(Luận văn thạc sĩ) ineffective performance appraisal method at xyz vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Nguyen Thi Diem Thu INEFFECTIVE PERFORMANCE APPRAISAL METHOD AT XYZ VIETNAM MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2018 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Nguyen Thi Diem Thu INEFFECTIVE PERFORMANCE APPRAISAL METHOD AT XYZ VIETNAM MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Dr THU PHAN Ho Chi Minh City – Year 2018 CONTENTS ACKNOWLEDGEMENTS EXECUTIVE SUMMARY .2 CHAPTER 1: INTRODUCTION 1.1 Overview of auditing and tax service field 1.2 Company’s background .5 CHAPTER 2: PROBLEM IDENTIFICATION 2.1 Company’s context and general symptoms: 2.2 Initial identification of problems: 10 2.3 Tentative problems 15 2.3.1 Ineffective task assigning method .15 2.3.2 Lack of training 16 2.3.3 Raising of competitor 17 2.3.4 Ineffective performance appraisal method: .17 2.4 Problem justification 21 2.4.1 Definition of ineffective performance appraisal .21 2.4.2 Justify the existence of the problem 22 2.4.3 Justify the importance of the problem .23 CHAPTER 3: ALTERNATIVE SOLUTIONS .24 3.1 Causes validation: 24 3.1.1 Unclear performance criteria and structure: 24 3.1.2 Lack of rating skills in conducting performance appraisal: 24 3.1.3 Unfair rating from rater: 25 3.1.4 Ineffective feedback to employees: 25 3.2 Alternative Solutions .26 3.2.1 Alternative solutions for unclear performance criteria and structures 27 3.2.2 Alternative solutions for lack of rating skills in conducting performance 30 3.3 Action Plan .33 CONCLUSION .38 REFERENCES 39 APPENDIX 1: Transcript of interviews .47 APPENDIX 67 Figure 1: Top 10 Auditing firms with the highest total revenue in 2017 Figure 2: Operation structure of XYZ Vietnam .6 Figure 3: Top 10 Auditing firms with the highest total revenue from tax services Figure 4: Initial Cause-effect Map 14 Figure 5: Updated causes-effect map 20 Figure 6: Final cause - effect map 23 Figure 7: Solution Map 27 Table 1: Performance of teams in 2018 Table 2: Stress condition of employees 2018 10 Table 3: Rate of achieved revenue in 2016, 2017 and 2018 10 Table 4: Number of customers terminating and signing service contract 13 ACKNOWLEDGEMENTS I would like to express my very appreciation for two years study in ISB Ho Chi Minh City Besides, I would like to offer my special thanks to my research supervisor, Dr Thu Phan for her patient guidance, valuable and constructive suggestions and her assistance in keeping my progress on schedule I would also like to extend my thanks to my family and my classmate in MBUS class for their support and encouragement throughout my study EXECUTIVE SUMMARY This thesis is conducted to analyze the problem of XYZ Vietnam The symptom of the Company is large different of achieve ratio between teams The thesis is consisted of three chapters which are company introduction, problem identification, and alternative solutions The thesis also contains supporting information In Chapter 1, there is an overview of auditing situation in Vietnam and the background of XYZ Vietnam as well as pay attention to the tax team of the Company The chapter also has figures as supporting information In Chapter 2, the thesis discuss about the identification of problem of the Company Through data of the company as well as interview information, the central problem of the Company which is ineffective performance appraisal has been addressed The Chapter is about causes and alternative solutions In this scope of thesis, the causes which are lack of rating skills in conducting and unclear performance criteria and structures will be selected as major causes for the central problem Rating scale will be chosen for unclear performance criteria and structures and Coverdale training will be chosen for lack of rating skills An action plan to implement the solutions is made for the Company In order to conduct this plan, it will cost the Company about VND 31,000,000 The result will be observed and analyzed in order to improve the performance appraisal of the Company so that team performance will be accurately evaluated A Conclusion will summarize all of our thesis and our purpose in doing this thesis The last part will contain information to support the thesis such as interview questions and answers CHAPTER 1: INTRODUCTION 1.1 Overview of auditing and tax service field History of Auditing firms in Vietnam The audit history of Vietnam dates back to the 1991 when the first two local firms, namely VACO (Deloitte) and AASC were established in response to the changes in Vietnam economy from a centrally planned to an open market economy According to statistics of the Vietnam Association of Certified Public Accountants (VACPA) from 1991 to 2005, the market for independent auditing services has nearly 150 qualified auditing firms, with nearly 11,000 employees working at audit firms across the country In 2016, the process of "purification" takes place so that the independent audit market develops Auditing firms which are small, weak performance, and cannot meet the strict requirements for service provision will be M&A or dissolve The number of audit firms will lower but more quality The latest statistic of the audit professional organization also shows that in 2014, the total revenue of the independent auditing industry reached 4,583 billion VND, in which the main services of auditing firms which are auditing and financial reporting services have reached 2,329.76 billion VND, accounting for 50% of the total revenue of the whole sector, the rest are belonged to other services In 2015, revenue of the independent auditing sector reached more than 5,000 billion VND (1) According to Vietnam Association of Certified Public Accountants (“VACPA”), top 10 auditing firms that have the highest revenue in 2017 Figure 1: Top 10 Auditing firms with the highest total revenue in 2017 In 2018 and following years, there are increasing positive forecasts for growth in foreign investment, healthy financial market, increasing in number of listed and public companies Furthermore, there will be more M&A and equitization activities as well as major changes in auditing and accounting regulations At the same time, the Government will make a decision regarding the application of International Financial Reporting Standards in Vietnam This will be a foundation for the strong development of auditing and accounting sector in Vietnam for the following years (2) Therefore, in the coming time, in order for the domestic audit firms in particular and the market of independent audit services in general to be able to develop quickly and sustainably, meet the requirements of innovation, integration, competitiveness, the following solutions should be addressed Tax services field in Vietnam Since July 2007, along with the unified and integrated implementation the selfdeclaration and self-apply, the establishment of Law on Tax Administration has set up the regulations for tax services Tax payer can sign contract with tax agents to receive tax services However, the tax service market in Vietnam has not really developed The number of enterprises providing tax services to date is too small compared to actual requirements, only equal to 0.021% of enterprises that conducting declaration activities managed by Tax Authorities In which, the majority of small-scale enterprises, both in terms of business capital and the number of employees who have practice certificates as tax procedure services, have affected the ability to conduct high value consultancy contracts and the chance to provide services to big firms (3) Vietnam’s General Department of Taxation had issued Official Letter 5339/TCTTT in November 2017 directing local tax offices to create a tax audit plan for 2018 Taxation is a major component of the state budget revenues and as the country’s budget deficit increases, taxpayers and enterprises will continue to face increased scrutiny from tax authorities trying to meet their revenue targets 1.2 Company’s background XYZ Vietnam is one of the leading mid-tier accounting and advisory firms in Vietnam, which was established in July 2001 XYZ Vietnam has become a member of XYZ network since August 2012 Under its core purpose of being the firm of choice for growing businesses looking for high quality and personalized services, XYZ Vietnam assists clients in achieving their goals through audit, tax, advisory and outsourcing services XYZ Vietnam has more than 200 professionals and staff serving mid to large public-listed, multi-national and private companies in various industries XYZ Vietnam serves clients worldwide as an independent and highly integrated member of the XYZ network which is ranked among the top global accounting networks with more than 41,400 people in 120 countries around the world XYZ Vietnam was founded by the group of the certified public auditors (CPAs) and accredited consultants, who had worked in the field of the auditing and consulting since the very first days of this industry in Vietnam With these advantages, XYZ Vietnam has possessed the valuable manpower resources to confidently provide professional services requiring full understanding of Vietnam business climate and with international quality standards History Timeline 2001 XYZ Vietnam was established the fact that we lost the profit from that service and not be able to achieve the target revenue 1st Interview with Mr Vu Le Minh – Supervisor Q1: Hello, Minh I need to interview and ask you some questions for my graduation thesis for Master of Business Can you help me? A1: Feel free to ask me, Thu Q2: Let’s start with a simple question Can you tell me about yourself? A2: I usually provide tax guidance for clients I like to research for tax regulations and summarize them in simple way for people to understand them easily Q3: How long have you been working in the Company? A3: Almost years Q4: Can you tell me about your team? A4: I belong to team We have more than members Providing tax guidance to clients and supporting other teams as well training management are our team’s jobs Q5: How you feel when working at XYZ Vietnam? A5: Well, everyone is nice here Employees are close and open with each other The workplace atmosphere is comfortable Q6: Do you satisfy with your workload now? If not, please clarify the reason A6: Yes, I think my workload is fine Q7: Can you tell me the current situation of your team’s jobs? A7: Our main service is provide tax guidance to clients Although we have monthly fee, it is quite low We also assist other teams to find tax regulations so that they can effectively provide quality services to their clients Q8: Do you have any difficulties when working? A8: Well, sometimes if the client asks for urgent work to be done, I need to work overtime I feel quite stress from it Besides, Q9: Do you want any improvement when working? A9: I think that our team will be able to perform better if we have more members and be able to provide more services Besides, the managements need to find a way to effectively distribute our contribution in assisting other teams because it also cost us a 53 lot of time and manpower to assist them Furthermore, the performance evaluation is not effectively recognize our actual performances It should have some more specific criteria to effectively measure our performances One more thing to notice is that I think the managements should treasure our effort in working such as work overtime Q10: Do you think that every team has the same work volume with each other? A10: No, I don’t Q11: What are the reasons for the difference of target revenue between each team? A11: Because the company use the same measurement to evaluate the actual performance of each team, I guess Q12: In fiscal year 2017 – 2018, the rate of achieving target revenue of your team is quite low How you feel about it? A12: I feel not happy not only because of the result but also because there are still no action to solve it The reasons for our poor performance are not be able to provide any other high profit services and lack of manpower I think that if we can provide more services, more clients will come to us We also need to recruit more members to provide those services to clients A6: As I said before The answer is No Q7: In your opinion, the training method in our Company is effective or not A7: Yes it so effective, I attend our training every week My assistant have a good knowledge based on what they gained in training sections I believed that I can provide quality staff for our client Interview with Mr Le Khanh Lam – Genereal Management Q1: Hello, Mr Lam I’m working on my graduation thesis for Master of Business at the moment Can you spare some of your time for a small interview? A1: Ok Thu, I have some free time You can conduct your interview Q2: Can you tell me about yourself? A2: I have worked for Big in the past When I realized that there was an opportunity to conduct business related to tax and audit services in Vietnam, I formed this company with my friends Q3: How long have you been working in the Company? 54 A3: I have worked in this company for 15 years Q4: How you feel when working at XYZ Vietnam? A4: Well, I think that XYZ Vietnam has provided suitable working environment for employees Furthermore, I think that my employees have a lot of energy and very promising Q5: Do you think that your employees are lacking of motivation A5: Yeah, when observing my employees, I think few of them is lack of motivation They work slow and take a lot of time to finish a task Q6: What you think is the reason for it? A6: I think that because of not having enough manpower, some employees need to shoulder quite a heavy workload which lead to the decrease of their motivation Q7: Do you think that every team has the same work volume with each other? A7: No, I don’t Q8: What are the reasons for the difference of target revenue between each team? A8: I think that the reason is because some teams have only one service If they don’t have many services, they cannot earn more profit Q9: Can you provide an example for the issue? A9: Let’s take a look at team Team is not doing well in having a high rate of achieving target revenue because it has only one type of service Furthermore, it is difficult to distribute profit for team 5’s contribution when assisting other teams which lead to the fact that team will not receive any profit from assisting other teams Q10: How you think about your employee’s effort in delivering a quality performance? A10: I think that it is a duty of employee to perform effectively My employees need to meet the client’s deadline to ensure that the client will not have negative ideas about our services Q11: Can you share some information about the performance appraisal A11: I think that the performance appraisal process is very important I usually find effective ways to conduct it 55 2nd Interview with Ms Bui Thi Tuyet – Staff Q1: In your opinion, the task assigning method of our Company is effective or not? A1: I have no idea with this point However, our team has a lot of Clients with a lot of service lines Our team has a high workload Our team member always fulfill with task Hence, we have a lot of revenue We never be afraid of lack of work We always have a lot of work to I think it is our advantages We have a lot of member and can provide a lot of service lines Q2: In your opinion, the performance appraisal and result recording applied for your teams is effective or not? A2: I have no idea My appraisal every year is still quite good I don’t care much of these Q3: In your opinion, does the performance appraisal affect to employees or not? And why A3: Of courses, performance appraisal effect to employees a lot I satisfy because my performance appraisal is still good If it not good and affect to my salary I will feed un comfortable because I work so hard and bring a lot of profit to Company Q4: In your opinion, the training method in our Company is effective or not A4: Training is very important My client always asking for new service which is not available at our Company or we have still not have enough knowledge or skill to provide I think if we can operate more training course for new service it will bring more opportunities for our company Q5: And what you think about current training programs in our company? A5: It is good now We have a lot of training I mean we can much better 2nd Interview with Mr Vu Le Minh – Supervisor Q1: In your opinion, the task assigning method of our Company is effective or not? A1: We have a big trouble in here Our team have to a lot of back-office work which is bring few profit It make our team cannot reach the target of the year We 56 want to develop more service lines which generate much revenue than what we are doing now We also can not find new clients just because we don’t have the service lines which they want We always have to refer the providing service to another teams Q2: I think that the some current service line of your team is also bring much profit Why you want to develop the others? A2: Our service always take a lot of time We have to spend time to read, summarize before issuing an advisory letter to client We always want to bring the highest quality result to customer, hence we have to work a lot The revenue gained is not deserve what we spend on Q3: In your opinion, the performance appraisal and result recording applied for your teams is effective or not? A3: It is not quite good As I said before, we have done a lot but our appraisal is still not high It makes me uncomfortable Q4: In your opinion, the training method in our Company is effective or not A4: Yes it is so effective Our team organize the training process every week with clear point to bring the most effective training course to our employees 2nd Interview with Mr Le Thi Giang Huong – Supervisor Q1: In your opinion, the task assigning method of our Company is effective or not? A1: I think it is okay I know that there is some problem in assigning method However, it is caused by nature of our service and operation We should not be changed because it can help us to bring the high quality result for clients Q2: Can you tell me more about the reasons why you said that? A2: Every team has their own strength We will assigned right work to right people It means we will priority assign to the teams who has the best employees in this service lines before consider to another team 57 Q3: In your opinion, the performance appraisal and result recording applied for your teams is effective or not? A3: I think the problem is not in assigning method, maybe it comes from appraisal of performance Q4: In your opinion, the training method in our Company is effective or not A4: I have worked in many companies And in my opinion, our company has a good training program 2nd Interview with Ms Pham Thi Tuyet Nga – Staff Q1: In your opinion, the task assigning method of our Company is effective or not? A1: It is not good I have to lot while the other is not But my duties is complete the work so I still work hard However I think we should change the assignment method in our Company Q2: In your opinion, the performance appraisal and result recording applied for your teams is effective or not? A2: It is not clearly I don’t see any effective scale or measurement I think it is not reflect our actual efforts In my case, I work a lot, however, the appraisal of mine is the same with the others in teams who has lower workload than me And I think that I have to work a lot If I try to work well, more task will be assign to me but in the end I be evaluated as same as the other I feel unhappy and will feel very demotivated Q3: In your opinion, the training method in our Company is effective or not A3: I gain a lot of knowledge after the training courses in our company I don’t think it is not effective 2nd Interview with Mr Le Khanh Lam – Manager Q1: In your opinion, the task assigning method of our Company is effective or not? A1: I think that our task assigning method is still effective but we need to have some more method to improve it Q2: Can you tell me how the task assigning process of the company at the moment 58 A2: When a client is asking for a specific service, I will assign a team which has a lot of experience in that specific service to assist the client By doing so, I believe that the client will be able to receive high quality service Q3: I see that many employees are having stress because of heavy workload, What is your action to solve this problem A3: I think that it is a duty of employee to provide quality performance to clients However, employees are the value asset of the company so I have think of many methods to help them One method is to form a team with members from current teams when providing services which are consisted of many tasks to clients By doing so, the right employee who specialize in a specific task will effectively provide quality performance on time to client Furthermore, I have asked the HR Department to recruit more members in order to reduce the current workload Q4: That’s sounds great Do you have any plant to increase the revenue of each team? A4: Well, in order to increase the revenue of each team in general and for the company in specific, I have asked each team to spend time to research for new services A team will need to present its research and will receive comments from other teams to help them effectively provide the researched service in the future Q5: How is the training situation of the Company? A5: I believe there are few companies in this business that provide many trainings like us We have a variety of training topics which suitable for employees from assistant level to management level We also provide soft skills training which will effectively help employees to conduct quality service Q6: How you conduct the performance appraisal? Q6: The performance appraisal form will be given out at the end of fiscal year After receiving all of the fill – in forms, I will hold a meeting with other management level and team leader to evaluate employees I’m very careful when evaluate employee because if the performance appraisals not reflect employee’s actual performance, it will affect employee’s motivation which will negatively affect the company 59 Q7: Can you share a little bit about the wage or promotion policies of the Company A7: My pleasure The Company policies on wage and promotion are based on how long the employee has worked in the company and evaluation from management or leader 3rd interview with Ms Dau Minh Phuong Q1: Can you tell me your opinion regarding the current appraisal system? A1: I think that the current appraisal system of the Company is not effective There are no criteria to evaluate our team effort in supporting or finding clients for other teams Q2: How you think about the rating scale method? A2: After hearing about this method, I think that it is quite effective to increase the efficient of our performance appraisal It has a simple structure and rater can freely design the criteria I think that our performance such as providing clients, providing members to participate in services of other team will be effectively evaluated Q3: How you think about the cost accounting method? A3: I think that this method is not difficult to execute as well as little expense will incurred Q4: How you think about the coverdale training? A4: Because the coverdale training will not require a supervisor so I think that the Company will not incur cost to hire a professional trainer Besides, this method is easy to conduct, raters just gather up and discuss Q5: How you think about the laboratory training? A5: This method does not have a timetable to follow so it is quite inconvenient for rater to effectively organize their works and participate 3rd interview with Ms Nguyen Thi Bich Thuy Q1: Can you tell me your opinion regarding the current appraisal system? A1: I think that being able to meet directly with Mr Lam is a good thing Because we can discuss about our team strengths and weaknesses 60 Q2: How you think about the rating scale method? A2: I realized that this method has simple training and structure Furthermore, it does not cost much to implement Q3: How you think about the cost accounting method? A3: This method is well organized Q4: How you think about the coverdale training? A4: I think it is quite relax to participate in Because people can talk and share their experiences with others Q5: How you think about the laboratory training? A5: I think that because there is no fixed schedule, it is inconvenient for raters to participate in 3rd interview with Ms Bui Thi Tuyet Q1: Can you tell me your opinion regarding the current appraisal system? A1: I think that it is not effective because it depends so heavy in revenue to evaluate performance of team Q2: How you think about the rating scale method? A2: From my opinion, this method will prove useful in accurately measure the performance of team Q3: How you think about the cost accounting method? A3: The structure of this method is quite organized and will help rater to track down and evaluate the assistance of a department to other department Q4: How you think about the coverdale training? A4: I think that it will be effective if people are open up to talk and discuss Q5: How you think about the laboratory training? A5: I think that it will be costly if the Company decides to hire a professional trainer 61 3rd interview with Ms Pham Thi Tuyet Nga Q1: Can you tell me your opinion regarding the current appraisal system? A1: Being able to discuss with Mr Lam is the good thing of the current appraisal system We can improve our team a lot by doing so Q2: How you think about the rating scale method? A2: I think that this method is not difficult to follow as well as the structure of this method is quite simple Q3: How you think about the cost accounting method? A3: I think that this method will take a lot of time to track back the revenue as well as performance of team when supporting other team Q4: How you think about the coverdale training? A4: From my opinion, it is not costly to conduct Q5: How you think about the laboratory training? A5: I quite like this method because it is not strict and easy to follow 3rd interview with Mr Vu Le Minh Q1: Can you tell me your opinion regarding the current appraisal system? A1: I think that rater should update their rating skills The format of performance appraisal is quite not clear which will lead to the unfair in rating Q2: How you think about the rating scale method? A2: For me, this method seems to be effective in assessing team performance because rater can freely put in adequate team evaluating criteria Q3: How you think about the cost accounting method? A3: I think that this method will help to see clearly the revenue that a team will earn even when it support other team 62 Q4: How you think about the coverdale training? A4: I think that this method will create an environment where good practices will be shared effectively between raters Q5: How you think about the laboratory training? A5: I think raters will have a hard time organize their works to participate in 3rd interview with Mr Le Khanh Lam Q1: Can you tell me your opinion regarding the current appraisal system? A1: I think that our performance appraisal system is currently not effective Some teams will be underestimate because the performance appraisal system focus so much on evaluating revenue Although this current performance appraisal is enough for evaluating, there are a lot of rooms to improve There are not much training given to rater because everyone is used to this performance appraisal system In addition, we usually hold meeting with team to discuss about their weaknesses and strengths through their performance appraisal form This practice is quite effective Q2: How you think about the rating scale method? A2: I think that the structure of this method is clear It is quite easy to follow, however the chance for bias in rating is quite high Q3: How you think about the cost accounting method? A3: From my point of view, because the evaluated information is in figure and have been recorded by the Company, the chance for bias is not high Q4: How you think about the coverdale training? A4: I have experience this method before By conducting this method, I have improve my skills as well as learn a lot from others Q5: How you think about the laboratory training? A5: I think that raters will have a chance to talk about their issues in rating 63 APPENDIX Questionnaire to measure the stress condition of XYZ’s employees in 2018 Name: Team: Instructions: We understand that working conditions affect worker well-being In order to effectively provide more suitable treatment to help our valued employees to reduce stress, please response to the question in accordance with how you feel when working in this fiscal year No Content I don’t understand what is expected of me at work The clients that I provide service is unsuitable with my ability I have not managed an adequate number of clients I have unachievable deadline I have to neglect some works because my workload is too high I have to work overtime a lot I cannot control my workload I have to work harder to help my team to achieve the target profit I feel uncomfortable when looking at my team’s revenue every month 10 I need to spend more time to find new clients 11 I am unable to take sufficient rest 12 My team leader hardly ever push everyone to work harder to achieve the target profit Disagree Agree 64 13 I feel that the target profit that the Company gave to my team is unable to achieve 14 I feel pressure when working under the current target profit 15 My colleagues are not friendly 16 I cannot ask my colleagues to assist me 17 My colleagues have not provide me with many adequate opinions 18 I have not effectively maintained good relationship with my colleagues 19 I cannot freely express our opinion about an issue with my colleagues 20 My colleagues and I not respect each other 21 My colleagues and I not encourage each other when working The first seven sentences will address the stress caused by workload The next seven sentences will address the stress caused by target profit The last seven sentences will address the stress caused by colleagues Employees will put a check to the choice that they think is able to express their opinions The point for Disagree will be and Agree will be After gathering all of the survey sheets, we will sum up all the points to see whether workload, target profit, or colleagues is the reason that cause stress to employees The results of the survey are as follow 65 Team Stress caused by workload Stress caused by target profit Stress caused by colleague 12 14 3 13 14 11 10 11 66 APPENDIX SUPERVISOR’S REPORT ON THE FINAL THESIS SUBMITTED FOR THE DEGREE OF MASTER of BUSINESS ADMINISTRATION Final thesis title: INEFFECTIVE PERFORMANCE APPRAISAL METHOD AT XYZ VIETNAM Student name: NGUYEN THI DIEM THU Supervisor name: Dr THU PHAN General comments: • Remarks on the student’s attitude: • Remarks on the assignment’s academic quality: Overall assessment: Meet requirement for submitting; Not meet requirement for submitting Other remarks: - Did the student follow the report schedule? Yes - No Other The Turnitin plagiarism percentage: Supervisor’s signature 67 ... Rating scale method Although rating scales method has been appeared for so long, it is still the most popular method in performance appraisal Rating scales method is a performance appraisal method. .. effective performance appraisal system, however ineffective performance appraisal system can put an organization in confusion and chaos (17) It is stated that ineffective performance appraisal. .. appropriate 2.3.4 Ineffective performance appraisal method: If the company is having an ineffective performance appraisal method, it will suffer with confusion and ineffective work performance from