Implementation of balanced scorecard for performance evaluation of construction department of phutho tourist limited company

UNIVERSITE OUVERTE DE HCMV UNIVERSITE LIBRE DE BRUXELLES ECOLE DE COMMERCE SOLVAY MMVCFB PROGRAMME DE MAITRISE EN MANAGEMENT VIETNAM-COMMUNAUTE FRANCAISE DE BELGIQUE HOANG VAN BA IMPLEMENTATION OF BALANCED SCORECARD FOR PERFORMANCE EVALUATION OF CONSTRUCTION DEPARTMENT OF PHUTHO TOURIST LIMITED COMPANY MASTER DEGREE THESIS IN MANAGEMENT MMVCFB 6 HO CHI MINH CITY 2007 Implementation of Balanced Scorecard for Performance Evaluation ii of Construction Department – Phu Tho Tourist Co., Ltd TABLE OF CONTENTS Page Pledge Acknowledgement Comments of Professors Abstract i Table of Contents ii Abbreviations viii List of Figures ix List of Tables xi List of Appendices xi INTRODUCTORY CHAPTER A. General 1 B. Problem statement 1 C. Objective of research 2 D. Methodology of research 3 E. Scope of research 3 CHAPTER 1 LITERATURE REVIEW 1.1 Organization Strategy Management 5 1.1.1 Strategy 5 1.1.2 Strategic planning 6 1.1.3 Control 6 Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation iii of Construction Department – Phu Tho Tourist Co., Ltd 1.1.4 Management Control 8 1.2 Management Control system 10 1.2.1 Management Control System and Organizational Goals 10 1.2.2 Designing Management Control System 12 1.2.2.1 Working with the Organization Structure 12 1.2.2.2 Identification of responsibility centers 13 1.2.2.3 Development of measures of performance 13 1.3 Balanced score card: 14 Strategic and performance management system 1.3.1 Balanced scorecard –BSC 14 1.3.1.1. The origin and meaning of BSC 14 1.3.1.2. Why enterprise need the BSC 15 1.3.2 Strategic management system 15 1.3.3 Measurement and evaluation 17 1.3.4 Performance management system 18 1.3.4.1 Performance management cycle 18 1.3.4.2 Performance Management Technique 19 CHAPTER 2 METHODOLOGY & OBJECTIVE OF RESEARCH 2.1. Methodology 23 2.1.1 General 23 2.1.2 Methodology framework 23 2.1.3 Corporate vision and strategy clarification 26 2.1.4 Selecting Business unit 26 Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation iv of Construction Department – Phu Tho Tourist Co., Ltd 2.1.5 Business unit strategy clarification 26 2.1.6 Business unit KPI development 27 2.1.7 Business unit KPI validation 28 2.1.8 Preparation of data collection 28 2.1.9 Business unit KPI data collection 28 2.1.10 Business unit KPI evaluation 28 2.1.11 Business unit performance analysis 29 2.1.12 KPI concept evaluation 29 2.1.13 Conclusion 29 2.1.14 Recommendation for further study 29 2.2 Construction Department - Phu Tho Tourist 29 2.2.1 Introduce 29 2.2.2 Summary of business actives 30 2.2.2.1 Main product 30 2.2.2.2 Result of business activities 30 2.2.3 Organization Chart 31 2.2.4 Existing problems 31 2.2.5 Construction department 32 CHAPTER 3 CORPORATE STRATEGY FORMULATION, KEY PERFORMANCE INDICATOR, ANALYSIS AND EVALUATION PERFORMANCE 3.1 Corporate Strategy Formulation 33 3.1.1 General 33 3.1.2 Corporate vision and strategy clarification of Phu Tho Tourist 33 Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation v of Construction Department – Phu Tho Tourist Co., Ltd 3.1.2.1 Planning 33 3.1.2.2 Implementation 34 3.1.2.3 Result 34 3.1.2.4 Evaluation 35 3.1.3 Selecting Business unit 36 3.1.4 Construction department strategy clarification 36 3.1.4.1 Planning 36 3.1.4.2 Implementation 36 3.1.4.3 Result 37 3.1.4.4 Evaluation 38 3.2 Key performance indicator development 38 3.2.1 General 38 3.2.2 KPIs development of construction department 38 3.2.2.1 Planning 38 3.2.2.2 Implementation 38 3.2.2.2.1 Translate strategy of construction department 38 3.2.2.2.2 Develop Construction Department Strategic map 40 3.2.2.3 Develop business unit KPI 41 3.2.2.4 Planning 43 3.2.2.5 Implementation 44 3.2.2.5.1 Finalize construction objective 46 3.2.2.5.2 Finalize construction department KPIs 51 3.2.2.5.3 Develop KPIs weighting 52 3.2.2.6 Evaluation 58 Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation vi of Construction Department – Phu Tho Tourist Co., Ltd 3.3 Performance evaluation, analysis 58 3.3.1 General 58 3.3.2 Preparation of data collection 59 3.3.2.1 Planning 59 3.3.2.2 Implementation 59 3.3.3 Business unit KPIs data collection 62 3.3.3.1 Planning 62 3.3.3.2 Implementation 62 3.3.3.3 Result 62 3.3.4 Business unit KPIs Evaluation 63 3.3.4.1 Planning 63 3.3.4.2 Implementation 64 3.3.4.3 Result 64 3.3.5 Construction department performance Analysis 64 3.3.5.1 Planning 64 3.3.5.2 Implementation 65 3.3.5.3 Calculation technique and result 68 3.3.5.4 Construction department performance analysis 73 3.3.6 KPI concept evaluation 79 3.3.6.1 Planning 79 3.3.6.2 Implementation 80 Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation vii of Construction Department – Phu Tho Tourist Co., Ltd CHAPTER 4 CONCLUSIONS AND RECOMENDATION 4.1. Summary of implementation process 82 4.2. Results and provident recommendation 82 4.2.1. Results 82 4.2.2. Improvement recommendation 83 4.3. Investigation of balanced scorecard implementation problem 84 4.4. Recommendation for BSC concept implementation problem 85 4.5. Recommendation for further study 89 References Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation viii of Construction Department – Phu Tho Tourist Co., Ltd LIST OF ABBREVIATIONS ABBREVIATIONS MEANING ¬ BSC Balanced Scorecard ¬ Construction Dept Construction Department ¬ KPI Key performance indicator ¬ KPIs Key performance indicators ¬ HCMC Ho Chi Minh city ¬ Phu Tho Tourist Phu Tho Tourist limited company ¬ USA United state of American ¬ VND Vietnam Dong Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation ix of Construction Department – Phu Tho Tourist Co., Ltd LIST OF FIGURES Figure 1.1 Management process 7 Figure 1.2 Element of the Control Process 8 Figure 1.3 Frameworks for Strategy Implementation 9 Figure 1.4 The Management control system 10 Figure 1.5 Managing Strategy: Four Processes 17 Figure 1.6 The Stages of Performance Management 19 Figure 1.7 The Balanced Scorecard Links Performance Measures 21 Figure 1.8 Cause and effect relation in balanced scorecard 22 Figure 2.1 Methodology Frameworks 25 Figure 2.2 Organization chart of Phu Tho Tourist 31 Figure 3.1 Corporate vision and strategies 35 Figure 3.2 Strategies of Construction Department 37 Figure 3.3 Translation Construction Department Strategy 40 Figure3.4 Preliminary Business Unit Strategic Map 41 Figure 3.5 KPIs valuation process 43 Figure 3.6 Business unit strategic Map 47 Figure 3.7 KPI weighting 58 Figure 3.8 Finance perspective performance scale 73 Figure 3.9 Customer perspective performance scale 75 Figure 3.10 Internal business process perspective performance scale 76 Figure 3.11 Learning and Growth perspective performance scale 78 Figure 3.12 Overall performance scale of construction department 79 Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation x of Construction Department – Phu Tho Tourist Co., Ltd LIST OF TABLES Table 2.1 Revenue in past five years 30 Table 3.1 Preliminary Business Unit KPIs 42 Table 3.2 Summary result from KPIs validation 45 Table 3.2 Summary result from KPIs validation (continue) 46 Table 3.3 Construction dept goal and objective due to finance perspective 48 Table 3.4 Construction dept goal and objective due to customer perspective 49 Table 3.5 Goals and objective due to internal business process perspective 50 Table 3.6 Goal and objective due to Learning and Growth perspective 51 Table 3.7 Construction department KPIs 52 Table 3.8 Summary of KPIs weighting 57 Table 3.9 Construction department KPIs Source of data 60 Table 3.9 Construction department KPIs source of data (continue) 61 Table 3.10 Summary result collecting data of KPIs 63 Table 3.11 Result KPIs Evaluation 66 Table 3.11 Result KPIs Evaluation(continue) 67 Table 3.12 Performance scale calculation 71 Table 3.12 Performance scale calculation (continue) 72 Table 3.13 Finance perspective performance scale 73 Table 3.14 Customer perspective performance scale 74 Table 3.15 Internal business process perspective performance scale 76 Table 3.16 Learning and Growth perspective performance scale 77 Table 3.17 Overall performance scale of construction department 79 Table 4.1 The summary of Problem Identification and Recommendation 88 Master Degree Thesis in Management [...].. .Implementation of Balanced Scorecard for Performance Evaluation of Construction Department – Phu Tho Tourist Co., Ltd xi LIST OF APPENDICES Appendix A: Validation of KPIs of Construction Department Appendix B: The result of validation of KPIs of Construction Department Appendix C: Weight analysis of KPIs of Construction Department Appendix D: Data collection form Appendix E: Result of KPIs... the performance through KPIs Stage four: Conclusion and Recommendation Conclusion Recommendation for the further study E Scope of research Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation of Construction Department – Phu Tho Tourist Co., Ltd 4 Study focus on balanced scorecard to evaluate the performance of Construction department – Phu Tho Tourist limited. .. they can understand better of using resources The result of performance is factor to conference to allocating the resources in the future of Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation of Construction Department – Phu Tho Tourist Co., Ltd 2 company The performance measurement will help to increase the operation effect of company Due to the importance... F: Performance scale Master Degree Thesis in Management Implementation of Balanced Scorecard for performance evaluation of Construction Department – Phu Tho Tourist Co., Ltd PLEDGE I pledge that this thesis is my research work The data and results which were presented in the thesis are absolutely honest Hoang Van Ba Master Degree Thesis in Management Implementation of Balanced Scorecard for performance. .. Management Implementation of Balanced Scorecard for Performance Evaluation of Construction Department – Phu Tho Tourist Co., Ltd 3 Development of KPIs implementation D Methodology of research Methodology of study combines many methodologies which become unifying methodology Basing on balanced scorecard concept, collecting data, figure, interviewing managers, quantitative analysis, form the steps of study... Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation of Construction Department – Phu Tho Tourist Co., Ltd 11 The purpose of performance measures is to set direction and to motivate managers Targets for goals are specific quantified levels of the measures As we can see, goals and their related performance measures are very broad In fact, they are often too vague to guide... Dixon (1999) achieved Master Degree Thesis in Management 14 Implementation of Balanced Scorecard for Performance Evaluation of Construction Department – Phu Tho Tourist Co., Ltd Performance Measure Questionnaire – PMQ to survey performance measurement, etc In 1990, Kaplan and Norton introduced balanced scorecard theory as a tool to measure performance including four aspects: finance, customer, integration... Management Implementation of Balanced Scorecard for Performance Evaluation of Construction Department – Phu Tho Tourist Co., Ltd 15 aspects But why balance? This is because there is a balance between short and long term goals, between leading indicators and lagged behind indicators, and between internal performance and external performance The focus of BSC is to find the key indicators for the business performance. .. translates organization vision through a key performance indicator (KPI), which can be used to evaluate and benchmark the performance of each function or very detail as each person perform Master Degree Thesis in Management Implementation of Balanced Scorecard for Performance Evaluation of Construction Department – Phu Tho Tourist Co., Ltd 20 The balanced scorecard enabled companies to track financial... key performance indicators- KPIs Developing key performance indicators - KPIs: to deploy business unit strategy into balanced scorecard aspects, strategic relation map, key performance indicators Quantify, develop key performance indicators of business unit Step 3: Development of key performance indicators implementation: Preparing and collecting data of KPIs Quantifying KPIs Analyzing performance of . Implementation of Balanced Scorecard for Performance Evaluation 4 of Construction Department – Phu Tho Tourist Co., Ltd Study focus on balanced scorecard to evaluate the performance of Construction. Management Implementation of Balanced Scorecard for Performance Evaluation xi of Construction Department – Phu Tho Tourist Co., Ltd LIST OF APPENDICES Appendix A: Validation of KPIs of Construction. DE BELGIQUE HOANG VAN BA IMPLEMENTATION OF BALANCED SCORECARD FOR PERFORMANCE EVALUATION OF CONSTRUCTION DEPARTMENT OF PHUTHO TOURIST LIMITED COMPANY MASTER DEGREE THESIS