improving quality and performance by transfroming from functional structure to process based structure at serenco company

HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT MBQPM5 PHẠM VĂN THUẬN IMPROVING QUALITY AND PERFORMANCE BY TRANSFROMING FROM FUNCTIONAL STRUCTURE TO PROCESS - BASED STRUCTURE AT SERENCO COMPANY MASTER FINAL PROJECT MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT Tutor: Jacques Martin Ho Chi Minh City (2016) Statement of Authentication I certified that this report is my own work and this work has not been presented elsewhere for assessment All materials and resources used in this report have been properly acknowledged and referred Acknowledgements I would like to thank Professor Jacques Martin and other professors form Solvay Program for providing me good knowledge and materials about quality and performance I would like to thank my classmates for their helps during class time and during my doing the assignment I would also like to thank my colleagues at Serenco for their support me in getting information and reports Academic tutor and practical tutor’s comments Table of Contents INTRODUCTION 1  1.  Company Overview 1  2.  Challenges for STECH 4  3.  Project objectives and scopes 4  Chapter ANALYSING THE CURRENT SITUATION OF STECH 6  1.  The organization structure analysis 6  2.  Process management analysis 9  3.  Analysis the business results in quality and performance 10  Chapter – ORGANIZATION TYPES AND THE CHOICE OF STECH 13  1.  Types of Organizational structure 13  2.  The choice for STech 18  3.  The roadmap for transforming from functional to process - based structure 19  Chapter – STRATEGY ANALYSIS, DEVELOPMENT AND PLANNING 20  1.  Strategy Analysis 20  2.  Strategy development 24  2.1  Strategy statement 24  2.2  The strategy map 25  Strategy map comments 26  3.  Planning 27  Chapter – DESIGN CORE PROCESSES 28  1.  Develop core processes 28  2.  Process flow chart 34  Chapter - RE-DESIGN THE ORGANISATIONAL STRUCTURE 37  1.  Changing the organization structure 37  2.  Change in roles and responsibilities 38  3.  Aligning processes and organizational structure 39  Chapter – PROCESS IMPLEMENTATION PLAN 41  1.  Implementation process 41  2.  Development of process management tools 41  Chapter – MEASUREMENT & DASHBOARD 43  1.  Performance management approach 43  2.  Process measurement 44  3.  Performance summary report 51  CONCLUSIONS 52  1.  The application and usefulness of the project 52  2.  What are the next steps 52  List of Abbreviations BSC Balanced Scorecard ERP Enterprise Resource Planning IT Information Technology SBU Strategy Business Unit KPI Key Performance Indicator QMS Quality Management System TQM Total Quality Management List of pictures Figure 1: Current organization structure of Serenco  . 2  Figure 2: New organization structure of STech   6  Figure 3: Current process structure   9  Figure 4: example of functional structure   13  Figure 5: example of Divisional structure   14  Figure 6: Example of matrix organization  . 16  Figure 7: example of process-based organization   17  Figure 8: Transition model for Serenco   19  Figure – Porter five forces model   23  Figure 10: The strategy map of sTech  . 25  Figure 11: General process mapping   32  Figure 12 – Detail Process mapping   33  Figure 13 - Sales process flow chart  . 34  Figure 14 - Purchasing process flow chart  . 35  Figure 15 - Customer support process flow chart   36  Figure 16 - New organizational structure for sTech   37  Figure 17 - Processes - based structure   39  Figure 18 - Performance management approach   43  Figure 19 - Process ID card for sales process  . 44  Figure 20 - Process metric for sales process   45  Figure 21 - Process ID card - Order fulfillment  . 46  Figure 22 - Process metric for order fulfillment - on time delivery  . 47  Figure 23 - Process metric for order fulfillment – Cost effective   48  Figure 24 - Process ID card - Customer support   49  Figure 25 - Process metric - Customer service process  . 50  List of tables Table 1: List of products and services  . 3  Table 2: List of customer  . 4  Table 3: Current management team   8  Table 4: Financial report   11  Table 5: On time delivery report  . 11  Table - Quaterly reports (Q1)  . 51  INTRODUCTION Company Overview 1.1 Serenco Company Serenco is a small company founded in 2004 and specialized in software development and hardware supplying and IT services The main market of Serenco is local banking industry From the year of 2014, to adapt to the tough market, the company top management had reorganized company structure and products The company has three main product categories which organized in three SBUs: - SBank: The key business unit of Serenco which providing banking software and services for local market - sTech: Focuses on IT Infrastructure services such as network installation, Surveillance system, Alarm system, - sSoft: Focuses on providing software outsourcing service to foreign market (US & Japan) Each of the three SBUs have different products, different customer sectors and have its own strategy to develop Serenco also have a Support Division to provide support services to all three SBUs, including: - Accounting & financial service - Administrative and human resource - Planning and marketing Serenco organization chart: 39 Aligning processes and organizational structure Executive Board sTech Director sales Team Purchasing Team Technical Team CS Team Marketing process Sales  process  manager Marketing  Process  manager Marketing Team Project  manager  Sales process Order fulfilment process CS  process   manager Customer support process Accounting process Admin - HR process Chief Accounting  Admin – HR Manager  Support Director Figure 17 - Processes - based structure 40 The main activities of sTech’s business are now organized in core processes The process team members are from functional teams and in charge of specific tasks in the process The process members will report to Process manager who is the pilot of the process Al of these processes are started from customers and ended at customers This will help the process teams focus on the satisfying customers This also a critical factor for sTech to become a customer focused organization 41 Chapter – PROCESS IMPLEMENTATION PLAN Implementation process After complete defining all core processes, sub processes, we go to the implementation phase to make the processes works We did the implementations steps by step: 1) Established an implementation team with members come from different functional departments 2) Get supports from all levels of managements (Team leaders, functional manager, Director,) to make sure there will be no obstacle for implementing new processes 3) Establish policies supporting for processes in order to perform day to day business, such as new corporate structure, quality policy… 4) Training all employees and managers to make sure everyone understand clearly about the process 5) During implementation process, the team will adjustment to processes to make sure they are best fit to the real works 6) Auditing: To make sure processes are used and every people in the company are following process requirements Development of process management tools To support process management, sTech has Implemented ERP software named Odoo Erp This is an open source software and implemented by inhouse software team The ERP software has helped the implementation team in many ways: 42 - Most of the processes will be mapped and presented in the ERP software to help everyone in the company to follow - Process manager can easily control the whole process and knowing exactly which tasks are active, which tasks are overdue and who are responsible for… - Measurement will be installed in ERP software and automatically retrieve and calculate the data - Reports and dashboards are defined and setup in ERP software and everyone can access at any time 43 Chapter – MEASUREMENT & DASHBOARD Performance management approach                 STRATEGY Strategy KPI & (Balanced scorecard) Dashboard PLANNING Business (Business plan) Performance report EXECUTION Process mesurement Reporting & feedback process   Planing & implementation process   (Processes)   Figure 18 - Performance management approach   1) The planning & implementation process starts from the company strategy then translated into planning (objectives and milestones) and execution (processes) 2) The reporting & feedback process will be in a reverse direction It starts from measurement the processes and goes up to planning and strategy 44 Process measurement 2.1 Sales Process Process ID card Process: Sales Date of review: 31th March, 2016 Pilot: Sales manager Process goals: 1) Increase success rate Company goals: P1 Increase sales & marketing efficiency F2 Increase revenue Requirements Entry data Customer needs Suppliers Marketing, Customers Customer Customers Exit Data Sales contract, Tech specs Measures and monitoring Target 50% success Metrics Critical points Responsible sales Percentage of sale Prepare proposal & Sales success quotation   Figure 19 - Process ID card for sales process manager 45 Process Metrics Metric: Sales success rate Metric name: Sales success rate Positioning Technical features Process/Activity Sales Unit % Sphere of responsibility Sales team Measurement frequency Monthly Personal responsibility Sales Manager Data Collection CRM software In which dashboard Sales & marketing report Data Origin Reporting Level: Director, Sales Recipients/diffusion manager, sales list: team Review: Director Way of collect Data extract Way of presentation Bar chart Difficulty to implement Metric signification Follow up No of closed deals Calculation formula Warning threshold =85%) 2) Reduction in Implementation cost Company goals: F1 Increase profit C1 Increase customer satisfaction P1 Increase process efficiency Requirements Entry data Sales Suppliers contract + Sales team Customers Customer Customer requirements Exit Data Customer acceptance Measures and monitoring Target 80% Metrics Critical points On-time On-time delivery rate delivery Responsible Project Manager 90% cost effective Project Cost effective: Real cost/ sale estimated cost Figure 21 - Process ID card - Order fulfillment Manager 47 Process Metrics Metric 1: On-time delivery Metric name: On-time delivery Positioning Technical features Process/Activity Order fulfillment Unit % Sphere of responsibility Purchasing team, technical team Measurement frequency Monthly Project management software Personal responsibility Project Manager Data Collection In which dashboard Operation report Data Origin Reporting Level: Director, Sales Recipients/diffusion manager, list: purchasing team, technical team Review: Director Way of collect Data extract Way of presentation Data & chart Difficulty to implement Metric signification Follow up No On-time delivery Calculation formula Warning threshold 100% Definition Retroaction No Related objectives Tool assessment Calculation formula Sale estimated cost   Figure 23 - Process metric for order fulfillment – Cost effective   49 2.3 Customer support process Process ID card Process: Customer support process Date of review: 31th March, 2016 Pilot: CS manager Process goals: 1) Reduce response time Company goals: C1 Increase customer satisfaction P1 Increase process efficiency Requirements Entry data Customer Suppliers support Customers Customers Customer Exit Data Problems solved requests Measures and monitoring Target Metrics hours average Average response time time Critical points response First Responsible technical CS Manager response Figure 24 - Process ID card - Customer support 50 Process Metrics Metric: Average response time Metric name: Response time Positioning Technical features Process/Activity Customer support Unit Hours Sphere of responsibility CS Team, technical team Measurement frequency Monthly Personal responsibility CS Manager Data Collection CRM software In which dashboard Operation Report Data Origin Reporting Level: Director, Sales Recipients/diffusion manager, CS team, list: technical team Review: Director Way of collect Data extract Way of presentation Data & chart Difficulty to implement Metric signification Calculation formula Summary of response time Follow up Warning threshold  hours Total requests Definition Retroaction Related objectives Tool assessment No   Figure 25 - Process metric - Customer service process     51 Performance summary report We design the performance report to review our plan every quarter Below is the report for 1st quarter of 2016 Objectives Metrics Unit Target 2016 F1 Increase Net profit net profit margin Q1 Q1 %/ Q1 %/Q1 Plan actual Plan 2015 2015 % 5% 4% 4.5% +13% N/A Year profit Mil 2,300 400 450 +13% N/A (before tax) VND 10,000 10,000 0% 7,000 margin F2 Increase Revenue in Revenue increase Year revenue % 15% Mil 46,000 +43% VND C1 Customer Customer satisfaction satisfaction Index P1 Operation Processes cost/ total efficiency revenue Rate of on- % 80% % 7% 8% 8% 0% N/A % 85% 78% 79% +1% 76% % 20% 10% 9% (-10%) N/A time delivery P2 Sales & % of sales Marketing from new efficiency customers …   Table - Quaterly reports (Q1) +4% 52 CONCLUSIONS The application and usefulness of the project - The business environment is changing very fast and its push sTech’s management team to re-engineer the sTech works and processes So process based organization is the best choice for sTech - The transition process has changed sTech completely from structure, staff roles and responsibilities, measurement and reporting, and working culture - New structure and processes have help sTech retrieve best result in product & service quality and in business performance - Process-based structure also helps sTech success in changing from trading focus to services focus - In addition, the most important result is to help sTech become more flexible and adaptable to the uncertain and changing business environment What are the next steps - To make the processes more effective and efficient, STech has to implement the process improvement and make it become a regular works - Process based organization is the first step for STech on the road to be excellent STech should plan for implementing QMS and then the TQM This will help sTech has good preparation for joining to global market as the goal set by Serenco’s top management References [1] Marlon Dumas , Marcello La Rosa, Jan Mendling, Hajo A Reijers 1998, Fundamental of process management, published by Springer [2] Pat Dowdle, Jerry Stevens, Dennis C.Daly 2007 Process based management at work in an organization, published by Thomson/Ria [3] Tomislav Hernaus, 2008, Process – based Organization design model: Theory review and model conceptualization [4] Wim P.M Vanhaverbeke and Huub M.P Torremans July 1998, Organizational structure in process based organizations [...]... and gaining customer satisfaction - Processes – based will help sTech to better use resources and reduce the operation cost, hence increasing competition ability and getting better business performance 19 The roadmap for transforming from functional to process based structure Transitioning an organization from functional structure to process- based structure is not easy The company has to choice the... specialization innovation product and 17 1.4 Process- based structure The process structure divides up the organization around processes, such as research, manufacturing and sales Unlike a purely functional structure, a process- based organization considers how the different processes relate to each other and the customer The sales process doesn't begin until the manufacturing process produces something to. .. products and services To make this strategy in action, sTech has to change the organization structure and process- based structure is the best choice Some reasons for this choice: - Process- based structure will help sTech to adapt to the rapidly change and uncertain business environment - New structure will enable the trends to customer-oriented organization; this is the key factor for quality improvement and. .. research and development to create the product Process- based structures are geared to satisfying the customer the end result of all the processes but they only work if managers understand how the different processes interact Figure 7: example of process- based organization Advantages Disadvantages - Dramatic - Threatening to middle - Business environment improvement of speed and efficiency - Adapts to. .. margin and Increase revenue - To increase margin, STech increase Customer satisfaction and implementing process efficiency - To increase the revenue, STech implement 2 objectives in customer’s perspective They are: Increase customer satisfaction and increase sales and marketing efficiency - To achieve Customer satisfaction, STech needs support from process efficiency - To achieve processes efficiency and. .. issues in business performance and it needs to be restructured to solve all these issues This is because: - Business environment is now changing very fast, so functional structure become an obstacle for the - Communication and collaboration are becoming key factors for improving service quality Beside, Top management have defined the strategy of sTech is improving processes and management to provide excellent... very fast and it requires sTech to be more adaptable and flexible if it wants to survive 3 Project objectives and scopes 3.1 Objectives - Adapting the company organization structure and management to help the company to faster react to the rapidly changing in the market - Improve supply chain management to help the company become more competitive advantages 5 - Improving the company performance to help... organization is and resources within duplication the resources, skills and division are of coordinated toward an expertise overall outcome division has its own functions as each very large in size - Business environment is dynamic and always in flux - Multiple products and customer types exist 1.3 Matrix structure The matrix structure is often overlaid on top of a company' s functional structure to tackle... C1 Customer satisfaction Customer satisfaction Index % N/A 80% P1 Processes efficiency Operation cost/ total revenue % 8% 7% 8% 7% 7% 9% Rate of ontime delivery % 76% 85% 78% 80% 82% 85% P2 Sales & Marketing % of sales from new % 10% 20% 10% 12% 16% 20% efficiency customers L1 Improve employee satisfaction Employee satisfaction index Marks N/A 80/100 L2 IT based management Process automation ration... difficult old style and unable to adapting and customer cut-down budget to the market changes on IT 2) There’re no strategic products 2) Poor performance of banking that could help the company to industry will lead to reduction in struggle with unstable market revenue and margin from this 3) All employees are lack of soft skill sector like English, presentation skill, 3) Cloud communication skill, etc…