Recommendations for setting up and running process of KPI system in ashico

LIST OF ABBREVIATIONS KPI Key Performance Indicators BCS Balance Score Card Ashico Asia Investment and Asset Management Joint Stock Company... dissertation, I decided to research and ana

MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING

VIETNAM MARITIME UNIVERSITY

STUDENT NAME:LE TAT QUOC ANH

DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATIONS FOR SETTING UPAND RUNNING PROCESS OF KPI SYSTEM IN ASIA INVESMENT AND ASSET

MANAGEMENT JSC

MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING

VIETNAM MARITIME UNIVERSITY

STUDENT NAME:LE TAT QUOC ANH

DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATIONS FOR SETTING UPAND RUNNING PROCESS OF KPI SYSTEM IN ASIA INVESMENT AND ASSET

MANAGEMENT JSC

Supervisor: Vu Thanh Trung

Student Name and Signature

Le Tat Quoc Anh

ACKNOWLEGEMENT

Firstly, I would like to express my sincere gratitude to my advisor Master Vu Thanh Trung for the continuous support of my dissertation and related research, for his patience, motivation, and immense knowledge His guidance helped me in all the time of research and writing of this thesis I could not have imagined having a better advisor and mentor for my study

TABLE OF CONTENTS

Preface i

Table of Contents iii

List of Symbols, Abbreviations iv

List of Tables and Chart and Figure v

INTRODUCTION 1

CHAPTER 1: THEORETICAL BACKGROUND 3

1.1 Definitions and contents of KPI 3

1.2 Requirement of KPI 4

1.3 Functions and meanings of KPI 6

CHAPTER 2: SETTING UP AND RUNNING PROCESS OF KPI SYSTEM 9

2.1 Company introduction 9

2.1.1 General information 9

2.1.2 Company network 9

2.1.3 Company structure 10

2.1.4 Operation fields and partners 10

2.2 The setting up and running process of KPI system in Ashico 12

2.2.1 Stage 1: Company information collection and set up Balance scorecard 13

2.2.2 Stage 2: Set up company targets and indicators by using Balance Scorecard 18

2.2.3 Stage 3: Set up specific indicators for departments and staffs 22

2.2.4 Stage 4: Running and adjusting and optimizing indicators 33

2.2.5 Stage 5: Combining salary with KPI 39

CHAPTER 3: EVALUATIONS AND RECOMMENDATIONS 41

3.1 Evaluations for setting up and running process of KPI system 41

3.1.1 Advantages 41

3.1.2 Disadvantages 43

3.1.3 Successes 43

3.1.4 Problems 45

3.2 Recommendations for setting up and running process of KPI system 50

CONCLUSION 53

Reference / Bibliography 54

Appendices 55

LIST OF ABBREVIATIONS

KPI Key Performance Indicators

BCS Balance Score Card

Ashico Asia Investment and Asset Management Joint Stock Company

LIST OF TABLES AND CHARTS AND FIGURES

Table 1: Company brief information 9

Table 2: SWOT analysis 17

Table 3: Financial KPI 23

Table 4: Customer KPI 26

Table 5: Process KPI 28

Table 6: Learn and growth KPI 29

Table 7: KPI calculation 36

Table 8: KPI – salary coefficient 39

Chart 1: Organization structure 10

Chart 2: KPI setting up and running process 13

Figure 1: KPI testing result 37

INTRODUCTION Necessity

In any period of time, human resource always plays an important role in the development of all the organizations from big countries to smaller groups and human are key factor that can control everything and the history can proved that In the history of humanity, even though suffering a lot of influences from natural disasters such as earthquakes or volcanoes, Japanese still created many inventions and deal with the nature and develop their country become one of the most powerful countries in the world America becomes an independent nation from 1776 and after only 239 years of development, US is becoming the leader in the entire field: economy, finance, society, military, etc For a long time ago, in long and severe wars, people of Vietnam have showed our power and won all the invaders All the achievements and successes of nation are reached by the power of the human in these nations

Nowadays, Vietnam are developing and penetrating into the world environment and the images and reputations of Vietnamese products are formed step by step in the market One of the key factors that bring the success to Vietnam

is the quality of human resource Not only in the level of nation, in every smaller organization and enterprise, the human resource management is considered as an important strategy and it is always be on top of developing plans Human resource will be the main power that brings the benefit for enterprises but the method to manage this precious resource effectively is not simple problems Human resource management often includes many other issues such as recruitment, appointment, training, control and evaluation Evaluation are an important process because from the result of evaluation, the company can understand clearly about the work of each employee and give the relevant behavior to increase the effectiveness of this employee and in order to assess the employee, there is a system that can help company to assess the employees from the working performance that called Key Performance Indicators (KPI) The KPI system has many advantages in the comparison with the other assessing methods because KPI system evaluate the performance by using the specific figure and number; it will not depend on the sentiment of any person and deal to the equity and accurate in the assessment

It is undeniable that KPI systems are increasingly popular in many organizations and showing their own remarkable applications Consequently, in this

dissertation, I decided to research and analysis the Key Performance Indicators

system in case of a specific company with the topic: “Recommendations for setting up and running process of Key Performance Indicators system in Asia Investment and Asset Management Joint Stock Company”

Research Object

The research objects of the topic are the foundation process, adjustment process, running and assessing process, completion process, application process and controlling process of Key Performance Indicators system in Asia Investment and Asset Management Joint Stock Company and the related elements, components, stages, etc that are founded and applied In addition, the research also analyzed the company employees in term of the establishment and running of KPI system

Research Scope

The research scope of the topic is the entire of Asia Investment and Asset Management Joint Stock Company with all the departments, offices and employees

of the company

The topic of this dissertation has been researched for five months from June

2015 to November 2015 This period of time corresponds with the time from the beginning to the end of KPI foundation projects and the starting period of running KPI assessing systems in Asia Investment and Asset Management Joint Stock Company

Research Findings

After the period of researching all the elements in the setting up and running process of KPI system in Asia Investment and Asset Management Joint Stock Company, the result of the research is the evaluation of these process including the advantages, strengths, successes as well as disadvantages, weaknesses and failures

in the KPI project Besides, some recommendations will be suggested to increase the efficiency of the KPI systems in Asia Investment and Asset Management Joint Stock Company

CHAPTER 1: THEORETICAL BACKGROUND

1.1 Definitions and contents of KPI

KPI – Key Performance Indicators is not a new concept with the modern business so some authors gave the different definitions about KPI in many points of view as well as many features of KPI According to F.J Reh (2014), “Key Performance Indicators, also known as KPI or Key Success Indicators (KSI), help

an organization define and measure progress toward organizational goals” or “KPIs are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization”

In other definition, KPIs are defined as “financial or nonfinancial measures that are used to define and evaluate the success of an organization and are linked to

an organization’s strategy for success” or KPIs are “devised to help evaluate the progress of an organization towards achieving its long-term goals and fulfilling its vision” (Thrall et.al, 2010)

In an easier and more specific way, KPI are a system of indicators and the size of this system can be very big or very small depend on the operations and scale

of the owning organization These indicators are the target that the in-charged person needs to reach and the result will show the level of his performance

F.J Reh also concludes that “KPIs give everyone in the organization a clear picture of what is important, of what they need to make happen” and “make sure that everything people in the organization do is focused on meeting or exceeding those KPIs”

KPI system can be presented by many ways: computer software, internet software or even traditional paper documents The software or automatic devices can help the owners easier to calculate or gather the information of KPI but it cannot impact on the content of KPI The KPI content depends totally in the operations or managements of the owning organizations Normally, the KPI content covers in 4 areas: financial, customer, internal process and learn and growth (Tracy, 1995):

- KPI financial contains the indicators that give the target of operation to increase the sales or incomes and maintain the flow of cash in the organization

Besides that, this group of KPI also can relate to the chances that help to gain the organization budget

- KPI customer often relates to the increase of number of new customers or maintains the current customer It also relates to the relationship with customer, so it can be seen in the quality of services or customer services of the organization

- Almost organization has its own internal processes so KPI process focus on implementation and application of the process into the operation The KPI process also mentions to the adjustment or creation to make the process better

- KPI learns and growth includes the training and increase the knowledge and skills for member of organization In addition, it also relates to the culture or social feature such as the working environment, attitude of members…

In the world, KPI is used for a long time in many companies but in Vietnam, not many organizations use KPI because it’s not too easy to make and their cost for automatic KPI system is not low Some brands that using KPI can be listed as Viettel Corporation, LG Electronic Vietnam,…

1.2 Requirements of KPI

The KPI can be different in different organizations or companies but it still needs to follow some general requirement Firstly, KPIs must to follow the S-M-A-R-T standards, Hursman (2010) found out the standard for KPI includes: Specific, Measureable, Attainable, Relevant, Time bound

The 5 criteria are used as standard for a “good” KPI If one of them is missed, KPI will become the wrong metrics that “can wreak havoc on an organization processes and demoralize employees” (Eckerson, 2007) Eckerson also defined “good” KPIs need to have the following characteristics:

“- Sparse: the fewer the better

- Drillable: can drill into detail

- Simple: easy can understand

- Actionable: know how to affect the outcomes

- Owned: KPI has owner

- Referenced: easy to view the case or context

- Correlated: lead to desired outcomes

- Balanced: both financial and nonfinancial

- Aligned: no conflict each other

-Validated: cannot cheat to reach KPIs.”

Secondly, the process of creating KPIalso need to have some standards Believing the KPI system can become perfect after 16 weeks (Kaplan and Norton),

D Parmenter (2007) analysis the lessons for KPI systems, specially:

“- Find an external project facilitator

- Begin with Senior Management Team commitment and education

- Start with balance score card template, includes: financial, customer, internal process, learning and growth, staff satisfaction, community

- Focus on Critical Success Factors

- Follow 10/80/10 rules: 10% Key Result Indicators / 80% Performance Indicators / 10% Winning Indicators

- Select small KPI team

- KPI reporting formats are an art form, not science”

Some of the above standards are only in the general view about KPI and there are many other factors, specially the current status and operation of the organization will impact on the success and effectiveness of KPI system

1.3 Functions and meanings of KPI

In the development of every organization or company, there are many power resources that bring the huge impacts and decide the failure or the success of operation such as human resource, financial resource, technology resource… Among these resources, human resource is often considered as one of the most important power of companies and becomes the similar concept for everyone However, it is not easy to define this elusive concept Until the XX century, the labor is regarded as a power of organization and the management methods is more flexible make the good condition for labors to increase their performance as well as potential (according to Ministry of Home Affairs)

Human resource can be defined as the power of all the people in organizations with different capacity and structure but these people has abilities and potentials to develop their organization or even out of their organization to the nations, regions and global (N.Henry, 2006)

In term of components, human resource is both internal and external factors

of each individual that ensure the creation and contribution to the successes and achievements of organization (George T.M and John W.B, 1994) More specifically, human resource contains the physical power and mental power Physical power depends on the health, income, living level, working conditions…

of people while mental power is talents, personalities, characteristics, opinions… (T.Giang, 2011)

According to the different definitions, it can be seen that human resource is playing an important role in the operation and the development of every organization It is one of the most difficult arts in many kinds of management It can

be consider that human resource management is “The process of analyzing and managing an organization’s human resource needs to ensure the satisfaction of its strategic objectives” (Hellriegel, Jackson, Slocum and Staudle, 2009)

Management and assessment always go together, after assessing, organizations can give the better management to correct or develop the operation of human resource Normally, almost organizations manage and appraise its human resource by 2 ways: strategic HR management and KPI management

Strategic human resource management (SHRM) is defined in many studies and researches Purcell (1999) considered that SHRM “focuses on actions that differentiate the firm from its competitors” or in 2003, Purcell and Boxall saw that

“SHRM is integral part of business strategy The main focus of this strategy is to achieve organizational objectives”

In the other view, Hendry and Pettigrew (1986) find out the meanings of SHRM in 7 terms, including: planning, managing by a coherent approach, basing on employment policy and workforce strategy, underpinning by a philosophy, matching human resource management and business strategy, seeing people as resource, achieving competitive advantage

In term of KPI, in the current time, almost modern organization change from SHRM to KPI in the human resource management KPI still has the current function

of SHRM but it also has its own different meaning

It can be seen that in almost theory, the researchers consider the SHRM or KPI are the method of human resource management with the destination is achievement of the organization mission In the way to reach the mission, the KPIas well as the SHRMwill impact on the performance of human resource and performance is the behaviors or action relevant to the attainment of an organization’s goals that can be measured (Campbell’s, 1999) In another way, Brumbrach (1988) sees the performance as both behavior and result of human resource So, performance can be both input and output in the same operation

According to Y Wang (2012), the conceptual process of organizational performance will follow the below flow:

- Organizational goals (mission, vision, value) andSWOT

- Strategy formulation (plan)

- Strategy execution (task analysis, task division, individual performance)

- Strategy evaluation (strategy result, organization performance)

So, the cycle of human resource performance will be repeated tocontinuously improve the operation of organization as well as increase the effectiveness of human resource management

However, KPI plays an important role in the development of human resource management The performance can be showed by the specific number so the human resource managers can directly and easily to control the situation of human resource operation KPI is also special because KPI is not only focus on general mission, it weaves through all the operations and behaviors of human resource so it also can be

a useful tool for the owner to know exactly what do they need to reach So, with the level of performance from KPI, the owner can control their target and do everything purposeful

In conclusion, the KPI system – a performance assessing method can makes the remarkable changes and brings the effectiveness to the organization in all kinds

of field: commercial companies, producing companies, social organizations… If KPI is created by a good ways, it will bring many advantages for the organizations

CHAPTER 2: SETTING UP AND RUNNING PROCESS OF

KPI SYSTEM IN ASHICO 2.1 Company Introduction

2.1.1 General information

Table 1 Company brief information Company name Asia Investment and Asset Management Joint Stock

Company

Head office Suite 311, DG Tower, No.15 Tran Phu Street, Haiphong

City, Vietnam

Telephone

Fax

(+84) 0313.757.366 (+84) 0313.757.266

Type of company Joint Stock Company

Business of

Registration No

0200809729 (Granted by Haiphong Investment and Planning Service)

Year of commencement 2008

General Director Mr Nguyen Son

Authorized Capital 105.000.000.000 VND

Bank Account (USD) 00237000170068

Bank Southeast Asia Commercial Joint Stock Bank

In all the operations, Ashico always aims to become the best supplier for customer in field of maritime and oil and gas industry with the high quality services Ashico also identifies clearly the mission of company in developing the general economic of country as well as ensure the other benefit of labors and the society

With the slogan “Passion for professionals”, Ashico determines to become the professional investor with high reputation not only in Vietnam but also in the region and international areas

2.1.2 Company network

Ashico has the operation network throughout of Vietnam in all of 3 areas

The main office is located in Hai Phong City and company has one representative office in Ha Noi City and one branch in Vung Tau City In the near future, Ashico will open one representative office in Ho Chi Minh City in order to widen the

operation into the Southern area

In addition, Ashico has one member company called Asia Trading and

Logistics JSC (Ashico Logs) that has a main office in Hai Phong and an office in

9 departments with Heads of Department and staffs

2.1.4 Operation fields and partners

2.1.4.1 Offshore marine services for oil and gas industry

Ashico is possessing a fleet of service vessels (Anchor Handling Tug Supply

- AHTS) with modern dynamic positioning system (DP1, DP2) namedPTSC HA NOI (5.000 BHP), PTSC LAM SON (7.000 BHP), PTSC HAI AN (8.000 BHP) and LEWEK PENGUIN (10.000 BHP) These vessels are operating for domesticas well

as foreign oil and gas contractors in short-term and long-term projects

In the near future, Ashico will continue investing and developing the service vessel fleet with greater capacity, more modern in terms of technology and more professional in management in order to meet the demand of the oil and gas contractors’ increasingly high requests

Besides investing activities, Ashico also acts as the management and operation company for the vessels of Vietnam Navy Forces and Vietnam Coastal Guard Forces in the works of security and patrol, assisting oil and gas exploration and exploitation in Vietnam’s continental shelf In both field of investment and management, Ashico has the biggest number of service vessel in Vietnam

The partner for service vessels of Ashico can be listed as: Branch of Vietnam National Oil and Gas Corporation, Bien Dong POC, Cuu Long JOC, SK E&C (Korea), SK TLO (Malaysia)…

2.1.4.2 Supply Vehicles and Facilities for Construction site

Supplying Vehicles and Facilities for Construction site in river and sea areas

is one of the fields which Ashico pays significant attention to for investing and operating works

Ashico owns aninland waterway fleet which is various in category as well as capacity In the North of Vietnam, Ashico is leading about the number of inland waterway vehicles With these modern vehicles and facilities plus experienced personnel, Ashico can satisfy all contractors for the projects of constructing on river

or sea, such as, dredging, building bridge, wharf, breakwater, etc

Ashico was the subcontractors for supplying vehicles and facilities for construction as Project of installing clear energy in Truong Sa, Construction of Nhat Tan Bridge, Construction of Lach Huyen Port, etc

2.1.4.3 Procurement, supply, installation of oil & gas, maritime materials and equipment

Depending on the partnership with a number of domestic and over sea equipment manufacturers along with highly qualified technical staff, Ashico is capable of providing variety of materials, equipment and spare parts with competitive price, meeting various demands of oil and gas contractors Ashico always ensure the competitive price and quality of services for customers

2.1.4.4 Crew manning services

Ashico is managing and training a big tem of crews with experiences in field

of maritime Ashico can supply crews to ship owners with full of certificates for every position following the international standard Crews of Ashico can satisfy the customer with their major skills, English and attitude

Main partners of Ashico in field of crew manning as Tan Cang Offshore, MODEC, EMAS…

2.1.4.5 Logistic services

As subsidiary of Ashico, Ashico Logistics focus on develop the commercial and logistics fields This subsidiary of the Company has affirmed its position in supplying professional services of providing services for inland and international transportation, handling service, custom clearance services, ship agency services,…

Ashico Logistics are traditional partner in term of logistics and transportation for many customer as PVTEX, LG Electronics, POSH SEMCO,…

2.2 The setting up and running process of Key Performance Indicators system

in Ashico

In the setting up and running process of KPI system in Ashico, there are totally five stages that correspond with five important missions for company to reach a successful system Each stage includes many smaller steps and it will be described as following part of the research The five stages are:

Chart 2 KPI setting up and running process

2.2.1 Stage 1: Company information collection and set up Balance scorecard

2.2.1.1 Set up the project managing team

In the first part of a project, all the company need to set up a group of human resource with the responsibility to track and monitor the whole project Commonly, these groups include people who have good knowledge and fully understand about the project; good working skills, ideas, creative… Especially, in a project of setting

up new managing system, the project leader group must be the expert or important people because the success or failure of the project can affect seriously the organization

Asia Investment and Asset Management JSC considered the KPI system as the most important revolution in the management and administration of the company in 2015 Consequently, people who manage the project of setting up KPI system must be the experts or managers in the company because these people are controlling the company and they know about all the element from both positive and negative views and combine with the managing skills, the project will be leaded

in the right way In the middle of June 2015, the management board of company decided to set up a project managing board with 10 members:

1 General Director

2 Director of Administrative and Human Resource Department

3 Deputy General Director – in charge of Operation and Ship Management Dept

4 Chief Accountant

Stage 5: Combining salary with KPI

Stage 4: Running and adjusting and optimizing indicators

Stage 3: Set up specific indicators for departments and staffs

Stage 2: Set up company targets and indicators by Balance Scorecard

Stage 1: Company information collection and SWOT analysis

5 Director of Maritime Services Department

6 Deputy Director of Commercial Department

7 Deputy Director of Crew Management Department

8 Director of Vung Tau Branch

9 Chief Representative of Ha Noi Office

10 Project Assistant

The above people almost are managers in the company with each person are

in charge of a specialized department This project managing team is key human factors in the KPI project of Ashico

2.2.1.2 Choosing the consulting company

It is not easy for a company to totally set up the KPI system by itself So, to help companies to build the KPI systems, many consultancy companies that specialize in supporting, consulting and instructing are established in the market In addition, not only supply the orientation and guideline to make the KPI system, these companies also provide software that can be used to control the KPI system in every company in the easiest way Some high reputation consulting companies can

be listed such as:

- OCD Management Consulting Company.1

- Cloudjet Solutions Corporation.2

- Institute of economics and international trade (Foreign Trade University)3Depend on the requirements in term of quality, time and cost, Ashico decided to choose Cloudjet Solutions Corporation (CJS) to be the consultant in setting up KPI systems CJS has highly experiences in consultancy of target managements, potential managements, and human resource managements In the clear plans, CJS showed the shortest way for Ashico to possess a good KPI assessing system with highly quality and lowest consulting costs

In the whole KPI setting up process, CJS is the consulting organization that support all the term of techniques as well as the methods to running a new KPI system

2.2.1.3 Company information collection

At the end of May, the KPI project was started in Ashico with the participation of the KPI team include the Director Board and company managers In this time, it is can be seen as one of the difficult period because the KPI definitions are almost new with all the people in the company, even the directors and managers With the support from consultant, the managers of the company have been introduced about the KPI systems as well as the benefit it will bring to company This is very important part of the project because the KPIs will be successful only when all the managers understand about the KPIs and they agree with the efficiencies of the KPIs If they do not support the KPIs system in the company, the KPIs surely failed

After the clear understand and consensus of entire managers, in the first main step, it will collect all the company information to make the company’s target system following the design of Balance Scorecard (BSC) The information that required firstly including:

- General information in term of company’s structure, list of human resources, financial reports…

- Company’s Vision;

- Company’s Mission;

- Company’s Core Values

Beside the specific information as structure or financial reports, with everyone who approaches to the company in the first time, the company’s vision, mission and core value will be the first bricks to form the images of operation of the company The above 3 terms also is the basis for managers to define what Ashico can provide to customer; what Ashico want to be in the market; what assets and achievements that Ashico want to possess or reach… According to the advice from consulting company, good visions or achievements need to be clear and possible and these statements can encourage people to want to join the company system Based on these requirements, Ashico completed as the following statements:

Company’s vision:

- Ashico will supply to customers the best products and services in field of maritime, seaport infrastructure, oil and gas exploration and exploitation, offshore service, logistics and tourism real estate, etc

- Ashico also will form the highest effective working environment in order to comprehensively promote the talent and competence of each staff from which to satisfy demands, private wishes of each staff in the most sufficiently, bring appropriate profits to the company and satisfactory interests for shareholders, and simultaneously make the most contribution to the country and society

Company’s mission:

- Ashico want to become a professional investor and asset management services supplier in the operating fields with high prestige and reputation in Vietnam and the region

Company’s achievements until 2030:

- The first Vietnamese company in field of oil and gas services is listed in the foreign joint stock market with the value of each share is not low

- Ashico will be the leading ship and logistics services suppliers for offshore services with the enormous and moderns team of vehicles, services… and high operating capacity:

+ About 30 AHTS (Anchor Handling and Tug Services) vessels;

+ About 15 internal water vehicles (barges, tow boats, tug boats…) with the tonnages from 5000 to 10000 tones;

+ Biggest crews exporting company in Vietnam;

+ Accounting for more than 50% of oil and gas services vessel supplying market in Vietnam and accounting for 30% of logistics services market for foreign tenders in Vietnam

- Ashico not only focuses on developing the operations and structures of the company, but also increases the company’s culture and working environment with the targets:

+ Ashico will become the most attractive working environment in Vietnam;

+ The average salary of employees of Ashico is from 3500 to 4000 US dollars per month

2.2.1.4 SWOT analysis

Table 2 SWOT analysis

- Advisors are experts in field of

offshore and marine services

- Young human resources

- Strong financial resources

- Vessel teams are always ready; labors

with high quality and relevant costs

- Professional service providers; high

responsibilities and connections

- Adaptable, quickly seize the

opportunities

- Joined the market for a short time

- Operation depends on big partners and many other factors

- High value contract are often through middle man; didn’t connect with the last customer

- Not completed management system

- Small number of vehicles

- The human resources with specialized quality are not much

- There are many remaining chance for

investing in offshore services

- Offshore service market can be opened

oversea

- Increasing of competitors

- Many competitors are national companies with long history, high experiences and resources

- Difficult to penetrate the market and easy to be acquired

- Oil price has trend to reduce for a long time

- Individual companies can directly join

the offshore services

In general view, with the professional management boards, young staffs and potential financial resources, there are many new opportunities for Ashico to join the field of offshore services in both domestic and oversea market But the competition is a big barrier for Ashico in offshore services and Ashico need to deal with many other objective factors as oil prices to exist and develop

Based on the SWOT of the company, management board decided that in the near future, company will focus on improving the weakness to catch the opportunities and remove the threats

2.2.2 Stage 2: Set up company targets and indicators by using Balance Scorecard

From the result of stage 1, Ashico has almost enough materials to build the indicators for company As mentioned above, there are 4 main terms in the Balance Scorecard: finance, customer, internal process and learn and growth According to the SWOT as well as vision and objectives of Ashico, in order to set up the company’s KPI, Ashico managers had to brainstorm and gave many big targets that company want to reach in the next time

2.2.2.1 Financial

In term of financial, Ashico concentrate on 2 strategic ways: increase the revenue (as open trading chances, increase customer…) and optimize the performance (as reduce cost; increase use of assets…)

After brainstorming the financial targets, most of the member in KPI team of company focused on saving the cost of every operation and opening new revenue sources for company such as:

+ Reduce cost of maintaining vehicles; cost of stationaries; cost of every project… or;

+ Increase the average profit growth rate; number of new customer; number

of new services; overall equipment effectiveness; cash conversion cycle…

In summary, the company KPI of Ashico about financial are listed below:

- Optimize the profit before tax:

+ F1: Increase the working performance;

+ F2: Optimize the effectiveness of assets;

+ F3: Improve the input cost structure;

+ F4: Use the optimal solution for each specific contract and agreement; + F5: Save administrative costs, reduce the unreasonable costs;

- Grow the revenue:

+ F6: Change the form of operating vessel from bareboat to time – charter; + F7: Maintain and develop the current customers;

+ F8: Open the opportunities to gain the income

2.2.2.2 Customer

Customer is the key factors in the development of Ashico and Ashico are always willing to meet the demand of customer and maximize the satisfaction of customer for company services The values that all the company needs to bring to customer includes products (price, quality, availability, diversity, function); relationship (service, cooperation) and image (branch, reputation) In this time, Ashico identified that the most important strategy for customer is price

The Ashico managers gave many opinions about the targets for company to increase the customer that related to the following issues:

+ Rate of reasonable prices that accepted by customers;

+ Reduce time for serving;

+ Rate of customer satisfaction, number of complaints; number of violations; + Quality and responsibility of human resources that serve customers… Based on these targets, managers decided to set up the company KPI about customer, including 6 KPIs:

- Assure the best price for customers:

+ C1: Understand about the customers and the competitors;

+ C2: Identify the accurate basic price for each project;

+ C3: Availability of vehices;

- Assure the highest quality for customers:

+ C4: Customers satisfy about vehicles;

+ C5: High quality of operating human resources;

+ C6: Management systems are relevant with quality standard, environment

and safety

+ C7: Bring the satisfaction to customers

2.2.2.3 Internal Process

In Ashico, the internal process systems are used in every operation of the

company and they are playing a very important role to save time and cost In term

of internal process, company KPIs are set up with all the current processes of

company:

- ISO processes:

+ P1: Corrective and preventative process;

+ P2: Quality profile controlling process;

- Ship exploitation and operation processes:

+ P16: Crew supplying and management process – MLC 2006;

+ P17: Safety Management Systems – SMS;

+ P18: Ship security systems – ISPS;

- General regulations

+ P19: General regulations in company, internal rules

2.2.2.4 Learn and growth

Learning and growing all the resources in the company is also important because it affect the sustainable in the development of company So, managers of Ashico believe the target for learn and growth are necessary for a long future These targets are focused on:

+ Percentages of trained staffs and effectiveness of training programs;

+ Increase the ability of human resources and company culture;

+ Increase the relationship and connection between company and staffs; + Strengthen the system and database

Thus, the KPI in term of learn and growth in Ashico divided follow 3 types

of resource as:

- Human resource:

+ L1: Training and developing professional and core abilities;

+ L2: Increase the soft abilities;

+ L3: Increase the key human resources;

- Organization resource:

+ L4: Culture and cooperation in company;

- Information resource:

+ L5: Managing the database;

+ L6: Strengthen the management in systems

2.2.3 Set up specific indicators for departments and staffs

2.2.3.1 Set up indicators for departments

After having the company KPI that are in charged by General Director, the managers in company need to divide the company KPI into smaller and more specific KPI for departments based on the function of each department In Ashico, the KPI assessing system is running automatically by an online software that provided by consulting company so all the step such as set up, divide, calculate the KPIs can be done in this system

In this step, from the company KPIs, managers need to create new KPIs that relevant for each department but all of them must contribute to the general target of company If the company KPI is only the target with the wide range, the department KPI need to be specific and can be calculate accurately by figures From this step, the KPI need to assure the SMART standard (specific, measurable, achievable, realistic, time – bound) so it can be considered as the most difficult and complicated steps in the whole process

* Financial

In the financial part, KPIs are mainly belonged to Commercial Department and Vung Tau Branch because these two departments are in charge of negotiating with customer about the contracts as well as the price of services So their function affects strongly the financial issue of company In additions, Operation and Ship Management Department and Administrative Department are able to control the cost of technical maintenance and office uses

Table 3 Financial KPI

F1 Increase the

working

performance

- Average profit before tax per staff ( ≥ xx millions VND/ staff/ quarter) Director Board

- Minimize the working overtime ( ≤ 10 hours / staff/ quarter) Administrative Dept

F2 Optimize the

effectiveness of

assets

- Overall equipment effectiveness ( ≥ 0.8 each quarter) Operation Dept

- Assure to maintain the computer system ( ≥ 3 times / quarter) Administrative Dept

F3 Improve the - Reduce hiring cost from outsources in the comparison with 2014 (≥ 5%) Commercial Dept

input cost

structure - Check the fuel consumption rate of the company’s vessels ( ≥ 1 times/ quarter)

- Reduce the maintaining cost of company vessels and vehicles (≥ 5%)

Operation Dept

- Check fuel consumption rate of the company vehicles (≥ 1 times/ quarter) Mar Services Dept

- Reduce financial cost in the comparison with the annual plan (≥ 5%)

- Improve the financial indicator of the company (≥ 10%)

- Improve the quick payment ratio in the comparison with 2014 (≥ 5%)

- Improve cash conversion cycle (≥ 5%)

- (≥ 85%) of project that saved 10% cost in the comparison with the plan

- (≥ 85%) of project that apply the more optimal solutions

- Reduce (≥ 10%) of preparing time before mobilizing vehicles and vessels

Operation Dept

F5 Save

administrative

costs, reduce the

- Save cost for company events (≥ 5%)

- Save cost for stationaries (≥ 5%)

Administrative Dept

unreasonable

costs - Save cost of administration than the plan of 2015 (≥ 5%) Vung Tau Branch

- Save cost of fuel for cars in Ha Noi Office (≥ 5%)

- Percentage of flight bought with discount price (≥ 50%)

- Increase the annual revenue from current customer than 2014 (≥ 5%) Vung Tau Branch

- Current principle contracts in 2015 will not be early terminated because Ashico’s faults (= 100%)

Vung Tau Branch and Commercial Dept

- Number of new contracts with current customers (≥ 6 contracts /year)

- Rate of contracts extension (≥ 100%)

Commercial Dept Mar Services Dept

F8 Open the

opportunities to

gain the income

- Rate of contracts with new customers or new services Commercial Dept

Mar Services Dept Crews Man Dept