(LUẬN VĂN THẠC SĨ) Applying the balanced scorecard (BSC) to develop key performance indicators (KPIs) at TTT corporation

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH - PHAN THỊ HỒNG THI APPLYING THE BALANCED SCORECARD (BSC) TO DEVELOP KEY PERFORMANCE INDICATORS (KPIS) AT TTT CORPORATION ỨNG DỤNG MƠ HÌNH THẺ ĐIỂM CÂN BẰNG ĐỂ XÂY DỰNG HỆ THỐNG CHỈ SỐ CHÍNH ĐO LƯỜNG KẾT QUẢ CÔNG VIỆC TẠI CÔNG TY CỔ PHẦN XÂY DỰNG VÀ THƯƠNG MẠI TTT LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH HÀ NỘI - 2019 TIEU LUAN MOI download : skknchat@gmail.com ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH - PHAN THỊ HỒNG THI APPLYING THE BALANCED SCORECARD (BSC) TO DEVELOP KEY PERFORMANCE INDICATORS (KPIS) AT TTT CORPORATION ỨNG DỤNG MƠ HÌNH THẺ ĐIỂM CÂN BẰNG ĐỂ XÂY DỰNG HỆ THỐNG CHỈ SỐ CHÍNH ĐO LƯỜNG KẾT QUẢ CÔNG VIỆC TẠI CÔNG TY CỔ PHẦN XÂY DỰNG VÀ THƯƠNG MẠI TTT Chuyên ngành: Quản trị kinh doanh Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: TS ĐỖ XUÂN TRƯỜNG HÀ NỘI - 2019 TIEU LUAN MOI download : skknchat@gmail.com DECLARATION The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article The other’s research result and documentation (extraction, table, figure, formula and other document) used in the thesis are cited properly and the permission (if required) is given The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration Hanoi, March 15, 2018 TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENT During my study and research at Hanoi School of Business and Management (HSB) of Vietnam National University, Hanoi (VNU), I have been paid much attention and many instructions from teachers, much encouragement from my family and friends To date, I have completed my master’s thesis to finish my process I would like to send my sincere thanks to the School Board of VNU in general, teachers at HSB in particular for their support to facilitate me in learning, accumulating and improving my knowledge I also kindly send the most sincere and profound thanks to my instructor, PhD Do Xuan Truong for his dedication and enthusiasm during the time guiding me to complete my thesis In addition, I would like to express my grateful gratitude to the Board of Directors and my colleges at TTT Corporation for their help in facilitating me to complete this thesis Finally, let me send my respectful words to my family and friends for their support during my study Hanoi, March 15, 2018 Phan Thi Hong Thi TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS INTRODUCTION .2 The necessity of the study 2 Objectives of the study Subjects and scope of the study .8 Methodology Thesis structure Chapter 1: Theoretical background on the balanced scorecard model and its application into the establishment of a measurement system of key performance indicators 10 1.1 Theoretical background on the balanced scorecard model 10 1.2 Barriers in making and putting into execution to business strategies .10 1.2.1 Introduction of the Balanced Scorecard model (BSC) 12 1.2.2 Advantages of the BSC model 15 1.3 Definition and roles of KPIs .16 1.2.1 Definition and classification of KPIs 16 1.2.2 Benefits of developing KPIs in the organization 20 1.4 Study overview of the BSC application for the development of KPIs 21 Chapter 2: Current situation of Key Performance Indicators (KPIs) at TTT Corporation during 2015- 2017 35 2.1 General Information of TTT Corporation 35 2.1.1 Overview of TTT Corporation .35 2.1.2 Analysis of the business strategy applied by TTT Corporation 45 2.1.3 Assessment on the current business strategy of TTT Corporation 57 2.2 The existing situation of key performance indicators at TTT Corporation 59 2.2.1 Survey of conditions to apply BSC and KPI .59 2.2.2 Assessment on deployment possibility of BSC and KPI at the Corporation 60 TIEU LUAN MOI download : skknchat@gmail.com 2.2.3 Factors impacting to deployment of BSC and KPI 65 Chapter 3: Proposals of key performance indicators at TTT Corporation during 2018-2020 .66 3.1 Key performance indicators at TTT Corporation during 2018-2020 .66 3.1.1 Development objectives of TTT Corporation during 2018-2020 66 3.1.2 Apply BSC and KPI to evaluate work performance at TTT Corporation 67 3.2 Some solutions to propose BSC/KPIs for staff performance assessment at TTT Corporation 86 CONCLUSION 89 REFERENCES 90 ANNEX I: STAFF SURVEY 92 ANNEX II: LEADER SURVEY 94 ANNEX 3: ASSESSMENT REGULATIONS ON WORK PERFORMANCE 96 BASED ON BSC/KPIS 96 TIEU LUAN MOI download : skknchat@gmail.com LIST OF SYMBOLS AND ABBREVIATIONS BSC Balanced Scorecard KPI Key Performance Indicator BSC/KPI BSC and KPI KRI Key Result Indicator PI Performance Indicator TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Page Table 1-1: Table 1-2: Table 2-1: Table 2-2: Table 2-3: Table 2-4: Table 2-5: Table 2-6: Table 2-7: Table 2-8: Table 2-9: Table 2-10: Construction and measurement procedure of KPIs by applying the BSC Basic conditions to apply the BSC into successfully establishing KPIs The income statement of TTT Corporation at the period of 2013 – 2017 Revenue and profit of TTT Corporation at the period of 2013-2017 Statistical table of human resources at TTT Corporation Personnel structure based on working age at TTT Corporation Comparison table of Marketing – Management capacity between TTT Corporation and its rivals Comparison table of design capacity between TTT Corporation and its rivals Production capacity of TTT Corporation compared with its rivals SWOT model of TTT Corporation Summary and survey of personnel’s opinions on application of BSC/KPIs Summary and survey of leaders’ opinions on application of BSC/KPIs 17 19 38 38 39 39 47 48 49 50 56 57 Table 3-1: BSC/KPI at company level 70 Table 3-2: BSC/KPI at department level 72 Table 3-3: KPIs for staff 77 Table 3-4: Assessment of capabilities and work performance based on BSC/KPI 79 TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Page Figure 1.1: The model of Balanced Scorecard (Kaplan & Norton) 10 Figure 2.1: The organization chart of TTT Corporation 32 Figure 2.2: The matrix combining activities of TTT Corporation 52 Figure 3.1: The procedure applying BSC/KPI into an organization 64 Figure 3.2: The strategic map of TTT Corporation 69 TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT This title is designed to evaluate the current work performance and apply the Balanced Scorecard (BSC) model to the practical measurement system of TTT Corporation at the period of 2014-2017 The BSC model consists of four aspects like as the original published by Kaplan & Norton in 1996 and integrated with some others The study method used in this thesis is collecting, synthesizing and analyzing data to seek the consensus when developing KPIs The research results have formed the BSC system including the strategic map of TTT Corporation during 2014-2017 The BSC at the corporate level with 22 objectives and KPIs measures strategic objectives of the Corporation The BSC at departments is allocated according to four aspects of the BSC model The author has proposed the application of research results for TTT Corporation The research has also shown the limitations of the title and the next study direction The thesis structure consists of the introduction, three main chapters and the conclusion The introduction presents the reason why the study has been made, thereby identifying the study objectives, limiting the scope, objects and method of the study and the practical meaning of the title Chapter presents the basic theory related to study problem solving, including the BSC theory applied in work performance measurement, strategic management and KPI theory Chapter introduces TTT Corporation and evaluates the current performance measurement system Chapter presents the steps and results of building up the BSC model at TTT Corporation to form a strategic map, KPIs and the BSC at the corporate, department and staff level, proposing the application of research results The conclusion generally evaluates the execution progress, the results while pointing out the study limitations and the next direction as recommended TIEU LUAN MOI download : skknchat@gmail.com After the assessment, the KPI project team coordinated with the Human Resources & Administration department to summarize and report the results to the Board of Directors for approval, officially announce the units and save documents 3.2 Some solutions to propose BSC/KPIs for staff performance assessment at TTT Corporation In fact, the application of the balanced scorecard and key performance indicators not just stop at evaluating the work performance of employees The balanced scorecard development process gives TTT Corporation a new roadmap to reach the vision of the enterprise, reorienting the entire enterprise from which it implements the key transformation process from strategy to action However, for the implementation of BSC/KPIs to achieve high efficiency, the Board of Directors and employees should pay attention to the implementation of the followings:  Commitment and determination of senior leaders and support of employees - Any system should have the testing and adjustment process as appropriate, which is especially important when it is a system that changes the management philosophy, changing the operation manner of an organization which employees are centered Building up a system is difficult; developing to fit the organizational identity is a process Developing the balanced scorecard in combination with performance indicators is a long-term process that needs to be done step by step, persistently weekly, monthly, annually in business process Thus, it requires strong determination not only from senior leaders but also from all employees in the organization - The commitment of senior leaders is that, during the project implementation, they have to spend time once a week to provide comments on indicators; ready to answer KPI questions; visiting organizations that successfully implemented the BSC/KPIs; Support for database development and reporting systems In addition, the company needs to carry out training, internal communication and dissemination to its employees about the benefits of the BSC/KPI, developing the determination for employees and managers at all 86 TIEU LUAN MOI download : skknchat@gmail.com levels to ensure assessment to be made continuously  Establish and update strategic issues - Establishing and updating strategic issues are a top-down guideline for the person in charge of the company's operations TTT Corporation should link its strategies with the ones of functional units and departments Objectives of the Corporation are linked simultaneously to the goals of functional units in the development of long-term plans and the balanced scorecard However, in the early stage of implementation, TTT Corporation should only focus on core strategies, not too many objectives and criteria that can cause resource disruption and ineffectiveness  Complete BSC at the Corporation and job description according to BSC - BSC and KPIs of the Corporation and all levels are built in a short time so there is no time to test the application to assess the feasibility and correctness Therefore, the Board of Management should consider adjusting and adding the BSC annually Adjustment and addition needs to include strategic considerations and key success factors for the organization - Based on changing the BSC at the corporate level, the functions and duties of the units, departments at all levels adjust the BSC as appropriate This is an important bridge to deploy the Corporation strategy to employees The KPI team is responsible for guiding, reviewing, and monitoring the development and application of the balanced scorecard to the Corporation - In addition, BSC and KPIs of employees are built on the BSC and KPIs of the direct manager and job description so that when their job changes, it is needed to be updated promptly and fully in the job description to have the basis for building up BSC and KPIs properly For manual workforce, due to some constraints in writing ability, direct managers will discuss and guide them to complete the development of their KPIs  Link objectives with private rewards - Although reward forms are not a prerequisite for applying BSC/KPIs to the enterprise, it is a necessary condition for the successful application of the 87 TIEU LUAN MOI download : skknchat@gmail.com BSC/KPIs to the evaluation process of work performance Therefore, the Board of Management at TTT Corporation should develop a suitable and encouraging reward policy In the process of applying assessment regulations, senior leaders should review the improvement of the policy, including the policy improvement, using the assessment results: salary and bonus payment based on KPIs, appointment based on the capacity and evaluation results of KPI, etc  Develop a statistical database and software for report - In fact, TTT Corporation has still faced many difficulties in management and database development, so it will be more difficult to develop and apply the BSC/KPIs To monitor and seek for information for the development and evaluation of the BSC and KPIs, the Corporation should focus on collecting information and developing software to make it easier for people to access information as necessary, helping to simplify data collection, improve the database system and support to build up the BSC for employee assessment 88 TIEU LUAN MOI download : skknchat@gmail.com CONCLUSION Based on theoretical study on the BSC / KPIs and conditions to apply the BSC/KPIs to TTT Corporation, this thesis has developed an employee assessment process based on the BSC/KPIs and application deployment according to sequential steps Main steps include developing KPIs at the corporate, department and personal level, making and evaluating reports The main results achieved when applying the staff evaluation process based on the BSC and KPIs were establishing the BSC and KPIs at the corporate, department and personal level These results not only applied to departments at TTT Corporation, but also to all branches and agents of the Corporation In order to implement the application of BSC and KPIs continuously and efficiently at TTT Corporation, this thesis also made some recommendations based on the current situation of the Corporation to improve the application process, using the BSC/KPIs These recommendations aimed to promote favorable conditions such as the strong commitment of leaders; Overcoming limitations such as incomplete databases and statistics, inadequacies in the communication process of strategic linkages As expected in 2018, TTT Corporation will officially apply BSC and KPIs to the staff assessment process for all departments and subordinate units With the processes and solutions proposed in this thesis, I believe that the Corporation will successfully apply BSC/KPIs to their staff assessment, making contribution to improved work efficiency and successful implementation of the Corporation objectives, turning the strategy into action 89 TIEU LUAN MOI download : skknchat@gmail.com REFERENCES List of Vietnamese references - The income statement during 2013-2017 of TTT Corporation - The financial statement during 2013-2017 of TTT Corporation - Bui Thi Thanh, 2011 Apply the Balanced Scorecard (BSC) and Key Performance Indicators (KPI) to staff performance assessment Economic Development Journal 172, NEU Publishing House - Kaplan Robert S & Norton David P, 2003 Strategy Maps Translation from English Translators: Phan Thi Cong Minh and Vu Minh Tu, 2011 Ho Chi Minh: Youth Publishing House - Kaplan Robert S & Norton David P 1996 The Balanced Scorecard: Making the strategy into action Translation from English Translators: Le Dinh Chinh and Trinh Thanh Thuy, 2011 Ho Chi Minh: Youth Publishing House - Prof Le Kieu, Ms Luu Truong Van and Ms Le Minh Khanh, Construction Economics Journal, No.1/2007, Applying the Balanced Scorecard (BSC) to evaluate the business strategy at Works Department of Phu My Hung JointVenture - Bui Thi Thanh, 2010, Applying the Balanced Scorecard (BSC) and Key Performance Indicators (KPI) to staff assessment in Liskin Corporation, Doctoral Thesis - Nguyen Van Minh, 2014, Applying the Balanced Scorecard (BSC) and KPIs to Mai Linh Logistics., JSC, Doctoral Thesis - Tran Kim Dung, 2015, Management of Human Resources 9th edition Ho Chi Minh City, Ho Chi Minh Economics Publishing House - www.Ocd.vn, 05/06/2015, KPI and the Balanced Scorecard (BSC) – Useful management tools of enterprises - www.kpionline.vn, Knowledge about KPI & the Balanced Scorecard, 15/06/2015, Applying the Balanced Scorecard (BSC): Improve management efficiency at enterprises 90 TIEU LUAN MOI download : skknchat@gmail.com - www.ihcm.vn, 04/2018, BSC and KPIs – Perfect measurement tools in corporate performance management List of English references - Ing Iveta Gabcanova, 2012, “Balanced Scorecard as a tool for human resources management in financial organizations”, Doctoral Thesis, Tomas Bata University in Zelin - Andhyaguna Adhiprasangga, Anindya Prawita Sari, Talkah Widya Putra, Prof Dermawan Wibisono, Asia Pacific Journal of Advanced Business and Social Studies, Volume 2, Issue 2, 2016, “Develop Balanced Scorecard from KPI in construction companies (Case-study: State-own enterprises)”, Institute Technology of Bandung, Bandung, West Java, Indonesia - Kaplan, R.S et al, 2012 Management Accounting - Information for Decision and Strategy Execution Sixth Edition New Jersey: Prentice Hall - Robert S.Kaplan & David P.Norton, January - February, 1996 - Harvard Business Review - Vu Ngoc Mai, 11/2016 “Is the Balanced Scorecard useful in the competitive industry?” Bachelor Thesis, Centria University of Applied Sciences - Nattarinee Kopecka, AccountingACFA 16th Prague, Annual Conference 29/05/2015, “The on Finance Balanced and Scorecard Implementation, Integrated Approach and the Quality of its Measures”, University of Economics, Prague, Department of Management Accounting 91 TIEU LUAN MOI download : skknchat@gmail.com ANNEX I: STAFF SURVEY Conditions to apply the BSC and KPIs to assess staff work performance at TTT Corporation Dear Sir/Madam, To prepare my Master's thesis with the title "Applying the Balanced Scorecard (BSC) to develop KPIs at TTT Corporation" to aim at improving the assessment on our work performance to create more motivation, and making contribution to our general development goals, we look forward to receiving your positive engagement The results of this survey are for the sole purpose of my thesis, not for the evaluation or implementation of other policies, so please provide true and accurate information Please check “X” into the box in corresponding with your selection In which: Completely disagree Disagree Normal Agree Completely agree I Survey opinions No Content I had a clear job description My job had specific standards (requirements on knowledge, skills, experience, etc) My objectives/criteria in work were assigned clearly I participated in building objectives for my job I participated in building objectives for my department/workshop I clearly understood objectives of the Corporation I clearly understood objectives of the department I have been working for Based on objectives of my department and job description to selfplan my goals 92 TIEU LUAN MOI download : skknchat@gmail.com My direct manager actively supported me in planning my job objectives 10 I have enough rights to my job 11 I know what to to perfect my goals 12 In general, job assessment results are now fair 13 14 At present, job assessment is based on clear objectives and criteria My assessment criteria/objectives are quantitative, computable and measurable 15 16 Now, before assessment of leaders, I self-evaluate my job I find difficult in collecting information and data to self-evaluate my job 17 18 19 I trust in assessment of leaders on me (accuracy and fair) My assessment results are always responded and explained properly by the manager Staff assessment results now attach with their rights and obligations 20 I have been trained in BSC - Balanced Scoredcard 21 I have been trained in KPI - Key Performance Indicators 22 II I agree to apply BSC/KPIs to evaluate work performance results of staff Personal Information Gender: Full name of employees Male/Female (optional) Current position ./ /2018 Survey date: Thank you! 93 TIEU LUAN MOI download : skknchat@gmail.com ANNEX II: LEADER SURVEY Conditions to apply the BSC and KPIs to assess staff work performance at TTT Corporation Dear Sir/Madam, To prepare my Master's thesis with the title “Applying the Balanced Scorecard (BSC) to develop KPIs at TTT Corporation” to aim at improving the assessment on our work performance to create more motivation, and making contribution to our general development goals, we look forward to receiving your positive engagement The results of this survey are for the sole purpose of my thesis, not for the evaluation or implementation of other policies, so please provide true and accurate information Please check “X” into the box in corresponding with your selection In which: Completely disagree Disagree Normal Agree Completely agree I Survey opinions No Content The Corporation has a clear mission, vision and strategy Current objectives at departments are linked to the strategic goal of the Corporation The Corporation has determined key successful factors The Board of Directors has found the link between short-term and long-term objectives of the Corporation Senior leaders are provided proper reference sources on BSC and KPI You are ready to spend your time participating in BSC/KPI workshops You have selected potential candidates for the team deploying BSC/KPIs You are ready to empower your staff for them to their job 94 TIEU LUAN MOI download : skknchat@gmail.com The Board of Management has fully understood about the connection between performance measurement, report and improvement 10 The Board of Management assigns specific tasks to departments 11 12 13 14 15 Current KPIs can measure strategic objectives of the Corporation Criteria for staff assessment are now specific, clear and suitable with title groups At present, employees at the Corporation believe in assessment of their managers on them (accuracy and fair) Staff assessment results are responded and explained properly by managers Leaders find difficult in collecting data and evidence to evaluate their staff 16 The Corporation has established a full database of KPIs 17 18 19 Staff assessment results now attach with their responsibilities and rights You support to apply BSC/KPIs to evaluate work performance results of your staff You are ready to support internal communication on applying BSC/KPIS 20 You are ready to use measurements to improve your work 21 22 II You support the outsourcing of advisors to consult and deploy BSC/KPIs You believe that the application of BSC/KPIs at TTT Corporation will be successful Personal Information Gender: Full name of leaders Male/Female (optional) Current position ./ /2018 Survey date: Thank you! 95 TIEU LUAN MOI download : skknchat@gmail.com ANNEX 3: ASSESSMENT REGULATIONS ON WORK PERFORMANCE BASED ON BSC/KPIS (No: I Date: ) General regulations Objectives Staff evaluation is a systematic activity that assesses the work performance and capabilities of employees, including work results, work methods, job quality and skills Through the assessment, leaders of the Corporation will have information about the capacity and performance of their employees The information from the evaluation results will be used for human resource planning, payroll, bonus and staff training Proper evaluation and appropriate incentive policies will create a fair working environment, stimulating the contribution of employees to improve organizational performance The assessment at TTT Corporation has the following objectives: - Encourage, recognize results and contribution of individuals and departments to the Corporation success Provide information for the planning and implementation, adjusting strategies of the Corporation and departments - Strengthen the exchange of management information and feedbacks between managers and employees; build up a professional and friendly working environment - Make salary and bonus payment and arrange jobs in accordance with the capacity and contribution of employees - Planning, training and developing employees in line with human resources strategy of the Corporation Subjects for assessment Subjects for assessment include all managers and employees in the Corporation who have labor contracts Particularly, the General Director of the Corporation shall be considered and evaluated by the Board of Management on the basis of evaluating the annual work performance This regulation is applied in the departments and divisions at TTT Corporation Other subordinates of the Corporation will be based on this regulation and their strategic objectives to develop a proper assessment mechanism for them to apply the assessment 96 TIEU LUAN MOI download : skknchat@gmail.com on BSC/KPIs not later than 2018 Time for assessment The assessment is made once a quarter and summarized annually The unexpected assessment or changing evaluation frequency will be decided by the Board of Directors and announced in writing II Assessment procedures Step 1: Identify key objectives in work performance assessment In order to evaluate, measure the level of work performance according to KPIs, the enterprise needs to deliver goals in work instead of just assigning the tasks A task can have many different objectives, corresponding to different ways of measurement From the current strategic goals of the company, determine the next ones From the company’s goals and tasks of departments, determine their objectives From the objectives of functional departments, specify personal goals Depending on the specific job, different criteria will be set up for each position Step 2: Classify the satisfaction level of goals in work performance Each goal should specify criteria, eg: employee satisfaction will increase by 10%, revenue will increase by 20%, cost / revenue will decrease by 5%, etc, it can be measured and evaluated specific results to avoid assigining general objectives such as the slogan: improve machine productivity, ensure living standards for employees, or guarantee a stable source of goods Each goal is divided into five levels: excellence, outstanding, pass, fail, and too low on demand Note: The required level (3 points) is completing 100% objectives At each level, specific illustrations are needed for employees Step 3: Evaluate the importance (proportion) of each objective group for the work performance of employees Each staff can be very well appreciated for some indicators but underestimated for some others Various objectives have different importance for the work performance, which should be reflected in the proportion of each goal Step 4: General assessment on the work performance of employees An employee can be rated excellent in this aspect but good in another General assessment on the work performance of employees will be based on the average score of requirements, taking into account the proportion of those requirements using the formula: 97 TIEU LUAN MOI download : skknchat@gmail.com In which: • Gtb: The final score, for the work performance of employees • n: Number of objectives in evaluating the work performance of emplpyees • Ki: The proportion of the objective i • Gi: The score for evaluating the work performance of employees based on the requirement i Gi is defined on the basis of comparing the work performance of employees with the level of classification – the scale – in step The final assessment result of the work performance is based on the Gtb score, or the percentage of employees completing objectives as follows:  Excellent: If Gtb> or 5% - 10% of employees, have the highest average score  Outstanding: If 3.1