure (Capacity by the Learning and Growth perspective (Rohm, 2002) BSC analysis method is constituted as four perspectives like in Figure 1.1 12 TIEU LUAN MOI download : skknchat@gmail.com Fin an cial p er sp ect iv es Are we meeting the expectations of our Shareholder? I n t er n al Pr ocess Per sp ect iv e Are we doing the right things? And doing things right? Cu st om er Per sp ect iv e Are we delighting ( or at least satisfying) our customers? Lear n in g an d g r ow t h Per sp ect iv e Are we prepared for the future? Figure 1.1: Four perspectives Source (Kaplan and Norton, 1996a) The measures of Balanced Scorecard should be used to realize three purposes: To articulate the strategy of the business To communicate the strategy of the business To help align individual, organizational, and cross-department initiatives to achieve common goal, so, while using BSC as a controlling system it should be used as a communication, informing, and learning system as well The Balanced Scorecard provides executives with a comprehensive framework that WUDQVODWHV D FRPSDQ\¶V YLVLRQ set of performance DQG VWU measures Many companies have adopted mission statements to communicate fundamental values and beliefs to all employees The mission statement addressed core beliefs and identifies target markets and core products The four perspectives of the scorecard permit a balance between short-term and longterm objectives, between outcomes desired and performance drivers of those outcomes, and between hard objectives measures and soften more objective measures While the 13 TIEU LUAN MOI download : skknchat@gmail.com multiplicity of measures on a balanced scorecard may seem confusing, properly constructed scorecards contain a unity of purpose since all the measures are directed toward achieving an integrated strategy (Kaplan 1996a: pp 24-25) The frameworks have increasingly purported to represent not merely a way of measuring the success of an organization but go further in that they offer managers a "road-map" by which they can manage In particular they focus on the way in which a strategic vision can be realized (Evans, 2005) 1.2.1 Financial perspective Despite the important role of the intangible objectives and their effect on the longterm goals, many authors consider the financial objectives as the "end of mind" of company's journey (Niven, 2005: p.68) "Financial performance measures indicate ZKHWKHU D FRPSDQ\¶V VWUDWHJ\ LPSOHPHQ bottom-line improvement" (Kaplan, 1996a: p.25) The objectives and measures in this perspective tell us whether our strategy execution, which is detailed through objectives and measures chosen in the other perspectives, leads to improved bottom-line results or not (Niven, 2006, p.16) It is clear that most of the writers săthe intangible objectives as factors of improving the financial results and raising its indicators, but not something that the company may sacrifice on the account of its return ratio in order to reach its destination The owners of the business are the category of the stakeholder who should be aware of the dimensions of concentrating on the financial results, and be aware of their effect on the other perspectives, since some executives supported by stockholders and different external stakeholders may support the desire of realizing high returns as an odd success indicator "Measures of share price and market valuation are often found on Balanced Scorecard Those working in organizations that rely heavily on innovation and KXPDQFDSLWDOZKRLVQ¶W" PD\GH sire a financial measure that captures the value of the intellectual assts As with all Balanced Scorecard measure, the key is 14 TIEU LUAN MOI download : skknchat@gmail.com alignment to your strategy The measures selected for the financial perspective will help set your course in determining measures for the rest of the scorecard, so ensure they accurately translate the objectives appearing on the Strategy Map The measures should tell every individual story." (Niven 2006: p.147) The measures in Table 1.1 may help the company get started Table 1.1: Commonly Used Financial Measures ƒ Total assets ƒ Profit as a % percentage of sales ƒ Value added per employee ƒ Total cost ƒ Total assets/employee ƒ Profit per employee ƒ Compound growth rate ƒ Credit rating ƒ Profits as a % of total assets ƒ Revenue ƒ Dividends ƒ Debt ƒ Return on net assets ƒ Revenue from new products ƒ Market value ƒ Debt to equity ƒ Return on total assets ƒ Revenue per employee ƒ Share price ƒ Times interest earned ƒ Revenues/total assets ƒ Return on equity(ROE) ƒ Shareholder mix ƒ Days in payable ƒ Gross margin ƒ Economic, value added (EVA) ƒ Shareholder loyalty ƒ Days in inventory ƒ Net income ƒ Market value added (MVA) ƒ Cash flow ƒ Inventory turnover ratio (Niven, 2006: p 148) When the financial perspectives measurements revised in profit- pursuing organizations, they give a real and clear definition to the main desired goals In times when the competitors may make advantage of their full capacity resources, 15 TIEU LUAN MOI download : skknchat@gmail.com and realize progress in the market, in these touch times of business, many might seem like everything, but the financial perspective gives us the following reminder: - The main goal of business is wealth creation, as measured by series of financial targets achieved - The purpose of financial targets is to galvanize the operating units to manage performance and gain competencies for future success - It is one of many other perspectives but the one that funds the mission and purpose of the organization - It is a lagging indicator of performance because it records success after the fact (Nair, 2004: p 22) Developing the BSC to be a strategy-focus management system makes it concentrate on the future, something may look as contradicted with the nature of the financial measures Should senior managers even look at the business from a financial perspective? Should they pay attention to short-term financial measures like quarterly sales and operating income? Many have criticized financial measures because of their well-documented inadequacies, their backward-looking focus, and their inability to reflect contemporary value-creating actions "Shareholder Value Analysis (SVA), which forecasts future cash flows and discounts them back to a rough estimate of current value, is an attempt to make financial analysis more forward-looking But SVA still based on cash flow rather than on the activities and processes that drive cash flow (Kaplan and Norton, 1992) Some critics go much further in their indictment of financial measures They argue that the team of competition has changed and that traditional financial measures GRQ¶WLPSURYHFXVWRPHUVDWLVIDFWLRQT y, cycle time, and employee motivation In their view financial performance is the result of operational actions, and financial success should be the logical consequence of doing the fundamentals well (Kaplan and Norton, 1992) 16 TIEU LUAN MOI download : skknchat@gmail.com Periodic financial statements remind executives that improved quality, response time, productivity, or new products benefit the company only when they are translated into improved sales and market share, reduced operating expenses, or higher asset turnover (Kaplan and Norton, 1992) 1.2.2 Customer perspective Answering questions like: to whom the firm introducing products and services? Or what is the customers proposed value? And how it could be improved? What chances available to increase market share? And which methods and techniques most effective to attain the highest customers value by the lowest cost? These questions and many more ones could be asked from the very beginning of establishing a business It is all about the customer, the final user and the strict evaluator who can GHFLGHWKHILUP¶VVXFFHVV In the customer perspective of the balanced scorecard, managers identify the customer and market segments in which the business unit will compete and the measures of the business unit's performance in these targeted segments "This perspective typically includes several core or generic measures of the successful outcomes from a well-formulated and ±implemented strategy The core outcome measures include customer satisfaction, customer retention, new customer acquisition, customer profitability, and market and account share in targeted segments But the customer perspective should also include specific measures of the value propositions that the company will deliver to customer in targeted market segments "(Kaplan & Norton, 1996 a, p 26) The Balanced Scorecard demands that managers translate their general mission statement on customer service into specific measures that reflect the factors that really matter to customers Kaplan and Norton (1992) saw that customer's concern tends to fall into four categories: time, quality, performance and service, and cost 17 TIEU LUAN MOI download : skknchat@gmail.com ... organization (Balanced Scorecard Institute, 2006) I believe that BSC will make an optimistic change in Maritime Bank, the thesis ³ Performance Measurement by applying Balanced Scorecard ? ?The case of 0DULWLPH%DQN¶V%UDQFK... destination The owners of the business are the category of the stakeholder who should be aware of the dimensions of concentrating on the financial results, and be aware of their effect on the other... about the performance of the company If they have been designed by a team of planners without the contribution of the different levels of business units and departments and without using the scorecard