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

LIST OF ABBREVIATIONSKPI Key Performance Indicators BCS Balance Score Card Ashico Asia Investment and Asset Management Joint Stock CompanyDept... Human resource management often includes

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 UP AND RUNNING PROCESS OF KPI SYSTEM

IN ASIA INVESMENT AND ASSET MANAGEMENT JSC

HAI PHONG – 2015

VIETNAM MARITIME UNIVERSITY

STUDENT NAME: LE TAT QUOC ANH

DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATIONS FOR SETTING UP AND RUNNING PROCESS OF KPI SYSTEM

IN ASIA INVESMENT AND ASSET MANAGEMENT JSC

Supervisor: Vu Thanh Trung

HAI PHONG – 2015

Le Tat Quoc Anh

Name: Le Tat Quoc Anh – Class: GMA 02 Page i

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

Name: Le Tat Quoc Anh – Class: GMA 02 Page ii

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

Name: Le Tat Quoc Anh – Class: GMA 02 Page iii

LIST OF ABBREVIATIONS

KPI Key Performance Indicators

BCS Balance Score Card

Ashico Asia Investment and Asset Management Joint Stock CompanyDept Department

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

Name: Le Tat Quoc Anh – Class: GMA 02 Page v

INTRODUCTIONNecessity

In any period of time, human resource always plays an important role in thedevelopment of all the organizations from big countries to smaller groups and humanare key factor that can control everything and the history can proved that In thehistory of humanity, even though suffering a lot of influences from natural disasterssuch as earthquakes or volcanoes, Japanese still created many inventions and dealwith 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 239years 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 Vietnamhave 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 environmentand the images and reputations of Vietnamese products are formed step by step in themarket One of the key factors that bring the success to Vietnam is the quality ofhuman resource Not only in the level of nation, in every smaller organization andenterprise, 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 powerthat brings the benefit for enterprises but the method to manage this precious resourceeffectively is not simple problems Human resource management often includes manyother issues such as recruitment, appointment, training, control and evaluation.Evaluation are an important process because from the result of evaluation, thecompany can understand clearly about the work of each employee and give therelevant behavior to increase the effectiveness of this employee and in order to assessthe employee, there is a system that can help company to assess the employees fromthe working performance that called Key Performance Indicators (KPI) The KPIsystem has many advantages in the comparison with the other assessing methodsbecause KPI system evaluate the performance by using the specific figure andnumber; it will not depend on the sentiment of any person and deal to the equity andaccurate in the assessment

It is undeniable that KPI systems are increasingly popular in manyorganizations and showing their own remarkable applications Consequently, in thisdissertation, I decided to research and analysis the Key Performance Indicators system

Name: Le Tat Quoc Anh – Class: GMA 02 Page vi

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, adjustmentprocess, running and assessing process, completion process, application process andcontrolling process of Key Performance Indicators system in Asia Investment andAsset Management Joint Stock Company and the related elements, components,stages, etc that are founded and applied In addition, the research also analyzed thecompany 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 AssetManagement Joint Stock Company with all the departments, offices and employees ofthe 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 thebeginning to the end of KPI foundation projects and the starting period of running KPIassessing 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 runningprocess of KPI system in Asia Investment and Asset Management Joint StockCompany, the result of the research is the evaluation of these process including theadvantages, strengths, successes as well as disadvantages, weaknesses and failures inthe KPI project Besides, some recommendations will be suggested to increase theefficiency of the KPI systems in Asia Investment and Asset Management Joint StockCompany

CHAPTER 1: THEORETICAL BACKGROUND

Name: Le Tat Quoc Anh – Class: GMA 02 Page vii

1.1 Definitions and contents of KPI

KPI – Key Performance Indicators is not a new concept with the modernbusiness so some authors gave the different definitions about KPI in many points ofview as well as many features of KPI According to F.J Reh (2014), “KeyPerformance Indicators, also known as KPI or Key Success Indicators (KSI), help anorganization define and measure progress toward organizational goals” or “KPIs arequantifiable measurements, agreed to beforehand, that reflect the critical successfactors of an organization”

In other definition, KPIs are defined as “financial or nonfinancial measures thatare used to define and evaluate the success of an organization and are linked to anorganization’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 theowning 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 clearpicture of what is important, of what they need to make happen” and “make sure thateverything people in the organization do is focused on meeting or exceeding thoseKPIs”

KPI system can be presented by many ways: computer software, internetsoftware or even traditional paper documents The software or automatic devices canhelp the owners easier to calculate or gather the information of KPI but it cannotimpact on the content of KPI The KPI content depends totally in the operations ormanagements of the owning organizations Normally, the KPI content covers in 4areas: financial, customer, internal process and learn and growth (Tracy, 1995):

- KPI financial contains the indicators that give the target of operation toincrease 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 theorganization budget

Name: Le Tat Quoc Anh – Class: GMA 02 Page viii

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

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

- KPI learns and growth includes the training and increase the knowledge andskills for member of organization In addition, it also relates to the culture or socialfeature 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 forautomatic KPI system is not low Some brands that using KPI can be listed as ViettelCorporation, LG Electronic Vietnam,…

“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

Name: Le Tat Quoc Anh – Class: GMA 02 Page ix

- 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 KPI also 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, internalprocess, learning and growth, staff satisfaction, community

- Focus on Critical Success Factors

- Follow 10/80/10 rules: 10% Key Result Indicators / 80% PerformanceIndicators / 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 thereare many other factors, specially the current status and operation of the organizationwill impact on the success and effectiveness of KPI system

1.3 Functions and meanings of KPI

Name: Le Tat Quoc Anh – Class: GMA 02 Page x

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

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

In term of components, human resource is both internal and external factors ofeach individual that ensure the creation and contribution to the successes andachievements of organization (George T.M and John W.B, 1994) More specifically,human resource contains the physical power and mental power Physical powerdepends on the health, income, living level, working conditions… of people whilemental power is talents, personalities, characteristics, opinions… (T.Giang, 2011)

According to the different definitions, it can be seen that human resource isplaying 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 considerthat human resource management is “The process of analyzing and managing anorganization’s human resource needs to ensure the satisfaction of its strategicobjectives” (Hellriegel, Jackson, Slocum and Staudle, 2009)

Management and assessment always go together, after assessing, organizationscan 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 andresearches Purcell (1999) considered that SHRM “focuses on actions thatdifferentiate the firm from its competitors” or in 2003, Purcell and Boxall saw that

Name: Le Tat Quoc Anh – Class: GMA 02 Page xi

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

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

In term of KPI, in the current time, almost modern organization change fromSHRM 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 KPIare the method of human resource management with the destination is achievement ofthe organization mission In the way to reach the mission, the KPI as well as theSHRM will impact on the performance of human resource and performance is thebehaviors or action relevant to the attainment of an organization’s goals that can bemeasured (Campbell’s, 1999) In another way, Brumbrach (1988) sees theperformance as both behavior and result of human resource So, performance can beboth input and output in the same operation

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

- Organizational goals (mission, vision, value) and SWOT

- 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 to continuouslyimprove the operation of organization as well as increase the effectiveness of humanresource management

However, KPI plays an important role in the development of human resourcemanagement The performance can be showed by the specific number so the humanresource managers can directly and easily to control the situation of human resource

Name: Le Tat Quoc Anh – Class: GMA 02 Page xii

operation KPI is also special because KPI is not only focus on general mission, itweaves through all the operations and behaviors of human resource so it also can be auseful tool for the owner to know exactly what do they need to reach So, with thelevel of performance from KPI, the owner can control their target and do everythingpurposeful

In conclusion, the KPI system – a performance assessing method can makes theremarkable changes and brings the effectiveness to the organization in all kinds offield: commercial companies, producing companies, social organizations… If KPI iscreated by a good ways, it will bring many advantages for the organizations

CHAPTER 2: SETTING UP AND RUNNING PROCESS OF

KPI SYSTEM IN ASHICO

Name: Le Tat Quoc Anh – Class: GMA 02 Page xiii

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

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 forcustomer 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 generaleconomic of country as well as ensure the other benefit of labors and the society

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

2.1.2 Company network

Name: Le Tat Quoc Anh – Class: GMA 02 Page xiv

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 Da Nang City

2.1.4 Operation fields and partners

Name: Le Tat Quoc Anh – Class: GMA 02 Page xv

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) named PTSC HA NOI(5.000 BHP), PTSC LAM SON (7.000 BHP), PTSC HAI AN (8.000 BHP) andLEWEK PENGUIN (10.000 BHP) These vessels are operating for domestic as well

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

In the near future, Ashico will continue investing and developing the servicevessel fleet with greater capacity, more modern in terms of technology and moreprofessional in management in order to meet the demand of the oil and gascontractors’ increasingly high requests

Besides investing activities, Ashico also acts as the management and operationcompany 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, Ashicohas the biggest number of service vessel in Vietnam

The partner for service vessels of Ashico can be listed as: Branch of VietnamNational 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 isone of the fields which Ashico pays significant attention to for investing and operatingworks

Ashico owns an inland waterway fleet which is various in category as well ascapacity In the North of Vietnam, Ashico is leading about the number of inlandwaterway vehicles With these modern vehicles and facilities plus experiencedpersonnel, Ashico can satisfy all contractors for the projects of constructing on river orsea, such as, dredging, building bridge, wharf, breakwater, etc

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

Name: Le Tat Quoc Anh – Class: GMA 02 Page xvi

2.1.4.3 Procurement, supply, installation of oil & gas, maritime materials andequipment

Depending on the partnership with a number of domestic and over seaequipment manufacturers along with highly qualified technical staff, Ashico iscapable of providing variety of materials, equipment and spare parts with competitiveprice, meeting various demands of oil and gas contractors Ashico always ensure thecompetitive 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 ofmaritime Ashico can supply crews to ship owners with full of certificates for everyposition following the international standard Crews of Ashico can satisfy thecustomer 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 commercialand logistics fields This subsidiary of the Company has affirmed its position insupplying professional services of providing services for inland and internationaltransportation, handling service, custom clearance services, ship agency services,…

Ashico Logistics are traditional partner in term of logistics and transportationfor 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 totallyfive stages that correspond with five important missions for company to reach asuccessful system Each stage includes many smaller steps and it will be described asfollowing part of the research The five stages are:

Name: Le Tat Quoc Anh – Class: GMA 02 Page xvii

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 humanresource with the responsibility to track and monitor the whole project Commonly,these groups include people who have good knowledge and fully understand about theproject; good working skills, ideas, creative… Especially, in a project of setting upnew managing system, the project leader group must be the expert or important peoplebecause the success or failure of the project can affect seriously the organization

Asia Investment and Asset Management JSC considered the KPI system as themost important revolution in the management and administration of the company in

2015 Consequently, people who manage the project of setting up KPI system must bethe experts or managers in the company because these people are controlling thecompany and they know about all the element from both positive and negative viewsand combine with the managing skills, the project will be leaded in the right way Inthe middle of June 2015, the management board of company decided to set up aproject 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

Name: Le Tat Quoc Anh – Class: GMA 02 Page xviii

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

Stage 1: Company information collection and SWOT analysis

4 Chief Accountant

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 incharge 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, tohelp companies to build the KPI systems, many consultancy companies that specialize

in supporting, consulting and instructing are established in the market In addition, notonly supply the orientation and guideline to make the KPI system, these companiesalso provide software that can be used to control the KPI system in every company inthe 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 KPIsystems CJS has highly experiences in consultancy of target managements, potentialmanagements, and human resource managements In the clear plans, CJS showed theshortest way for Ashico to possess a good KPI assessing system with highly qualityand lowest consulting costs

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

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 iscan be seen as one of the difficult period because the KPI definitions are almost newwith all the people in the company, even the directors and managers With the supportfrom consultant, the managers of the company have been introduced about the KPIsystems as well as the benefit it will bring to company This is very important part ofthe project because the KPIs will be successful only when all the managers understandabout the KPIs and they agree with the efficiencies of the KPIs If they do not supportthe KPIs system in the company, the KPIs surely failed

After the clear understand and consensus of entire managers, in the first mainstep, it will collect all the company information to make the company’s target systemfollowing the design of Balance Scorecard (BSC) The information that requiredfirstly 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 everyonewho approaches to the company in the first time, the company’s vision, mission andcore value will be the first bricks to form the images of operation of the company Theabove 3 terms also is the basis for managers to define what Ashico can provide tocustomer; what Ashico want to be in the market; what assets and achievements thatAshico 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 canencourage people to want to join the company system Based on these requirements,Ashico completed as the following statements:

Company’s vision:

Name: Le Tat Quoc Anh – Class: GMA 02 Page xx

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

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

Company’s mission:

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

Company’s achievements until 2030:

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

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

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

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

+ Biggest crews exporting company in Vietnam;

+ Accounting for more than 50% of oil and gas services vessel supplyingmarket in Vietnam and accounting for 30% of logistics services market for foreigntenders in Vietnam

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

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

Name: Le Tat Quoc Anh – Class: GMA 02 Page xxi

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

2.2.1.4 SWOT analysis

Name: Le Tat Quoc Anh – Class: GMA 02 Page xxii

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 andmany other factors

- High value contract are often throughmiddle man; didn’t connect with the lastcustomer

- Not completed management system

- Small number of vehicles

- The human resources with specializedquality are not much

- There are many remaining chance for

investing in offshore services

- Offshore service market can be opened

oversea

- Individual companies can directly join

the offshore services

- Increasing of competitors.

- Many competitors are nationalcompanies with long history, highexperiences and resources

- Difficult to penetrate the market andeasy to be acquired

- Oil price has trend to reduce for a longtime

In general view, with the professional management boards, young staffs andpotential financial resources, there are many new opportunities for Ashico to join thefield 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 otherobjective factors as oil prices to exist and develop

Name: Le Tat Quoc Anh – Class: GMA 02 Page xxiii

Based on the SWOT of the company, management board decided that in thenear future, company will focus on improving the weakness to catch the opportunitiesand 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 theindicators for company As mentioned above, there are 4 main terms in the BalanceScorecard: finance, customer, internal process and learn and growth According to theSWOT as well as vision and objectives of Ashico, in order to set up the company’sKPI, Ashico managers had to brainstorm and gave many big targets that companywant to reach in the next time

2.2.2.1 Financial

In term of financial, Ashico concentrate on 2 strategic ways: increase therevenue (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 ofcompany focused on saving the cost of every operation and opening new revenuesources for company such as:

+ Reduce cost of maintaining vehicles; cost of stationaries; cost of everyproject… or;

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

Name: Le Tat Quoc Anh – Class: GMA 02 Page xxiv

+ 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 arealways willing to meet the demand of customer and maximize the satisfaction ofcustomer for company services The values that all the company needs to bring tocustomer includes products (price, quality, availability, diversity, function);relationship (service, cooperation) and image (branch, reputation) In this time, Ashicoidentified that the most important strategy for customer is price

The Ashico managers gave many opinions about the targets for company toincrease 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 aboutcustomer, 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;

Name: Le Tat Quoc Anh – Class: GMA 02 Page xxv

+ C5: High quality of operating human resources;

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

- 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

Name: Le Tat Quoc Anh – Class: GMA 02 Page xxvi

Learning and growing all the resources in the company is also importantbecause it affect the sustainable in the development of company So, managers ofAshico believe the target for learn and growth are necessary for a long future Thesetargets 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 ofresource 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, themanagers in company need to divide the company KPI into smaller and more specificKPI for departments based on the function of each department In Ashico, the KPIassessing system is running automatically by an online software that provided by

Name: Le Tat Quoc Anh – Class: GMA 02 Page xxvii

consulting company so all the step such as set up, divide, calculate the KPIs can bedone in this system

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

Name: Le Tat Quoc Anh – Class: GMA 02Page xxviii

* Financial

In the financial part, KPIs are mainly belonged to Commercial Department and Vung Tau Branch because these twodepartments are in charge of negotiating with customer about the contracts as well as the price of services So their functionaffects strongly the financial issue of company In additions, Operation and Ship Management Department and AdministrativeDepartment 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

input cost

structure

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

- 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%) Accounting Dept

Name: Le Tat Quoc Anh – Class: GMA 02 Page 23

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

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

- Improve cash conversion cycle (≥ 5%)F4 Use the optimal

solutions for

contract /

agreement

- (≥ 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

- Save cost for company events (≥ 5%)

- Save cost for stationaries (≥ 5%)

Administrative Dept

- 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 andCommercial Dept

Name: Le Tat Quoc Anh – Class: GMA 02 Page 24

customers - 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

* Customer

The KPIs in this part focus on increasing the satisfactions of customer and bring the best value to customers in every term

as prices, services, availabilities, human resource abilities… and Commercial Department, Maritime Services Department andVung Tau Branch have responsibility in most of customer KPIs

Table 4 Customer KPI

C1 Understand about the

customers and the

competitors

- Rate of the bidding of Ashico accepted by customer (≥ 30%)

- Percentage of the project that Ashico fully understand about customer and competitors (≥ 60%)

Commercial Dept.Mar Services Dept.Vung Tau Branch

C2 Identify the accurate

basic price for each

project

- ( = 100%) the services, products, vehicles of company have basic prices Commercial Dept

Mar Services Dept.Vung Tau Branch

Name: Le Tat Quoc Anh – Class: GMA 02 Page 25

about vehicles

- (= 100%) company ships and vehicles satisfied the registering authorities

- Percentage of satisfaction of customer about ships and vehicles (≥ 80%)

Operation Dept

C5 High quality of

operating human

resources

- Rate of operating staffs that are trained and got the certificates (≥ 60%) Operation Dept

- Rate of operating staffs that met the works ( = 100%)

- Number of violations safety and environment protection (≤ 3 times)

- No any accident and incident that can lead to off-hire ship ( = 0)

- Reduce (≥ 50%) of number of non-conformation (NC) than 2014

Operation Dept

- Receive the Crews Management System (CMS) certificates Crews Man Dept.C7 Bring the satisfaction

to customers

- The satisfactions of customers about services of company (≥ 80%) Commercial Dept

Mar Services Dept.Vung Tau Branch

Name: Le Tat Quoc Anh – Class: GMA 02 Page 26