improving quality and performance by transfroming from functional structure to process based structure at serenco company

HO CHI MINH CITY OPEN UNIVERSITY

UNIVERSITÉ LIBRE DE BRUXELLES
SOLVAY BRUSSELS SCHOOL OF
ECONOMICS & MANAGEMENT

MBQPM5
PHẠM VĂN THUẬN

IMPROVING QUALITY AND PERFORMANCE
BY TRANSFROMING FROM FUNCTIONAL
STRUCTURE TO PROCESS - BASED
STRUCTURE AT SERENCO COMPANY
MASTER FINAL PROJECT
MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT

Tutor: Jacques Martin

Ho Chi Minh City
(2016)


Statement of Authentication
I certified that this report is my own work and this work has not been presented
elsewhere for assessment. All materials and resources used in this report have
been properly acknowledged and referred.


Acknowledgements
I would like to thank Professor Jacques Martin and other professors form Solvay
Program for providing me good knowledge and materials about quality and

performance.
I would like to thank my classmates for their helps during class time and during my
doing the assignment.
I would also like to thank my colleagues at Serenco for their support me in getting
information and reports.


Academic tutor and practical tutor’s comments


Table of Contents
INTRODUCTION .................................................................................................................................... 1 
1. 

Company Overview ..................................................................................................................... 1 

2. 

Challenges for STECH ................................................................................................................ 4 

3. 

Project objectives and scopes...................................................................................................... 4 

Chapter 1 ANALYSING THE CURRENT SITUATION OF STECH............................................... 6 
1. 

The organization structure analysis ........................................................................................... 6 

2. 

Process management analysis ..................................................................................................... 9 

3. 

Analysis the business results in quality and performance ..................................................... 10 

Chapter 2 – ORGANIZATION TYPES AND THE CHOICE OF STECH..................................... 13 
1. 

Types of Organizational structure ........................................................................................... 13 

2. 

The choice for STech ................................................................................................................. 18 

3. 

The roadmap for transforming from functional to process - based structure ..................... 19 

Chapter 3 – STRATEGY ANALYSIS, DEVELOPMENT AND PLANNING ............................... 20 
1. 

Strategy Analysis ....................................................................................................................... 20 

2. 

Strategy development ................................................................................................................ 24 

2.1  Strategy statement ....................................................................................................................... 24 

2.2  The strategy map ......................................................................................................................... 25 
Strategy map comments ...................................................................................................................... 26 
3. 

Planning ...................................................................................................................................... 27 

Chapter 4 – DESIGN CORE PROCESSES .................................................................................... 28 
1. 

Develop core processes .............................................................................................................. 28 

2. 

Process flow chart ...................................................................................................................... 34 

Chapter 5 - RE-DESIGN THE ORGANISATIONAL STRUCTURE ............................................. 37 
1. 

Changing the organization structure ....................................................................................... 37 

2. 

Change in roles and responsibilities......................................................................................... 38 


3. 

Aligning processes and organizational structure .................................................................... 39 

Chapter 6 – PROCESS IMPLEMENTATION PLAN ...................................................................... 41 

1. 

Implementation process ............................................................................................................ 41 

2. 

Development of process management tools ............................................................................. 41 

Chapter 7 – MEASUREMENT & DASHBOARD ............................................................................ 43 
1. 

Performance management approach ....................................................................................... 43 

2. 

Process measurement ................................................................................................................ 44 

3. 

Performance summary report .................................................................................................. 51 

CONCLUSIONS.................................................................................................................................... 52 
1. 

The application and usefulness of the project ......................................................................... 52 

2. 

What are the next steps ............................................................................................................. 52 

List of Abbreviations
BSC

Balanced Scorecard

ERP

Enterprise Resource Planning

IT

Information Technology

SBU

Strategy Business Unit

KPI

Key Performance Indicator

QMS

Quality Management System

TQM

Total Quality Management

List of pictures
Figure 1: Current organization structure of Serenco ................................................................. 2 
Figure 2: New organization structure of STech .......................................................................... 6 
Figure 3: Current process structure ............................................................................................. 9 
Figure 4: example of functional structure .................................................................................. 13 
Figure 5: example of Divisional structure .................................................................................. 14 
Figure 6: Example of matrix organization ................................................................................. 16 
Figure 7: example of process-based organization ................................................................... 17 
Figure 8: Transition model for Serenco ..................................................................................... 19 
Figure 9 – Porter five forces model ............................................................................................ 23 
Figure 10: The strategy map of sTech ....................................................................................... 25 
Figure 11: General process mapping ........................................................................................ 32 
Figure 12 – Detail Process mapping .......................................................................................... 33 
Figure 13 - Sales process flow chart ......................................................................................... 34 
Figure 14 - Purchasing process flow chart ............................................................................... 35 
Figure 15 - Customer support process flow chart .................................................................... 36 
Figure 16 - New organizational structure for sTech ................................................................ 37 
Figure 17 - Processes - based structure ................................................................................... 39 
Figure 18 - Performance management approach .................................................................... 43 
Figure 19 - Process ID card for sales process ......................................................................... 44 
Figure 20 - Process metric for sales process ........................................................................... 45 
Figure 21 - Process ID card - Order fulfillment ......................................................................... 46 
Figure 22 - Process metric for order fulfillment - on time delivery ......................................... 47 
Figure 23 - Process metric for order fulfillment – Cost effective ............................................ 48 
Figure 24 - Process ID card - Customer support ..................................................................... 49 
Figure 25 - Process metric - Customer service process ......................................................... 50 


List of tables

Table 1: List of products and services ......................................................................................... 3 
Table 2: List of customer ............................................................................................................... 4 
Table 3: Current management team ............................................................................................ 8 
Table 4: Financial report .............................................................................................................. 11 
Table 5: On time delivery report ................................................................................................. 11 
Table 6 - Quaterly reports (Q1) ................................................................................................. 51 


1

INTRODUCTION
1. Company Overview
1.1. Serenco Company
Serenco is a small company founded in 2004 and specialized in software
development and hardware supplying and IT services. The main market of
Serenco is local banking industry.
From the year of 2014, to adapt to the tough market, the company top
management had reorganized company structure and products. The company
has three main product categories which organized in three SBUs:
-

SBank: The key business unit of Serenco which providing banking software
and services for local market.

-

sTech: Focuses on IT Infrastructure services such as network installation,
Surveillance system, Alarm system,

-

sSoft: Focuses on providing software outsourcing service to foreign market
(US & Japan).

Each of the three SBUs have different products, different customer sectors and
have its own strategy to develop.
Serenco also have a Support Division to provide support services to all three
SBUs, including:
-

Accounting & financial service

-

Administrative and human resource

-

Planning and marketing

Serenco organization chart:


2

Executive Team

SBANK

SSOFT

STECH

SUPPORT

Banking
software &
service

Software
outsourcing
service

Hartware & IT
service

Marketing, sales
support and
Back office

Figure 1: Current organization structure of Serenco
1.2. Overview of sTech
STECH is Business Division of Serenco, was founded in 2007 and mainly
focused on IT trading and services. The main services of STECH are
designing and building IT infrastructure for its clients includes Networking,
Surveillance system and Alarm system. Almost 60% of its customers are
banks, the rest are construction companies and small enterprises. STECH has
about 30 suppliers including manufacturers like IBM, Cisco, Av-gad, etc

and

local distributors like FPT Distribution, ADG, The annual revenue of STECH is
about 40 billion VNĐ ( ~ 2 Million USD) and the Net Profit is about 5% of
revenues (100.000 USD)
Mission statement:
sTech’s mission is to help customers in building up a high quality and cost
effective IT infrastructures to increase their performance and service quality.


3

Business main objectives:
-

Delivery high quality service

-

Increase customer satisfaction

-

High profit (20% increase in profit every year)

Strategy
-

Improving processes and management to provide excellence service to
customers

Product and services
#

Products & Service

% of total revenues

I

Trading

65%

1

Server, Network devices, Security devices…

20%

2

Computer, laptop, office machines…

30%

3

POS EDC

5%

4

Software licenses
database…)

II

IT Services

35%

1

Networking design and installation

15%

2

Design & installation of Surveillance, Alarm
system…

15%

3

Maintenance services

5%

(windows,

antivirus,

Table 1: List of products and services

10%


4

Customers
#

Customer group

% of total revenues

1

Banking

60%

2

FDI enterprises

20%

3

SMEs

10%

4

Others

10%
Table 2: List of customer

2. Challenges for STECH
Like other IT companies in Vietnam, STech is also facing big challenges in
keeping the company survival and development. The challenges for sTech are:
-

Gross margin has gone downed in the past three years because of tough
competition and high operation cost.

-

STech is still based on traditional products and services which have low
valued added

-

The business environment is changing very fast and it requires sTech to be

more adaptable and flexible if it wants to survive.

3. Project objectives and scopes
3.1 Objectives
-

Adapting the company organization structure and management to help the
company to faster react to the rapidly changing in the market

-

Improve supply chain management to help the company become more
competitive advantages.


5

-

Improving the company performance to help the company become profit
again.

3.2 Scopes of the project
Reengineering and transforming an organization structure is not an easy work.
It needs a lot of time and resources to help the transformation success.
Therefore, in this project, we just focus on one SBU and on the first period of
the transforming journey.
-

Redesign the business processes of STech for Hardware Trading and IT

services

-

Implement the new processes and organizational structure to sTech

-

Develop measurement and performance reporting for monitoring sTech
performance


6

Chapter 1 ANALYSING THE CURRENT SITUATION OF
STECH
1. The organization structure analysis
STech is organized in functional structure with three departments: Sales,
Purchasing and Technical. The support activities are located in Support
division with three departments: Accounting, Administration & Human
resource, Marketing & Planning. The company structure supporting sTech
business as below:

EXECUTIVE BOARDS

STECH

SUPPORTS DIVISION

Sales Department

Accounting Department

Purchasing department

Admin & HR Department

Technical Department

Marketing & Planning

Figure 2: New organization structure of STech


7

Each department is managed and controlled by a departmental manager and they
report to director of sTech.
List of management team:
#

Position

I

STech’s department

1

Sales manager

Responsibilities

- Responsible for sale revenue
- Customer development
- Manage and develop sale team
- Control sale process
- Review contract before submit to director to
sign off

2

Purchasing manager

- Manage all suppliers
- Responsible for purchasing process
- Responsible for inventory and delivery
- Supplier development

3

Technical Manager

- Manage technical team
- Responsible
installation

for

technical

design

and

- Technical support
II

Support department

1

Chief Accountant

- Manage account department
- Responsible for the correction of accounting
booking


8

- Manage & control financial
- Manage receivable and payable
- Cash management
2

Administration
and - Administration management
Human
resource

- Human resource management (recruiting,
Manager
employee management, salary payment…)
- Planning for training, resource development

3

Marketing & planning - Develop marketing plan
Manager
- Implement marketing activities
- Planning and reporting for Serenco
Table 3: Current management team

Comments:
By investigating the organization structure and management, we can see many
issues in term of organization and management of sTech includes:
-

The organization structure is organized in functional structure where its
functions are grouped in department. Each department is managed and
controlled in by a department’s manager. Departmental managers nearly
have full power to their employees. This structure had help sTech develop
at the first time, but now it becomes an obstacle for the development of
sTech .

-

Some key functions of sTech (Marketing, financial…) are in Support
division and not controlled by sTech’s Director. It has caused many issues
in management and providing best service to customers.

-

Measurement and reporting are mainly based on department’s objectives
and they are all aligned with the objectives of sTech


9

2. Process management analysis
Current state of processes management of sTech:
Excecutive Board

sTech Director

Support Director

Sale
process

Purchasing
process

Technical
process

Accounting
process

Admin-HR

process

marketing
process

(Sale
Manager)

(Purchasing
Manager)

(Technical
Manager)

(Chief
Accountant)

(Sale
Manager)

(Sale
Manager)

Contact
customer

Call for
quotation

Planning

for install

Inventory
Accounting

Administrti
on

Planning
process

Prepare
Quotation

Select
Suppliers

Implement
ation

Payable
accounting

HR
process

Marketing
process

Make

contract

Make
contract

Acceptanc
e sign off

Receivable
accounting

Contract
closing

Goods
receive and
stocking

Technical
support

Customer
care

Delivery to
customers

Figure 3: Current process structure

10

Comments:
-

sTech’s business processes are separated in sub-processes that controlled
by different departments. Department managers will be responsible for the
quality and performance of their processes. This situation has caused
many issues because department managers have different objective and
they don’t look forward to the final results when products or services
delivered to customers.

-

There are huge barriers between department that prevent work flows and
information flows between departments. There are always a lot of
arguments and problems between departments when information transfers
from one department to another.

3. Analysis the business results in quality and performance
During the last three years, sTech have been geeting poor result both in
financial and service quality. These results showed on the company reports:
3.1 Financial performance report in last 3 years
Item/Quarter

2013

Revenue (Million VND)

Gross margin

2014

2015

33,000

37,000

40,000

Q1

6,000

7,000

7,000

Q2

7,000

7,000

8,000

Q3

9,000

10,000

10,000

Q4

11,000

12,000

15,000


11

Percentage (%)

16%

13%

12%

Value (million VND)

5,300

4,800

4,800

by Percentage

7%

5%

4%

By Value

2,300

1,900

1,600

Net profit

Table 4: Financial report
Comments:
-

The revenue keeps growing every year, but the growth is slowing down.

-

Although the revenue is increase, but the gross margin reduces, so the net
profit goes down.

3.2 On time delivery by product group

Years/Quarters

Total

On time

delivery

Delivery

Percentage

2013

210

155

74%

2014

250

190

76%

2015

275

210

76%

Q1

50

38

76%

Q2

70

52

74%

Q2

75

58

77%

Q4

80

62

78%

Table 5: On time delivery report


12

Comments:
-

The rate of on-time delivery has the same over the past three years despite
of the efforts of sTech’s management team in improving the processes

-

The low rate in on time delivery of IT services has caused not only
reduction the quality but also increasing the implementation cost especially
cost for engineers.

-

Improving the on time delivery will improve the service quality and improve
the business performance of sTech.


13

Chapter 2 – ORGANIZATION TYPES AND THE CHOICE
OF STECH
1.

Types of Organizational structure
The company structure has changed rapidly to adapt with the changing
business environment. There are five typical types of organization structure:

1.1 Functional structure
Functional organizational structures are the most common. A structure of this
type

groups

individuals

by

specific

functions

performed.

Common

departments such as human resources, accounting and purchasing are
organized by separating each of these areas and managing them
independently of the others.
Example of Functional structure:

CEO

Marketing
Manager

Sales
Manager

Purchasing
Manager

Technical
Manager

Accounting
Manager

Figure 4: example of functional structure
Advantages

Disadvantages

- Reinforces

- Short-term focus on - Business environment

specialized skills and
resources

routine tasks
- Business perspectives

Works best when

is

stable

predictable

and


14

- Reduces

duplication

of scarce resources

are narrow
- Communication

- Organization is small

other departments is

- Facilitates
communication within

and medium in size

with

- Quality is maintained

reduced

through routine tasks

department
1.2 Divisional structure
Divisions are mini-companies built around particular products or regions. A
car company could have one division for SUVs, one for luxury cars, and
another for economy vehicles, for example. Each division contains all the
functions necessary to handle business for that region or product line.
Because everyone in the division shares a common goal, such as boosting
sales for their products, there's more cross-function cooperation. The
downside is that every division duplicates the same functions - sales,
marketing and manufacturing - which is often wasteful.

CEO

Division
product X

Division
Product Y

Division
Product Z

Maketing Dept.

Maketing Dept.

Maketing Dept.

Sales Dept.

Sales Dept.

Sales Dept.

Technical Dept.

Technical Dept.

Technical Dept.

Figure 5: example of Divisional structure

15

Advantages
- Key

Disadvantages

independencies - There

is

Works best when
heavy - The organization is

and resources within

duplication

the

resources, skills and

division

are

of

coordinated toward an

expertise

overall outcome

division has its own
functions

as

each

very large in size
- Business
environment

is

dynamic and always
in flux
- Multiple products and
customer types exist

1.3 Matrix structure
The matrix structure is often overlaid on top of a company's functional
structure to tackle projects that involve multiple departments. Project
managers recruit staff for their teams from different departments so that all
the necessary functions work on it together. This offers companies flexibility
and a better use of resources than a purely functional model. The downside
is that authority and the chain of command become more confused, as team

members answer to both the project manager and their department
supervisor.


16

Figure 6: Example of matrix organization

Advantages

Disadvantages

- Interdependencies

- Difficult
and

between
departments

are

managed well
- Skill

diversification

to

Works best when

manage - The organization is very

control

the

coordination

- Business environment is

- Employees may face
unclear

roles

and training across

inconsistent

functions is easier

demands

large

and
job

uncertain

and

unpredictable
- High

level

of

technological
interdependency across
functions exist
- The

goals is

specialization
innovation

product
and