increasing pvengineering’s quality performance in design engineering

ECONOMICS & MANAGEMENTMBQPM5 NGUYEN NGOC HUYNH INCREASING PVENGINEERING’s QUALITY PERFORMANCE IN DESIGN ENGINEERING MASTER FINAL PROJECT MASTER IN BUSINESS QUALITY AND PERFORMANCE MANA

ECONOMICS & MANAGEMENT

MBQPM5

NGUYEN NGOC HUYNH

INCREASING PVENGINEERING’s QUALITY PERFORMANCE IN DESIGN ENGINEERING

MASTER FINAL PROJECT MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT

STATEMENT OF AUTHENTICATION

I hereby declare that the master final report titled “Increasing PV Engineering’s quality performance in design engineering” is my own work and has not been submitted for a degree or diploma in any university I have acknowledged all source materials in the work itself The materials, either in full or in part, are duly acknowledged/ referred in the text

HoChiMinh City, 23 rd April, 2016

Signature of Student

Nguyen Ngoc Huynh

ACKNOWLEDGMENTS

I would like to express my special thanks of gratitude to my tutor, Prof Jacques Martin as well as my company/ department (PV Engineering/ Project Management Department) who gave me the opportunity to do this wonderful project on the topic “Increasing PV Engineering’s quality performance in design engineering”, which also helped me in doing a lot of Research and orientate the right direction

Secondly I would also like to thank my friends who helped me a lot in finalizing this report within the limited time frame and had a lot of supports such as the necessary and helpful ideas for contents and structure

Next, I would also like to thank the experts, co-workers who were involved in the survey for this research project and from engineering disciplines Without their passionate participation and input, the survey could not have been successfully conducted

Finally, I must express my very profound gratitude to my parents and to my husband for providing me with support and continuous encouragement throughout my years of study and through the process of researching and writing this thesis This accomplishment would not have been possible without them

Thank you so much

Mr/Ms NGUYEN NGOC HUYNH’s final project report for the degree of Master in

Business Quality and Performance Management is officially accepted for defense

On 13 April 2016

Dr Jacques M.A Martin

Academic Director

Master in Business Quality and Performance Management

Solvay Brussels School of Economics and Management – Ho Chi Minh City Open University

TABLE OF CONTENTS

INTRODUCTION 1

1 Introduction To PVEngineering 1

2 PV Engineering’s Problem 3

3 Purpose of Master Final Report 3

4 Structure Of Report 3

PART 1: CURRENT QUALITY PERFORMANCEAT PVE’s DESIGN ENGINEERING 4

CHAPTER 1: MANAGEMENT STRUCTURE 4

1 Organization Culture And Strategic Management In PV Engineering 4

2 Working Environment And Job Design 8

CHAPTER 2: ANALYSIS OF DESIGN ENGINEERING PROCESS 11

1 Selection of Research Strategy 11

2 Data Collection Methods 11

3 Data Analysis Methods 13

PART 2: EVALUATION OF PERFORMANCE 14

CHAPTER 1: RESULTS - FINDINGS 14

Key Findings: 14

1 Roles And Tasks of Disciplines In Quality Management 15

2 Strategy 16

3 Key Success Factors 17

4 Innovation 17

5 Information Systems And Network 18

6 Performance Management System 18

CHAPTER 2: PROPOSED IMPROVEMENT FOR INCREASING QUALITY PERFORMANCE 20 1 Roles And Tasks of Disciplines In Quality Management 20

2 Strategy 21

3 Key Success Factors 21

4 Innovation 23

5 Information Systems And Network 23

6 Performance Management System 24

LIST OF ABBREVIATIONS

Company

LIST OF FIGURES AND TABLES List of figures

Figure 1: PVE’s organizational structure

Figure 2: Elements of organizational culture

Figure 3: Strategies for strengthening organizational culture

Figure 4: PV Engineering’ strategy map

Figure 5: Workplace factors affecting employee performance

Figure 6: Results of Interviews on Knowledge of Quality Management System

Figure 7: Percentage of staffs complying with Quality Management System

Figure 8: PDCA – based on Performance Management System

List of Tables

Table 1: Success factor datasheet

INTRODUCTION

Vietnam is rich in natural resources and minerals which are favorable conditions for strongly growing economic development of the country, especially Vietnam Oil & Gas sector To contribute to the development of Vietnam Oil & Gas Group, PetroVietnam Engineering (PVE) has the important roles in the Engineering design and consultancy for the Group’s projects

PVE‘s predecessor was established, and began operation in 1998 With gradually consistent development, PVE has developed subsidiaries and specialized centers which are suitable to the sustainable operation of the company for the foreseeable future PVE became a joint stock company in 2005 and has participated in Oil and gas exploration and development projects, gas processing and transportation; and also provided services for projects in petroleum storage, LPG/ CNG stations and other key projects in power plants, industrial Until now, PVE has the organizational structure as the below figure to operate the corporation and complete the projects and works within PVE’s mission, such as Engineering Consultancy, EPC/ Construction/ Installation, Project Management Consultancy, and Survey & Inspection Until now, PVE has successfully completed many major projects with Petro Vietnam and other international partners such as Nam Con Son 2 Pipeline, Su Tu Trang Platform, Dai Hung Gas gathering project, etc.; and PVE is one of the top providers for professional engineering consulting services in the petroleum industry from upstream to downstream, power projects, other industry and civil projects in Vietnam Moreover,

in the future, PVE will be your constant and closest companion not only in the projects of oil and gas industry and other related projects as: Onshore, Offshore; Gas Pipeline; Gas Processing Plant; Petrochemical Plant (such as polypropylene, fertilizer plants); Gas power, coal power; wind power and hydropower plants; Bio-Ethanol plants; but also in industrial and civil projects and will provide expert services in: FS; FEED, detailed engineering; General cost estimation; Procurement support; Survey and inspection; Project management consultancy

Figure 1: PVE’s organizational structure (Source: PVE’s website)

Human

Resources

Division

Financial Division Planning & Investment

Division

Technical Division

Design Engineering Consultancy Center (DEC)

Shareholders General Assembly

Supervisory Board Board of Management

Board of Director

Commercial

& Contract Division

2 PV ENGINEERING’s PROBLEM

Nowadays, Vietnam participates in many international organizations such as ASEAN, APEC, WTO and TPP It is the mark for success of Vietnam’s development and efforts in global economy Besides that, it means there is strictly international and national competitive environment that will bring increased demands on the organizations competiveness and customers One of the most important management conditions to make the branch and performance of business is quality that is an important management philosophy, which supports the organizations in their efforts to obtain satisfied customers However, quality management is not fully implemented and complied with PVE’s regulations, ways how to deal with customers, etc Finally, traditional work practice and management attitudes do not conform to total quality management, which causes a resistance towards an implementation of total quality management, especially in Design Engineering of PVE

The aim of report is to study the role and tasks of Design Engineering Departments in regard to implementing the Quality Management and to propose methods to increase the performance in design engineering

Chapter 1: Results – Findings

Chapter 2: Proposed Improvement for Increasing Quality Performance

DISCUSSION

CONCLUSION

PART 1:CURRENT QUALITY PERFORMANCEAT

PVE’s DESIGN ENGINEERING

CHAPTER 1: MANAGEMENT STRUCTURE

PVENGINEERING

1.1 PV Engineering’s Mission and Vision

As our mission, PV Engineering will

- Be the professional design consultant contractor in oil and gas field,

- Provide the products and services in design consultancy, survey consultancy, project management consultancy, high technical services in oil & gas field and other industries with high quality and competitive prices to meet needs of customers from PVN’s members and customers from other industrial fields;

- Ensure the benefits of stakeholders, and

- Contribute to the industrialization and modernization of Vietnam

And in the future, PV Engineering will:

- Be one of the leading companies in Vietnam and Southeast Asia with key business areas (such as design consultancy, survey consultancy, project management consultancy, high technical services in oil & gas field and other industries);

- Have enough competitive power with local companies and international companies in Vietnam; while expanding service oversea

1.2 Organization Culture

Organizational culture includes the basic pattern of shared assumptions, values, and beliefs As Figure 2, the organizational behavior presents the assumptions, values, and beliefs that operate underneath of surface of organizational behavior Assumptions present the deepest part of organizational culture because they are unaware and taken granted Beliefs represent the individual’s perceptions of reality and values are more stable, long-lasting beliefs about what is important (Steven, 2000)

Figure 2: Elements of organizational culture (Steven, 2000)

In addition, an organization’s cultural assumptions, values, and beliefs cannot be seen directly As figure 2, it is implicitly expressed through artifacts such as the physical layout, how to communicate; and how to reward for excellent employees It’s considered four broad categories of artifacts, including organizational stories and legends, rituals and ceremonies; languages; and physical structures and symbols

Organizational culture has three main functions: (1) It is asocial control form that deeply influences the employees’ decisiveness and activities; (2) It is to make employee network and a part of the organizational experience, so called “social glue”; and (3)It helps employees understand organizational events and communicate more efficiently in the cooperation (Schein Edgar, 1992)

Figure 3: Strategies for strengthening organizational culture (Steven, 2000)

Thus, that PV Engineering is a member of Oil and Gas Group brings not only many advantages but also great challenges It means that PV Engineering is inherited 4000-year cultural traditions of Vietnamese with the continuous contribution of Oil and Gas Group During its development process, PV Engineering makes a great deal of efforts for building a cultural working environment with good traditional and modern characteristics in the international integration

In the development of Vietnam industry and international economic integration, PV Engineering has to prove the outstanding capacity in studying, researching and working in oil & gas design consultancy project in comparison with other Vietnamese and Vietnam-based foreign competitors in the same field For sustainable development, PV Engineering orientates its personal and social responsibilities PV Engineering brings the social feelings into every development plan; each alternative processes, design drawings, each supervision and management procedures to ensure that each project or projects, contributed by

PV Engineering, are friendly to environment and worth living for our future These are showed in work of employees’ community who are honest, aggressive, and concentrated on the oil and gas projects, including onshore and offshore projects that provide necessary products for living demands as gas, petrol, biological

energy, etc In social life, PVE employees have their own kindness, humanity which being adapted from PVE working environment

Moreover, to build the organizational culture more perfectly, Board of Management has been preparing the PV Engineering Culture Standard so that all employees would adjust their behavior and thinking in communication and workings in accordance with the international working environment PV Engineering Culture Standard stipulates in ethics, responsibility, working and learning culture, communication and extracurricular activities Based on these standards, it guides all employees in order to be more professional, self-confident, civilized and polite in their works and behavior Besides that, it provides the conditions to promote personnel’s capacity for contributing the Company’s growth

1.3 Organization Strategy

According to PV Engineering Culture, Board of Managers define the Company Strategy, including the Company development, competition on international integration, the best products and service and high qualified resources, including human, technology, equipment, etc

Firstly, PV Engineering would like to concentrate resources to build and develop

PV Engineering to become the sustainable, unique and the best consultant company

in Oil & Gas Group They want to develop intensively the design consultancy, investment project, survey consultancy and project management that make the competiveness of PVE in Vietnam and actively integrate international operations and expansion overseas Secondly, PV Engineering will provide the best products and services; ensure schedule, quality, efficiency, safety and high reliability as committed to our customers and international requests that follows the status “what foreigners can do, Vietnamese can too” And finally, Board of Managers really wants to develop the high qualified HR, increase investments in technical equipment and technologies; proactively studies and applies advanced scientific technologies, management in business to achieve efficiency and high quality for PVE’s products

Specifically, PV Engineering has been building a good strategy map linking together that provides a visual framework for an organization’s strategy based on simplified strategy map of Kaplan and Norton in 2002 as below:

Figure 4: PV Engineering’ strategy map (Final Report of PV Engineering, 2015)

In today’s competitive business environment, organizations can no longer afford to waste the potential of their workforce There are key factors in the employee’s workplace environment that greatly impact on their level of motivation and performance The most important working environment factors, which are either led to engagement or disengagement, are shown in the following diagram There are also other factors that may impact on performance like environmental factors and physical factors

Organizational Capital Information Capital

Design &

Consultant

Customer Manageme t

Operational Management

Regulation

& Goals

Customer Satisfaction Trade Mark

Customer Value Proposition

Intangible Assets

Figure 5: Workplace factors affecting employee performance

(Chandrasekar, 2011)

According to Dr K Chandrasekar (2011), to begin for implementing a workplace environment that brings the best opportunities to improve the satisfaction of technical and professional employees, the Company should follow four steps as below:

(1) Doing an audit of the company’s control system

(2) Deciding what characteristics to adopt

(3) Training technical workers and managers for the new culture

(4) Monitoring success and providing feedback

Since working environment plays a vital role in motivating employees to perform their assigned work, and PV Engineering has just been introducing the motto

“Intelligence, Professionalism, Efficiency” so that all personnel can be more ambitious and determined with high expectation to conquer every challenge and rise up to the highest peak

Furthermore, job design is concerned with structuring jobs in order to improve organizational efficiency and employee satisfaction Job design describes “how job tasks and roles are structured, enacted and modified and what the impact of these structures enactments, and modifications re on the individual, group, and organizational outcomes” (Grant and Parker, 2009) Job design is usually approached as a top-down process in which the organization creates jobs and, in

turn, selects people with the appropriate knowledge, skills, and abilities for these jobs

Comprehensively understanding the limitation of natural resources, PV Engineering – as the leading consultant in the energy sector – is committed to minimize material wastes, negative impacts or dangerous risks to the living environment PVE also has been researching and developing with care in computation and planning to ensure labor safety and efficiency in operations of their projects

In spite of understanding the importance of working environment and job design,

PV Engineering has just followed the orientation of Vietnam Oil and Gas Group and Vietnamese Laws and they do not combine and evaluate the influence of working environment and job design to PVE performance Thus, PV Engineering should have job analysis that is the process of obtaining information about the duties, tasks, or activities of the jobs that people do After that, job analysis result appears as a written report summarizing information obtained from the analysis of individual job tasks or activities This report is used to develop job descriptions more detail and reality

CHAPTER 2: ANALYSIS OF DESIGN ENGINEERING

PROCESS

Grounded theory has been defined as theory that is “derived from data, systematically gathered and analyzed through the research process” that make the closed relationship between data collection and analysis (Strauss & Corbin, 1998)

It is also a suitable method for investigating the interactions of people and the view

of participants (Denscombe, 1998) The researchers can keep an open mind to the problem at hand and compare the results from data collection to theory, in order to generate a systematic analysis The purpose of this study has been to evaluate department’s quality management, which demands the researchers to take a hermeneutic approach in this research project And the purpose of hermeneutic approach is to understand and examine the thoughts and feelings of people through interpretation and comprehension (Ödman, 2003) Therefore, there is an opportunity to evaluate and understand the organizational quality system and performance in design engineering thoroughly

There is no particular, unique method that is unique for the grounded theory, as what distinguish the research method is the way of gathering and analyzing information (Denscombe, 1998) The data collection methods, which have been used for this research, are participant observations, interviews, questionnaires, and documents, because they have made it possible for the researchers to be flexible in their search for information According to Denzin (2006), this study use the methodological triangulation approach in order to facilitate the validation of information obtained in interviews with observations, which has increased the credibility of the outcome of this study Moreover, the use of several diverse data collection methods is common in qualitative research, and the combination of interviews with participant observations will ensure credibility by triangulation of information (Bryman&Bell, 2003; Denscombe, 1998)

2.1 Observations

Marshall and Rossman (1989) define observation as “the systematic description of event, behaviors, and artifacts in the social setting chosen for study” Thus, using the observations method aims to understand what people actually do, rather than replying on what they say they did However, it is susceptible to observer bias before staring a research, it was therefore important to keep an open mind towards the subject under study

One of observation types, participant observation, is the combination of two types

of participant’s roles that are engaging in the social interactions, and the observer

of people under study (Fangen, 2005) To understanding the organizational quality settings, the researchers have been able to participate in a project and/or periodic audit of the Company and work in a specific project

Further, planned observations were conducted in the engineering departments, in order to get an understanding of how the engineers work in the design consultancy, especially in oil and gas field These observations were performed by at least two researchers to avoid problems with selective memory, which was discussed by Denscombe (1998), and the observations were documented immediately after being performed

2.2 Interviews

Interviews can have many different purposes, as getting information from the respondents only, or understanding the opinions and beliefs of an interviewee (Bjerke, 2003) As this research aimed to analyze the organization quality system, in-depth interviews were considered as an important information source and a key input in addition to the observation methodology

Five interviews were carried out concerning the department’s quality system when implementing the projects and administrative works The selection of interviewees was intended to generate a sample that could be generally represented for the whole department (Denscombe, 1998) However, even though the choice of interviewees was done with the aim to get representatives randomly from all different level within the departments, the interview sample was sometimes opportunistically chosen The interviews were carried out in their native language, but the interviewees did not share information particularly due to many reasons, such as

All of the interviews lasted for half an hour each and as memory is an un-reliable tool for collecting data in interviews, they were all tape recorded (Dencombe, 1998) Both researchers were presented at the interviews, and while one raised the initial questions, both researchers asked follow up questions

In qualitative research, theories and analysis are generated during the research process, which is the foundation of grounded theory (Denscombe, 1998) It is followed by the general procedure, including preparation, conversance, interpretation, verification and presentation of data All the collected data was first converted into written text (Denscombe, 1998) For the planned observations, both observers’ thoughts and actions related to quality management system were written and used for the comparision because of assuring an inter-observer-consistency between both researchers, which refers to the ambition of a match between members of a research team (Bryman&Bell, 2003) For interviews, all answers of interviewees were carefully recorded and summarized later in the agreement of both researchers Moreover, the researchers considered additional notes regarding

to the interviewee’s action and behavior during the interview in order to interprete the information more accurately Therefore, the results of analysis were taken consideration so that the factors affecting quality management the most were highlighted

PART 2: EVALUATION OF PERFORMANCE

CHAPTER 1: RESULTS - FINDINGS Key Findings:

- Staffs do not have full knowledge and understand the importance of Quality Management for Business Operations, therefore, the Quality Management has not been complying with PVE procedures and manuals and they also do not know how to perform their works based on quality management system

- The junior level employees, who have to guide and orientate the individual employees’ objectives with the strategic goals of company, lack of understanding

of the PVE strategic plan and strategic goals,

- The way of communication of the strategy and target setting in the Company seems to be ineffective

- There is limited knowledge on listed key success factors of the Company in employees

management system and limit of individual innovation and improvement

- The IT system sometimes is not as well maintained as the committee of third parties providing those services and feedback from disciplines were not resolved

- The network and information flow seem to be an “automatic” process among the managers, and not “automatic” from management level to employee level, especially on quality issues of project and quality management system

- The result of performance evaluation was not announced to employees in order to give them opportunity to “correct” their performance, in case of any deficiencies

- The KPIs system is unclear and only has been setting up into two levels to evaluate their performance, including manager level and employee level

- The key performance measures and level performance are not explained clearly, with more detail and explanation for each level

1 ROLES AND TASKS OF DISCIPLINES IN QUALITY MANAGEMENT

Roles and Tasks of each position in Project and Disciplines are required more detailed in procedures and Company’s decisions that are kept not only by softcopies

on PVE’s server and but also by hardcopies There is findings for understanding and complying with Company’s requirements in quality management

Firstly, there were interviews to evaluate how staffs of engineering departments have been complying with quality management system The interviews were carried out in five days with fifty – five (55) interviewees that were selected randomly from thirteen engineering departments The questions focused on the understanding and knowledge on the quality management system applied in PV Engineering It was divided into four levels of evaluation, including weak, average, fair and good And the results showed as the below figure:

Figure 6: Results of Interviews on Knowledge of Quality Management System

The interviews were conducted with fifty-five people from all PVE’s departments

In there, all peoples of Mechanical, Civil and IT departments interviewed only achieved at the average level In the contrary, one hundred percent (100%) of Instrumental department’s staffs reached at the fair level And most of the departments, the percent of average level is higher than fair level, expect the Electrical Department So, the result reflected the reality of complying with Quality

Management System in PV Engineering through the interviews and executed projects

Figure 7: Percentage of staffs complying with Quality Management System

As Figure 7, staffs complying with Quality Management System are the largest percent in the average level, about sixty-seven percent It means staffs do not have full knowledge and understand the importance of Quality Management for Business Operations In addition, when interviewed, some staffs answered that they have not been complying with PVE procedures and manuals and they also do not know how

to implement their works based on quality management system

2 STRATEGY

After reviewing of the relevant internal documents including training materials, reports, individual plans, researchers group cannot find the clear connection between the PVE missions and visions to those personnel trainings and personal plan documents above Although there are various channels such as website, formal letters, intranet, etc to implement the communicating strategy issue, the updated information on the organization strategy, including the strategic plan and strategic goal, it is not all of PVE employees following those materials This is also lack of understanding of the junior level employees who have to guide and orientate the

Although the top management just did have detailed information about strategies and planning for PVE’s Planning Department to carry out and control the Company’s plans and strategies, the junior and senior employees seem to be less interested in getting detailed information about strategy issues Moreover, because all departments seem isolated to each other, which means no sharing necessary information to each other, Planning Department does not fully understand works of engineering departments and make them difficult to build their plans and individual employees’ objectives toward strategic direction

Thus, it is also affected to the implement of KPI system because employees cannot define their function’s goals toward strategic objectives This makes no committee

of employees to assure the quality of their works and does not comply with quality management system And the way of communication of the strategy and target setting in the Company seems to be ineffective

3 KEY SUCCESS FACTORS

One of the findings is that the interviewed employees seem to have limited knowledge on listed key success factors of the Company The company defines four key success factors by which the Company’s strategy, including quality, progress, talent and incomes However, most of interviewees just understood and focused on schedule, finance, and profit After clarification, almost all of the interviewed peoples knew key success factors of the Company and had clear understanding of the factors that drive the PV Engineering success It seems that there is no formal communication, training or other processes of listed factors as even for the junior employees because they did not know the specifically identified listed success factors on the papers Interviewees mentioned that they felt there are no supports of PVE in order to improve employees’ technical and soft skills although a part of PV Engineering strategy defines new function, called “talent function” that control the improvement of employees at all levels

4 INNOVATION

In PV Engineering, there is no innovation strategy for engineering departments, especially in quality management system For example, the Company had the ideas box so that all employees could contribute their ideas for developing and improving the business operation, organizational culture, quality or social activities But the ideas box was cancelled because there were no ideas collected Specially, when

interviewed, there were only 7.72 percent of interviewees having the ideas for improving the quality management system such as changing some processes to solve problem and work their jobs faster and more easily, and others did not have ideas or want to contribute their opinions due to policies, regimes and PVE’s ways to resolve and/or implement their ideas Moreover, the innovation funds of the Company are very limited amount and procedures to pay and adapt employees’ improvement Thus, it did not make good thinking for contributing innovation to the Company in general, and limit of individual innovation and improvement in particularly

5 INFORMATION SYSTEMS AND NETWORK

PV Engineering has improved information system such as intranet, hot news, and PVE magazine The intranet provide the sufficient formal information such as quality policy, strategy and strategic changes, quality management system, specific projects and all the employees have access to it Besides that, there are learning materials on how to do their job, such as audit manual, codes and standards system, manuals, technical journals or books available on the system Nevertheless, the system sometimes is not as well maintained as the committee of third parties providing those services and any feedback from disciplines were not resolved It affected the progress and quality of project when project teams worked and prepared their documents or drawings on system 100 percent of interviewed people agreed

on the inconvenience and system’s problems In addition, the network and information flow seem to be an “automatic” process among the managers, and not

“automatic” from management level to employee level, especially on quality issues

of project and quality management system This is the one of reasons for not be complied with quality management system by employees

6 PERFORMANCE MANAGEMENT SYSTEM

Performance evaluation process of PV Engineering involves two main phases, including in the middle of the business year and in the year-end In this form, called

“Individual Performance and Development Plan”, an employee evaluates achieved performance by himself and set general performance goals for the short-term and long-term This form covers the contribution areas, such as the capability in his job, schedule of his job, complying with the Company’s regulations, English level, and his orientation for short-term and long-term But the result of performance