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

Subject, scopes and objective in the disseration Research subjects in the disseration are theoretical issues in Operational efficiency evaluation criteria; real situation of Operationa

INTRODUCTION

1 The necessity of the disseration

In the context of competition and lack of the human resource, to firmly stand in the market and to constantly develop, it is nescessary for enterprises

to effectively use its resources In order to effectively use limited resources, enterprises should assess efficiency of resource use In other words, enterprises must properly assess its own operational efficiency

In order to strongly stand and to prevail with competitors, strategies must be given by enterprises and every operations of the enterprises must be focused on implementation of strategies It is needed for the enterprises to give Operational efficiency evaluation criteria in compliance with strategies

in successful implementation of the strategies

Vietnam is a developing country; thus, transport and communications play an important role in development of the country Liking as enterprises in other sectors, operational efficiency is the survival of the enterprises; therefore, it is always cared by traffic construction enterprises However, through the field research, there are a lot of shortcomings in Operational efficiency evaluation criteria If applying the current assessment system, it is very difficult for traffic construction enterprises to sucessfully perform strategies and to firmly stand in fiercer and fiercer competition conditions

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

2 Subject, scopes and objective in the disseration

Research subjects in the disseration are theoretical issues in

Operational efficiency evaluation criteria; real situation of Operational efficiency evaluation criteria and method to complete the Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport

Research scope in the dissertation is limited in Traffic construction enterprises under Ministry of Transport (these enterprise mainly focus on 07 corporations)

The research purpose in this dissertation is to systematize basic theoretical issues on operational efficiency and Operational efficiency evaluation criteria associated with short-term and strategic objectives Then, the Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport are evaluated and proposals are given

to complete Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport that helps these enterprises to

correctly assess operational efficiency and to effectively perform strategic objectives

Data, material collecting and processing methods include: survey method, group distribution method, rate method, etc The methods are applied to present research results: comparision method, analysis method, synthetic method, induction method, etc

4 Main new aspects in the disseration

Theoretically: Systematization and completion of theory of operational

efficiency and Operational efficiency evaluation criteria in traffic construction enterprises in general, and Traffic construction enterprises under Ministry of Transport in particular are associated with implementation of business strategies to meet development requirements of the enterprises in the globalization and economic integration period

For field study: the dissertation has been considered and evaluated the

real situation of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport, then giving advantages and shortcomings of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport Basing on the field study, the dissertation gave solutions to complete Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport in the economic development and integration

5 Outline of the disseration

The Dissertation includes 132 pages, 17 tables, 10 charts, 7 pictures and annexes; and is divided into 03 chapters, exclusive of the annex:

Chapter 1: Theoretical bases of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport

Chapter 2: Real situation of Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport

Chapter 3: Solutions to complete Operational efficiency evaluation criteria in traffic construction enterprises under Ministry of Transport

CHAPTER 1

THEORETICAL BASES OF OPERATIONAL EFFICIENCY

EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT

1.1 ROLES OF OPERATIONAL EFFICIENCY EVALUATION CRITERIA IN ENTERPRISES

1.1.1 Operation efficiency and Operation efficiency eveluation

1.1.1.1 Viewpoints of operational efficiency

According to Enterprise Law 2005, business operation is: “constant

implementing one or some or every sections in investment, from production

to consumption of the products or service supply in the market to profit”

[21]

In the fiercer and fiercer competition and scarcer and scarcer wealth of the society, enterprises and economists has been interested in evaluating operational efficiency and finding out solution to increase operational efficiency Operational efficiency is a concept which has wide meaning and

is understood according to many different ways depending on each individual and specific circumstance

Through analysis of different viewpoints of operational efficiency, the

author concluded that: Operational efficiency reflects results on enterprises’

human resource use to achieve business objectives with the lowest expenses

or with defined expenses

1.1.1.2 Measurement and evaluation of operational efficiency

Measurement of operational efficiency is to the enterprises’ quantify operational result into specific criteria for evaluating operational efficiency Operational efficiency evaluation and measurement are closely related together and impacts significantly on each other In order to properly evaluate operational efficiency, it is required to have reasonable operational efficiency measurement criteria In contrast, measurement criteria are depended on purposes of operational efficiency evaluation Therefore, in fact, operational efficiency measurement and evaluation is one process Operational efficiency measurement criteria are considered operational efficiency evaluation criteria

Operational efficiency evaluation is comparison among Operational efficiency measurement criteria and thier standard to give conclusion on enterprises’ operational efficiency The operational efficiency evaluation is performed through Operational efficiency evaluation criteria These criteria

can be relative criteria or absolute criteria

1.1.2 Roles of operational efficiency evaluatoin in enterprises

Operational efficiency evaluation is one of three functions of administrators in enterprises According to Operational efficiency evaluation, administrators can update operation situation of enterprises and working situation of departments or employees, then the administrators will give suitable adjustment to improve operational efficiency of the enterprises Operational efficiency evaluation criteria are applied by enterprises to monitor and control particular operation, forecast enterprises’ situation in the further to give proper strategic adjustment in Operational efficiency evaluation

Operational efficiency evaluation plays an important role for enterprises

in both short term and long term In short term, an enterprise will not control their activities if the enterprise does not have effective efficiency evaluation system Effective efficiency evaluation system helps enterprises not only control their activities in short term, but also make motive and encourage effective operation to achieve long-term objectives In long term, operational efficiency evaluation significantly impacts on improvement of competition and implementation of strategies of the enterprises If An enterprise has a good strategy but ineffective operation, the enterprise cannot highly compete and cannot obtain its strategic objectives

Results on operational efficiency evaluation are widely applied in encouragement, motivation, reward and punishment to abtain high efficiency

by enterprises Apart from efforts of every department and every employees

in enterprises, the operationa; efficiency evaluation criteria plays an important in controlling and encouraging to achieve strategic objectives

1.2 OPERATIONAL EFFICIENCY EVALUATION SYSTEM

1.2.1 Principles of development of operational efficiency evaluation criteria

An enterprise is a complex organization To surve and develop in competitive environment, the enterprise needs a proper operational efficiency evaluation criteria According to researches from many authors, it is required for operational efficiency evaluation criteria to design basing on the following principles to obtain success in short term and in long term:

- Operational efficiency evaluation criteria must be in compliance with the enterprise’s strategy

- Operational efficiency evaluation criteria must be associated with view, value, and factors constituting the enterprise’s success

- Operational efficiency evaluation criteria must reflect history, present and future associated with the enterprise’s operation

- Operational efficiency evaluation criteria must reflect demand of customers, of shareholders and of employees

- Operational efficiency evaluation criteria must be consistent and closely associated among upper departments and lower department

in the enterprise

- Operational efficiency evaluation criteria must be changed when the enterprise’s strategy changes

- Operational efficiency evaluation criteria must be reliable

- Operational efficiency evaluation criteria must reflect the enterprise’s specific objectives

- Operational efficiency evaluation criteria must constitute financial and non-financial criteria

1.2.2 Factors impacting on enterprises’ Operational efficiency evaluation criteria

Factors impacting on enterprises’ Operational efficiency evaluation criteria are divided into two groups: internal factors and external factors

Internal factors: include organizational structure, business strategies,

organizational culture, human resources, responsibility of individuals, operational processes of enterprises, etc

External factors: Business environment, business lines, policies, law,

market, etc significantly impact on enterprises’ selection of Operational efficiency evaluation criteria

Internal factors and external factors does not impact independently, they interact and support together When developing Operational efficiency evaluation criteria, enterprises should analyze to select proper criteria in order to operational efficiency of each department and of whole enterprise

is nescessary for enterprises to give evaluation criteria of work completion time, initiatives in execution to save expenses and execution time, etc

Each work is built in different places with different construction conditions, thus, it is required different construction solutions Therefore,

traffic construction enterprises must have creativity and efficiency evaluation criteria in using construction solutions via operational efficiency evaluation criteria to ensure quality of the works with the lowest expenses, operational efficiency evaluation criteria

Traffic works are often far from enterprises’ office, thus, proper solution in construction such as material supply, vehicle, construction machines, human resouce supply, etc play an important role Operational efficiency evaluation criteria can effectively evaluate construction serving

A popular phenomenon in enterprises is wrong construction in comparison to the desgin, thus, criteria reflecting re-construction volume or value are operational efficiency evaluation criteria In construction, enterprises are interested in organization of material supply system for constant execution which constitutes in operational efficiency evaluation criteria of material department

1.2.4 Operational efficiency evaluation frameworks in enterprises

Changes of business environment, demand for information in enterprise administration, awareness of managers and of researcheres, etc has a significant influence on development of operational efficiency evaluation criteria in enterprises It can be divided into two stages as following:

Operational efficiency evaluation frameworks before 1980

Before 1980, Operational efficiency evaluation frameworks mainly were based on accounting data with financial Operational efficiency evaluation criteria such as profit, profit on investment, profit on asset, profit

on owner’s capital, etc [Neely, 2000:291] In current period, some Operational efficiency evaluation frameworks are based on proposed financial measures

Operational efficiency evaluation frameworks before 1980 mainly focused on financial Operational efficiency evaluation criteria which are commented by many researhers Neely (1999) has synthesized financial criterial as following:

- Promoting managers to concentrate on short-term objectives

- Not concentrating on strategies and quantity, punctuality and flexibility

- Promoting to increase efficiency such as much production to effectively use human resource and machineries

- Promoting managers to reduce deviation from standard because of continuous improvement

- Not providing information about customers’ demand and competitors’ operational efficiency [55]

Proposed operational efficiency evaluation frameworks before 1980 tended to focus on financial criteria and for short-term Operational efficiency evaluation These criteria can help managers and individuals of interest to easily evaluate Operational efficiency of enterprises, then make decision to obtain short-term objectives There are some shortcomings in applying financial criteria in Operational efficiency evaluation These shortcomings are financial criteria along with a specific financial period, not combination among objectives, success factors, strategies with operational efficiency evaluation in the enterprises Therefore, if basing solely on financial criterion

to evaluate operational efficiency, this criterion maybe accidentally become a barrier in performing strategies, improving the competitiveness of enterprises

Operational efficiency evaluation after 1980

Limitations of operational efficiency evaluation before 1980 has not been associated with strategies; thus, enterprises could not assess implementation of strategies In competitive environment, business strategies become a guideline in every operation of the enterprise which helps the enterprises to succeed in business world To successfully implement strategies, operational efficiency evaluation criteria must be attached with strategies and can measure efficiency in strategy implementation This viewpoint is accepted by many scholars Many evaluation frameworks were proposed after 1980 Typical frameworks are matrix operational efficiency evaluation framework by Keegan, Eiler and Jones in 1989 [Neely, 2007: 145]; SMART pyramid framework by Lynch and Cross (1991); Result and Determinants Framework by Fitzgerald and his coworkers (1991), Performance Measurement Questionnaire by Dixon and his coworkers (1990), Efficiency prism framework by Neely (2001), etc, of which Balance Scorecard by Kaplan and Norton in beginning the 90s (Bourne, 2008) is the most typical framework in operational efficiency evaluation under many different aspects

CONCLUSION OF CHAPTER 1

In the context of scarcer and scarcer resources, fiercer and fiercer global competition, it is required for enterprises to properly evaluate operational efficiency of each department in enterprises as well as entire enterprise to make correct decisions Recently, viewpoint of operational efficiency in the world has changed dramatically While short-term operational efficiency was paid attention previously, long-term operational efficiency is more cared currently Operational efficiency evaluation criteria also changed much; while mainly financial criteria were applied to evaluate Operational

efficiency, enterprises apply not only financial criteria, but also non-financial criteria

Operational efficiency evaluation criteria include financial criteria and non-financial criteria, short-term Operational efficiency and long-term Operational efficiency, etc which can be applied to not only evaluate Operational efficiency in short term but also assess implementation of strategic objectives of enterprises

A viewpoint of Operational efficiency evaluation is changed in appreciting strategic operation and objectives rather than short-term Operational efficiency Operational efficiency evaluation is combined with strategy and implementation of strategic objectives of enterprises

Contents in chapter 1 are focused on study of basic theorical issues of Operational efficiency and Operational efficiency evaluation in enterprises to clarify theory of Operational efficiency and Operational efficiency evauation criteria for business administration

CHAPTER 2

REAL SITUATION OF OPERATIONAL EFFICIENCY

EVALUATION CRITERIA IN TRAFFIC CONSTRUCTION

ENTERPRISES UNDER MINISTRY OF TRANSPORT

2.1 GENERAL INFORMATION OF TRAFFIC CONSTRUCTION ENTERPRISES UNDER MINISTRY OF TRANSPORT

2.1.1 Establishment and development

The opening and converting the economy into market economy in Vietnam has created a strong change in structure of economic sectors that create conditions for Vietnamese enterprises to gradually develop and integrate into regional and international market Along with delopmet of economic sectors, enterprises in the transport sector in general and enterprises in traffic construction enterprise under Ministry of Transport in particular also has a great growth in both quantity and quality

Recently, transport and communications sector has made effort and overcome many difficulties and challenges, actively perform objectives and duties, as well as more effectively perform management function on transport and communications Besides obained achievement, enterprises under Ministry of transport also exist many shortcomings: scale is small, structure exists many irrationalities, operational efficiency and competitiveness are low, debt-liabilities are high, etc

Although there are some shortcomings, effort of Ministry of Transport

in limiting and reducing traffic accidents is apprepriated Order and traffic safety are enhanced in both institutional and synchronization solutions, etc

2.1.2 Business production organizational structure and business production management structure

Traffic construction corporations are organized according to model of Board of directors, General director, functional departments and member units Lower-level enterprises are organized according to independent accounting enterprises as limited companies or joint stock companies and dependent accounting enterprises Under a corporation are member firms including one member limited companies and joint stock companies One member limited companies are organized according to structure of board of directors, the Board of Directors will select a CEO and vice directors Departmets and divisions will assist director Production units are organized into plants or execution groups

Traffic construction joint stock companies under Ministry of transport mainly are state enterprises which are in difficult in privatized finance When changed into joint stock companies, these enterprises are organized according

to structure of board of directors, Genreral director, vice general directror and functional departments Production units are organized into plants or execution groups

2.1.3 Business line

In the development trend of society, in order to take advantages of buysiness benefits and roduct diversification, aprt from main business line as construction of traffic works, traffic construction enterprises also gradually enlarge business lines in many different fields such as real estate investment, import-export, production of materials and fertilizer, transport trading, travel, etc Main business activities of traffic construction enterprises include:

- Construction of traffic works: this is the main business operation and nature of tradition in traffic construction enterprises

- Construction of civil and industrial works: investment and construction of industrial zones, residential areas and urban areas, etc

- Expoilting and processing construction materials, producing precast concrete components

- Other activities

2.1.4 Organization of accounting machinery and accounting system in Traffic construction enterprises under Ministry of Transport

2.1.4.1 Organization of accounting machinery

Because traffic construction enterprises must execute traffic works far from head office of the enterprises, accounting machinery is organized according to model of semi-concentration and semi-dispersion

At the enterprises, the company accounting department plays a central role in collecting, processing accounting documents submitted by member units, and in investing and accepting works, items, in making financial statement of holdings company and making united statement

2.1.4.2 Organization of accounting system in Traffic construction enterprises

Traffic construction enterprises under Ministry of Transport is applying the accounting regime promulgated under the Decision No 15/2006 QĐ-BTC dated 20/03/2006 by Minister of Finance and under the Circular No 244/2009TT-BTC dated 31/12/2009, the Circular No 106/2008 and the Circular No 206/2009 guiding to adjust and to complete accounting machinery of the enterprises

Due to regulatory requirements, and due to the nature of accounting work in construction enterprises, most of traffic construction enterprises applied common diary accounting machinery Currently, accounting is performed by computers through accounting softwares

2.2 REAL SITUATION OF OPERATIONAL EFFICIENCY

ENTERPRISES UNDER MINISTRY OF TRANSPORT

To study on the real situation of operational efficiency evaluation criteria in traffic construction enterprises, the author performed field survey

in these enterprises and the authors has obtained 84 survey cards from 41 traffic construction enterprises Survey subjects are directors, heads of business departments, masters of construction team, some chief accountants and accountants in these enterprises The results reflect the following aspects:

- Structure of subjects answering the survey cards

- Number of employees in surveyed enterprises

- Organization form of the enterprises participating in the survey

- Charter capital of the enterprises participating in the survey

- Operation time of the enterprises participating in the survey

Actually, the research on operational effeciency evaluation criteria system of traffic construction enterprises shows that most companies use operational efficiency evaluation criteria as follow:

2.2.1 Operational efficiency evaluation criteria of businesses under Government’s regulation

Most traffic construction enterprises under Ministry of Transport are owned by State or State –owned-enterprise accounts for dominant share, therefore, they are objects applying the operational efficiency evaluation criteria of State-owned enterprise, the operational result of Board of Directors, Board of Managers is under regulation in Article 12 Supervision regulations issued with Decision No 224/2006/QD-TTg dated 06/10/2006 of Prime Minister and Clause 2, Section II, Circular No 115/2007/TT-BTC dated 25/9/2007 of Ministry of Finance

Enterprises evaluate the operational efficiency under criteria regulated

in Clause 1, Article 12 Regulations, accompany with Decision No 224/2006/QD-TTg, including:

a Revenue and other income: This criteria is identified based on the business opreational result report

b Implementation profit and profit margin on State capital: Include net profit from business operation and other profits reflecting on business operation result report

c Overdue liabilities and due debt payment ability : is liabilities which overdue of payment commitment for creditor

d Situation of executing mode, legal policy: include tax policy, budget apply, credit, insurance, environment protection, labor, salary, financial mode, accounting, auditing, financial statement mode and other report

e Situation of implementing the product, public service: based on directly implementing the national defense and military duty, production, public service supplying as State’s policy through procedure method or accept orders or accept duty assigned by State

2.2.2 Other efficiency evaluation criteria

Beside the efficiency evaluation criteria regulated by management agencies to State-owned enterprise and Joint Stock Company which State holds dominant shares, traffic construction enterprises under Ministry of Transport use other efficiency evaluation criteria serving for management and specific evaluation of their units, include:

a Evaluation criteria of profitability: The dissertation has investigated actual criteria on gross profit margins; Return on sales (ROS); Return on assets (ROA); ROTA; Return on equity ( ROE); Return on investment (ROI)

b Assets use efficiency evaluation criteria: rounds per minute of assets; production capability of fixed assets, rounds per minute of short term asset; time of a round of short term asset; rounds per minute of inventory, rounds per minute of receivables liabilities of customer; average collection period

c Efficiency evaluation criteria of loan use: Coefficiency of profitability

of borrowed interest

d Cost using efficiency evaluation criteria and other criteria: Return of capital price of selling goods; return of sale cost, return of business management cost; return of total cost, etc

e Non-financial criteria

Recognizing the important role of non-financial crieria and using these criteria in actual operational efficiency of traffic construction enterprises under Ministry of Transport are so limit Originated from old business perspective, enterprises have not really focused on customer They still have perspective that sector’s products are single, so they have not paid attention to keep customer who has come to them, or they have not known the important role of training and enhancing business culture for employee, especially those who hand over the construction, therefore, expenditure for these works has not reasonable

The writter gave a lot of survey questions to evaluate the effectiveness

of the operational efficiency evaluation criteria to business administration, construction evaluation of the operational efficiency evaluation criteria of departments in enterprise, conformity and relationship of evaluation criteria