Recommendations for setting upand running process of kpi system in asia invesment and asset management jsc

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MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING
VIETNAM MARITIME UNIVERSITY
STUDENT NAME: LE TAT QUOC ANH
DISSERTATION
GLOBAL STUDIES AND MARITIME AFFAIRS
RECOMMENDATIONS FOR SETTING UP
AND RUNNING PROCESS OF KPI SYSTEM
IN ASIA INVESMENT AND ASSET MANAGEMENT JSC
HAI PHONG – 2015
MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING
VIETNAM MARITIME UNIVERSITY
STUDENT NAME: LE TAT QUOC ANH
CLASS : GMA 02
DISSERTATION
GLOBAL STUDIES AND MARITIME AFFAIRS
RECOMMENDATIONS FOR SETTING UP
AND RUNNING PROCESS OF KPI SYSTEM
IN ASIA INVESMENT AND ASSET MANAGEMENT JSC
Supervisor: Vu Thanh Trung
Division: Basic Economics
Faculty: Economics
HAI PHONG – 2015
Recommendations for setting up and running process of KPI system in Ashico
PREFACE
I declare that this report is my own unaided work. It has not been submitted
before.
If violated, I am solely responsible for and bear the punishments of the Institution and
University.
Student Name and Signature
Le Tat Quoc Anh
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Recommendations for setting up and running process of KPI system in Ashico
ACKNOWLEGEMENT
Firstly, I would like to express my sincere gratitude to my advisor Master Vu
Thanh Trung for the continuous support of my dissertation and related research, for
his patience, motivation, and immense knowledge. His guidance helped me in all the
time of research and writing of this thesis. I could not have imagined having a better
advisor and mentor for my study.
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Recommendations for setting up and running process of KPI system in Ashico
TABLE OF CONTENTS
Preface.............................................................................................................................i
Table of Contents..........................................................................................................iii
List of Symbols, Abbreviations.....................................................................................iv
List of Tables and Chart and Figure...............................................................................v
INTRODUCTION .........................................................................................................1
CHAPTER 1: THEORETICAL BACKGROUND...................................................3
1.1 Definitions and contents of KPI............................................................................3
1.2 Requirement of KPI...............................................................................................4
1.3 Functions and meanings of KPI............................................................................6
CHAPTER 2: SETTING UP AND RUNNING PROCESS OF KPI SYSTEM......9
2.1 Company introduction...........................................................................................9
2.1.1 General information..............................................................................................9
2.1.2 Company network.................................................................................................9
2.1.3 Company structure..............................................................................................10
2.1.4 Operation fields and partners..............................................................................10
2.2 The setting up and running process of KPI system in Ashico..........................12
2.2.1 Stage 1: Company information collection and set up Balance scorecard...........13
2.2.2 Stage 2: Set up company targets and indicators by using Balance Scorecard....18
2.2.3 Stage 3: Set up specific indicators for departments and staffs............................22
2.2.4 Stage 4: Running and adjusting and optimizing indicators ................................33
2.2.5 Stage 5: Combining salary with KPI ..................................................................39
CHAPTER 3: EVALUATIONS AND RECOMMENDATIONS..........................41
3.1 Evaluations for setting up and running process of KPI system.......................41
3.1.1 Advantages..........................................................................................................41
3.1.2 Disadvantages......................................................................................................43
3.1.3 Successes.............................................................................................................43
3.1.4 Problems..............................................................................................................45
3.2 Recommendations for setting up and running process of KPI system............50
CONCLUSION............................................................................................................53
Reference / Bibliography..............................................................................................54
Appendices...................................................................................................................55
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Recommendations for setting up and running process of KPI system in Ashico
LIST OF ABBREVIATIONS
KPI Key Performance Indicators
BCS Balance Score Card
Ashico Asia Investment and Asset Management Joint Stock Company
Dept. Department
CJS Cloudjet Solution Corporation
SHRM Strategic Human Resource Management
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Recommendations for setting up and running process of KPI system in Ashico
LIST OF TABLES AND CHARTS AND FIGURES
Table 1: Company brief information..............................................................................9
Table 2: SWOT analysis...............................................................................................17
Table 3: Financial KPI.................................................................................................23
Table 4: Customer KPI.................................................................................................26
Table 5: Process KPI....................................................................................................28
Table 6: Learn and growth KPI....................................................................................29
Table 7: KPI calculation...............................................................................................36
Table 8: KPI – salary coefficient..................................................................................39
Chart 1: Organization structure....................................................................................10
Chart 2: KPI setting up and running process................................................................13
Figure 1: KPI testing result..........................................................................................37
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Recommendations for setting up and running process of KPI system in Ashico
INTRODUCTION
Necessity
In any period of time, human resource always plays an important role in the
development of all the organizations from big countries to smaller groups and human
are key factor that can control everything and the history can proved that. In the
history of humanity, even though suffering a lot of influences from natural disasters
such as earthquakes or volcanoes, Japanese still created many inventions and deal
with the nature and develop their country become one of the most powerful countries
in the world. America becomes an independent nation from 1776 and after only 239
years of development, US is becoming the leader in the entire field: economy, finance,
society, military, etc. For a long time ago, in long and severe wars, people of Vietnam
have showed our power and won all the invaders. All the achievements and successes
of nation are reached by the power of the human in these nations.
Nowadays, Vietnam are developing and penetrating into the world environment
and the images and reputations of Vietnamese products are formed step by step in the
market. One of the key factors that bring the success to Vietnam is the quality of
human resource. Not only in the level of nation, in every smaller organization and
enterprise, the human resource management is considered as an important strategy and
it is always be on top of developing plans. Human resource will be the main power
that brings the benefit for enterprises but the method to manage this precious resource
effectively is not simple problems. Human resource management often includes many
other issues such as recruitment, appointment, training, control and evaluation.
Evaluation are an important process because from the result of evaluation, the
company can understand clearly about the work of each employee and give the
relevant behavior to increase the effectiveness of this employee and in order to assess
the employee, there is a system that can help company to assess the employees from
the working performance that called Key Performance Indicators (KPI). The KPI
system has many advantages in the comparison with the other assessing methods
because KPI system evaluate the performance by using the specific figure and
number; it will not depend on the sentiment of any person and deal to the equity and
accurate in the assessment.
It is undeniable that KPI systems are increasingly popular in many
organizations and showing their own remarkable applications. Consequently, in this
dissertation, I decided to research and analysis the Key Performance Indicators system
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Recommendations for setting up and running process of KPI system in Ashico
in case of a specific company with the topic: “Recommendations for setting up and
running process of Key Performance Indicators system in Asia Investment and
Asset Management Joint Stock Company”.
Research Object
The research objects of the topic are the foundation process, adjustment
process, running and assessing process, completion process, application process and
controlling process of Key Performance Indicators system in Asia Investment and
Asset Management Joint Stock Company and the related elements, components,
stages, etc. that are founded and applied. In addition, the research also analyzed the
company employees in term of the establishment and running of KPI system.
Research Scope
The research scope of the topic is the entire of Asia Investment and Asset
Management Joint Stock Company with all the departments, offices and employees of
the company.
The topic of this dissertation has been researched for five months from June
2015 to November 2015. This period of time corresponds with the time from the
beginning to the end of KPI foundation projects and the starting period of running KPI
assessing systems in Asia Investment and Asset Management Joint Stock Company.
Research Findings
After the period of researching all the elements in the setting up and running
process of KPI system in Asia Investment and Asset Management Joint Stock
Company, the result of the research is the evaluation of these process including the
advantages, strengths, successes as well as disadvantages, weaknesses and failures in
the KPI project. Besides, some recommendations will be suggested to increase the
efficiency of the KPI systems in Asia Investment and Asset Management Joint Stock
Company.
CHAPTER 1: THEORETICAL BACKGROUND
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1.1 Definitions and contents of KPI
KPI – Key Performance Indicators is not a new concept with the modern
business so some authors gave the different definitions about KPI in many points of
view as well as many features of KPI. According to F.J. Reh (2014), “Key
Performance Indicators, also known as KPI or Key Success Indicators (KSI), help an
organization define and measure progress toward organizational goals” or “KPIs are
quantifiable measurements, agreed to beforehand, that reflect the critical success
factors of an organization”.
In other definition, KPIs are defined as “financial or nonfinancial measures that
are used to define and evaluate the success of an organization and are linked to an
organization’s strategy for success” or KPIs are “devised to help evaluate the progress
of an organization towards achieving its long-term goals and fulfilling its vision”
(Thrall et.al, 2010).
In an easier and more specific way, KPI are a system of indicators and the size
of this system can be very big or very small depend on the operations and scale of the
owning organization. These indicators are the target that the in-charged person needs
to reach and the result will show the level of his performance.
F.J. Reh also concludes that “KPIs give everyone in the organization a clear
picture of what is important, of what they need to make happen” and “make sure that
everything people in the organization do is focused on meeting or exceeding those
KPIs”.
KPI system can be presented by many ways: computer software, internet
software or even traditional paper documents. The software or automatic devices can
help the owners easier to calculate or gather the information of KPI but it cannot
impact on the content of KPI. The KPI content depends totally in the operations or
managements of the owning organizations. Normally, the KPI content covers in 4
areas: financial, customer, internal process and learn and growth (Tracy, 1995):
- KPI financial contains the indicators that give the target of operation to
increase the sales or incomes and maintain the flow of cash in the organization.
Besides that, this group of KPI also can relate to the chances that help to gain the
organization budget.
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- KPI customer often relates to the increase of number of new customers or
maintains the current customer. It also relates to the relationship with customer, so it
can be seen in the quality of services or customer services of the organization.
- Almost organization has its own internal processes so KPI process focus on
implementation and application of the process into the operation. The KPI process
also mentions to the adjustment or creation to make the process better.
- KPI learns and growth includes the training and increase the knowledge and
skills for member of organization. In addition, it also relates to the culture or social
feature such as the working environment, attitude of members…
In the world, KPI is used for a long time in many companies but in Vietnam,
not many organizations use KPI because it’s not too easy to make and their cost for
automatic KPI system is not low. Some brands that using KPI can be listed as Viettel
Corporation, LG Electronic Vietnam,…
1.2 Requirements of KPI
The KPI can be different in different organizations or companies but it still
needs to follow some general requirement. Firstly, KPIs must to follow the S-M-A-R-
T standards, Hursman (2010) found out the standard for KPI includes: Specific,
Measureable, Attainable, Relevant, Time bound.
The 5 criteria are used as standard for a “good” KPI. If one of them is missed,
KPI will become the wrong metrics that “can wreak havoc on an organization
processes and demoralize employees” (Eckerson, 2007). Eckerson also defined
“good” KPIs need to have the following characteristics:
“- Sparse: the fewer the better
- Drillable: can drill into detail
- Simple: easy can understand
- Actionable: know how to affect the outcomes
- Owned: KPI has owner
- Referenced: easy to view the case or context
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- Correlated: lead to desired outcomes
- Balanced: both financial and nonfinancial
- Aligned: no conflict each other
-Validated: cannot cheat to reach KPIs.”
Secondly, the process of creating KPI also need to have some standards.
Believing the KPI system can become perfect after 16 weeks (Kaplan and Norton), D.
Parmenter (2007) analysis the lessons for KPI systems, specially:
“- Find an external project facilitator
- Begin with Senior Management Team commitment and education
- Start with balance score card template, includes: financial, customer, internal
process, learning and growth, staff satisfaction, community.
- Focus on Critical Success Factors
- Follow 10/80/10 rules: 10% Key Result Indicators / 80% Performance
Indicators / 10% Winning Indicators
- Select small KPI team
- Just do it
- Use existing system for the first 12 months for collection and reporting result
of KPI.
- Trap all performance measures in a database and make them available to all
teams includes: description, type, responsible person, source, time zone, frequency …
of performance measure.
- KPI reporting formats are an art form, not science”
Some of the above standards are only in the general view about KPI and there
are many other factors, specially the current status and operation of the organization
will impact on the success and effectiveness of KPI system.
1.3 Functions and meanings of KPI
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Recommendations for setting up and running process of KPI system in Ashico
In the development of every organization or company, there are many power
resources that bring the huge impacts and decide the failure or the success of operation
such as human resource, financial resource, technology resource… Among these
resources, human resource is often considered as one of the most important power of
companies and becomes the similar concept for everyone. However, it is not easy to
define this elusive concept. Until the XX century, the labor is regarded as a power of
organization and the management methods is more flexible make the good condition
for labors to increase their performance as well as potential (according to Ministry of
Home Affairs).
Human resource can be defined as the power of all the people in organizations
with different capacity and structure but these people has abilities and potentials to
develop their organization or even out of their organization to the nations, regions and
global (N.Henry, 2006).
In term of components, human resource is both internal and external factors of
each individual that ensure the creation and contribution to the successes and
achievements of organization (George T.M and John W.B, 1994). More specifically,
human resource contains the physical power and mental power. Physical power
depends on the health, income, living level, working conditions… of people while
mental power is talents, personalities, characteristics, opinions… (T.Giang, 2011).
According to the different definitions, it can be seen that human resource is
playing an important role in the operation and the development of every organization.
It is one of the most difficult arts in many kinds of management. It can be consider
that human resource management is “The process of analyzing and managing an
organization’s human resource needs to ensure the satisfaction of its strategic
objectives” (Hellriegel, Jackson, Slocum and Staudle, 2009).
Management and assessment always go together, after assessing, organizations
can give the better management to correct or develop the operation of human resource.
Normally, almost organizations manage and appraise its human resource by 2 ways:
strategic HR management and KPI management.
Strategic human resource management (SHRM) is defined in many studies and
researches. Purcell (1999) considered that SHRM “focuses on actions that
differentiate the firm from its competitors” or in 2003, Purcell and Boxall saw that
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“SHRM is integral part of business strategy. The main focus of this strategy is to
achieve organizational objectives”.
In the other view, Hendry and Pettigrew (1986) find out the meanings of
SHRM in 7 terms, including: planning, managing by a coherent approach, basing on
employment policy and workforce strategy, underpinning by a philosophy, matching
human resource management and business strategy, seeing people as resource,
achieving competitive advantage.
In term of KPI, in the current time, almost modern organization change from
SHRM to KPI in the human resource management. KPI still has the current function
of SHRM but it also has its own different meaning.
It can be seen that in almost theory, the researchers consider the SHRM or KPI
are the method of human resource management with the destination is achievement of
the organization mission. In the way to reach the mission, the KPI as well as the
SHRM will impact on the performance of human resource and performance is the
behaviors or action relevant to the attainment of an organization’s goals that can be
measured (Campbell’s, 1999). In another way, Brumbrach (1988) sees the
performance as both behavior and result of human resource. So, performance can be
both input and output in the same operation.
According to Y. Wang (2012), the conceptual process of organizational
performance will follow the below flow:
- Organizational goals (mission, vision, value) and SWOT.
- Strategy formulation (plan)
- Strategy execution (task analysis, task division, individual performance)
- Strategy evaluation (strategy result, organization performance)
So, the cycle of human resource performance will be repeated to continuously
improve the operation of organization as well as increase the effectiveness of human
resource management.
However, KPI plays an important role in the development of human resource
management. The performance can be showed by the specific number so the human
resource managers can directly and easily to control the situation of human resource
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Recommendations for setting up and running process of KPI system in Ashico
operation. KPI is also special because KPI is not only focus on general mission, it
weaves through all the operations and behaviors of human resource so it also can be a
useful tool for the owner to know exactly what do they need to reach. So, with the
level of performance from KPI, the owner can control their target and do everything
purposeful.
In conclusion, the KPI system – a performance assessing method can makes the
remarkable changes and brings the effectiveness to the organization in all kinds of
field: commercial companies, producing companies, social organizations… If KPI is
created by a good ways, it will bring many advantages for the organizations.
CHAPTER 2: SETTING UP AND RUNNING PROCESS OF
KPI SYSTEM IN ASHICO
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Recommendations for setting up and running process of KPI system in Ashico
2.1 Company Introduction
2.1.1 General information
Table 1. Company brief information
Asia Investment and Asset Management Joint Stock
Company name
Company
Name for short ASHICO
Suite 311, DG Tower, No.15 Tran Phu Street, Haiphong
Head office
City, Vietnam.
Telephone (+84) 0313.757.366
Fax (+84) 0313.757.266
Type of company Joint Stock Company
0200809729
Business of
(Granted by Haiphong Investment and Planning
Registration No.
Service)
Year of commencement 2008
General Director Mr. Nguyen Son
Authorized Capital 105.000.000.000 VND
Total asset 780.000.000.000 VND
Bank Account (USD) 00237000170068
Bank Southeast Asia Commercial Joint Stock Bank
In all the operations, Ashico always aims to become the best supplier for
customer in field of maritime and oil and gas industry with the high quality services.
Ashico also identifies clearly the mission of company in developing the general
economic of country as well as ensure the other benefit of labors and the society.
With the slogan “Passion for professionals”, Ashico determines to become the
professional investor with high reputation not only in Vietnam but also in the region
and international areas.
2.1.2 Company network
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Recommendations for setting up and running process of KPI system in Ashico
Ashico has the operation network throughout of Vietnam in all of 3 areas. The
main office is located in Hai Phong City and company has one representative office in
Ha Noi City and one branch in Vung Tau City. In the near future, Ashico will open
one representative office in Ho Chi Minh City in order to widen the operation into the
Southern area.
In addition, Ashico has one member company called Asia Trading and
Logistics JSC. (Ashico Logs) that has a main office in Hai Phong and an office in Da
Nang City.
2.1.3 Company structure
Chart 1. Organization structure
Source: www.ashico.com.vn
Ashico has form of a joint stock company so in the highest position of
company organization is General Assembly. Supporting for General Assembly is
Supervision Department and Management Board (include General Director and
Deputy General Director). And to be in charge for each specific operation, there are 9
departments with Heads of Department and staffs.
2.1.4 Operation fields and partners
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2.1.4.1 Offshore marine services for oil and gas industry
Ashico is possessing a fleet of service vessels (Anchor Handling Tug Supply -
AHTS) with modern dynamic positioning system (DP1, DP2) named PTSC HA NOI
(5.000 BHP), PTSC LAM SON (7.000 BHP), PTSC HAI AN (8.000 BHP) and
LEWEK PENGUIN (10.000 BHP). These vessels are operating for domestic as well
as foreign oil and gas contractors in short-term and long-term projects.
In the near future, Ashico will continue investing and developing the service
vessel fleet with greater capacity, more modern in terms of technology and more
professional in management in order to meet the demand of the oil and gas
contractors’ increasingly high requests.
Besides investing activities, Ashico also acts as the management and operation
company for the vessels of Vietnam Navy Forces and Vietnam Coastal Guard Forces
in the works of security and patrol, assisting oil and gas exploration and exploitation
in Vietnam’s continental shelf. In both field of investment and management, Ashico
has the biggest number of service vessel in Vietnam.
The partner for service vessels of Ashico can be listed as: Branch of Vietnam
National Oil and Gas Corporation, Bien Dong POC, Cuu Long JOC, SK E&C
(Korea), SK TLO (Malaysia)…
2.1.4.2 Supply Vehicles and Facilities for Construction site
Supplying Vehicles and Facilities for Construction site in river and sea areas is
one of the fields which Ashico pays significant attention to for investing and operating
works.
Ashico owns an inland waterway fleet which is various in category as well as
capacity. In the North of Vietnam, Ashico is leading about the number of inland
waterway vehicles. With these modern vehicles and facilities plus experienced
personnel, Ashico can satisfy all contractors for the projects of constructing on river or
sea, such as, dredging, building bridge, wharf, breakwater, etc.
Ashico was the subcontractors for supplying vehicles and facilities for
construction as Project of installing clear energy in Truong Sa, Construction of Nhat
Tan Bridge, Construction of Lach Huyen Port, etc.
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2.1.4.3 Procurement, supply, installation of oil & gas, maritime materials and
equipment
Depending on the partnership with a number of domestic and over sea
equipment manufacturers along with highly qualified technical staff, Ashico is
capable of providing variety of materials, equipment and spare parts with competitive
price, meeting various demands of oil and gas contractors. Ashico always ensure the
competitive price and quality of services for customers.
2.1.4.4 Crew manning services
Ashico is managing and training a big tem of crews with experiences in field of
maritime. Ashico can supply crews to ship owners with full of certificates for every
position following the international standard. Crews of Ashico can satisfy the
customer with their major skills, English and attitude.
Main partners of Ashico in field of crew manning as Tan Cang Offshore,
MODEC, EMAS…
2.1.4.5 Logistic services
As subsidiary of Ashico, Ashico Logistics focus on develop the commercial
and logistics fields. This subsidiary of the Company has affirmed its position in
supplying professional services of providing services for inland and international
transportation, handling service, custom clearance services, ship agency services,…
Ashico Logistics are traditional partner in term of logistics and transportation
for many customer as PVTEX, LG Electronics, POSH SEMCO,…
2.2 The setting up and running process of Key Performance Indicators system in
Ashico
In the setting up and running process of KPI system in Ashico, there are totally
five stages that correspond with five important missions for company to reach a
successful system. Each stage includes many smaller steps and it will be described as
following part of the research. The five stages are:
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Chart 2. KPI setting up and running process
Stage 1: Company information collection and SWOT analysis
Stage 2: Set up company targets and indicators by Balance Scorecard
Stage 3: Set up specific indicators for departments and staffs
Stage 4: Running and adjusting and optimizing indicators
Stage 5: Combining salary with KPI
2.2.1 Stage 1: Company information collection and set up Balance scorecard
2.2.1.1 Set up the project managing team
In the first part of a project, all the company need to set up a group of human
resource with the responsibility to track and monitor the whole project. Commonly,
these groups include people who have good knowledge and fully understand about the
project; good working skills, ideas, creative… Especially, in a project of setting up
new managing system, the project leader group must be the expert or important people
because the success or failure of the project can affect seriously the organization.
Asia Investment and Asset Management JSC. considered the KPI system as the
most important revolution in the management and administration of the company in
2015. Consequently, people who manage the project of setting up KPI system must be
the experts or managers in the company because these people are controlling the
company and they know about all the element from both positive and negative views
and combine with the managing skills, the project will be leaded in the right way. In
the middle of June 2015, the management board of company decided to set up a
project managing board with 10 members:
1. General Director
2. Director of Administrative and Human Resource Department
3. Deputy General Director – in charge of Operation and Ship Management Dept.
4. Chief Accountant
5. Director of Maritime Services Department
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