Build up a balance scorecard for annual planning in the training center of viet capital bank to achieve the bank objectives for next years

HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT MBQPM4 TRINH VAN THUY BUILD UP A BALANCE SCORECARD FOR ANNUAL PLANNING

HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES

SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT

MBQPM4

TRINH VAN THUY

BUILD UP A BALANCE SCORECARD FOR

ANNUAL PLANNING IN THE TRAINING

CENTER OF VIET CAPITAL BANK TO

ACHIEVE THE BANK OBJECTIVES FOR

Table of Contents

Statement of authentication 1

Acknowledgement 2

List of Symbols and Abbreviations 4

List of Figures 5

List of Table 6

1 INTRODUCTION 7

1.1 Subject studied 7

1.2 Scope and Delimitation 7

1.3 Research Methodology 8

1.4 Research Method 8

1.5 Thesis structure 8

PART I: BALANCED SCORECARD OVERVIEW 9

1.1 The concept of balanced scorecard 9

1.2 Cause and effect in balance scorecard 11

1.3 Strategy map 12

1.4 Tool use and satisfaction 13

PART II: ANALYSIS TRAINING CENTER OF VIET CAPITAL BANK 15

2.1 Bank profile 15

2.2 Structure of Training center of in Viet Capital bank 15

2.3 Operation of Training center in Viet Capital Bank 17

2.4 Investigation of problem in annual planning for VCTC 17

PART III: APPLIED BSC TO BUILD UP A BALANCE SCORECARD FOR ANNUAL PLANNING IN TRAINING CENTER OF VIET CAPITAL BANK 24

3.1 Steps to building a balanced scorecard 24

3.2 Six steps to develop a balanced scorecard for VCTC 24

3.3 Balance scorecard for annual planning in Training Center of Viet Capital Bank 32

RECOMMENDATIONS 41

CONCLUSIONS 41

References 41

List of Symbols and Abbreviations

VCCB : Viet Capital Commercial Joint Stock Bank or Viet Capital Bank

VCTC : Training center of Viet Capital Bank or Viet Capital Bank Training Center

BSC : Balance scorecard

SME : Small and medium enterprises

List of Figures

Figure 1.1: Four perspectives of the BSC model 9

Figure 1.2: Cause and effect in balance scorecard 11

Figure 1.3: Strategy map 12

Figure 1.4: Management Tools and Trends 13

Figure 2.1: VCCB organization chart 15

Figure 2.2: Structure of Training center of in Viet Capital bank 16

Figure 2.3: Main training procedure of the center 17

Figure 2.4: Training processes in VCTC 22

Figure 3.1: Translate strategy into objectives in VCTC 29

Figure 3.2: Strategy map 30

Figure 3.3: Develop result and process measures 31

Figure 3.4: Balance scorecard logic 32

List of Table

Table 2.1: 2013 annual training plan of VCTC 21

Table 3.1: BSC for financial perspective in VCTC 34

Table 3.2: BSC for internal business perspective in VCTC 35

Table 3.3: BSC for Learning and growth perspective in VCTC 36

Table 3.4: BSC for Customer perspective in VCTC 37

Table 3.5 : BSC for VCTC 40

1 INTRODUCTION

1.1 Subject studied

Training and development are important for an organization to retain and increase its competitiveness However, many companies struggle to establish well their training function Planning and performance of training must follow the organization’s vision, strategy and goals that need to be defined clearly and communicated at all levels of the organization Furthermore, all efforts and actions must be focused on achieving the organization’ goals

Kaplan & Norton (1992) develops balance scorecard that is ranked six in top ten of most used management tool until now Today, BSC is widely used in various types of enterprises of different industries BSC helps to translate the vision and strategy of a business unit into objectives and measure its specific targets and initiatives in four perspectives: financial, customer, internal business process and learning – growth It not only record operational results but also explains the cause – effect of operational results, and forecasts possible future

General, BSC is developed at high-level corporate and then it forms the basis for subsequent business unit Sometimes a BSC begins in a strategic business unit or support unit, in which case the unit scorecard is built first and becomes the basis for subsequent unit and corporate scorecards VCTC is a sample of building up BSC support unit first then apply throughout the bank following the success of VCTC’s balance scorecard

This project is to discuss using Kaplan and Norton’s balance scorecard’s model to build up

a balance scorecard to make an annual plan in the Training center of Viet Capital Bank showing the main objectives, indicators (measurement system)and actions to implement in order to achieve the bank objectives for next years

1.2 Scope and Delimitation

The research covers a journey to make an annual training plan for VCTC in Viet Capital bank only The purpose of the research is to find answers to the following two main research questions

(1) What do steps need to make an annual plan for the Training center of Viet Capital bank under BSC insight?

(2) What components are needed in a BSC for an annual training plan of VCTC?

Therefore, environmental factors would be focusing on strategy business of VCTC and Viet Capital Bank in Vietnam

1.3 Research Methodology

The research uses inductive approach, starting from data analysis and getting understanding of a phenomenon The research will use the combination of three types of studies following as below:

Exploratory - finding what is happening and understanding a problem

Descriptive - portray an accurate profile of a situation

Explanatory - establish causal relationships between variables

1.4 Research Method

The research collects data from real business curriculum of VCTC and Viet Capital bank based on reports and records as primary source of data The research also uses result of other studies as secondary data source To achieve research objectives, the author combined two methods: qualitative research and quantitative research for all data collected

In addition, Statistical tools would also be used for the research

1.5 Thesis structure

To clarify the situation, this thesis is followed below structure:

Introduction

Part I: Balance scorecard overview

Part II: Analysis of training center of Viet Capital bank

Part III: Applied BSC to build up a balance scorecard for annual planning in Training Center of Viet Capital Bank

Recommendations

Conclusions

PART I: BALANCED SCORECARD OVERVIEW

1.1 The concept of balanced scorecard

Historically, performance measurement systems have been financial in nature for most businesses Unfortunately, financial indicators don't tell the entire story about the companies in many business situations Financial indicators are needed, but these only tell

us what has happened in the past, where the operations took place Financial statements do not tell us what problems will occur in the front and what happen to the business in the future This shows that we are operating businesses similar driving a cars just by looking at the rear-view mirrors! In addition, comparing two companies with similar financial situations but in completely different market environments could be disastrous For example, a company can reduce the level of customer service to increase current profits, but in the long term, future profits can be negatively affected due to descending customer satisfaction

Realizing the limits of old financial indicator system, Robert S Kaplan and David Norton developed a new performance measure system namely balance scorecard in a series of articles for the Harvard Business Review in the mid- 1990s In which, not only the financial measures, but also measures of customer, internal processes, training and development are put in to consideration Kaplan & Norton (1992) described BSC is a strategic measure system including both non-financial and financial measure to measure the performance of a business organization BSC adopted quickly by academic scholars and practitioners and is appreciated as one of the 75 most effective ideas of the twentieth century by the Harvard Business Review BSC helps to translate the vision and strategy of

a business unit into objectives and measure its specific targets and initiatives in four perspectives: financial, customer, internal business process and learning – growth It not only record operational results but also explains the cause – effect of operational results, and forecasts possible future (Figure 1.1: Four perspectives of the BSC model)

Figure 1.1: Four perspectives of the BSC model

Source: Kaplan, R.S & Norton, D.P (1992)

Thus, we can understand the BSC as a management tool, it helps businesses set up, implement and monitor to achieve strategic goals through the translation and development

of strategic goals into specific targets and initiatives basing on four perspectives: financial, customers, internal processes, learning and growth as shown in Figure 1.1 above

Andersen (2001) believes that BSC and its associated management process can prove equally beneficial to SMEs as to large organizations He stated that BSC can prove an effective tool for companies in meeting the challenge posed by the need to introduce more efficient strategic planning processes while retaining the competitive advantage of having relatively simple structure

Success stories of organizations that have implemented BSC seem to promise high benefits for BSC users Several surveys indicate that the BSC concept is widely used in large organizations in the United States and throughout Europe For example, Williams (2001) estimates that more than 40% of all Fortune 500 US organizations use BSCs Another study estimates that 60% of the Fortune 1000 organizations in the USA have had knowledge with BSC (Silk, 1998) Rigby (2001) stated that BSC has a utilization rate of 44% Some benefits of implementing the BSC are suggested as below

A key advantage of the balanced scorecard is that it puts strategy, structure, and vision at the center of management’s focus Furthermore, BSC was constructed to tell the story of an organization strategy and to guide its implementation

Balanced scorecard emphasizes an integrated combination of financial and financial performance measures It keeps management focused on the entire business process and helps ensure that actual current operating performance is in line with long-term strategy and customer values Moreover, Chow, Haddad, & Williamson (1997) argue that BSC retains traditional financial measures and these financial measures are viewed in the larger context of a company’s competitive strategies for creating future value through investment in customers, suppliers, employees, processes, technology, and innovation

The cause-and-effect linkages of the BSC confine the difficulty and interrelationships of a strategy, facilitating explicit tradeoffs among quality, cost, and access

The researchers also state that companies have benefit above from applying BSC whether the companies are large or SMEs (Basuony, 2014)

1.2 Cause and effect in balance scorecard

Figure 1.2: Cause and effect in balance scorecard

The figure 1.2 shows that four perspectives in BSC have closely relationship under cause and effect principle For the vision, strategy and shareholders’ expectation, the first is financial perspectives To hit the financial target, company must satisfy its customer For the customer satisfaction, companies have to develop solid internal procedure Then learning and development are infrastructure for a good internal management system for client’s satisfaction, financial target and shareholder expectation toward vision and strategy

of the company

In most presentations of the balanced scorecard the so-called cause and effect principle has been a core feature of the BSC The cause-and-effect principle has been developed with inspiration from the service management literature (Heskett et al 1997) towards a generic business model in the form of the strategy map (Kaplan & Norton 2001, 2004 )

Some authors (Nørreklit, 2000, 2004; Brignall 2002) have, however, questioned the logic

of the cause-and-effect principle They have questioned the practicality of BSC as a method on the premise that no cause and effect relationship exists between measurement areas However, researchers state that the view on question of cause-and-effect in BSC is mistaken and we can see the principle as “fundamentally an applied research area that should ultimately provide new insights for practice” (Ittner et al, 2002, p.788, see also Mitchell, 2002) We acknowledge that cause-and-effect, as well as other design principles

of scorecards, may only partially explain the potential benefits from BSC It seems that research and practitioners should pay much more attention to how people in organizations actually use various types of scorecards to commit action

1.3 Strategy map

Figure 1.3: Strategy map

A strategy map is a diagram that is used to document the primary strategic goals being pursued by an organization with all aspects to get a successful strategy The first diagrams

of this type appeared in the early 1990s, and the idea of using this type of diagram to help document Balanced Scorecard was discussed in a paper by Dr Robert S Kaplan and David

P Norton in 1996 as the figure 1.3 above This map will be mentioned later in building a BSC for the VCTC

Kaplan and Norton (2002) stated that there are five key principles common to all successful balanced scorecard companies: translate the strategy to operational terms; align the organization to the strategy; make the strategy everyone’s everyday job; make strategy

a continual process; mobilize change through executive leadership 4 of these five

principles look forward directly to the company’ strategy The key principles of strategy to

successful use of BSC can help large structured companies to overcome the difficulties in their characteristics For example, aligning the organization to the strategy can help to overcome the formal and bureaucratic administration in organization Another example, if

the organization makes the strategy everyone’s everyday job through the use of BSC, then

the challenges and difficulties of communication and co-ordination in large firms can be minimized Currently, strategy maps and cause-and-effect relationships attract considerable interest among practitioners in Scandinavia, and some firms are developing their BSC based on strategy mapping (Kasurinen, 2002, Bukh et al 2004) This shows that the important of strategy map in the successful balance scorecard companies

In addition, strategy map is a map that creates value for the company by providing specificity needed to translate general statements about high-level direction and strategy

into specific objectives that are more meaningful for all employees and that they can act

on, direct their action on the same objectives Strategy map helps to balance long-term and short-term objectives in the financial perspective, differentiate value proposition in the customer perspective, create value through internal business processes, and strategic alignment of intangible assets in the learning and growth Hence, the strategy also helps companies by ultimate objectives of four perspectives and putting all the pieces together (Kaplan and Norton, 2004)

1.4 Tool use and satisfaction

Bain & Company has been conducting global Management Tools and Trends surveys since

1993 Never before have we surveyed executives during a period of such economic turbulence It is a sign of the times that a cost cutting tool Benchmarking-has become the most popular tool for the first time in 11 years The latest questionnaire was conducted in January 2009 and reflects behavior in 2008 (See figure 1.4) It was completed by 1,430 international executives from companies in a broad range of industries and focuses on 25 tools The survey also show that BSC ranked 6 in top ten of most used tool It is used 53% among companies and have satisfaction rate of 3.83/5 point

Figure 1.4: Management Tools and Trends

Source: Bain & Company, 2008

Today, BSC is widely used in various types of enterprises of different industries On the overall, the research and application of the BSC follow two main directions (1)application research in non-profit organizations and (2) application research in for - profit organizations

This paper aims to apply BSC for the training function as a sub-organisation that direct link to profit generating capability of a for-profit enterprise

PART II: ANALYSIS TRAINING CENTER OF VIET CAPITAL BANK

2.1 Bank profile

Viet Capital bank is a small commercial local bank of Vietnam It has 37 transaction offices and over 1.000 employees nationwide Its chatter capital is 3.000 billion VND (approximately 150 million USD) and asset of 23.000 billion VND (approximately 1.1 billion USD) in 2013 It operates in all fields of a commercial bank such as loan, credit, deposit, export credit, international payment, account management credit, debit card, inter-bank market, capital market, investment, etc

The organization structure of Viet Capital Bank is below:

Figure 2.1: VCCB organization chart

Source: http://www.vietcapitalbank.com.vn/so-do-to-chuc

2.2 Structure of Training center of in Viet Capital bank

Viet Capital bank training and development function is a center under directly board of management supervision and operates independent from Human Resource department The center takes responsibility for all training aspects throughout the bank It also develops training activities that link directly to sales campaign or its own sales development campaigns

The training and development center has 3 departments these are soft-skill, knowledge cum hard-skill, and administration department

Soft-skill department is in charge of research, training soft-skills such as: sales, communication, train the trainer, leadership ect

Knowledge cum hard-skill department is in charge of research, training professional knowledge such as core-banking soft-wares, bank production, micro and macro-economic, orientation for new employees etc

Training - admin department is in charge of supporting activities such as organizing training class, preparing contracts, update trainees and trainings records etc

In addition, VCTC develops internal trainers who are experts, managers, specialists in all functions of the bank It also has relationship with external trainer, free-land trainer, training companies, education institute for outsourcing if needed

The VCTC is organized as chart below:

Figure 2.2: Structure of Training center of in Viet Capital bank

The center has main functions as below:

a) Taking all responsibility about training and development throughout of the bank b) Establish training and development policies and procedures to ensure efficiency and effectiveness of training and development

c) Developing and operating campaign to support bank’ strategy to get the targets d) Enable employee to acquire the knowledge and skills to improve their performance e) Implement training and development activities

f) Implement activities for carrier roadmaps

g) Budget and manual expenses in the training and development

h) Administer and follow up the performance appraisal & management review

In the bank, VCTC is considered a professional service organization that supply training and development activities only for the bank but help to contribute and improve profit generating capability of the bank

Other bank functions

External trainer - outsources

Head of training

Soft-skillss department

Hard-skills

department

Training-admin department

2.3 Operation of Training center in Viet Capital Bank

Annually, head of training center makes a plan, estimates budget and target for the whole next year Under the plan, each training departments take its own responsibility by its functions and under alignment with other for joining activities

Each training department then makes its plan to hit the assigned target of the departments and whole training center The plan will be divided and assigned to each member in the team for short term

Monthly, head of training center synthesizes training demand of the bank and monthly plan

of training departments to a monthly schedule then public the schedule for the bank through internal network called intranet

Training - admin department then collect enrolment from banks’ department, notifying to registers and organizing training classes as well as following activities The main training procedure of the center describes by figure 2.3 below and sub-processes connect to the main procedure

Figure 2.3: Main training procedure of the center

2.4 Investigation of problem in annual planning for VCTC

Training is important for an organisation to retain and increase its competitiveness (Ramsay, H., Dora Scholarios, D., and Harley, B.,: British Journal of Industrial Relations 38:4 December 2000, pp 501) However, many companies struggle to establish well their

training function and find it difficult to make its plan to link to the organisation’s strategy and objectives

There are 3 parts in annual plan of VCTC in 2013 included:

- Training plan: 73 courses included 12 outsourcing courses (for approximately total 400 persons), 61 internal courses (for approximately total 2.100 personal)

- Budget plan: 2.5 billion VND

- Human resource: 8 headcount

See detail of an annual training plan as table 2.1 below:

Annual training plan and budget of Training center 2013

(from 01/01 - 31/12/2014)

quantity

Courses budget Time

Training modality Note

1

Customer relationship officers

financial report

1 30580 Quarter 4 Outsource

project

1 47580 Quarter 3 or4 Outsource

11 Sales skills 2 1760 Quarter 2, 3 Internal

17

Staffs of the bank

Documentary verification 1 25580 Quarter 3 or 4 Outsource

26 Managers and assistant managers Advanced change management 1 41280 Quarter 2 Outsource

27 Managers and assistant managers,

Directors and assistant directors

Credit risk management for managers 1 25980 Quarter 3 or 4 Outsource

28 Assistant managers and supervisors Basic management skills 1 30880 Quarter 3 Outsource

29 Assistant managers and supervisors Counter management skills 1 35880 Quarter 3 or 4 Outsource

30 Assistant managers and supervisors Teamwork skills 1 48880 Quarter 2 or 3 Outsource

31 Training director Analysis and training performance

assessment

32 Branch directors and potentials Branch/ office transaction management 1 3090 Quarter 3 Outsource

33 Branch directors and potentials Business plan and implement 1 6180 Quarter 3 Outsource

34 Branch directors and potentials Marketing and sales management 1 6180 Quarter 3 Outsource

35 Branch directors and potentials Quality management 1 3090 Quarter 3 Outsource

36 Branch directors and potentials Risk management 1 6180 Quarter 3 Outsource

37 Branch directors and potentials Human resource management 1 456180 Quarter 3 Outsource Total training plan: 73 courses included 12 outsourcing courses (for approximately total 400 persons), 61 internal courses ( for approximately total 2.100 personal)

2 - Budget: 2.5 billion VND

3 - Headcount: 8

Table 2.1: 2013 annual training plan of VCTC