key performance indicators for alibaba’s sales staffs at osb investment and technology joint stock company

2.3 Factors impacting on developing and using KPIs...262.3.1 External factors impacting on developing and using KPIs...26 2.3.2 Internal factors impacting on developing and using KPIs...

I express my gratitude to a number of people for the assistance that theyhave given me in conducting the research for this dissertation In particular I wish tothank my supervisor whose interest guidance and thoughtful criticism have been ofthe greatest benefit to me Also, I would like to convey my sincere appreciation tolecturers and staffs at the NEU Business School for their insights, knowledge andsupport for this endeavor

I also want to thank Vice Director of e-Commerce of OSB Investment andtechnology joint stock company, my co-workers for their co-operation and valuableassistance throughout the execution of the study A special word of appreciationgoes to my family for their moral support without which it would have beenimpossible to initiate this study I thank them sincerely

TABLE OF CONTENTS

ACKNOWLEDGMENT i

TABLE OF CONTENTS ii

ABBREVIATIONS iv

LIST OF TABLES v

LIST OF FIGURES AND CHARTS vi

EXECUTIVE SUMAMRY vii

CHAPTER 1 INTRODUCTION 1

1.1 Rational 1

1.2 Research Objectives 3

1.3 Research Questions 3

1.4 Research methodology 3

1.4.1 Research Process 3

1.4.2 Data Collection 4

1.4.3 Data Analysis 5

1.5 Scope of research 5

1.6 Thesis structure 5

CHAPTER 2 THEORETICAL FRAMEWORK ON KEY PERFORMANCE INDICATORS 6

2.1 Nature of Key performance indicator 6

2.1.1 Definition of Performance Appraisal and KPIs 6

2.1.2 Characteristics of KPIs 9

2.1.3 Purposes and benefits of KPI 10

2.1.4 Steps to implement KPI 11

2.2 Balance scorecard as a tool for KPIs development 12

2.2.1 Balance scorecard definition 12

2.2.2 Balanced scorecard as a tool to develop KPIs 15

2.2.3 Four perspectives of developing KPIs 19

2.3 Factors impacting on developing and using KPIs 26

2.3.1 External factors impacting on developing and using KPIs 26

2.3.2 Internal factors impacting on developing and using KPIs 26

CHAPTER 3 DEVELOP THE KEY PERFORMANCE INDICATORS FOR ALIBABA’S SALES STAFF AT OSB 29

3.1 Overview of OSB and Alibaba’s department 29

3.1.1 Overview of OSB 29

3.1.2 Overview of Alibaba’s department 34

3.2 Requirements for Alibaba’s sales staff performance measurement 37

3.2.1 Alibaba’s sales staffs job requirements 37

3.2.2 Requirements for Alibaba’s sales staffs performance measuarement 40

3.3 Develop KPIs for Alibaba’s sales staffs base on BSC 42

3.3.1 Respondent profile 42

3.3.2 KPIs for Alibaba’s sales staffs according to financial perspective 47

3.3.3 KPIs for Alibaba’s sales staffs according to Education and Growth 47

3.3.4 KPIs for Alibaba’s sales staffs according to Internal business process 48

3.3.5 KPIs for Alibaba’s sales staffs according to customer perspective 49

CHAPTER 4 SOLUTIONS AND RECOMMENDATIONS TO USE THE KPIs FOR ALIBABA’S SALES STAFF AT OSB 51

4.1 Plan and objective of Alibaba’s department 51

4.2 Solution to implement KPIs for Alibaba’s sales staffs at OSB JSC 51

4.3 Recommendations to implement KPIs 56

4.3.1 Recommendation for Leadership 56

4.3.2 Recommendation for HRM 57

4.3.3 Recommendation for training activities at OSB 58

CONCLUSION 61

REFERENCES 62

APPENDIX 1 SURVEY QUE STIONNAIRES 64

APPENDIX 2 IN-DEPTH INTERVIEW QUESTIONS 68

BSC

GGS

HR

Balance score card

Global Gold suppliers

Key performance indicators

OSB Investment and Technology Joint Stock Company

Performance appraisals

Sales Manager

Sales executive

TL Team leaders

LIST OF TABLES

Table 2.1 Generic Mesuarements of four perspectives 25

Table 3.1: OSB’s financial highlights from 2010-2012 33

Table 3.2: Current Appraisal Form 40

Table 3.3: Employees’ Perception about OSB’s Strategic Development 43

Table 3.4: Employees’ perceptions about the KPI system 44

Table 3.5: Employees’ satisfaction with current job 46

Table 3.6: Employees’ perceptions about career development opportunities 47

Table 3.7: Employees’ perceptions about working relations and cooperation 48

Table 3.8: Suggested indicator groups and indicators for Alibaba’s sales staffs 50

Table 4.1: Instructions for Evaluating Job Results 53

Table 4.2: Sugested KPI for Sales Manager 54

Table 4.3: Sugested KPI for Sales Executive 55

LIST OF FIGURES AND CHARTS

Figure 1.1 Research Process 4

Firgue 2.1 Model of KPI by David Parmenter 7

Figure 2.2 Balance scorecard framework 15

Figure 2.3: Using the BSC as a strategic Management system 17

Figure 2.4: Internal business process 23

Figure 2.5: Four perspective of Balance scorecard 24

Figure 3.1: OSB structure 29

Figure 3.2 Alibaba’s team structure 36

Figure 3.3 Sales process 37

Figure 3.4: Current Performance Appraisal Flow Chart 42

Method of research is analysis, comparisons, synthesis to examine bothprimary data and secondary data Base on given KPIs required, the survey wasconducted to assess the current KPIs for Alibaba’s sales staffs at OSB JSC In thisstep, Four business perspectives of BSC model was to identify their current KPIs.Different types of data sources were used to gather the data that include OSB’sreport, regulations, procedures, job description, magazines, books and Internet(secondary data), and surveys and interviews (primary data) which coveringdifferent levels of employees of OSB, the survey questionnaires was directlydistributed through OSB internal mailing system to explore deep information onhow to develop KPI for sales department in Ha Noi

The research objectives are to analyze the job requirements of sales teamsand performance requirements for Alibaba’s sales staffs, to develop KPIs base onBSC model model to measure the performance of Alibaba’s sales staff at OSB JSCand to propose solutions and recommendations to use the KPIs for Alibaba’s salesteam at the OSB The research covered different issues related to effective KPI

system such as the scope, criteria, method of measurement and procedure ofapplying KPIs system, the improvements in new KPIs system, and how theemployees perceive the evaluation conducted by their concerned managers

Base on KPIs required, thesis suggested some solutions and recommendation

to use KPIs for Sales teams and the company's requirements The report found thesuitable of having KPI system for Alibaba’s sales staffs to improve their activities.This thesis also suggested some recommendations to use KPIs for Alibaba’s salesstaffs at OSB Company:

 Develop KPIs based on Balance Scorecard model

 Training apply KPIs: Raising awareness and widespread KPI for all officers

and employees, training evaluators and designer of KPIs for Alibaba’s sales staffs

at OSB Company…

 Solutions to implement KPIs and recommendation for OSB Company to usenew KPIs system for Alibaba’s sales staffs: Recommendation for awareness ofleadership and recommendation for training activites at OSB

CHAPTER 1 INTRODUCTION Rational

People say that selling is a numbers game, and all sales organizations keeptrack of certain sets of numbers It is easy to obsess over the obvious numbers likemonthly or quarterly revenue or close rates If enterprises want to improve the waytheir team plays the game and boost the score in the future, they need to be payingmuch closer attention to another set of numbers, namely, the Key PerformanceIndicators (KPIs) that give them insights into how well each member of their team

is actually playing

A KPIs is a measure of a business activity used to estimate how a particularprocess is actually performing It is KEY to the success of the business Forexample, is the number of sales contacts per week important to the success oforganization? It is related to PERFORMANCE when it can be clearly measured,quantified and easily influenced by the members of team For example, does abusiness have a benchmark that tells sales manager that when a salesman makes atleast 5 contacts with Executive level decision makers during a sales cycle the value

of the final deal will go up by 40%? And it is used as an INDICATOR; in other

words, it is something that provides leading information about future results For

example, one version of the 80/20 rule says that 80% of a salesman’s production isgenerated by activity in 20% of their accounts Given that information, it might be agood idea to track the number of calls and the amount of time each sales makerspends with high value contacts in those accounts, and set some specificexpectations there that can be measured Essentially, KPIs should provide visibilityinto current activity that will impact future sales team productivity Tracking theseindicators in the present will allow you to identify gaps and coach team members,which will help manager influence the outcome of those monthly, quarterly andannual productivity numbers that are so important

With the above benefits of KPIs for sales staff, to ensure business activitieseffectively and growing, OSB Investment and Technology Joint Stock Company(OSB JSC) cannot but carry out employee performance appraisal However, thenature of current performance appraisal (PA) at OSB JSC is formal and emotional.Why is staff appraisal formal and emotional? The fundamental cause of thisexistence is that Company has not built performance indicators to appraise foremployee especially for Alibaba’s sales staffs Because of not having a system ofevaluation criteria, employee performance appraisal at OSB JSC is not exact, notefficient and does not reach expected goal of leadership From the inexactevaluation of employee, it has influenced a range of issues related to humanresource management such as rewards, bonus paying, training, promotion Theinexact evaluation of employee results in unfair rewards, bonus paying, trainingwrong people; the promotion did not achieve the purpose of staff development andthere are no motivation to push employees to work better Due to lack of employeeperformance appraisal system, leaders tent to egalitarianism and avoid questionsfrom staffs With above evaluation, the employees who work ineffectively andirresponsibly usually sanction actively, by contrast, who work hard and responsiblyoften discontent and certainly decrease performance because they are all equal Inrecent years, productivity of whole sales teams was still not stable It is so farbehind the dream target of year Although Vietnam is highly appreciated a potentialmarket

In order to help sales staff develop their performance and motivate themworking better, OSB should build a clear and effective employee performanceappraisal system The KPIs not only provide enough information for evaluationcriteria, career planning, training and other personal decision but also can helpmanager to conduct performance appraisal well and help employees in identifyingthe knowledge and skills required for performing the job efficiently as this woulddrive their focus towards performing the right task in the right way

Therefore, I look forward to improving the current key performanceindicators base on knowledge and applying theories and measures that give me inBussiness School of National Economy of University That is the reason why the

author would like to conduct the research named “Key performance indicators for Alibaba’s sales staffs at OSB Investment and Technology Joint Stock Company” with the expectation to contribute OSB JSC development

The main research questions to be addresses are:

 What is the responsibility of Alibaba’s sales staffs?

 What are the performance requirements for Alibaba’s sales staffs at OSB JSC?

 What are the KPIs for Alibaba’s sales staffs at OSB JSC base on BSC model?

 What are solutions and recommendations to use the KPIs for Alibaba’ssales staff at OSB JSC?

Research methodology

1.4.1 Research Process

This research was carried out through the literature review and the case study

of Alibaba’s sales staff at OSB JSC The research includes following aspects:

 Data gathering

 Data analysis

 Comparing the study outcome with the proposed theoretical framework

In-depth interview

Develop KPIs

Recommendations &

Solutions

Figure 1.1 Research Process

Source: Author's research

1.4.2 Data Collection

 Secondary Data: Collected from academic literatures, popular writings in

research papers, published books, journal articles, and from the World Wide Web,and the internal circulated documents from OSB JSC’s annual report, workingregulations, working procedures, job descriptions, etc in order to generalize currentsituation of KPIs In addition to that, secondary data was also utilized to clarify theperformance requirements of Alibaba’s sales staff in OSB JSC when transferingKPIs into practice

 Primary Data: collected by two sources, surveys and in-depth interviews: Survey: The survey were designed to collect information about employees’

perceptions and satisfaction of the current KPIs and to find out the gaps between thecurrent KPIs with the required one and the necessary criteria to improve the thecurrent KPIs more effectively Survey is conducted with 15 people including 4 teamleaders and 11 Alibaba’s sales people in OSB JSC at Head office in Ha Noi Theonline employee survey was conducted through internal mailing system tomaximize employee participation and to take their own individual feedback

In-depth interview: Implement to Deputy Director and Sales Manager figure

out the performance requirements of Alibaba’s sales staffs at OSB JSC.Furthermore, answers to interviews from managers helped to collect informationrelated to their feelings and opinions about the KPIs and brought a picture ofproblems that they have to deal with when transfering KPIs into practice

The way of conduct interview: The interviews were held face to face Theduration of each interview was an average of 1 hour The interviews was conducted

in Vietnamese and major contents were translated into English by writers

The interviewee 1: Mr Tran Dinh Toan – Director of E-commerce division(Alibaba sales staffs)

The interviewee 2: Mr Dao Manh Khoi – Sales Manager of Alibaba’s sales staffs

1.4.3 Data Analysis

After collecting all the data, analysis will be conducted with the support ofExcel software and other tools Based on those outcomes, a new KPIs will berecommended for OSB JSC

Scope of research

 Research Objects: The Key Performance Indicators for Alibaba’s sales staff at

OSB JSC

 Geographical scope: Alibaba Sales Department in Hanoi

 Timing: The secondary data could be collected from 2010 to 2012.

The primary data could be collected in 2013

Thesis structure

The thesis is divided into 4 chapters described as follows:

 Chapter 1 – Introduction

 Chapter 2 – Theoretical framework on Key Performance Indicators

 Chapter 3 – Develop the Key Performance Indicators for Alibaba’s

sales staff at OSB JSC

 Chapter 4 – Proposed recommendations to use the Key Performance

Indicators for Alibaba’s sales staff at OSB JSC

CHAPTER 2 THEORETICAL FRAMEWORK

ON KEY PERFORMANCE INDICATORS

Nature of Key performance indicator

2.1.1 Definition of Performance Appraisal and KPIs

Definition of Performance Appraisal

Bates & Holton (1995) pointed out the meaning of performance as:

“Performance is a multi-dimensional construct, the measurement of which variesdepending on a variety of factors It is important to determine whether themeasurement objective is to assess performance outcome or behavior"

Bernadin et al (1995) mentioned that: “Performance should be defined as theoutcomes of work because they provide the strongest linkage to the strategic goals

of the organization, customer satisfaction and economic contributions” However,

as per Armstrong, (1999 P430), the Oxford English dictionary defines performanceas: “The accomplishment, execution, carrying out, working out of anything ordered

or undertaken” He added a more comprehensive view of performance, which is

“performance means both behaviors and results Behaviors emanate from theperformer and transform performance from abstraction to action Not just theinstruments for results, behaviors are also outcomes in their own right – the product

of mental and physical effort applied to tasks and can be judged apart from results”

Performance Appraisal is a system that the organization uses to evaluate itsemployees performance in order to develop their skills and identify growthopportunities in the organization if the system was used correctly

Performance Appraisal is a process in where an individual's performance isscored and feedback is given A large component in psychology is trying to measurehuman behavior Performance appraisals are often used in the work place to informemployees on their work progress Promotions, bonuses and training needs are oftenbased on the information provided by a performance appraisal

Tick (2006) posted that an Appraisal is: "a formal evaluation of theperformance of an employee over a particular period of time A good appraisalshould identify the strengths and weaknesses and the improvement opportunities."Appraisal is supposed to be a planned meeting between the employee and theconcerned manager It provides opportunity to have an overall view of performance

to discuss what was achieved against the agreed objectives

Weightman (1999) said that performance appraisal is a well-established way ofproviding milestones, feedback, guidance and monitoring for employees The essentialelements of any performance appraisal are judgment and reporting The performanceappraisal is not simply being measured as in the completion of workload, it is beingjudged This judgment not only has to be made but also passed on to other people insuch a way that the other understands what it is intended and takes action upon

Firgue 2.1 Model of KPI by David Parmenter

Source: Key Performance Indicator by DAVID PARMENTER

KPI

KRI PI

 Outcome Indicators crucial - KRI: to know you have done with oneperspective (finance, customer, internal processes, Learning &Development, Environment & Community Satisfaction of staff .) in theorganization's strategy.

 Performance index - PI: What do you need to know

 Key performance indicators - KPIs: to know you have to do to increasethe performance significantly

For performance measurement system needs to establish measurableperformance indicators The focus of the key performance indicators is measuringthe process and the results of the most crucial decisions to the organization'ssuccess Toward the mission, vision, strategy of the organization, the system isdesigned only stratification from level to level the organizations / groups /individuals, reflecting the results of operations of all levels within the organization.Originating from requirements of the measurement results in business performance,KPI approach was introduced in the U.S in the 80s of the 20th century, then withthe advent of the equilibrium of 2 Cards S.Kaplan author Robert and David Norton,KPI is widely used around the world as one effective method to measure theperformance through the first set and measure system performance KPI method hasalso been applied in organizations such as the Government of Malaysia Currently,the method is carried out KPI is quite strong in Vietnam, especially in the businesshas successfully applied ISO 9001

The key stages in identifying KPIs are:

 Having a pre-defined business process (BP)

 Having requirements for the BPs

 Having a quantitative/qualitative measurement of the results andcomparison with set goals

 Investigating variances and tweaking processes or resources to achieveshort-term goals

2.1.2 Characteristics of KPIs

KPI characteristics include the following

KPIs are non-financial measures: KPIs are not expressed in monetary

figures When putting a pound sign to a measure it means that has not dug deepenough Sales made yesterday will be a result of sales calls made previously toexisting and prospective customers, advertising, and amount of contact with the key

customers, product reliability, etc Any sales indicators expressed in monetary terms

are result indicators

In many organizations, a KPI may rest with certain activities undertaken withkey customers, who often generate most, if not all, of profit

KPIs are measured frequently: KPIs should be monitored and reported

24/7, daily, and a few, perhaps, weekly A KPI can't be measured monthly as this isshutting the stable door well after the horse has bolted

KPIs are current or future measures, as opposed to past measures Mostorganizational measures are past indicators, measuring events of the last month orquarter These indicators cannot be and never were KPIs That is why a satisfactionpercentage (e.g 65%) from a customer satisfaction survey performed every sixmonths can never be a KPI

KPIs are acted upon by the CEO and senior management: All good KPIs

that make a difference should have the CEO's constant attention, with daily calls tothe relevant staff Having a potentially career-limiting discussion with the CEO isnot something staff wants to repeat

KPIs are understood by staff: A KPI should make clear what action is

needed In the case of an airline that was having a problem with late planes, a KPIcommunicated immediately to all staff that there needed to be a focus on recoveringthe lost time Cleaners, caterers, ground crew, flight attendants and liaison officerswith traffic controllers would all work some magic to save "a minute here and aminute there" while maintaining or improving service standards

KPIs are the responsibility of individuals: A KPI is deep enough within an

organization to be tied down to an individual In other words, the CEO can ringsomeone and ask "why?" Return on capital employed has never been a KPI as itcannot be tied down to a manager; it is a result of many activities under differentmanagers

KPIs have a significant effect on the organization: A KPI will affect most

of the critical success factors (CSFs) and more than one balanced scorecardperspective In other words, when the CEO focuses on the KPI and the staffs followthe organization scores goals in all directions

KPIs have a positive effect on other measures: A KPI has a flow-on effect

on other performance measures Reducing late planes would improve performancemeasures around improved service by ground staff as there is less "firefighting" todistract them from a quality and caring customer contact

2.1.3 Purposes and benefits of KPI

KPI will help the sales manager make better decisions He must have timelyand accurate information about all aspects of the performance of his team members

in order to plan and coach effectively He can’t rely on hope and assumptions; hemust be assessing real data in real time that will reveal what is going on so he cantake action now, before it is too late

This leads to better execution Identifying, measuring and – most of all coaching to the right KPIs leads directly to behavior change and skill improvementacross the entire team

-KPIs set expectations and improve communication Defining -KPIs clarifiesfor sales makers the activities upon which they should be spending their time, andprovides a context for sales managers to interact with sales makers regarding theirperformance

A clear focus on KPIs will change sales maker behavior Once sales makersunderstand the activities they are supposed to be concentrating on, they will devote

more time and energy to these areas, especially if they know their compensationwill be tied to their performance in these areas

Focusing on a core set of KPIs will keep sales maker activities consistent.There is an old saying; “People don’t do what is expected, the only do what isinspected.” When sales makers understand what you are going to inspect everyweek, they are much more likely to do them every week

Tracking KPIs is the best way to identify and qualify sales makerperformance Sales makers might be staying busy and giving a 100% effort everyday, which can be confused with real productivity However, if they aren’t givingthat effort to the right activities, all that effort is wasted Tracking KPIs helps salesmanagers make sure sales makers are spending the right amount of time on the rightactivities

Tracking KPIs takes the guess work out of evaluation and coaching This isrelated to the previous point Sales managers who don’t regularly track sales makerperformance against a set of standard KPI metrics don’t really have any objectivebasis for evaluating performance The sales maker may be a great person and hardworker, or they may be a disagreeable know-it-all, but those aren’t the mostimportant behaviors for a sales manager to evaluate The only thing that reallymatters is how they are performing in relation to the KPIs

Effective coaching begins with KPIs Most sales managers understand thatcoaching is important, but coaching is useless if it is not based on quantifiable,actionable skills and behaviors The greatest value of tracking KPIs is theinformation they reveal about where each sales maker is doing well, and where theymight need to help to do better Sales managers can quickly access KPI’s from theirCRM for every sales maker and use this data to customize coaching conversationsthat will address gaps and boost performance

2.1.4 Steps to implement KPI

KPIs give everyone in the organization a clear picture of what is important,

of what they need to make happen The boss uses that to manage performance He /

She make sure that that everything the people in his organization do is focused onmeeting or exceeding those Key Performance Indicators There are 5 steps toimplement KPI as follow:

Step1: Implementation BSC to department

Step2: Fulfill Job description based on the BSC and KPI (individual KPI)

Step3: Set up evaluation criteria (Criteria capacity, result performance )

Step4: Organizing the implementation and evaluation

Step5: Report performance result and records

 Identify and define essential factors that are critical to achieving yourorganization's goals For example, a sales department may define success byincreased sales success However, sales alone is too general of a measure AKPI accurately defines and measures increased sales A better measure ofsales success would be the number of units sold or number of sales at listprice

 Denote a quantity that will represent your company's success This quantitymust be a measurable value, such as percent, number, dollar value, etc

 Post the KPIs in places that will show all stakeholders what the target is foreach KPI Show the progress toward each target Post the KPIs inlunchrooms, conference rooms and company newsletters KPIs giveemployees a picture of what is important to the organization

Balance scorecard as a tool for KPIs development

2.2.1 Balance scorecard definition

The following definitions of the Balanced Scorecard concept present a richpicture from multiple angles:

"The balanced scorecard retains traditional financial measures But financialmeasures tell the story of past events, an adequate story for industrial agecompanies for which investments in long-term capabilities and customer

relationships were not critical for success These financial measures are inadequate,however, for guiding and evaluating the journey that information age companiesmust make to create future value through investment in customers, suppliers,employees, processes, technology, and innovation.” (Kaplan R.S and Norton D.P.(1992) The Balanced Scorecard - Measures that drive performance, HarvardBusiness Review, Jan-Feb.)

A tool that translates an organization's mission and strategy into acomprehensive set of performance measures that provides the framework for astrategic measurement and management system.” (Balanced ScorecardCollaborative, 2005, Online)

The balanced scorecard is a strategic planning and management system that isused extensively in business and industry, government, and nonprofit organizationsworldwide to align business activities to the vision and strategy of the organization,improve internal and external communications, and monitor organizationperformance against strategic goals (Balanced Scorecard Institute, 2010)

The balanced scorecard has multiple meanings The initial meaning when itwas first popularized in early 90s was of an approach for generating a performancereport, by grouping performance measures by perspectives, the most commonlyused being: Financial, Customer, Internal Processed and Innovation and Learning.Gradually, this management tool evolved to become the basis on a performancemanagement system that usesstrategic, operational and individual performanceplans as the basis for a communicating, monitoring and improving organizationalperformance.(eab group, 2010)

The balanced scorecard is a strategic planning and management system that

is used extensively in business and industry, government, and nonprofitorganizations worldwide to align business activities to the vision and strategy of theorganization, improve internal and external communications, and monitororganization performance against strategic goals It was originated by Drs RobertKaplan (Harvard Business School) and David Norton as a performance

measurement framework that added strategic non-financial performance measures

to traditional financial metrics to give managers and executives a more 'balanced'view of organizational performance While the phrase balanced scorecard wascoined in the early 1990s, the roots of the this type of approach are deep, andinclude the pioneering work of General Electric on performance measurementreporting in the 1950’s and the work of French process engineers (who created theTableau de Bord – literally, a "dashboard" of performance measures) in the earlypart of the 20th century

The balanced scorecard has evolved from its early use as a simpleperformance measurement framework to a full strategic planning and managementsystem The “new” balanced scorecard transforms an organization’s strategic planfrom an attractive but passive document into the "marching orders" for theorganization on a daily basis It provides a framework that not only providesperformance measurements, but helps planners identify what should be done andmeasured It enables executives to truly execute their strategies

This new approach to strategic management was first detailed in a series ofarticles and books by Drs Kaplan and Norton Recognizing some of the weaknessesand vagueness of previous management approaches, the balanced scorecardapproach provides a clear prescription as to what companies should measure inorder to 'balance' the financial perspective The balanced scorecard is a managementsystem (not only a measurement system) that enables organizations to clarify theirvision and strategy and translate them into action It provides feedback around boththe internal business processes and external outcomes in order to continuouslyimprove strategic performance and results When fully deployed, the balancedscorecard transforms strategic planning from an academic exercise into the nervecenter of an enterprise

Kaplan and Norton describe the innovation of the balanced scorecard asfollows:

"The balanced scorecard retains traditional financial measures But financialmeasures tell the story of past events, an adequate story for industrial agecompanies for which investments in long-term capabilities and customerrelationships were not critical for success These financial measures are inadequate,however, for guiding and evaluating the journey that information age companiesmust make to create future value through investment in customers, suppliers,employees, processes, technology, and innovation."

Figure 2.2 Balance scorecard framework

Sourvce:Kaplan & Norton 1996 The Balance scorecard Havard Business School press 9.

Original from HBR Jan/ Feb 1996, p.76

2.2.2 Balanced scorecard as a tool to develop KPIs

Management control systems (MCS) are the information systems and thevarious applications software‘s that managers use to direct the behaviors and actions

of its members towards the goals of the company Otley (1994), define managementcontrol as the process by which managers assure that resources are obtained andused effectively and efficiently to accomplishment the goals of an organization In

another study, Otley (2003), considers the BSC as a novel management control tool.

In fact, the BSC was design to serve as a control tool for managers originally Intheir earlier writings on the BSC, Kaplan and Norton (1992) define BSC as a set ofmeasures that give top managers a fast view of their business These measures wereaim to help managers control their organization To use BSC as a managementcontrol tool involves four processes shown in Figure 2; namely;

Clarifying and translating the vision and strategy of the organization Thisprocess enables that, managers agree on the direction the company should followand make it known to other employee This involves setting appropriate targets andmotivating the employee to reach them The second process, communication andlinking; ensures that the goals of the organization is made known to all the differentunits of the organization The process involves linking the business unit goals tothose of the organization It also involves coordination of the various departmentalactivities such that a common vision is shared among organizational participant

The third process, planning and target setting, ensures the business plans is inline with the financial goal In the planning and target setting process, the how toachieve organizational goals are elucidated and the measures in the BSC are use asthe basis to allocate the resources The final process, feedback and Learning; makessure adequate feedback is received from the various activities The feedback processbegins with a clarification of vision for the organization The whole process form aloop, whereby the feedback received from the management process are then usedagain to reshape corporate strategy and the process goes on and on

Figure 2.3: Using the BSC as a strategic Management system

Source: Kaplan and Norton, 1996

The balanced scorecard suggests that we view the organization from fourperspectives, and to develop metrics, collect data and analyze it relative to each ofthese perspectives

The Key Benefits of using Balanced Scorecards

The Balanced Scorecard can help overcome such difficulties by providing afocus that unifies all parts of the business It provides a methodology that turns theeyes of all employees to a single direction The Balanced Scorecard can therefore be

a very effective tool for changing the organisational culture, breaking down thebarriers between team islands, creating an overall team culture and therebyimproving organisational performance The key benefits of using a BSC include:

Better Strategic Planning – The Balanced Scorecard provides a powerful

framework for building and communicating strategy The business model isvisualised in a Strategy Map which forces managers to think about cause-and-effectrelationships The process of creating a Strategy Map ensures that consensus isreached over a set of interrelated strategic objectives It means that performanceoutcomes as well as key enablers or drivers of future performance (such as theintangibles) are identified to create a complete picture of the strategy

Improved Strategy Communication & Execution – The fact that the

strategy with all its interrelated objectives is mapped on one piece of paper allowscompanies to easily communicate strategy internally and externally We haveknown for a long time that a picture is worth a thousand words This “plan on apage” facilities the understanding of the strategy and helps to engage staff andexternal stakeholders in the delivery and review of strategy In the end it isimpossible to execute a strategy that is not understood by everybody

Better Management Information – The Balanced Scorecard approach

forces organisations to design key performance indicators for their various strategicobjectives This ensures that companies are measuring what actually matters.Research shows that companies with a BSC approach tend to report higher qualitymanagement information and gain increasing benefits from the way this information

is used to guide management and decision making

Improved Performance Reporting – companies using a Balanced

Scorecard approach tend to produce better performance reports than organisationswithout such a structured approach to performance management Increasing needsand requirements for transparency can be met if companies create meaningfulmanagement reports and dashboards to communicate performance both internallyand externally

Better Strategic Alignment – organisations with a Balanced Scorecard are

able to better align their organisation with the strategic objectives In order toexecute a plan well, organisations need to ensure that all business and support unitsare working towards the same goals Cascading the Balanced Scorecard into thoseunits will help to achieve that and link strategy to operations

Better Organisational Alignment – well implemented Balanced Scorecards

also help to align organisational processes such as budgeting, risk management andanalytics with the strategic priorities This will help to create a truly strategyfocused organisation

These are compelling benefits; however, they won’t be realised if theBalanced Scorecard is implemented half-heartedly or if too many short cuts aretaken during the implementation

As the name denotes, balanced scorecard creates a right balance between thecomponents of organization's objectives and vision It's a mechanism that helps themanagement to track down the performance of the organization and can be used as

a management strategy It provides an extensive overview of a company's objectivesrather than limiting itself only to financial values This creates a strong brand nameamongst its existing and potential customers and a reputation amongst theorganization's workforce

2.2.3 Four perspectives of developing KPIs

According to Robert Kaplan and David Norton who developed the concept

of balanced scorecard for business performance management in the early 90s, inorder to identify and monitor achievements by a combination of financial,operational and other critical metrics, a set of key performance indicators has to bedeveloped for each of four perspectives, they are Financial perspective, Customer,Internal business process and Organizational learning and growth , as shown infigure 2.2 The KPIs from the four perspectives provide a balance between short-term and long-term goal, future desired outcomes and past achieved outcomes, hardobjective measurement and soft subjective measurement, and all the KPIs areleading towards achieving an integrated strategy

A model developed from the four perspective structure in KPI developmentwill be used for analyzing and evaluating the case study data later on In thefollowing section I will first explain each perspective in detail

KPIs related to Financial Perspective

Financial metrics are very effective and critical measures to monitor businessperformance It illustrates how the strategy, implementation and execution

contribute to the “bottom line”, it is summarize the results of actions taken from theeconomic point of view

Most of the business find the most important indicator is profitability, andthere are also some other important measures, but they may vary from the differentbusiness stages since the objectives of each stage are different For example thebusiness in the early stage of their life cycle will focus on the objectives related torapid growth, whereas the businesses in the mature stage most likely emphasize onmaximizing cash flow Generally speaking, there are 3 different stages thatbusinesses belong to: Rapid growth, Sustain, and Harvest

Rapid growth business

It is the early stage in a business life cycle, in this stage usually companieswill have to make investment to develop and improve the products and services; tobuild and expend production and operating facilities; to develop system,infrastructure, distribution networks and customer relationships for the future globalexpansion

Therefore the financial objectives in the growth stage will emphasize onsales growth; sales in new markets and to new customers; sales from new productsand services; maintaining adequate spending levels for product and processdevelopment, systems, employee facilities; and establishment of new marketing,sales and distribution channels

Sustain business

It is the stage that majority of the companies belong to The companies inthis stage still make investment, but with the condition of high and fast returns, theyare aiming to maintain the market share that they already get while expecting a slowgrowth on yearly base

Financial objective for the companies in this stage will focus on thetraditional financial measure such as return on capital employed, operating income,and gross margin Moreover in order to meet the financial goal of earning excellent

return on capital investment project will be evaluated by standard, discounted cashflow, capital budgeting analysis and so on.

Harvest business

There are also some businesses which have reached a mature phase of theirlife cycle where they intent to harvest all the investment they’ve made in theprevious time Those companies only make necessary investment to maintainoperations, but no longer expand or build new facilities The main goal is tomaximize cash flow back to the corporation

Although companies may belong to different business stages, there are threefinancial themes which can be applied to all of them

Revenue Growth and Mix: is related to product and service offering

expansion; customer relationship and new markets development; and product andservice redesigning and re-pricing

Cost Reduction/Productivity Improvement: is aiming to lower the direct costs

of product and services, reduce indirect costs, share resources with other businessunits or enhance working efficiency

Asset Utilization/ Investment strategy: in terms of the asset utilization,

managers intend to reduce working and physical capital required to support a givenvolume

This perspective was estimated as being of high relevance when analyzingthe organization of my case study I will summarize the important factors that KPIs

in the Finance perspective should cover from above, and use it in the development

of KPI diagnosis framework, and it will be used as the criteria to evaluate thecompleteness of the empirical data which are related to the finance function of theinvestigated organization in the later section

KPIs related to the Customer Perspective

Since nowadays being customer-oriented is becoming more and moreimportant for business success, the purpose of defining customer- related KPIs is to

get information about business performance from customers’ point of view in order

to improve their business From a well-formulated and implemented strategy, thegeneric measures include customer satisfaction, customer retention, new customeracquisition, customer profitability and market share in target segments Althoughthe generic measures could be applied to all kinds of organizations, they may varyfrom the different customer groups that business are dealing with

Recent management philosophy has shown an increasing realization of theimportance of customer focus and customer satisfaction in any business These areleading indicators: if customers are not satisfied, they will eventually find other suppliersthat will meet their needs Poor performance from this perspective is thus a leadingindicator of future decline, even though the current financial picture may look good

In developing metrics for satisfaction, customers should be analyzed in terms

of kinds of customers and the kinds of processes for which we are providing aproduct or service to those customer groups

KPIs related to the Internal Business Process Perspective

This perspective refers to internal business processes Metrics based on thisperspective allow the managers to know how well their business is running, andwhether its products and services conform to customer requirements (the mission).These metrics have to be carefully designed by those who know these processesmost intimately; with our unique missions these are not something that can bedeveloped by outside consultants

Business process model is showed as figure 2.4, enables organizations tomeet two objectives:

Deliver on the value propositions of customers in targeted market segments Satisfy stockholders expectations of excellent financial returns

The measures should focus on critical processes to achieve customersatisfaction and organizational financial objectives, and they must be included inboth short-wave operational cycles and long-wave innovation cycles Measuresinclude quality, response times, cost, and new product introductions and so on

Figure 2.4: Internal business process

Source: Balance scorecard, Kaplan & Norton 1996

KPIs related to the Organizational learning and growth Perspective

This perspective includes employee training and corporate cultural attitudesrelated to both individual and corporate self-improvement In a knowledge-workerorganization, people the only repository of knowledge are the main resource Inthe current climate of rapid technological change, it is becoming necessary forknowledge workers to be in a continuous learning mode Metrics can be put intoplace to guide managers in focusing training funds where they can help the most Inany case, learning and growth constitute the essential foundation for success of anyknowledge-worker organization

Kaplan and Norton emphasize that 'learning' is more than 'training'; it alsoincludes things like mentors and tutors within the organization, as well as that ease

of communication among workers that allows them to readily get help on a problemwhen it is needed It also includes technological tools; what the Baldrige criteria call

"high performance work systems."

This perspective is concerned with identifying the infrastructure thatorganizations need for a long term business improvement and growth The threecritical factors involved :

People

Information systems

Organizational procedures

Organizational learning and growth is aiming to fill the gap between theexisting capabilities of people, information systems and organizational procedures,and what will be required to achieve the further objectives; the gap is identifiedthrough financial, customer and business process perspectives Therefore themeasures are focused on the investment in people training, enhancement ofinformation systems and improvement to procedures, for example staff retention,increasing expertise, information system availability

This perspective was estimated as being of high relevance when analyzingthe organization of my case study I will summarize the important factors that KPIs

in the learning and growth perspective should cover from above, and use it in thedevelopment of KPI diagnosis framework, and it will be used as the criteria toevaluate the completeness of the empirical data which are related to the businessfunction supporting, business sustainability and growth of the investigatedorganization in the later section

Figure 2.5: Four perspective of Balance scorecard

Source: Tatikonda & Tatikonda Figure 2 p.51

The measurements should be focused on a single strategy and be linked,consistent and mutually reinforcing Some generic measurements are presented inthe table below.

Table 2.1 Generic Mesuarements of four perspectives

Financial Return of Capital Employed, Economic value

added, Sales growth, Cash flowCustomer Customer satisfaction, retention, acquisition,

profitability, market shareInternal business process Includes measurements along the internal

value chain for:

Innovation - measures of how well the company identifies the customers’ future needs

Operations - measures of quality, cycle time, and costs

Post sales service - measures for warranty, repair and treatment of defects and returns

Learning and Growth Includes measurements for:

People - employee retention, training, skills, morale

Systems - measure of availability of critical real time information needed for front line employees

Factors impacting on developing and using KPIs

2.3.1 External factors impacting on developing and using KPIs

Culture factor : Every business has a characteristic consistent with the work

environment and the manufacturing sector will therefore have the form ofperformance evaluation of different jobs, depending on the assessment of eachbusiness In the enterprise evaluation system through official documents,regulations, completion status of employee labor tasks is evaluated in a certainperiod of time, cyclical weekly, monthly, quarterly or annually The evaluator willselect the assessment method was designed to be a suitable option for the purpose ofevaluation If businesses have fewer employees, the number of assess throughevaluation of the daily management their subordinates and the mutual feedbackbetween colleagues Whether formal or informal, businesses can also have forms ofassessment in accordance with its terms

Levels of Evaluators

The assessments are conducted depends very much on subjective opinionand the level of evaluators Therefore, the evaluators as experienced and qualifiedfirm, the more likely to have declining to errors in assess much Therefore newevaluation results clearly and accurately

2.3.2 Internal factors impacting on developing and using KPIs

The strategy of organization

The strategy of organization has high impact on KPI development andusage of that organization Organization’s KPI is always inline withorganization’s strategy and target at a time For example the target of a company

in the next year is increasing revenue to X % in the year XXXX Therefore, toachieve this target, the company has to identify a KPI to focus on increasingrevenue The KPI criteria shall include the following criteria such as: new salesvolume, number of new customers etc …

Therefore, the business strategy of a company has an impact to KPI system.

A company with long term and stable stratergy will have higher capability andbehaviour criteria proporation in KPI than short term strategy and via verse

Job description

Each job description will require different KPI development and usage Ifone of your objectives is to expand into new markets, your marketing staff would betasked with researching possible markets to target The key performance indicatorsfor this task might be the identification of a specific number of new markets and amarketing plan for each

Your employees' success depends on how well they understand their jobresponsibilities and the specific tasks their jobs entail The job description is anassessment tool that helps managers measures the employee's performance againstthe stated job requirements Key performance indicators are measurable outcomestied to specific tasks the job description lists

Job descriptions explain the duties of a job to an employee but it does notensure that the employee is completing these duties at the level of performancerequired to ensure success in the job as well as contributing positively to thecompany Key Performance Indicators attached to the job description provide thatquantifiable measure The job description tells employees what they have to do andKPIs tell them how well they have to do it

In every aspect of the employee's task, there has to be standardized keyperformance indicators This set the expectations as to what the employee is trying

to achieve and this is an assurance that the employee's personal goals are alignedwith the company's organizational goals These may not be financial in terms, butthe employee's outputs are integral to the company's success in its business venture

In conclusion, KPI development and usage is used for employer to followexactly their job descriptions, roles and responsibilities Therefore, KPI indicators

should be developed upon their key responsibilities and KPI of eachdevision/department

When building KPI and using and applying KPI, the most well-known model

is Balance scorecard Thus, the researcher also uses this model for a basisframework to demonstrate the author’s view of point and analyze the situation ofKPI for Alibaba’s sales staffs at OSB JSC

Limited understanding

KPIs base on BSC is a measure that is quite new and has only been applied

in Vietnam in recent years Therefore, the understanding of BSC of leadership aswell as Alibaba's sales staffs at OSB is limited The presentation of benefits of BSC

to the leaders, team leaders and all employees in convince management andapplication takes a lot of time and effort

So far, all activities of Alibaba's sales staffs are evaluated based on CRMindices This assessment is supported by the system information technology systemsand automated reporting system, is quite convenient to monitor at BSC approach,many departments find it difficult to change their habits of work and feel thatmeasurement too complicated So they not ready to accept BSC

CHAPTER 3 DEVELOP THE KEY PERFORMANCE INDICATORS

FOR ALIBABA’S SALES STAFF AT OSB Overview of OSB and Alibaba’s department

3.1.1 Overview of OSB

OSB Investment and Technology Joint Stock Company (OSB JSC) operates

in the key areas of satellite and wireless communication, information technology and investment

The founder’s professional experience in management expertise,responsibility and enthusiasm as well as various co-operations from domestic andinternational partners, have provided a steady ground for OSB’s future stabledevelopment

Guided by “win-win” strategy, the company always pursues customers,partners’ benefits and considers them the measure of its long-term success Hence,potential Opportunities (O) are always properly evaluated so as to find appropriateSolutions (S) and goal achieve success in Business (B)

Structure:

Figure 3.1: OSB structure

Source: OSB 2012