The necessity of the study
The Balanced Scorecard is an organizational performance measurement model developed by Norton and Kaplan in 1990 The nature of which is a system transforming the vision and strategy of an organization into specific objectives and measurements by establishing a measurement system of work performance in an organization based on four aspects including finance, customer, internal business, learning and development The selected measurement system becomes a tool for managers to communicate with employees and stakeholders about the orientation of results and work performance that help the organization achieve its strategic goals In addition, the system also helps to direct the behavior of all individuals and departments within the organization towards the common goal Thus, through the application of the balanced scorecard model, it is possible to develop a measurement system of key performance indicators, which is the basis for the management and evaluation process of employees’ performance In fact, according to Bain & Company's survey in 2014, the balanced scorecard model has been applied by more than half of enterprises in the list of 1000 highest revenue US companies (Fortune 1000) since 1996
In fact, after 30 years of renovation, reform and integration, the Vietnamese economy has won many great achievements, per capita income in Vietnam has risen more than 5 times from 438 USD (1986) to 2,200 USD (2016) and expected to reach 3,000 USD by 2020 Along with improved living standards,the demand on houses and resorts has increased This not only expands great market opportunities but also poses a competitive challenge among companies offering architectural, interior and construction design consultancy products Therefore, every enterprise must establish a suitable business strategy to make competitive advantages in the market TTT Corporation founded in 1992 is one of the leading companies running in the fields of: (i) Design - Construction - Interior decoration;
(ii) manufacture and supply of furniture; (iii) Execution of "Turnkey" projects on a variety of projects such as hotels, resorts, high-end apartments and offices 2016 was considered as an important turning point of TTT Corporation with fundamental changes in business strategies The new context requires the management board of the Corporation to clarify new vision and strategies as targets and a system of key performance indicators for each department in the organization
In terms of both theoretical and practical aspects, therefore, it is pointed out that the application of the balanced scorecard model aiming to materialize new vision and strategies into goals and a system of key performance indicators at TTT Corporation is an urgent issue today Thus, with my knowledge and learning experience in the Corporation, I choose the topic "Application of the balanced scorecard model to establish a measurement system of key performance indicators at TTT Corporation"as my master thesis
Overview of both global and domestic study on the Balanced Score Card (BSC)
The Balanced Scorecard (BSC) - is a modern strategic measurement and planning system, first introduced by R.Kaplan and D.Norton of Harvard Business School in
1992 It always receives the attention and research of managers and scientists at home and abroad Scorecard balances more than half of the Fortune 1000 companies' applications since 1996 and a balanced Scorecard is rated by Harvard Business Review as one of the 75 most influential ideas of the 20th century
Vietnam Report's observation in January 2009, published impressive figures related to 500 largest enterprises in Vietnam in the process of building a business development strategy That is 7% applied and 36% are planning to apply the Balanced Scorecard (BSC) These are good news because it shows the initiative in standardizing and modernizing basically the process of corporate governance and management of Vietnamese enterprises The fact that enterprises access modern management science methods does not stop on book theory but through applications in organizational and executive practices, Vietnamese enterprises are increasingly integrated and sufficient Competitiveness with global market
In the world, there have been many researches on applying card balance to balance BSC in strategic management One of the three basic functions of BSC is application in strategic management Since forming the concept of BSC model, there have been many important research projects that make the application of The
BSC in strategic management more effective These studies are mostly based on the viewpoint of that: The implementation of the strategy is very important
However, in practice, the leaders are too focused on developing strategies that lack attention to implementation, leading to unproductive and ineffective strategies To solve this problem, researchers began to find out what factors influence BSC application in strategic management at the enterprise? To what extent can BSC solve problems in strategic management? How can BSC support the integration of organization and control mechanisms? Find out how an operational management system in an organization is used is also an important aspect of research and this will be linked to important factors that are thought to be relevant successful strategic management In addition, the question of whether or not to use BSC will achieve the level of coordination and integration of necessary elements for successful strategic management or the support of some other support tools however, BSC cannot help strategic management miraculously organizations still offer a roadmap from the current starting point to the point that the organization wants to be in the future, BSC can provide means for the team officials can go to that future
The BSC began to enter Vietnam in the 2000s and was quickly known and mentioned in many workshops on deploying applications of business administration models and some articles introducing it After that, a number of foreign and domestic consulting companies such as Deloit and MCG began to see the potential of this model and started investment activities to implement training and consulting activities
- In practical terms, some companies in Vietnam have started pioneering in applying this model such as FPT Corporation, Kinh Do Company, Phu Thai Group, Garni but the results are achieved not high, not as expected initially
- In study terms, according to the author's research, it is still quite limited The research results only stop at the research level in a narrow range Studies mostly stop at the scope of a company, some essays, dissertations and mostly scientific papers Some of the following research products include:
Doctoral thesis in Business & Management by Tran Quoc Viet (2012): In May
2012, Doctor Tran Quoc Viet successfully defended his doctoral thesis with the topic "Factors affecting the level accept the balanced score card model in strategic management in Vietnamese enterprises "at the National Economics University In the thesis, the author used qualitative research methods through in-depth interviews and research Quantitative research by collecting survey questionnaires
206 surveyed Vietnamese enterprises on the factors affecting the acceptance of Balanced Scorecard (BSC) in strategic management , the thesis has discovered a new scale for the dependent variable "BSC acceptance level in management." strategy ”: measured by three items according to 3 levels of BSC use in enterprises: (1) application of BSC's ideas; (2) wide application of BSC functions, and (3) application Using information technology to improve the efficiency of using BSC, this scale is more suitable for Vietnamese enterprises than the scale of previous studies
In addition, the study has confirmed six factors affecting the level of acceptance of BSC in strategic management at enterprises in the context of the transition economy in Vietnam, namely: (1) the level participation of senior leaders; (2) concentration level; (3) the power of the finance department; (4) standardization;
(5) internal communications and (6) market dynamics - products The impact level of each factor is different and has been determined specifically In which, there are
2 factors that have negative impact (opposite direction): centralization and systematization, the remaining 4 factors positively affect (positive direction) This result has opened up a research direction on BSC in countries that have just started applications
Subjects and scope of the study
Regarding subjects of the study, my thesis focuses on the application of the balanced scorecard model in the establishment of a measurement system of key performance indicators at TTT Corporation
Survey participants are the Board of Directors, Heads of Departments at TTT Corporation
In terms of scope of the study, my thesis focuses on researching in space and time range as follows:
- Space: In my thesis, I focus on the system of key performance indicators at TTT Corporation
- Time: My thesis focuses on collecting, researching and using data related to business strategies, objectives and the system of key performance indicators at TTT Corporation in the last 3 years, from 2015 to 2017 The KPI system is built to the level of departments at the Corporation The Corporation’s internal data used for analysis is mainly taken from data within 2015 to 2017.
Methodology
Data collection and summary method: For research purposes, I determine to collect primary and secondary data sources In which, secondary data is collected from internal and external sources of TTT Corporation such as company strategies, financial statements, key performance indicators, etc Primary data is collected through the sociological survey with managers of TTT Corporation The sample size is expected to be 40 samples (equivalent to 40 employees at the Corporation) The sociological survey is conducted through questionnaires with the purpose of assessment: (1) current basic conditions for the application of BSC at TTT Corporation (the availability of human resources, the standardization level of working procedures, and the completeness of the database system); (2) assess the work completion level under current KPIs
Data analysis method: Based on primary and secondary collected data, I will use the statistical and summary method to process and analyze.
Thesis structure
The expected thesis structure is as follows:
The introduction includes: the necessity of the study, objectives, subjects, the scope and the method of the study, etc
In addition, the thesis consists of the list of tables, abbreviations and figures
II Content Chapter 1: Theoretical basis on the BSC model and the application in developing Key Performance Indicators (KPIs)
1.1 Theoretical basis on the BSC model - Clarify basic issues on the BSC
Performance Indicators (KPIs) - Clarify basic issues on KPIs
1.3 Apply the BSC model in developing KPIs
- Clarify how to apply the BSC model in developing KPIs
Chapter 2: The current situation of KPIs at TTT Corporation during 2015- 2017
- The business strategies that TTT Corporation has applied
- Evaluate changes in the business strategies at TTT Corporation
2.2 The current situation at TTT
- General assessment on KPIs at TTT Corporation
- Summarize and analyze comments and recommendations of employees at TTT Corporation (through the survey) on props and cons of KPIs at TTT Corporation
Chapter 3: Propose KPIs at TTT Corporation during 2018-2020
3.1 KPIs at TTT Corporation during 2018-2020 3.2 Propose deployment schedule of KPIs into the practice
Theoretical background on the balanced scorecard model and its
Theoretical background on the balanced scorecard model
Theoretically, making and carrying out strategies plays an important role in the existence and development of businesses Through the strategy, it will help administrators to use and allocate existing resources optimally and efficiently coordinate functions of the organization to achieve common goals as required
Besides, analyzing and making business strategies not only helps enterprises clearly recognize their strengths and weaknesses, but also identify the opportunities and challenges happening in the present and future Since then, enterprises can make full use of their strengths to seize these opportunities, prevent and minimize risks, helping them have competitive strength to win in the market
However, the implementation of the company's strategies is always difficult In fact, according to a study by Aberdeen Research (The Balanced Scorecard Collaborative 1999/2001), there are nine out of ten companies failed to implement their strategies, in which, four barriers pointed out by this study, leading to such failure in the strategy execution include: (1) the vision barrier that only about 5% employees know and understand the company's strategies; (2) the resource barrier that 60% organizations do not connect their budget to the corporate strategies; (3) The managerial barrier that nearly 85% executives taking less than one hour per month to discuss about their company's strategies; and (4) finally, the human barrier that only about 25% managers giving out their ideas matching with strategies
Similarly, according to Robert S Kaplan and David P Norton ("Using the Balanced Scorecard as a Strategic Management System" January-February, 1996), there are four barriers leading to the effective implementation of the company's strategies, particularly:
Barriers in making and putting into execution to business strategies
Theoretically, making and carrying out strategies plays an important role in the existence and development of businesses Through the strategy, it will help administrators to use and allocate existing resources optimally and efficiently coordinate functions of the organization to achieve common goals as required
Besides, analyzing and making business strategies not only helps enterprises clearly recognize their strengths and weaknesses, but also identify the opportunities and challenges happening in the present and future Since then, enterprises can make full use of their strengths to seize these opportunities, prevent and minimize risks, helping them have competitive strength to win in the market
However, the implementation of the company's strategies is always difficult In fact, according to a study by Aberdeen Research (The Balanced Scorecard Collaborative 1999/2001), there are nine out of ten companies failed to implement their strategies, in which, four barriers pointed out by this study, leading to such failure in the strategy execution include: (1) the vision barrier that only about 5% employees know and understand the company's strategies; (2) the resource barrier that 60% organizations do not connect their budget to the corporate strategies; (3) The managerial barrier that nearly 85% executives taking less than one hour per month to discuss about their company's strategies; and (4) finally, the human barrier that only about 25% managers giving out their ideas matching with strategies
Similarly, according to Robert S Kaplan and David P Norton ("Using the Balanced Scorecard as a Strategic Management System" January-February, 1996), there are four barriers leading to the effective implementation of the company's strategies, particularly:
First, the vision barrier and the strategy can not be transformed into an action
Indeed, one of the important roles of the strategy is to help businesses clearly see their goals and orientation in the development of their business activities It shows chief executives how to consider and determine where their organizations would like to go and when they will achieve their desired results Therefore, if enterprises cannot turn their vision and strategies into understandable criteria that can be transformed into actions, their organization will lack consent and clarity, making different groups to carry out different action programs - quality, regular improvement, redesign, empowerment - in their own way of thinking about the vision and strategy According to Aberdeen Research (The Balanced Scorecard Collaborative 1999/2001), only about 5% employees know and understand the company's strategies
Second, strategies are not linked to the purposes of departments, groups and individuals Accordingly, the second barrier appears when the long-term strategic requirements of business units are not transformed into goals for each department, group and individual Instead, the work performance of departments remains to focus on meeting the established financial budget And groups and individuals in each department only associate their purpose with the accomplishment of the short-term tactical goals of their department, leading to the exclusion of capacity building enabled for completion of the long-term strategic objectives According to Kaplan and Norton, 74% of their senior executives have their bonuses associated with the organization's annual goals and only about 10% middle executive and junior staff have their rewards associated with the long-term strategy of the company
Third, strategies are not linked to resource allocation: Linking action plans and resource allocation with long-term strategic priorities is one of the barriers to effective strategy implementation of enterprises Theoretically, strategy implementation will be effective when it helps administrators use and allocate existing resources optimally However, each organization has its own procedures for establishing the annual long-term strategy and short-term budgets
Consequently, the arbitrary allocation of funds and capital is often not related to strategic priorities
Fourth, it is the tactical feedback instead of strategic one According to Ngo Thi Kim Thanh (Strategic Management Textbook – Publishing House of NEU 2011), strategy implementation requires inspection, assessment and response to adjust business strategies in line with changes of market fluctuations, making the basis for research and development activities of enterprises However, most of management systems today provide only short-term performance feedbacks, and the majority of responses focus only on financial measurements, usually by comparing actual results with monthly and quarterly budget There is almost no time for testing indicators related to the deployment and the success as well of the strategy The survey in groups made by Robert S Kaplan and David P Norton found that 45% companies did not spend their time in periodical performance meetings to evaluate or make strategic decisions This gap may be due to lacking of information, as well as the tactical assessment process organized and executed by Vice President in charge of Finance As a result, there was no way for businesses to get feedbacks on their strategies
1.2.1 Introduction of the Balanced Scorecard model (BSC)
Starting from the barriers impacting to the strategy implementation based on traditional administration models, Kaplan and Norton developed a Balanced Scorecard (BSC) model in the early 1990s which was considered as one of the 75 most influential business ideas of the XX century by Harvard Business Review magazine Currently, this model has been applied very strongly in the world and in Vietnam The BSC model is construed as a system transforming the vision and strategies of an organization into specific goals and measurements by establishing a system of key performance indicators in an organization on four perspectives, including: finance, customers, internal business, study and development
According to Niven (2009), key indicators selected for measurement will be used by leaders in communicating to employees and outside stakeholders about the results and the performance drivers, thereby, the organization will achieve its mission and strategic goals Thus, building up a measurement system of key performance indicators is one of the outcomes of applying the Balanced Scorecard (BSC) model
According to Kaplan, four prospects in the BSC model are arranged according to the cause and effect principle, in which, emphasizing that strong and sustainable financial results are highly dependent on customer satisfaction Meanwhile, the customer satisfaction depends on the ability to create products and services meeting the demands of customers This also depends on the quality and implementation of internal processes and its efficiency And for internal processes to be effective, it is subjected to great impact on the ability to develop knowledge and skills of human resources, organizational and information capacity In short, the application of the BSC model to develop key performance indicators on full four aspects has a cause and effect relationship with each other and closely follows the organizational strategy implementation
Figure 1.1 The Balanced Scorecard model (Kaplan & Norton)
Source: Robert S.Kaplan & David P.Norton - Harvard Business Review (January -
Based on Figure 1.1, it can be seen that the use of the vision and strategy as a guideline, identifying core issues needed to guide for each scope of activities, establishing related objectives, then proposing measures of work performance, particularly:
- Finance: including traditional financial indicators that can be measured towards achieving strategic goals, providing financial information to stakeholders as expected Kaplan and Norton did not disregard the need of traditional financial data However, if the organization focuses too much on financial issues, it will lead to an imbalance in relation to other prospects in the BSC model
- Customers: including goals related to the customers' perceptions in your business It can comprise of criteria such as the level of customer satisfaction, the number of potential customers or the ability to enter the market, etc At present, in the strong competitive environment, strategic activities of the organization must be oriented to customers and ensure their satisfaction It is very important to set up specific objectives and measures to evaluate the customer satisfaction
- Internal process: covering main business procedures of an enterprise such as production, distribution or sales and then establishing related objectives such as quality, time/efficiency and cost reduction The establishment of indicators in this prospect shows managers the level of business performance of the company, and the level of correspondence to products and services requested by customers
Definition and roles of KPIs
1.2.1 Definition and classification of KPIs
According to David Parmenter (Performance Indicators – General Publishing House of Ho Chi Minh City, 2013), performance measures are the system of key indicators measuring and evaluating work performance in the organization through data, ratio and quantitative targets to reflect the work performance of organizations or functional departments and individuals In other words, they are objectives in work that individuals, teams/groups, departments, organizations need to obtain to meet the general requirement It has been developed on the basis of the company's strategic objectives, product and service characteristics, and become a modern tool for managers to transform leadership strategies into management objectives and specific action plans for each department and staff (Ms.Nguyen Thi Nam Phuong,
"The role of BSC in deploying business strategies" - Keieijuku Conference November, 2012)
Many companies have been applying indicators to measure, monitor and evaluate the work performance of employees However, not all enterprises are clear about types of indicators According to David Parmenter (2013) there are three types of performance indicators, namely: (1) Key Result Indicators (KRIs); (2) Performance Indicators (PIs); (3) Key Performance Indicators (KPIs) a KRIs (Key result indicators)
KRIs are indicators reflecting how the organization is well managed and measured by the board of management to assess the efficiency of general management decisions Therefore, KRIs are usually reviewed in a relatively long period, usually by a month or a quarter According to David Parmenter (2013) in the measurement system of key performance indicators, enterprises should only build up 10 to 12 KRIs And, it usually includes:
- Financial indicators such as Return on equity (ROE), Earning before tax (EBT), etc;
- Customer indicators such as customer satisfaction, profitability of customers, etc;
- Indicators of study and development prospect such as employee satisfaction, etc b PIs (Performance indicators)
PIs are indicators showing the employees what to do PIs tend to more focus on smaller targeted areas than KRIs but less powerful than KPIs PIs are performance indicators in a specific area with both tactical and strategic characteristics They represent a more focused range of activities than KRIs, but may not necessarily be important for the general strategy execution.For example, PIs may include:
- Profitability of 10% of top customers;
- Net profit per specific product group;
- The rate of sales increase in a specific area;
- The rate of participation of employees in training programs; c KPIs (Key performance indicators)
KPIs are the key indicators measuring the work performance of employees They are considered not as a tool for evaluating work performance of employees but also helping managers know what to do to increase their employee performance It is the result of an action, and directly related to a strategic goal In addition, KPIs are direct indicators of strategic management decisions; they are the most important measures of significant improvement for the company It is also the result of a direct action making contribution to the strategic goal and measured at very short intervals: hours, days, weeks, and months Thus, the establishment of KPIs within an organization requires starting from strategies and objectives of the organization Through the use of the BSC model, the organization will be able to develop KPIs for evaluating work performance based on four prospects, cause and effect relationship and matching with strategic goals of the organization
According to David Parmenter (2013), KPIs have the following basic characteristics:
- KPIs have short measurement cycles which are continuously monitored so measurement frequency is always accompanied with KPIs;
- KPIs need to be involved in construction and supervision by senior executives and working team leaders;
- KPIs must link responsibility to teams and individuals;
- As a tool for work performance assessment, KPIs must ensure SMART goals including: Specific, Measurable, Achievable, Realistic, and Timebound
Step 1: Identify the department / builder of KPIs
The departments / sections / departments to build their own KPIs: can be created by the departments / departments / departments directly building the KPIs system for positions in that department / department / department based on the guidance, methodological assistance of professionals (human resources department, professionals)
- The person who builds KPIs is usually the Head / Department / Department - who understands and generalizes the tasks and requirements of positions in the department In case of department / department / department is too big, building KPIs should be undertaken by lower level managers
- Division of human resources, professionals: different from the above method, this method ensures objectivity and science of the method However, the proposed KPIs may not be realistic, can not show the functions and tasks of the department / department / department
- To overcome this problem, after being built, the KPIs system needs to have comments, appraisal and evaluation of the functional department
Step 2: Identify the department's KRAs (Keys Result Area) (functions / tasks of the Department)
Each part of the organization has specific functions / responsibilities specific to the department / department / department and the system of built KPIs must be associated with the characteristics, functions and tasks of the department
Step 3: Define position titles and key responsibilities of position titles
- For each position, the developer of the KPIs should point out some of the main responsibilities that the person in charge of this job must perform (job description)
These key responsibilities are the basis for building the KPIs, so the responsibilities set out must be clear, specific and achievable
Step 4: Identify KPIs (evaluation index) a Department KPIs: based on the functions and tasks of each department / department / committee who build the KPIs system will build common KPIs that characterize the whole department These KPIs are the basis for building KPIs of each position b KPIs for each position:
- Build KPIs for employees to follow the description and work requirements
Therefore, KPIs are built on the basis of the main responsibilities of the above positions and KPIs of each department
- KPIs must ensure SMART criteria and there must be sources of information that businesses are applying or will apply in the near future
- Evaluation period: The assessment period is usually applied in months, quarters and years Depending on each KPI index, the content of each individual indicator
Step 5: Determine the score level for the achieved results
- Usually the score is divided into 2 - 5 levels of score corresponding to the level of work completion according to the results
- The more the score level, the more objective the assessment is However, if the score levels are broken down, the final evaluation and the final score determination will be difficult to determine the score
Step 6: Contact between KPIs assessment results and salaries and bonuses
For each specific score frame, the person who builds the KPIs system will determine the relationship between the evaluation results and specific remuneration levels
Depending on each title, field of operation managers make building flexible KPIs in steps and should hire experienced consultants to combine with employees in the Company to targets put into use promote high efficiency and consistent with the general management objectives of the Company, especially the goal in human resource management
1.2.2 Benefits of developing KPIs in the organization
As analyzed in Section 1.2.1, the development of KPIs does not only serve to assess the work performance of employees, but also offers other benefits, namely:
- It helps all levels in the company define objectives, how to do and measure results based on performance indicators;
- It measures the work performance in the past, present and future of all levels in the organization, facilitating instant overcome and directing appropriate steps to successfully execute the strategy;
- It measures key elements of the organization to ensure current success, the future and sustainable development;
- The measures themselves are guides attracting and encouraging people to make continuous improvements If these measures are aimed at carrying out the strategy, they will be a powerful tool for effective strategic management;
- It overcomes the limitations, including long measurement period, delay in improvement and unclear issues, of traditional methods such as performance and financial management
- Mainly addressing four major barriers to strategy execution which are key reasons for the failure of strategic management, comprising of: vision, human, resource and management barriers
- From scoring KPIs results to accurately evaluate the achievements obtained by each level, it is possible to make timely and appropriate reward and treatment policies
- Create the scientific basis for the planning and development of intangible assets such as: (1) training strategies, knowledge development of enterprises; (2) optimize the value of management elements of internal processes; (3) Exploitation of possible values from customers It is the foundation for financial success.
Study overview of the BSC application for the development of KPIs
The application of the BSC model in developing KPIs has become popular in enterprises worldwide in general and in Vietnam in particular Within the scope of this topic, I will list several studies together with important research results as the basis for my study Some specific studies include: a Applying the Balanced Scorecard model to assess business strategy at project department of Phu My Hung Joint-venture Company by Prof
Le Kieu, MSc Luu Truong Van and MSc Le Minh Khanh on Construction Economics Magazine, No 1/2007
Originating from the increased globalization and competitive business environment, the study indicated that measuring work performance in an enterprise has become more and more important for its success However, assessment on work performance based on only financial indicators has not satisfied managers because financial measures only showed events that occurred in the past In the information technology era today, businesses must create the future value through investment in customers, suppliers, employees, working methods, engineering and innovation The inadequacy between the measurement system through financial indicators and non-financial measures is the basis for these authors to select the use of the balanced scorecard (BSC) model in determining and quantifying Key Performance Indicators (KPIs) of businesses, in accordance with four prospects, including:
- Finance: The typical financial goals of an organization are profit, rate of return, growth and relevant values;
- Customers: Customer criteria will include output measures such as customer satisfaction, customer retention, and acquisition of new customers;
- Internal process: The measures used in the internal process will be factors most influencing customer satisfaction and achievement of the financial goals Factors affecting customer satisfaction can include product lifecycle, product quality, employee skills and labor productivity;
- Study and development: Study and development criteria define the organization's infrastructure to create long-term development and improvement, meanwhile determine employee satisfaction, retention and training to improve organizational competitiveness
In addition, the study also pointed out construction and measurement procedure of KPIs with application of the BSC model, particularly:
Table 1.1: Construction and measurement procedure of KPIs with application of the BSC model
Step 1 Determine the company’s strategy
- Determine viewpoints and the strategy of the company
- Define strategies of departments Step 2 Develop KPIs - Develop KPIs for departments
- Quantify for departments Step 3 Develop the application of - Prepare and collect data
KPIs - Collect data of KPIs from departments
- Analyze the completion of departments
Step 4 Conclusion and recommendation b Applying the Balanced Scorecard (BSC) and Key Performance Indicators (KPIs) into staff evaluation at Liskin Corporation by PhD
In contrast to the traditional performance assessment method that was based on only financial indicators, the application of Balanced Scorecard (BSC) integrated non-financial measures on customers, internal process, study and development Therefore, the BSC application to the development of key performance indicators will enable managers to link operational objectives at all levels with strategies, focusing on key success factors and reasonable resource allocation Finally, it also helped managers have a balanced look between organizational activities, ensuring objectivity and equity in evaluating work performance of employees
A new point in this study was the clear distinguishment of key indicators, in accordance with the four prospects of BSC, referred to as KPIs including: (1) KPI is defined as the Key Performance Indicator; (2) KRI is defined as the Key Result Indicator; (3) and PI is defined as Performance Indicator Basically, these measures at four differient prospects added each other by a mutual relationship making contribution to achieving the organization's strategic goals
And each organization should not use more than 10 KPIs, 10 KRIs and 80 PIs (David Parmenter, 2009)
In addition, the study also pointed out that, in order to successfully apply BSC in developing KPIs, the following conditions must be met, namely:
First, the availability of human resources for deploying BSC model Successful deployment of BSC requires enterprises to organize internal communication activities on the purpose and benefits of BSC and KPIs as well; Set up a key team to implement BSC and KPIs Especially, managers at all levels need to be ready to provide resources and solve problems during execution
Second, the standardization level of working procedures in the organization
This implies that all major activities of the enterprise must be formalized for the execution to be consistent, in which, employees follow the issued procedure and ready to change to adapt with a new assessment system
Third, the level of sufficiency and consistency of the database system in the organization This implies that the enterprise has to set up a unified measurement system from the organization, departments to individuals In addition, the measurement system as well as assessment results must be kept scientifically so that it is easy to access, retrieve, adjust and supplement as well
Table 1.2: Basic conditions to apply BSC into successful development of
The availability of human resources for deploying the BSC application
1 You clearly understand the meaning, purpose and determine to deploy the application of BSC into the development of KPIs
2 You are ready to provide resources and solve problems when applying BSC into the development of KPIs
3 You are ready to take part in setting up internal communication activities on applying BSC into the development of KPIs
4 You are ready to employ consultants to apply BSC into the development of KPIs
5 You can select a key team to participate in applying BSC into the development of KPIs
6 You are ready to empower your subordinates for them to actively carry out their work
7 You are totally supportive of applying BSC into the development of KPIs to serve evaluating work performance of employees
Standardization level of working procedures in the organization
8 All main activities of the company are based on procedures and done consistently
9 You have done according to the issued process/procedure
10 You will quickly adapt with a new assessment system
Sufficiency and consistency of the database system
11 The mission, vision and strategy of the company are materialized as indicators
12 Key success factors of the company are fully determined
13 You have a clear and specific job discription
14 Data is fully collected to apply BSC into the development of KPIs
15 You find difficulties in collect data to evaluate work performance of employees
Assessment results are made by Likert scale from 1 to 5 levels, in which, the first level shows full disagreement and the fifth level indicates total agreement c Applying the Balanced Scorecard (BSC) to develop KPIs for Mai Linh Logistics Joint-stock Company by PhD Nguyen Van Minh, 2014
A new point in this study of the author was recommendation of 07 steps to apply the BSC model to develop KPIs in the organization, specifically:
Step 1 is the objective formation Objectives are always described in some form and exist in every company Clearly understanding and agreement with common tasks for the company is the first and necessary step in developing BSC
Step 2 is to define the prospects or direction for indicators In this step, it is necessary to identify the direction of action required to carry out strategic objectives In this case, the four prospects recommended by Kaplan and Norton may be used
Step 3 is to identify the tasks that need to be addressed to achieve the goals and allocate them to the areas of activity This step requires a further refinement of tasks leading to the achievement of key objectives
Step 4 is to build a strategic map Building up a strategic map is the establishment of a cause and effect relationship and affecting factors between goals and tasks Ideologically, this is the most important step, in which, it is necessary to clarify the impact to performing tasks to achieve the goal and the relationship between tasks Identification of affecting factors helps to put tasks and goals into a single system and completing the phase of building up a strategic map
Step 5 is to identify KPIs, the targeted measurement tool The performance of each strategic and general objective should be measured by certain indicators and expressed in numbers Within the BSC framework, performance indicators are defined for each task Each indicator has a standard value indicating that the target can be reached in the required time based on indicators and standard values, as well as the permitted deviation limit of the targeted value forming the indicator map
Step 6 is to develop a program based on the target and tasks coordinated with middle managers The targeted program is designed to make a necessary change on the most problematic operations of the company, where the indicators can not be significantly improved in the management of current activities
Current situation of Key Performance Indicators (KPIs) at TTT
General Information of TTT Corporation
2.1.1 Overview of TTT Corporation a History of formation and development
Established in 1992, with more than 25 years of experience, TTT Corporation is now one of the leading companies in architecture, construction and interior design in the segment of luxury Offices, Hotels and Resorts in Vietnam During the development process, the Corporation always seeks to bring advanced technologies into project management, investment in equipment at factories, constantly renovating construction and installation techniques to provide the best products and services for customers, ensuring the progress and quality in compliance with international standards
Company Name: TTT Trading and Construction Joint-stock Company
Transaction Name in English: TTT Corporation
Headquarter in Ho Chi Minh City: No.36, Ly Tu Trong Street, Ben Nghe Ward, District 1, HCMC
Representative Office in Hanoi: Villa A3, No 11, Xuan Dieu Street, Tay Ho District, Hanoi
The plant in Binh Duong: Lot A3, No.11, Road No 6, Song Than Industrial Zone, Di An Ward, Di An Town, Binh Duong Province
Business lines: Interior design, manufacture and supply of interior products, interior decoration, turn-key services
Mission: As a pioneer in the field of technology, professional in creative work, TTT Corporation not only creates living spaces but also brings a beautiful and perfect life to everyone
Stability maintainance in work at high intensity and quality
Positive thinking inspite of difficulties
Understanding of the influence of our decisions on other activities
Understanding our success is based on the strength and wisdom of the whole team Working together to achieve a common goal of the group
Building a working environment that will promote all the capabilities and potential abilities of the group members
Each individual is responsible for his own successes and failures as well as those of the group
Encouraging colleagues at the right time, sharing when colleagues have problems
Willing to share knowledge and experience
Passionate about the work undertaken, determined to pursue its aim until the end, making great efforts to overcome difficulties to create the best results
Continuously release and not afraid to test new, strange, unique ideas
Always exploring and working out solutions and new approaches to make better results
Pioneering in research, improving and applying new technology
Excellent performance, always taking your career to new heights with desire b Organization chart
Figure 2.1: The organization chart of TTT Corporation
(Source: Department of Administration and Human Resources)
- The Chairman/General Director: is the business owner, playing a strategic
MANAGING DIRECTOR PROJECT DIRECTOR MARKETING &
HEAD OF LABOR SAFETY DEPARTMENT
HEAD OF KTS TECHNICAL DEPARTMENT
HEAD OF QUALITY CONTROL DEPARTMENT
HEAD OF PURCHASING DEPARTMENT HEAD OF ESTIMATION DEPARTMENT planning role, making investment decisions, directing and monitoring activities at the Headquarter in Ho Chi Minh City, the Representative Office in Hanoi and the plant in Binh Duong province
Cooperate with the Management Board to develop the vision, mission, core values and long-term goals
Manage departments of the Corporation to set up objectives and targets for each department to ensure the achievement of the general goal
Supervise projects and make decisions and proper proposals of solutions, strategies, etc with the Management Board, develop a procedural and required system at the company and department level
Ensure the administration system to be updated and effective
- The Director of Marketing, Business & Warranty:
Direct and supervise the development of long and short-term marketing plans and objectives; periodically evaluate marketing channels for products and services of the Corporation
Direct the development and implementation of marketing plans to promote the Corporation's brand in the market
Periodically evaluate and adjust marketing plans and activities
Orient the organization, construction and development of sales channels for the Corporation
Coordinate with the Management Board to plan and develop standards for each channel of sales
Establish and maintain internal and external relationships related to the business operation of the Corporation in order to facilitate business activities
Evaluate and monitor the business performance of each channel of sales
Closely manage and supervise the product warranty for customers, timely handle feedbacks, complaints about the warranty to avoid affecting the reputation of the Corporation
Manage and operate the quality management system and technical issues of the plant
Research and develop the production process of the plant
Responsible for proposing and managing the plant budget
Ensure production schedule as planned
Ensure equipment and machinery to be well operated
Able to build up and manage the quality control system of the plant
Responsible for managing all issues related to all plant activities
Report to the Board of Directors
Plan and organize production activities to achieve the planned objectives of productivity, output and quality and minimize the consumption of raw materials in production
Organize the production management as scheduled, production orders approved by the leaders with the scale of the plant capacity
Control the performance of procedures, regulations, guidelines, etc on equipment, machinery, production technology at the Corporation
Manage machinery, equipment, workshops, architectural items in the production line
Make training for managers and workers
Manage and operate production activities to achieve the planned objectives
Organize, coordinate, monitor and supervise the optimal use of human resources for production purposes to meet the requirements as scheduled
Supervise the use of raw materials in accordance with norms, monitor the statistics of materials, take recommendation and measures to reduce the loss of raw materials in production
Set up standard procedures in production, training for workers
Supervise the observance of by-laws, procedures and labor disciplines, labor safety, fire protection and fighting regulations
Develop, direct and supervise the performance of procedures, give instructions related to the production of the Corporation
Develop industrial designs for new product concepts and give design advices on architecture, interior, product structures, interior decoration materials, construction, production methods and accomplishment of interior decoration and construction
Organize the design work for projects under the direction of the Board of Directors
Responsible for all architectural design in asthetical and functional aspects proposed by the architectural design department
Manage and coordinate tasks in the department, ensure the quality and schedule of projects
Support the sales department in training, giving ideas and introducing products to customers
Perform and responsible for the design of images, catalogues and some publications, marketing tools for sales and reporting to the Board of Directors
Organize and make recruitment and training:
Build up the organizational structure of the design department in accordance with the orientation and development strategy of the Corporation
Develop, approve the system of regulations, internal management regulations, work procedures in the areas related to functions and duties of departments
Participate in the development of the system of regulations and other internal management rules of the Corporation related to his field of expertise
- Department of Administration – Human Resources:
Management: Include design and organization activities, human resource planning, selection and arrangement of human resources; work supervision and management
Development: Include training and development activities to improve staff capacity, supporting human resources development
Support: Include the development of salary, bonus and welfare policies for employees Thus, the Department of Administration – Human Resources is responsible for making policies and building up the structure and system in human resource management
Make annual short and long-term financial plans in line with production, business and investment activities of the Corporation;
Monitor the performance of the approved financial plan and propose correction measures in accordance with the production and business tasks of the Corporation at times;
Organize the accounting, statistical work and statistical accounting organ in accordance with the Accounting Law, accounting standards, current legal regulations and the organizational structure of production and business of the Corporation; c Products, market and business results
- Products of the Corporation are architectural and design works for luxury restaurants, hotels, offices and resorts
- There are some typical works including:
+Address: Hon Tre Island, Nha Trang City, Khanh Hoa Province
Vinpearl Phu Quoc 4 – Club House 1 + Address: Long Beach Area, Ganh Dau Commune, Phu Quoc District, Kien Giang Province
+ Address: 3 rd Floor, Sai Gon Center, 65 Le Loi Street, Ben Nghe Ward, District 1, Ho Chi Minh City
JTI Office in Ho Chi Minh City + Address: 9 th Floor, Pearl Plaza, 561 Dien Bien Phu Street, Ward 25, Binh Thanh District, Ho Chi Minh City
- Market: at present, TTT Corporation is the leading company in design, architecture and construction in Vietnam
+ Interior design and architecture + Manufacture and supply of interior products Customers of TTT Corporation are mainly big groups and companies domestically and internationally such as: Phillip Morris Vietnam Inc, Liberty Corporation, Sai Gon Inn, JTI Vietnam, Hoa Binh Group, DIC Phuong Nam, British American Tobacco Marketing (Singapore) Private Limited HCMC, etc
Based on the financial statements of the Corporation for the last 5 years (2013-2017), it can be seen that the revenue increased rather stably, especially in 2017
Table 2-1: The income statement of the Corporation during 2013 – 2017
(Source: Marketing Department of TTT Corporation)
The business results of the Corporation for the last 5 years are shown in Table 2-
2 Although experiencing the economic downturn from 2013 to 2015, the Corporation has maintained rather steady and profitable sales growth for such three years However, the rate of return tended to decrease as investment and production costs highly increased The revenue of the Corporation actually increased from 2016 and had a strong breakthrough in 2017
Table 2-2: The revenue and profit of TTT Corporation during 2013-2017
(Source: self-summarized from the financial statement of the Corporation) d Human resources at TTT Corporation Table 2-3: Statistical table of human resources at TTT Corporation
(Source: The Department of Administration – Human Resources)
Personnel structure based on working age
Table 2-4: Personnel structure based on working age at TTT Corporation
No Working age Quantity Ratio
(Source: The Department of Administration – Human Resources)
TTT Corporation has the largest labor force aged from 25 to 32, accounting for 52.85% who are young staff, working under high pressure and intensity, followed by those aged 33 to 40, accounting for 20.53% who are experienced and qualified enthusiastic students and those aged over 40 account for 12.16% who are usually consultants, advisors and senior managers
The Corporation always focuses on training and development to improve the staff capacity at all levels, establishing forums to exchange knowledge on the portal
- For new employees: Develop an integrated training program, introducing new employees with clear documents and methods
- For managerial levels: Set up separated training programs for all managerial levels (staff management, treatment and bonus system, staff motivation, leadership skills, negotiation and conflict resolution skills, communication skills for leaders, cultural building) Focus on practical applications
- For departments: make internal, external and cross training programs
The young and dynamic staffs at TTT Corporation are one of the positive factors that facilitate the learning and development process and possibly meet ambitious objectives in finance, customers and internal business processes At the same time, the leaders of TTT Corporation have spent a lot of time and money on the training and development of human resources However, the Corporation needs to set up a measurement system to manage human resources, information and cultural system to improve the work performance assessment and corporate development
2.1.2 Analysis of the business strategy applied by TTT Corporation a Definition of a business strategy
Definition of a business strategy can be construed as follows: “The business strategy of an enterprise is a general strategy in the business sector of such enterprise It mentions the most important issues, with long-term significance, determines the survival of the enterprise A business strategy includes common and departmental strategies interconnecting organically to form a complete business strategy that covers all business activities”
(Source: Ngo Kim Thanh, Strategic Management Textbook, 2012)
A business strategy allows the enterprise to have long-term orientation, which is a condition to ensure the effective mobilization of business production resources, making coordination in a synchronous process as the basis to determine the necessary solutions in accordance with the objectives set out in specific situations
A business strategy must consist of four elements: strategic objectives, strategic scope, competitive advantages, strategic activities and core competencies These four elements require a consistent and coherent relationship
Strategic Objectives: In fact, many enterprises tend to confuse their goal with their mission The mission of an enterprise indicates the purpose or the reason for the existence so it is often generalized In contrast, strategic objectives need to be specific and quantitative with a clear period A strategy needs to establish visible objectives Strategic objectives will play a direction role in business activities for a number of years
Objective selection has a great impact on the enterprise With each goal set out, the enterprise will have different strategic plans to fit and achieve the goal most effectively
Strategic scope: The scope selection must be based on the principle that there are actual needs in the market and enterprises are really knowledgeable and able to meet such demands Enterprises also need to avoid confrontation with competitors who are strong or well meeting their customers’s demands
Competitive advantages: In order to win in the selected market segment, the products/services of enterprises must have a unique or superior advantage to their rivals
Strategic activities and core competencies: Core competencies, which are the ability to carry out activities in a superior manner to rivals in terms of quality or performance, are often the possibility of connecting and coordinating a major group of activities or functions of an enterprise and rarely included in a specific function This capability can allow enterprises to compete effectively and diversify their products b Analysis of the business strategy applied by TTT Corporation
Interior design has been highly appreciated and played an important role in construction, especially the demands in medium and high-class segments The growth index has shown an increase in the interior design industry This has attracted many human resources as well as investment capital of enterprises, making contribution to the national economic growth
The existing situation of key performance indicators at TTT
2.2.1 Survey of conditions to apply BSC and KPI
The Balanced Scorecard (BSC) is well known in the business and consultancy community (management and strategic consultancy) in Vietnam Many enterprises are trying to learn to apply BSC/KPI for their business, but not all of them are successful Before deploying BSC/KPI to TTT Corporation, we will conduct a survey to assess the feasibility of this application in the company
The survey will be conducted on two target groups of leaders and staff at TTT
Corrporation based on the actual situation and the theoretical background on conditions to successfully apply BSC and KPI
For staff, the survey focuses on the job description status, objectives of departments and individuals, the staff assessment status, and the viewpoints and understanding of employees about supporting BSC/KPI application to assess their work performance The survey scale is a five-level Likert scale Particularly, there are 22 survey questions in Annex 01 For the management team, the survey focuses on issues such as sponsorship, commitment of leaders, the demand on using Balanced Scorecard (BSC) in the company, the support from direct managers There are 22 questions expressed in Annex 02
The survey will be conducted by sending questionnaires to employees at TTT Corporation Sample size consists of 30 staff members and 10 people on the Board of Management including the Board of Directors and Heads of departments
Sampling method: For employees, select random samples from the list of personnels at TTT Corporation For the management team, choose a convenient sample including leaders presenting at the Corporation during the survey The survey and information collecting period will last 01 week The time to enter and process data will be 03 weeks The data analysis will be conducted by the statistical method, processed by using excel software; mainly take mean values of comments The statistics of mean values reflect opinions of the surveyed subjects regarding the application of BSC/KPI and future orientation
2.2.2 Assessment on deployment possibility of BSC and KPI at the Corporation
With valid votes of 30/30 for the survey of staff and 10/10 for the survey of leaders, I summarized assessment and comments in Table 2.9 and 2.10 The average scores in tables were made on the basis of total score of survey samples dividing total samples
Table 2-9: Summary of staff survey on BSC/KPI
2 My job had specific standards (requirements on knowledge, skills, experience, etc) 3.34
3 My objectives/criteria in work were assigned clearly 3.08
4 I participated in building objectives for my job 3.75
5 I participated in building objectives for my department/workshop 3.63
6 I clearly understood objectives of the Corporation 2.78
7 I clearly understood objectives of the department I have been working for 3.46
8 Based on objectives of my department and job description to self-plan my goals 3.65
9 My direct manager actively supported me in planning my job objectives 3.41
10 I have enough rights to do my job 3.47
11 I know what to do to perfect my goals 3.41
12 In general, job assessment results are now fair 3.38
13 At present, job assessment is based on clear objectives and criteria 3.22
14 My assessment criteria/objectives are quantitative, computable and measurable 3.21
15 Now, before assessment of leaders, I self-evaluate my job 3.69
16 I find difficult in collecting information and data to self- evaluate my job 4.00
17 I trust in assessment of leaders on me (accuracy and fair) 3.00
18 My assessment results are always responded and explained properly by the manager 3.59
19 Staff assessment results now attach with their rights and obligations 3.45
20 I have been trained in BSC - Balanced Scoredcard 2.43
21 I have been trained in KPI - Key Performance Indicators 3.21
22 I agree to apply BSC/KPIs to evaluate work performance results of staff 4.15
Table 2-10: Summary of leader survey on BSC/KPI
1 The Corporation has a clear mission, vision and strategy 4.7
2 Current objectives at departments are linked to the strategic goal of the Corporation 2.9
3 The Corporation has determined key successful factors 2.7
4 The Board of Directors has found the link between short-term and long-term objectives of the Corporation 3.7
5 Senior leaders are provided proper reference sources on BSC and KPI 3.3
6 You are ready to spend your time participating in BSC/KPI workshops 4.2
7 You have selected potential candidates for the team deploying
8 You are ready to empower your staff for them to do their job 4.3
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 4.1
11 Current KPIs can measure strategic objectives of the
12 Criteria for staff assessment are now specific, clear and suitable with title groups 3.9
13 At present, employees at the Corporation believe in assessment of their managers on them (accuracy and fair) 3.4
14 Staff assessment results are responded and explained properly by managers 4
15 Leaders find difficult in collecting data and evidence to evaluate their staff 3.7
16 The Corporation has established a full database of KPIs 3.1
17 Staff assessment results now attach with their responsibilities and rights 4
18 You support to apply BSC/KPIs to evaluate work performance results of your staff 4.3
19 You are ready to support internal communication on applying
20 You are ready to use measurements to improve your work 4.3
21 You support the outsourcing of advisors to consult and deploy
22 You believe that the application of BSC/KPIs at TTT
Through surveying the staff and leaders, reviewing the actual situation at TTT Corporation and based on conditions to apply BSC/KPI application, I have some experience when deploying and applying BSC and KPI at TTT Corporation as follows:
Starting from the business strategy
The Balanced Scorecard (BSC) is a strategic planning and management system designed with the focus on interconnecting the process of managing work performance of an organization with the strategy so that it does not make any sense if the enterprise deploys BSC without any connection with the business strategy The clarity level of the company's vision, mission and strategy was rated 4.7/5 points by the Board of Directors, indicating that the strategy of TTT Corporation is relatively clear This is a good condition for the company to apply BSC and KPI
The connection between key performance indicators and the strategic orientation
The survey sentence "The objectives of current levels are clearly linked to the company's strategic goals" was rated at 2.9/5 points And the company has not yet identified the key success factors, only 2.7/5 points Current KPIs do not measure the organization's strategic objectives, only at 2.8/5 points
In terms of staff, they are involved in setting goals for their work (3.75/5 points), employees self-assess their work before their leaders’ evaluation (3.69/5 points), making contribution to set goals for their department (3.63/5 points), based on their departmental goals to plan their work (3.65/5 points) However, the targets and objectives have not been clearly assigned (3.08/5 points), the staff has not understood objectives of the Corporation (2.98/5 points) and departments (3.08/5 points)
The assessment results, in spite of being adequately explained by the manager (3.59/5 points), are not based on clear criteria (3.22/5 points) and the criteria are not measurable (3.21/5 points) So employees do not trust the evaluation of the Corporation (3/5 points)
- The Board of Management and managers:
The final commitment and determination of the senior leaders is a prerequisite for the Corporation to successfully deploy the Balanced Scorecard Through the actual survey, it can be said that leaders at TTT Corporation are highly determined to continuously improve key performance indicators and apply the Balanced Scorecard in the future The support level of the Board of Director was 4.3/5 points 4.2/5 points was the level that leaders are willing to spend their time to participate in BSC/KPI workshops The level of confidence in applying BSC/KPIs was rated at 4.1/5 points Readiness to use measurement results to improve their work was rated at 4.3/5 points The level of management support for outsourcing consultants to deploy the BSC/KPI was rated at 4.1/5 points The survey results showed that the Board of Directors was willing to support the application of BSC/KPIs to the Corporation and believed in the success of this approach to improve the efficiency of work performance assessment
In order to successfully apply the Balanced Scorecard, the purpose, benefits and the way of application must be diffused from the top to the bottom and vice versa as well as acrossing departments so that every member has ability to apply thoroughly and effectively In terms of leaders, they are always ready to support internal communication on applying BSC/KPI (4.5/5 points)
The Board of Directors understood and found that potential candidates could assist the company in deploying the BSC/KPIs (4/5 points), they were ready to empower their staff to perform their work (4.3/5 points) and had satisfactory feedbacks, timely explained to staff about their working results (4/5 points) In terms of employees, 4.15/5 points was the level that employees were willing to support BSC/KPIs, however, they were not trained in BSC (2.43/5 points) and the number of employees understanding KPIs was only rated at 3.21/5 points
Combining measurements, reports and enhancing work performance
It is needed to develop a unified framework so that work performance can be measured and reported to result specific actions 3.2/5 points was the level that leaders fully understood the link between measurements, reports, and improvement
Enterprises have to set up a unified measurement system from the organization, departments to individuals The survey sentence "The Board of Management found difficult to collect data, evidence for staff evaluation" rated at 3.7/5 points, and “employees found difficult to collect information and data for their job assessment” rated at 4/5 points, demonstrated that the Corporation was getting trouble in staff assessment and the need is to have a database system continuously updated for the evaluation At the same time, reference sources for BSC/KPI provided for the leaders were only at 3.3/5 points, 3.1/5 points was the level that leaders agreed the company to set up full database for KPI storage
The comment "I have a clear job description" was rated at 3.77/5 points And the current work with specific standards (3.34/5 points) showed that the company partly set the standard for each job
2.2.3 Factors impacting to deployment of BSC and KPI
Proposals of key performance indicators at TTT Corporation
Key performance indicators at TTT Corporation during 2018-2020
3.1.1 Development objectives of TTT Corporation during 2018-2020
According to the schedule at the period of 2018-2020 from the Board of Directors, TTT Corporation has intended to become one of the top 10 companies in interior architecture design and construction The Corporation focuses on environmentally friendly and community-based products, providing high quality services to meet customers’ demand The Corporation also strives to list shares on the stock exchange soon
- Accelerate sales growth to achieve the highest business results
- Increase the usage efficiency of assets and labors
- Ensure the difference between revenue and expenditure, improve the cost structure
- Diversify financial investment sources; attract investment capital both domestically and globally, take advantage of low interest rates
- The market segment of TTT Corporation is the high-class segment with products including luxury offices, hotels and resorts Therefore, the target customers of the Corporation will still be: big corporations in tourism, restaurants-hotels, construction companies, entertainment areas both domestically and internationally
- In order to achieve annual revenue growth and market shares, TTT Corporation focuses on improving customer satisfaction in order to retain existing customers and attract new ones to increase and expand market shares At the same time, improving the quality of services to meet customers’ demand, aiming at the development of a comprehensive customer system
- Complete the integrated management system to standardize and improve internal processes Enhance the professionalism in screening and shortening processes, adding new ones to solve problems more quickly and effectively
- Apply advanced management methods to production Improve technologies and products to meet the increasing demand of customers Use advanced technologies at high automation level, select appropriate equipment to ensure the manufacture of high quality, stable, affordable and diversified products, ensuring the norms of product quality and environmental protection in accordance with the State specifications and catch up with the latest international standards Encourage initiatives and innovation from employees at the Corporation
- Build up and maintain the internal evaluation system
- Make planning and training for the team to inherit, retain key personnels, improve treatment policies, and evaluate employees in detail, such as the application of the Balance Scorecard and key performance indicators into the assessment of actual work results to improve satisfaction and productivity of employees
3.1.2 Apply BSC and KPI to evaluate work performance at TTT Corporation
After studying the theoretical basis for applying BSC and KPIs to the organization, based on the mission, objectives, vision and strategy of the Corporation as mentioned in Chapter I, reviewing the assessment situation of work performance and characteristics at TTT Corporation in Chapter II, I suggested a process of applying BSC and KPIs to evaluate the work performance of employees as follows:
Figure 3.1: Application process of BSC/KPI into the organization
(Source: summarized from data of TTT Corporation) a Establishment of the project team of BSC and KPI
- The commitment of senior management team is a prerequisite for the success of the Balanced Scorecard First of all, senior management team needs to understand the definition of the Balanced Scorecard, key performance indicators, and the benefits that the Corporation will achieve with the successful application of these tools Selecting an external consultant will assist the management team to achieve this The Corporation made invitation to consultants from Balanced Scorecard Vietnam (BSV) for a 5-day training program on the Balanced Scorecard and key performance indicators
- In addition, the senior management team, under the support, established a KPI project team The project team consists of two to four people, including those experienced in key performance indicators and new staff with qualities
Selected members should focus on full-time working for the project and
Step 1: Establishing a BSC/KPI project team
Step 2: Building up BSC/KPI at corporate level
Step 3: Building up BSC/KPI at department level
Step 4: Building up BSC/KPI at staff level
Step 5: Making regulations on evaluation and organization
Step 6: Organizing for execution and storing documents directly reporting to the Board of Directors b Determine key success factors
- Determining key success factors is needed when building up an organizational level BSC Key success factors are critical to establish KPIs
Key success factors depend on characteristics of each organization with the following key features:
Key success factors determine the health status of the organization
Key success factors orientate the goal completion of the organization
Key success factors create competitive advantages for the organization
Key success factors determine how each employee in the organization must act to be consistent with the mission, towards the vision of the organization
- In order to identify key success factors for TTT Corporation, the KPI and senior management team discussed with heads of departments based on samples defining success factors key of the organization The results of key success factors of the Corporation are determined as follows:
Increase market shares in each sector
Make full use of assets and resources
Seize the trust and satisfaction of customers
Make reputation for the brand, sharing for community and environmentally friendly
Continuous innovation and creation, more effective working measures
Support employees to develop in many ways
Maintain key staff c Build up the strategic map
- Making a strategic map is the way that we graphically illustrate what to do in each perspective in order to effectively implement our strategy A strategic map, showing the causal relationship between strategic perspectives, is an effective tool in turning a business strategy into action When building up a strategic map and the Balanced Scorecard for an organization, it is important to consider how many perspectives there are and which companies should select There are typically six perspectives, including finance, learning and development, customers, internal processes, employee satisfaction, environment and community These perspectives cover most of components but they are not fixed, depending on the organization's strategy we can consider and choose Through the strategic and practical study on the entire activities of TTT Corporation, together with comments from the management team, the BSC of TTT Corporation will be built up with four perspectives: finance (F), customers (C), internal process (I), learning and development (L) Indicators in the employee satisfaction perspective will be included in the learning and development Indicators of environmental and community are presented in customer perspective Then define a specific goal for each:
- Financial goals serve as a centerpoint for objectives and as a measure in all other aspects of the Balanced Scorecard Based on the mission, vision and the strategy analyzed above, we can identify key financial goals that the Corporation needs to make With its business strategy, aspects promoting the business strategy of TTT Corporation consist of sales growth and product collection, cost effectiveness and increased asset efficiency
Sales growth and product collection: mentioning the expansion of product and service supply, gaining new customers and markets, changing product and service collection towards higher added value and re-pricing of products and services
Cost effectiveness: refers to efforts to reduce direct costs of products/services, minimize indirect costs and share common resources with other business units
Enhancing asset usage efficiency: Managers are striving to reduce the amount of working capital needed to support sales and a set of products of a business unit Make more use of the fixed-asset platform by orientating new business activities into resources that are currently under-utilized, using rare resources more effectively, eliminating unprofitable assets compared with the market value
- Thus, objectives of the financial perspective of TTT Corporation are determined as follows:
F1: Revenue growth and product collection
- TTT Corporation clearly identifies customers and market segments that it has selected to compete In the increasingly competitive market, the maintenance and retention of loyal customers, especially those who bring high profitability, is the most important issue This is an important strategic objective to ensure stable and sustainable revenue in business activities
Next, the Corporation will expand and increase market shares from searching new customers to facilitate revenue growth as well as make advantages on productivity and cost Both customer retention and new customer acquisition are motivated by meeting and satisfying customers’ demands
- Therefore, objectives should be defined in the customer perspective at TTT Corporation:
C2: Expanding and increasing market shares
Some solutions to propose BSC/KPIs for staff performance assessment
In fact, the application of the balanced scorecard and key performance indicators do 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 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
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
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
- 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
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STAFF SURVEY
Conditions to apply the BSC and KPIs to assess staff work performance at TTT Corporation
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:
2 My job had specific standards (requirements on knowledge, skills, experience, etc)
3 My objectives/criteria in work were assigned clearly
4 I participated in building objectives for my job
5 I participated in building objectives for my department/workshop
6 I clearly understood objectives of the Corporation
7 I clearly understood objectives of the department I have been working for
8 Based on objectives of my department and job description to self- plan my goals
9 My direct manager actively supported me in planning my job objectives
10 I have enough rights to do my job
11 I know what to do to perfect my goals
12 In general, job assessment results are now fair
13 At present, job assessment is based on clear objectives and criteria
14 My assessment criteria/objectives are quantitative, computable and measurable
15 Now, before assessment of leaders, I self-evaluate my job
16 I find difficult in collecting information and data to self-evaluate my job
17 I trust in assessment of leaders on me (accuracy and fair)
18 My assessment results are always responded and explained properly by the manager
19 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 I agree to apply BSC/KPIs to evaluate work performance results of staff
Full name of employees (optional)
LEADER SURVEY
ASSESSMENT REGULATIONS ON WORK PERFORMANCE 96
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 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 on BSC/KPIs not later than 2018
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
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:
• 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 2
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> 4 or 5% - 10% of employees, have the highest average score
Outstanding: If 3.1
