it is essential to complete business assessment targets in Traffic construction enterprises under Ministry of Transport

1 INTRODUCTION The necessity of the disseration In the context of competition and lack of the human resource, to firmly stand in the market and to constantly develop, it is nescessary for enterprises to effectively use its resources In order to effectively use limited resources, enterprises should assess efficiency of resource use In other words, enterprises must properly assess its own operational efficiency In order to strongly stand and to prevail with competitors, strategies must be given by enterprises and every operations of the enterprises must be focused on implementation of strategies It is needed for the enterprises to give Operational efficiency evaluation criteria in compliance with strategies in successful implementation of the strategies Vietnam is a developing country; thus, transport and communications play an important role in development of the country Liking as enterprises in other sectors, operational efficiency is the survival of the enterprises; therefore, it is always cared by traffic construction enterprises However, through the field research, there are a lot of shortcomings in Operational efficiency evaluation criteria If applying the current assessment system, it is very difficult for traffic construction enterprises to sucessfully perform strategies and to firmly stand in fiercer and fiercer competition conditions Thus, “it is essential to complete business assessment targets in Traffic construction enterprises under Ministry of Transport” Subject, scopes and objective in the disseration Research subjects in the disseration are theoretical issues in Operational efficiency evaluation criteria; real situation of Operational efficiency evaluation criteria and method to complete the Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport Research scope in the dissertation is limited in Traffic construction enterprises under Ministry of Transport (these enterprise mainly focus on 07 corporations) The research purpose in this dissertation is to systematize basic theoretical issues on operational efficiency and Operational efficiency evaluation criteria associated with short-term and strategic objectives Then, the Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport are evaluated and proposals are given to complete Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport that helps these enterprises to correctly assess operational efficiency and to effectively perform strategic objectives Research Methods Theoretical research: Through mass media, internet, newspapers, books, ebooks, etc Field research: applying Qualitative Research Methods such as survey method, telephone interviews of managers and accountants in some enterprises, directly survey in enterprises and using survey cards Data, material collecting and processing methods include: survey method, group distribution method, rate method, etc The methods are applied to present research results: comparision method, analysis method, synthetic method, induction method, etc Main new aspects in the disseration Theoretically: Systematization and completion of theory of operational efficiency and Operational efficiency evaluation criteria in traffic construction enterprises in general, and Traffic construction enterprises under Ministry of Transport in particular are associated with implementation of business strategies to meet development requirements of the enterprises in the globalization and economic integration period For field study: the dissertation has been considered and evaluated the real situation of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport, then giving advantages and shortcomings of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport Basing on the field study, the dissertation gave solutions to complete Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport in the economic development and integration Outline of the disseration The Dissertation includes 132 pages, 17 tables, 10 charts, pictures and annexes; and is divided into 03 chapters, exclusive of the annex: Chapter 1: Theoretical bases of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport Chapter 2: Real situation of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport Chapter 3: Solutions to complete Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport CHAPTER THEORETICAL BASES OF OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT 1.1 ROLES OF OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN ENTERPRISES 1.1.1 Operation efficiency and Operation efficiency eveluation 1.1.1.1 Viewpoints of operational efficiency According to Enterprise Law 2005, business operation is: “constant implementing one or some or every sections in investment, from production to consumption of the products or service supply in the market to profit” [21] In the fiercer and fiercer competition and scarcer and scarcer wealth of the society, enterprises and economists has been interested in evaluating operational efficiency and finding out solution to increase operational efficiency Operational efficiency is a concept which has wide meaning and is understood according to many different ways depending on each individual and specific circumstance Through analysis of different viewpoints of operational efficiency, the author concluded that: Operational efficiency reflects results on enterprises’ human resource use to achieve business objectives with the lowest expenses or with defined expenses 1.1.1.2 Measurement and evaluation of operational efficiency Measurement of operational efficiency is to the enterprises’ quantify operational result into specific criteria for evaluating operational efficiency Operational efficiency evaluation and measurement are closely related together and impacts significantly on each other In order to properly evaluate operational efficiency, it is required to have reasonable operational efficiency measurement criteria In contrast, measurement criteria are depended on purposes of operational efficiency evaluation Therefore, in fact, operational efficiency measurement and evaluation is one process Operational efficiency measurement criteria are considered operational efficiency evaluation criteria Operational efficiency evaluation is comparison among Operational efficiency measurement criteria and thier standard to give conclusion on enterprises’ operational efficiency The operational efficiency evaluation is performed through Operational efficiency evaluation criteria These criteria can be relative criteria or absolute criteria 4 1.1.2 Roles of operational efficiency evaluatoin in enterprises Operational efficiency evaluation is one of three functions of administrators in enterprises According to Operational efficiency evaluation, administrators can update operation situation of enterprises and working situation of departments or employees, then the administrators will give suitable adjustment to improve operational efficiency of the enterprises Operational efficiency evaluation criteria are applied by enterprises to monitor and control particular operation, forecast enterprises’ situation in the further to give proper strategic adjustment in Operational efficiency evaluation Operational efficiency evaluation plays an important role for enterprises in both short term and long term In short term, an enterprise will not control their activities if the enterprise does not have effective efficiency evaluation system Effective efficiency evaluation system helps enterprises not only control their activities in short term, but also make motive and encourage effective operation to achieve long-term objectives In long term, operational efficiency evaluation significantly impacts on improvement of competition and implementation of strategies of the enterprises If An enterprise has a good strategy but ineffective operation, the enterprise cannot highly compete and cannot obtain its strategic objectives Results on operational efficiency evaluation are widely applied in encouragement, motivation, reward and punishment to abtain high efficiency by enterprises Apart from efforts of every department and every employees in enterprises, the operationa; efficiency evaluation criteria plays an important in controlling and encouraging to achieve strategic objectives 1.2 OPERATIONAL EFFICIENCY EVALUATION SYSTEM 1.2.1 Principles of development of operational efficiency evaluation criteria An enterprise is a complex organization To surve and develop in competitive environment, the enterprise needs a proper operational efficiency evaluation criteria According to researches from many authors, it is required for operational efficiency evaluation criteria to design basing on the following principles to obtain success in short term and in long term: - Operational efficiency evaluation criteria must be in compliance with the enterprise’s strategy - Operational efficiency evaluation criteria must be associated with view, value, and factors constituting the enterprise’s success - Operational efficiency evaluation criteria must reflect history, present and future associated with the enterprise’s operation 5 - Operational efficiency evaluation criteria must reflect demand of customers, of shareholders and of employees - Operational efficiency evaluation criteria must be consistent and closely associated among upper departments and lower department in the enterprise - Operational efficiency evaluation criteria must be changed when the enterprise’s strategy changes - Operational efficiency evaluation criteria must be reliable - Operational efficiency evaluation criteria must reflect the enterprise’s specific objectives - Operational efficiency evaluation criteria must constitute financial and non-financial criteria 1.2.2 Factors impacting on enterprises’ Operational efficiency evaluation criteria Factors impacting on enterprises’ Operational efficiency evaluation criteria are divided into two groups: internal factors and external factors Internal factors: include organizational structure, business strategies, organizational culture, human resources, responsibility of individuals, operational processes of enterprises, etc External factors: Business environment, business lines, policies, law, market, etc significantly impact on enterprises’ selection of Operational efficiency evaluation criteria Internal factors and external factors does not impact independently, they interact and support together When developing Operational efficiency evaluation criteria, enterprises should analyze to select proper criteria in order to operational efficiency of each department and of whole enterprise is properly evaluated 1.2.3 Business natures of Traffic construction enterprises impacting on Operational efficiency evaluation criteria Traffic works are infrastructure of nation, therefore, the state is the investor of these works To contract the works, enterprises often must ratisfy bidding One of standards to enterprises to participate bidding is execution capacity and experience The enterprises’ execution capacity and experience are presented through works that completed on time with good quality and was appreciated by the investor In order to implement these requirements, it is nescessary for enterprises to give evaluation criteria of work completion time, initiatives in execution to save expenses and execution time, etc Each work is built in different places with different construction conditions, thus, it is required different construction solutions Therefore, traffic construction enterprises must have creativity and efficiency evaluation criteria in using construction solutions via operational efficiency evaluation criteria to ensure quality of the works with the lowest expenses, operational efficiency evaluation criteria Traffic works are often far from enterprises’ office, thus, proper solution in construction such as material supply, vehicle, construction machines, human resouce supply, etc play an important role Operational efficiency evaluation criteria can effectively evaluate construction serving A popular phenomenon in enterprises is wrong construction in comparison to the desgin, thus, criteria reflecting re-construction volume or value are operational efficiency evaluation criteria In construction, enterprises are interested in organization of material supply system for constant execution which constitutes in operational efficiency evaluation criteria of material department 1.2.4 Operational efficiency evaluation frameworks in enterprises Changes of business environment, demand for information in enterprise administration, awareness of managers and of researcheres, etc has a significant influence on development of operational efficiency evaluation criteria in enterprises It can be divided into two stages as following: Operational efficiency evaluation frameworks before 1980 Before 1980, Operational efficiency evaluation frameworks mainly were based on accounting data with financial Operational efficiency evaluation criteria such as profit, profit on investment, profit on asset, profit on owner’s capital, etc [Neely, 2000:291] In current period, some Operational efficiency evaluation frameworks are based on proposed financial measures Operational efficiency evaluation frameworks before 1980 mainly focused on financial Operational efficiency evaluation criteria which are commented by many researhers Neely (1999) has synthesized financial criterial as following: - Promoting managers to concentrate on short-term objectives - Not concentrating on strategies and quantity, punctuality and flexibility - Promoting to increase efficiency such as much production to effectively use human resource and machineries - Promoting managers to reduce deviation from standard because of continuous improvement - Not providing information about customers’ demand and competitors’ operational efficiency [55] Proposed operational efficiency evaluation frameworks before 1980 tended to focus on financial criteria and for short-term Operational efficiency evaluation These criteria can help managers and individuals of interest to easily evaluate Operational efficiency of enterprises, then make decision to obtain short-term objectives There are some shortcomings in applying financial criteria in Operational efficiency evaluation These shortcomings are financial criteria along with a specific financial period, not combination among objectives, success factors, strategies with operational efficiency evaluation in the enterprises Therefore, if basing solely on financial criterion to evaluate operational efficiency, this criterion maybe accidentally become a barrier in performing strategies, improving the competitiveness of enterprises Operational efficiency evaluation after 1980 Limitations of operational efficiency evaluation before 1980 has not been associated with strategies; thus, enterprises could not assess implementation of strategies In competitive environment, business strategies become a guideline in every operation of the enterprise which helps the enterprises to succeed in business world To successfully implement strategies, operational efficiency evaluation criteria must be attached with strategies and can measure efficiency in strategy implementation This viewpoint is accepted by many scholars Many evaluation frameworks were proposed after 1980 Typical frameworks are matrix operational efficiency evaluation framework by Keegan, Eiler and Jones in 1989 [Neely, 2007: 145]; SMART pyramid framework by Lynch and Cross (1991); Result and Determinants Framework by Fitzgerald and his coworkers (1991), Performance Measurement Questionnaire by Dixon and his coworkers (1990), Efficiency prism framework by Neely (2001), etc, of which Balance Scorecard by Kaplan and Norton in beginning the 90s (Bourne, 2008) is the most typical framework in operational efficiency evaluation under many different aspects CONCLUSION OF CHAPTER In the context of scarcer and scarcer resources, fiercer and fiercer global competition, it is required for enterprises to properly evaluate operational efficiency of each department in enterprises as well as entire enterprise to make correct decisions Recently, viewpoint of operational efficiency in the world has changed dramatically While short-term operational efficiency was paid attention previously, long-term operational efficiency is more cared currently Operational efficiency evaluation criteria also changed much; while mainly financial criteria were applied to evaluate Operational efficiency, enterprises apply not only financial criteria, but also non-financial criteria Operational efficiency evaluation criteria include financial criteria and non-financial criteria, short-term Operational efficiency and long-term Operational efficiency, etc which can be applied to not only evaluate Operational efficiency in short term but also assess implementation of strategic objectives of enterprises A viewpoint of Operational efficiency evaluation is changed in appreciting strategic operation and objectives rather than short-term Operational efficiency Operational efficiency evaluation is combined with strategy and implementation of strategic objectives of enterprises Contents in chapter are focused on study of basic theorical issues of Operational efficiency and Operational efficiency evaluation in enterprises to clarify theory of Operational efficiency and Operational efficiency evauation criteria for business administration 9 CHAPTER REAL SITUATION OF OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT 2.1 GENERAL INFORMATION OF TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT 2.1.1 Establishment and development The opening and converting the economy into market economy in Vietnam has created a strong change in structure of economic sectors that create conditions for Vietnamese enterprises to gradually develop and integrate into regional and international market Along with delopmet of economic sectors, enterprises in the transport sector in general and enterprises in traffic construction enterprise under Ministry of Transport in particular also has a great growth in both quantity and quality Recently, transport and communications sector has made effort and overcome many difficulties and challenges, actively perform objectives and duties, as well as more effectively perform management function on transport and communications Besides obained achievement, enterprises under Ministry of transport also exist many shortcomings: scale is small, structure exists many irrationalities, operational efficiency and competitiveness are low, debt-liabilities are high, etc Although there are some shortcomings, effort of Ministry of Transport in limiting and reducing traffic accidents is apprepriated Order and traffic safety are enhanced in both institutional and synchronization solutions, etc 2.1.2 Business production organizational structure and business production management structure Traffic construction corporations are organized according to model of Board of directors, General director, functional departments and member units Lower-level enterprises are organized according to independent accounting enterprises as limited companies or joint stock companies and dependent accounting enterprises Under a corporation are member firms including one member limited companies and joint stock companies One member limited companies are organized according to structure of board of directors, the Board of Directors will select a CEO and vice directors Departmets and divisions will assist director Production units are organized into plants or execution groups Traffic construction joint stock companies under Ministry of transport mainly are state enterprises which are in difficult in privatized finance When changed into joint stock companies, these enterprises are organized according 10 to structure of board of directors, Genreral director, vice general directror and functional departments Production units are organized into plants or execution groups 2.1.3 Business line In the development trend of society, in order to take advantages of buysiness benefits and roduct diversification, aprt from main business line as construction of traffic works, traffic construction enterprises also gradually enlarge business lines in many different fields such as real estate investment, import-export, production of materials and fertilizer, transport trading, travel, etc Main business activities of traffic construction enterprises include: - Construction of traffic works: this is the main business operation and nature of tradition in traffic construction enterprises - Construction of civil and industrial works: investment and construction of industrial zones, residential areas and urban areas, etc - Expoilting and processing construction materials, producing precast concrete components - Other activities 2.1.4 Organization of accounting machinery and accounting system in Traffic construction enterprises under Ministry of Transport 2.1.4.1 Organization of accounting machinery Because traffic construction enterprises must execute traffic works far from head office of the enterprises, accounting machinery is organized according to model of semi-concentration and semi-dispersion At the enterprises, the company accounting department plays a central role in collecting, processing accounting documents submitted by member units, and in investing and accepting works, items, in making financial statement of holdings company and making united statement 2.1.4.2 Organization of accounting system in Traffic construction enterprises Traffic construction enterprises under Ministry of Transport is applying the accounting regime promulgated under the Decision No 15/2006 QĐBTC dated 20/03/2006 by Minister of Finance and under the Circular No 244/2009TT-BTC dated 31/12/2009, the Circular No 106/2008 and the Circular No 206/2009 guiding to adjust and to complete accounting machinery of the enterprises Due to regulatory requirements, and due to the nature of accounting work in construction enterprises, most of traffic construction enterprises applied common diary accounting machinery Currently, accounting is performed by computers through accounting softwares 11 2.2 REAL SITUATION OF OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT To study on the real situation of operational efficiency evaluation criteria in traffic construction enterprises, the author performed field survey in these enterprises and the authors has obtained 84 survey cards from 41 traffic construction enterprises Survey subjects are directors, heads of business departments, masters of construction team, some chief accountants and accountants in these enterprises The results reflect the following aspects: - Structure of subjects answering the survey cards - Number of employees in surveyed enterprises - Organization form of the enterprises participating in the survey - Charter capital of the enterprises participating in the survey - Operation time of the enterprises participating in the survey Actually, the research on operational effeciency evaluation criteria system of traffic construction enterprises shows that most companies use operational efficiency evaluation criteria as follow: 2.2.1 Operational efficiency evaluation criteria of businesses under Government’s regulation Most traffic construction enterprises under Ministry of Transport are owned by State or State –owned-enterprise accounts for dominant share, therefore, they are objects applying the operational efficiency evaluation criteria of State-owned enterprise, the operational result of Board of Directors, Board of Managers is under regulation in Article 12 Supervision regulations issued with Decision No 224/2006/QD-TTg dated 06/10/2006 of Prime Minister and Clause 2, Section II, Circular No 115/2007/TT-BTC dated 25/9/2007 of Ministry of Finance Enterprises evaluate the operational efficiency under criteria regulated in Clause 1, Article 12 Regulations, accompany with Decision No 224/2006/QD-TTg, including: a Revenue and other income: This criteria is identified based on the business opreational result report b Implementation profit and profit margin on State capital: Include net profit from business operation and other profits reflecting on business operation result report c Overdue liabilities and due debt payment ability : is liabilities which overdue of payment commitment for creditor 12 d Situation of executing mode, legal policy: include tax policy, budget apply, credit, insurance, environment protection, labor, salary, financial mode, accounting, auditing, financial statement mode and other report e Situation of implementing the product, public service: based on directly implementing the national defense and military duty, production, public service supplying as State’s policy through procedure method or accept orders or accept duty assigned by State 2.2.2 Other efficiency evaluation criteria Beside the efficiency evaluation criteria regulated by management agencies to State-owned enterprise and Joint Stock Company which State holds dominant shares, traffic construction enterprises under Ministry of Transport use other efficiency evaluation criteria serving for management and specific evaluation of their units, include: a Evaluation criteria of profitability: The dissertation has investigated actual criteria on gross profit margins; Return on sales (ROS); Return on assets (ROA); ROTA; Return on equity ( ROE); Return on investment (ROI) b Assets use efficiency evaluation criteria: rounds per minute of assets; production capability of fixed assets, rounds per minute of short term asset; time of a round of short term asset; rounds per minute of inventory, rounds per minute of receivables liabilities of customer; average collection period c Efficiency evaluation criteria of loan use: Coefficiency of profitability of borrowed interest d Cost using efficiency evaluation criteria and other criteria: Return of capital price of selling goods; return of sale cost, return of business management cost; return of total cost, etc e Non-financial criteria Recognizing the important role of non-financial crieria and using these criteria in actual operational efficiency of traffic construction enterprises under Ministry of Transport are so limit Originated from old business perspective, enterprises have not really focused on customer They still have perspective that sector’s products are single, so they have not paid attention to keep customer who has come to them, or they have not known the important role of training and enhancing business culture for employee, especially those who hand over the construction, therefore, expenditure for these works has not reasonable The writter gave a lot of survey questions to evaluate the effectiveness of the operational efficiency evaluation criteria to business administration, construction evaluation of the operational efficiency evaluation criteria of departments in enterprise, conformity and relationship of evaluation criteria 13 system of current operational efficiency to enterprise’s strategy, efficiency of the operational efficiency evaluation criteria system to the strategic implementation of enterprise, and evaluating the neccessary of completing the operational efficiency evaluation criteria system to help administrator to complete and implement the strategy However, the questions are rather difficult Besides, due to the limitation on awareness and result’s proven ability of the system, it is difficult to answer this question Answering this question depends fully on subjective evaluation of respondent 2.3 Comment on the operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport 2.3.1 Advantage Traffic construction enterprises under Ministry of Transport have applied the operational efficiency evaluation criteria of State–owned enterprise, operation result of Board of Directors, Board of Managers implement as regulation Beside using criteria under regulation in Decision No 224/2006/QG-TTg, some enterprises use other criteria to reflect the operational efficiency under business administration’s requirement such as criteria to reflect profitability efficiency, assets using efficiency, borrowed capital using efficiency, etc Some enterprises use some non-financial criteria to evaluate the operational efficiency of enterprise such as material waste rate compared to the norm, etc The calculation of above criteria is suitable for practice and general trend of enterprises Data resource using to gather and calculate above criteria base on financial statement of enterprise, so it is rather reliable Using rather full efficiency evaluation criteria with suitable determination method based on reliable information source partly help enterprises to supervise and evaluate the operational efficiencyof departments in enterprise as well as whole enterprise 2.3.2 Shortcomings Compared to the trend and efficiency evaluation pratice which international enterprises are applying, the operational efficiency evaluation criteria system of traffic construction enterprises under Ministry of Transport are disclosuring some following shortcomings: Evaluation criteria system is not comprehensive and full Most enterprises comply with the efficiency evaluation criteria under regulation in Decision No 224/2006/QD-TTg dated 06/10/2006 of Prime Minister and Clause 4, Section III, Circular No 115/2007/TT-BTC dated 25/9/2007 of Ministry of Finance However these criteria only reflect partly the business efficiency, not reflect comprehensively all enterprise’s operation Criteria used by enterprises outside the management agency’s regulation have reflected the operational efficiency of enterprise in respect of 14 profitability However, this is only short term operational efficiency evaluation criteria, not associated with long term strategic and target of enterprise Compared to standard of the efficiency evaluation criteria system which must have, targets in the efficiency evaluation criteria system of enterprise also have some following inadequacies: The operational efficiency evaluation criteria system of traffic construction enterprises under Ministry of Transport also focuses on financial criteria and bases on previous information Because they base much on previous information and have not contained elements affected importantly to the success of enterprise, the operational efficiency evaluation criteria which is used by these enterprises has little forecast ability for the enterprise’s success in the future The operational efficiency evaluation criteria is used by traffic construction enterprises under Minitry of Transport aslo mainly focuses on short term criteria Using short term criteria to evaluate the operational efficiency of enterprises and departments in the enterprises will lead administrator to care only short term result and improve action perspective for short term target This perspective can cause difficulty for enterprise in implementing the strategy and long term plan to enhance the competitive ability and position of the enterprise Efficiency evaluation criteria has not accompanised with the enterprise’s strategy: many enterprises have not strategy Enterprises who have strategy however the efficiency evaluation criteria has not accompanished with the strategy as well as the view, value and main successful elements and specific target of the enterprise In the operational efficiency evaluation criteria system of enterprises, there is little non-financial criteria reflecting internal business, it has not reflection criteria of customer aspect, awareness and development aspect The operational efficiency evaluation criteria is only constructed to evaluate the operational efficiency of whole enterprise, it has not criteria reflecting operation efficiency of lower department of enterprise Criteria used by traffic construction enterprises under Ministry of Transport have not strong mutual relationship Therefore, administrator can not see how to to improve the operational efficiency of the enterprises Criteria used in the enterprises mostly based on the previous information, it has not predicted effect Therefore, it has reduced partly the effect of criteria to enterprise adminstration operation Some enterprises use so much criteria, of which, there is unimportant criteria, sometimes, duplicated leading to reduce the concentration on criteria affected imporatantly to the success of the enterprise in the market 15 CONCLUSION OF CHAPTER Investigating the actual use of operational efficiency evaluation criteria of traffic construction enterprises shows that most enterprises concentrate on the operational efficiency evaluation of enterprises under Government’s regulation and some evaluation criteria of operational efficiency reflecting the view, strategic of enterprises as well as creteria reflecting the demand of customer and shareholder The operational efficiency evaluation criteria system of some enterprises contain so much criteria, therefore it will reduce the concentration of enterprise on important criteria Above limitation has reduced the role and effect of the operational efficiency evaluation criteria system of entrprises to enterprise’s administartion operation in specific and to user in general Therefore, it is necessary to complete the operational efficiency evaluation criteria system in traffic construction enterprises Chapter has evaluated the advantage and limitation of actual operational efficiency evaluation criteria use in traffic construction enterprises Above evaluation is important base to help the writter to give feasible recommendation, suiting for practice of traffic construction enterprises CHAPTER SOLUTIONS TO COMPLETE OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT 3.1 DEVELOPMENT ORIENTATION OF VIETNAM TRANSPORTATION SECTOR In the transportation development strategic from now to 2020, Ministry of Transport aslo specify: “ Transportation is an important part in economicsocial infrastructure, it should be priority to develop more than one step with high and stable speed to make prequisite for economic- social development, supporting the defense- military, serving for country industrializationmodernization” [6] About constructing Transportation infrastructure, the social- economic development strategy of Party from now to 2020 is: “ Concentrating investment sources to construct South- North highway, enhance available railway, construct urban railway system in big cities On planning base, prepare conditions to construct step by step South- North high-speed rail with suitable route, construct some seaports and modern airports; enhance and improve urban infrastructure in Hanoi and Ho Chi Minh City Establish 16 gradually synchrously South- North traffic road, West- East corridor to ensure link with transportation method; construct external roads reaching international standard” In order to implement this strategy, Party and State have given the target from now to 2020 is : improve available works, newly construct some important works serving for social- economic development of Center and local 3.2 THE NECESSITY IN COMPLETING OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT Traffic construction enterprises have important role in creating the traffic infrasture for country Using huge investment capital in transport sector requires traffic construction enterprises to control the business operation and use efficiently these assets Enterprises want to have good operational efficiency evaluation criteria system because good system not only helps enterprises to see important elements affecting to implement successfully strategy, but also focuses on important aspects in strategic implementation process, encouraging all human resources in enterprises to attend to strategic implementtion 3.3 VIEW ON COMPLETING OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT The completion of operational efficiency evaluation criteria in traffic construction enterprises should follow views and orientation as below: - The system should help the enterprise evaluate the operational efficiency both in short term and long term - The system should adhere to the enterprise’s strategies - The system should reflect important aspects in business as well as impact factors which decide the success of the enterprise - The system should allow of operational efficiency evaluation of various managerial levels of the enterprise - The system should create motivations, encourage individuals and groups of the enterprise to well performance in order to reach the strategic targets of the enterprise - The evaluation system is supposed not to result in negative effects of tested individuals, which prejuidice the enterprise - The built system should be feasible and appropriate to strategies and implementing capacity of the enterprise 17 3.4 REQUIRMENTS AND PRINCIPLES OF COMPLETING OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT 3.4.1 Requirements for operational efficiency evaluation criteria The operational efficiency evaluation criteria should explain the strategies of traffic construction enterprises in specific goals - The operational efficiency evaluation criteria should reflect aspects and principal factors affecting strategic implementation of traffic construction enterprises - The system should help enterprises anticipate the future, figure out the feasibility of realizing strategic targets of the enterprise - The criteria should balance between factors related to the enterprise’s operation - Benefits from the evaluation criteria system should outnumber implementing expenses 3.4.2 Principles to perfect the operational efficiency evaluation criteria in traffic construction enterprises - Accomplishment of the evaluation system should conform to the enterprise’s strategies - The criteria should link together in a cause and effect relationship - Not use far to criteria, which affects the concentration in the operation of the enterprise - It is necessary to have balance between criteria in the operational efficiency evaluation criteria - It raises a need to have proper criteria for each department, individual 3.5 USING THE BALANCED SCORECARD TO COMPLETE OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT The operational efficiency evaluation criteria in traffic construction enterprises of Ministry of Transport can be completed by many different ways However, when studying the model of assessing the operational efficiency of enterprises, the model of balanced scorecard of Kaplan and Norton proposed in 1992 proves to have the most advantages and being widely used by many enterprises in the world Applying the balanced scorecard to complete the operational efficiency evaluation criteria in enterprises has the following advantages: 18 - Avoid excessive focus on unnecessary targets and distracts the focus on the goals of the enterprise which having the importance in success of the strategy - Create the balance between the internal and external factors, between short-term and long-term objectives, between the financial and nonfinancial criteria, etc - Create the link between criteria under the causal relation, thus enable the administrators to forecast the operating results in the future - Traffic construction enterprises implement missions about building the high-quality transportation infrastructure to serve for the socioeconomic development of the country To carry out the missions, the enterprises must have appropriate business strategies to improve the operational efficiency and increase their competiveness in the market in the condition of international economic integration 3.5.1 Vision, Mission, and business strategy of trafffic construction enterprises under Ministry of Transport Currently, beside some traffic construction enterprises identified their vision, mission, many other ones have not noticed this issue Similarly, the Enterprises have not identified their own business strategy However, doing business in the highly competitive and deeper integration economy into the regional and international economy, the enterprises expect to be enhanced the competitiveness to stabilize and develop in the market Achieving this strategic target requires the enterprises to increase the quality of goods, handover the works in time, efficiently use the execution techniques, save the costs, reduce the price, and increase the profits These are short-term objectives of the enterprise To assess the implementation of these targets, the enterprise needs to have operational efficiency evaluation system for the whole enterprises as well as for each department 3.5.2 Building the balanced scorecard to apply in traffic construction enterprise under Ministry of Transport To assess the operational efficiency in traffic construction enterprise, it is necessary to build a balanced scorecard for traffic construction enterprises under Ministry of Transport These are the operational efficiency evaluation criteria in the long-term and short-term period together with the link criteria under the casual link; which are classified into four following groups: 3.5.2.1 Criteria assessing the awareness and development aspects Criteria assessing the awareness and development often use the criteria including the annual trained employee number, the number of employees participating in the new execution training course, the number of employees participating in the responsibility training course between the enterprise and the society, the number of employees participating in the training course of 19 business culture, the number of employees participating in the training course of labor safety, etc 3.5.2.2 Criteria assessing the internal process These criteria reflect that how the enterprise is improved to bring the expected values of the customers Basing on the knowledge and skills of the employees through training and education courses, the enterprise improves the execution methods to reduce the completion time, save the costs and improve the quality of construction Thanks to good coaching, spirit and attitudes of employees when communicating with the customers are improved The customers feel comfortable when received attentive services together with proper behavior of the employees The criteria assessing the internal processes of the enterprise can be: Criteria on innovations and creativity in execution method; criteria on cost savings, criteria for quality improvement, hand-over project time, and criteria on attitude to customers, etc 3.5.2.3 Evaluation criteria on the aspect of customers The customers of these enterprises are investors Investors of transport constructions can be the Government (Ministry of Transport), People’s Committee of provinces, owners of industrial zones, etc The investors usually establish project management board to directly sign the contract, supervise the progress, and manage the quality of constructions Investors concern about time of construction, price, and quality of construction Thus, to satisfy these investors, the enterprises building the transport constructions have to handover the construction in time with competitive price and high quality Criteria which need to be used to evaluate the satisfactory of customer are as follow: The enterprises are evaluated as successful ones when the number of loyal customers is increased, annually the enterprises have new customers, and the number of leaving old customers is decreased The evaluation criteria on the aspect of customers will include: the increasing number of new customers; the decreasing number of leaving old customers; the rate of satisfactory customers of the quality of construction; the rate of satisfactory customers of the price of the construction; the rate of satisfactory customers of time of handing over the construction; the rate of satisfactory customers of serving attitudes of staffs, etc 3.5.2.4 Criteria to assess financial aspect Finance factor reveals the final operation results of the enterprise These results are expressed via financial efficiency criteria namely: revenue, profit, return on assests (ROA), return on equity (ROE) 20 Aspects Finance Targets A rise in revenue and profit - Retain existing customers - Add new clients Meassure Net profit, ROI, ROA, ROE - The proportion of satisfied customers; proportion of satisfied customers on construction price; time of handing over the construction; serving attitude, quantity of Customers contracts signed with customers - Upgrade - Number of methods, initiatives applied on executing methods execution - Shorten - Proportion of early construction handcompletion time over; punctual construction hand-over; overdue hand-over; troubleshooting time (repair damaged construction) - Save expenses - Ratio of successful decrease of construction charge year-on-year - Decrease selling - Ratio of decreasing selling price compared price to previous year for unit Internal - Foster - Ratio of redone- works (counting on m2) process construction - Ratio of construction repairing costs out of quality executing costs - Boost serving - The number of customers’ complaints quality against serving attitude -Improve - The quantity of staffs is trained annually qualifications and The Quantity of staffs takes part in training skills; equip staffs courses on new executing techniques with necessary Perception knowledge, skills and - Equip staffs with - The number of staffs participates in development business culture training courses on reponsibility toward the corporate and society; courses on business culture; labour safety - Attract, retain - Quantity of staffs whose scale, salary and good labour average salary are increased, etc 3.5.2.5 The casual relation between the targets Criteria linked together base on the causal relation A change in one criterion will be followed by a change of other criteria The relation among four criteria can be illustrated in the following balanced transcript: 21 F I N A N C E C U S T O M E R I N T E R N A L P R O C E S S ROA, ROS, ROE, ROI… (+) Increase in revenue ( + ) Decrease in expense ( - ) Increase in number of labor contract ( + ) Customer’s satisfaction Customer’s satisfaction Customer’s satisfaction of construction time (+) of work quality (+) of service attitude (+) Shortening of Decrease in the proportion Decrease in the number of construction transfer (-) of technical errors (-) complaints about service attitude (-) Shortening of construction time (-) Increase in the number of initiatives and innovations in the construction ( + ) Number of employees AWAE NESS & DEVE LOP MENT Number of employees with signed labor contract training skills are educated business culture (+) (+) Labour’s high salary (+) Figure 3.1: Proposed balanced diagram for traffic construction enterprises 22 3.5.3 Establish operational efficiency evaluation criteria for key departments in the Enterprise Traffic construction enterprises usually are organized into departments such as technical department, finance – plan department, material department, department of personnel organization, finance – accounting department, and executive units According to the functions, the departments take over advisory works related to different fields, thus it is necessary to develop the criteria to evaluation the effectiveness of operation in accordance with functions, duties of these departments As mentioned, the highest expression of business’s effectiveness is performance Therefore, the dissertation has developed specific criteria for each functional department in the enterprise, including: 3.5.3.1 Efficiency evaluation criteria of technical department - The number of staffs attended in training courses - The number of technical solutions which are suggested - …… 3.5.3.2 Efficiency evaluation criteria of material department - The rate of saving the price of selling materials - Number of days to stop the production due to lack of materials - …… 3.5.3.3 Efficiency evaluation criteria of economy – plans department - The value of signed contracts - The rate of cost savings in comparison with estimates 3.5.3.4 Efficiency evaluation criteria of personnel department - The number of staffs who are trained - The rate of saving the costs of recruitment, training and costs of operation in comparison with estimates 3.5.3.5 Efficiency evaluation criteria of financial accounting department - Number of days to be stopped the operation due to lack of capital - Number of days when wage are delayed - …… 3.5.3.6 Efficiency evaluation criteria of executive units - The number of initiatives, technical improvements are applied - The number of days when the construction is took over before term 23 3.6 NECESSARY CONDITIONS TO PERFORM SOLUTIONS TO PERFECT OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT OF VIETNAM 3.6.1 On the business side In term of perception: the leaders of the enterprises need to consider operational efficiency evaluation criteria as a tool to help enterprises to control and implement strategy targets rather than to report the achievements This awareness will help the enterprises to evaluate the substance of performance, to avoid formalism In term of organization: the enterprises need to well organize the information system to manage the enterprise, especially in accounting system It is necessary to organize management accounting system of the enterprises well, especially in responsible accounting to supply the suitable, dependable, and timely information to the administrators The enterprises need to build scientific and reasonable ascertaining and estimating systems Analysis of gap between estimates and costs controlling should be respected The companies need to care to train, improve the knowledge of managing the businesses to administrators and staffs 3.6.2 On the government side It is necessary to change operational efficiency evaluation criteria which are suitable with general global tendencies The criteria should be stick with strategy targets of the enterprises Need to avoid criteria of performance which are not stick with business strategy or can lead to damage to the enterprises The government should have supporting policies to improve the knowledge about management and business to strengthen the competiveness of the enterprises CONCLUSION OF CHAPTER Due to orientation of development of transport sector and necessity of successfully performing the strategies of the traffic construction enterprises, this dissertation has specified the point of views and suggested the solutions to perfect operational efficiency evaluation criteria in these enterprises under Ministry of Transport To implement these solutions, necessary conditions to perfect operational efficiency evaluation criteria have been suggested in this dissertation Due to the difference in business strategies, the perfection and developing the general efficiency evaluation criteria of the enterprises is very difficult However, the general targets of these enterprises are building the high quality traffic construction with lower price in shortest time; the 24 development of operational efficiency evaluation criteria for these enterprises can be done CONCLUSION To implement developing strategies of transport to the year of 2020, in the vision to 2020, the traffic construction enterprises have to use effectively existing limited resources Evaluation criteria not only helps to evaluate the situation and performance in the past but also to estimate the success of the enterprise in the future Spontaneously, evaluation criteria not only helps the enterprises evaluate and find out the solutions to improve the short term performance, but also to achieve the long term success and implement successfully the strategic targets of the companies Based on these targets, this dissertation has achieved some following results: Firstly, the dissertation has mentioned the theoretical base of performance and evaluation of performance in the enterprise Thus, firstly the dissertation has clarified the performance and evaluation of performance in the enterprises; then, the roles of evaluation of performance in the enterprises and evaluation criteria system in the enterprise Secondly, the dissertation has conducted a survey of status of using operational efficiency evaluation criteria of the traffic construction enterprises Basing on the results, the dissertation has evaluated the advantages as well as the limitations of the real situation of using operational efficiency evaluation criteria of these enterprises The author realized that the perfection of evaluation criteria of performance in these enterprises is necessary Thirdly, due to the urgent demand of perfection of operational efficiency evaluation criteria in traffic construction enterprises under the Ministry of Transport, the dissertation has specified the point of views and suggestion of the solutions to perfect operational efficiency evaluation criteria in these enterprises The solutions suggested by the author are feasible, but it is necessary to have some conditions to perform the solutions Thus, the author also has mentioned the conditions which help to perform the solutions of perfecting operational efficiency evaluation criteria in the dissertation  ... CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT The operational efficiency evaluation criteria in traffic construction enterprises of Ministry of Transport can be completed... criteria in traffic construction enterprises under Ministry of Transport Chapter 2: Real situation of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry. .. trading, travel, etc Main business activities of traffic construction enterprises include: - Construction of traffic works: this is the main business operation and nature of tradition in traffic