ỨNG DỤNG mô HÌNH THẺ điểm cân BẰNG để xây DỰNG hệ THỐNG CHỈ số CHÍNH đo LƯỜNG kết QUẢ CÔNG VIỆC tại CÔNG TY cổ PHẦN xây DỰNG và THƯƠNG mại TTT

ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA QUẢN TRỊ VÀ KINH DOANH
---------------------

PHAN THỊ HỒNG THI

APPLYING THE BALANCED SCORECARD (BSC)
TO DEVELOP KEY PERFORMANCE INDICATORS (KPIS)
AT TTT CORPORATION
ỨNG DỤNG MÔ HÌNH THẺ ĐIỂM CÂN BẰNG ĐỂ XÂY DỰNG
HỆ THỐNG CHỈ SỐ CHÍNH ĐO LƯỜNG KẾT QUẢ CÔNG VIỆC
TẠI CÔNG TY CỔ PHẦN XÂY DỰNG VÀ THƯƠNG MẠI TTT

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2019


ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA QUẢN TRỊ VÀ KINH DOANH
---------------------

PHAN THỊ HỒNG THI

APPLYING THE BALANCED SCORECARD (BSC)
TO DEVELOP KEY PERFORMANCE INDICATORS (KPIS)
AT TTT CORPORATION
ỨNG DỤNG MÔ HÌNH THẺ ĐIỂM CÂN BẰNG ĐỂ XÂY DỰNG
HỆ THỐNG CHỈ SỐ CHÍNH ĐO LƯỜNG KẾT QUẢ CÔNG VIỆC
TẠI CÔNG TY CỔ PHẦN XÂY DỰNG VÀ THƯƠNG MẠI TTT

Chuyên ngành: Quản trị kinh doanh
Mã số: 60 34 01 02
LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: TS. ĐỖ XUÂN TRƯỜNG

HÀ NỘI - 2019


DECLARATION
The author confirms that the research outcome in the thesis is the result of author’s
independent work during study and research period and it is not yet published in
other’s research and article.
The other’s research result and documentation (extraction, table, figure, formula and
other document) used in the thesis are cited properly and the permission (if
required) is given.
The author is responsible in front of the Thesis Assessment Committee, Hanoi
School of Business and Management, and the laws for above-mentioned
declaration.
Hanoi, March 15, 2018


ACKNOWLEDGEMENT

During my study and research at Hanoi School of Business and Management (HSB)
of Vietnam National University, Hanoi (VNU), I have been paid much attention and
many instructions from teachers, much encouragement from my family and friends.
To date, I have completed my master’s thesis to finish my process. I would like to
send my sincere thanks to the School Board of VNU in general, teachers at HSB in
particular for their support to facilitate me in learning, accumulating and improving

my knowledge.
I also kindly send the most sincere and profound thanks to my instructor, PhD. Do
Xuan Truong for his dedication and enthusiasm during the time guiding me to
complete my thesis.
In addition, I would like to express my grateful gratitude to the Board of Directors
and my colleges at TTT Corporation for their help in facilitating me to complete
this thesis.
Finally, let me send my respectful words to my family and friends for their support
during my study.
Hanoi, March 15, 2018
Phan Thi Hong Thi


TABLE OF CONTENTS

INTRODUCTION .....................................................................................................2
1. The necessity of the study .................................................................................2
2. Objectives of the study ......................................................................................7
3. Subjects and scope of the study .......................................................................8
4. Methodology ......................................................................................................8
5. Thesis structure .................................................................................................8
Chapter 1: Theoretical background on the balanced scorecard model and its
application into the establishment of a measurement system of key
performance indicators ...........................................................................................10
1.1. Theoretical background on the balanced scorecard model ...................10
1.2. Barriers in making and putting into execution to business strategies .....10
1.2.1.

Introduction of the Balanced Scorecard model (BSC) ...................12

1.2.2.

Advantages of the BSC model ..........................................................15

1.3. Definition and roles of KPIs .....................................................................16
1.2.1. Definition and classification of KPIs ....................................................16
1.2.2. Benefits of developing KPIs in the organization ..................................20
1.4. Study overview of the BSC application for the development of KPIs ..21
Chapter 2: Current situation of Key Performance Indicators (KPIs) at TTT
Corporation during 2015- 2017..............................................................................35
2.1. General Information of TTT Corporation ................................................35
2.1.1. Overview of TTT Corporation ...............................................................35
2.1.2. Analysis of the business strategy applied by TTT Corporation ............45
2.1.3. Assessment on the current business strategy of TTT Corporation ......57
2.2. The existing situation of key performance indicators at TTT
Corporation .........................................................................................................59
2.2.1. Survey of conditions to apply BSC and KPI .............................................59
2.2.2. Assessment on deployment possibility of BSC and KPI at the
Corporation...........................................................................................................60


2.2.3. Factors impacting to deployment of BSC and KPI ................................65
Chapter 3: Proposals of key performance indicators at TTT Corporation
during 2018-2020 .....................................................................................................66
3.1. Key performance indicators at TTT Corporation during 2018-2020 .....66
3.1.1. Development objectives of TTT Corporation during 2018-2020..........66
3.1.2. Apply BSC and KPI to evaluate work performance at TTT Corporation
...........................................................................................................................67
3.2. Some solutions to propose BSC/KPIs for staff performance assessment
at TTT Corporation ............................................................................................86

CONCLUSION ........................................................................................................89
REFERENCES ........................................................................................................90
ANNEX I: STAFF SURVEY..................................................................................92
ANNEX II: LEADER SURVEY ............................................................................94
ANNEX 3: ASSESSMENT REGULATIONS ON WORK PERFORMANCE 96
BASED ON BSC/KPIS............................................................................................96


LIST OF SYMBOLS AND ABBREVIATIONS

BSC

Balanced Scorecard

KPI

Key Performance Indicator

BSC/KPI

BSC and KPI

KRI

Key Result Indicator

PI

Performance Indicator

LIST OF TABLES
Page
Table 1-1:

Table 1-2:

Table 2-1:

Table 2-2:
Table 2-3:
Table 2-4:

Table 2-5:

Table 2-6:

Table 2-7:
Table 2-8:
Table 2-9:

Table 2-10:

Construction and measurement procedure of KPIs by
applying the BSC
Basic conditions to apply the BSC into successfully
establishing KPIs
The income statement of TTT Corporation at the period
of 2013 – 2017
Revenue and profit of TTT Corporation at the period of

2013-2017
Statistical table of human resources at TTT Corporation
Personnel structure based on working age at TTT
Corporation
Comparison table of Marketing – Management capacity
between TTT Corporation and its rivals
Comparison table of design capacity between TTT
Corporation and its rivals
Production capacity of TTT Corporation compared with
its rivals
SWOT model of TTT Corporation
Summary and survey of personnel’s opinions on
application of BSC/KPIs
Summary and survey of leaders’ opinions on application
of BSC/KPIs

17

19

38

38
39
39

47

48

49
50
56

57

Table 3-1:

BSC/KPI at company level

70

Table 3-2:

BSC/KPI at department level

72

Table 3-3:

KPIs for staff

77

Table 3-4:

Assessment of capabilities and work performance based
on BSC/KPI

79

LIST OF FIGURES

Page
Figure 1.1:

The model of Balanced Scorecard (Kaplan & Norton)

10

Figure 2.1:

The organization chart of TTT Corporation

32

Figure 2.2:

The matrix combining activities of TTT Corporation

52

Figure 3.1:

The procedure applying BSC/KPI into an organization

64

Figure 3.2:

The strategic map of TTT Corporation

69


ABSTRACT

This title is designed to evaluate the current work performance and apply the Balanced
Scorecard (BSC) model to the practical measurement system of TTT Corporation at the
period of 2014-2017. The BSC model consists of four aspects like as the original
published by Kaplan & Norton in 1996 and integrated with some others.
The study method used in this thesis is collecting, synthesizing and analyzing data
to seek the consensus when developing KPIs.
The research results have formed the BSC system including the strategic map of
TTT Corporation during 2014-2017. The BSC at the corporate level with 22
objectives and KPIs measures strategic objectives of the Corporation. The BSC at
departments is allocated according to four aspects of the BSC model. The author
has proposed the application of research results for TTT Corporation. The research
has also shown the limitations of the title and the next study direction.
The thesis structure consists of the introduction, three main chapters and the
conclusion. The introduction presents the reason why the study has been made,
thereby identifying the study objectives, limiting the scope, objects and method of
the study and the practical meaning of the title. Chapter 1 presents the basic theory
related to study problem solving, including the BSC theory applied in work
performance measurement, strategic management and KPI theory.
Chapter 2 introduces TTT Corporation and evaluates the current performance
measurement system. Chapter 3 presents the steps and results of building up the
BSC model at TTT Corporation to form a strategic map, KPIs and the BSC at the
corporate, department and staff level, proposing the application of research results.

The conclusion generally evaluates the execution progress, the results while
pointing out the study limitations and the next direction as recommended.

1


INTRODUCTION

1. The necessity of the study
The Balanced Scorecard is an organizational performance measurement model
developed by Norton and Kaplan in 1990. The nature of which is a system
transforming the vision and strategy of an organization into specific objectives and
measurements by establishing a measurement system of work performance in an
organization based on four aspects including finance, customer, internal business,
learning and development. The selected measurement system becomes a tool for
managers to communicate with employees and stakeholders about the orientation
of results and work performance that help the organization achieve its strategic
goals. In addition, the system also helps to direct the behavior of all individuals
and departments within the organization towards the common goal. Thus, through
the application of the balanced scorecard model, it is possible to develop a
measurement system of key performance indicators, which is the basis for the
management and evaluation process of employees’ performance. In fact, according
to Bain & Company's survey in 2014, the balanced scorecard model has been
applied by more than half of enterprises in the list of 1000 highest revenue US
companies (Fortune 1000) since 1996.
In fact, after 30 years of renovation, reform and integration, the Vietnamese
economy has won many great achievements, per capita income in Vietnam has
risen more than 5 times from 438 USD (1986) to 2,200 USD (2016) and expected
to reach 3,000 USD by 2020. Along with improved living standards,the demand
on houses and resorts has increased. This not only expands great market

opportunities but also poses a competitive challenge among companies offering
architectural, interior and construction design consultancy products. Therefore,
every enterprise must establish a suitable business strategy to make competitive
advantages in the market. TTT Corporation founded in 1992 is one of the leading
companies running in the fields of: (i) Design - Construction - Interior decoration;
(ii) manufacture and supply of furniture; (iii) Execution of "Turnkey" projects on a
variety of projects such as hotels, resorts, high-end apartments and offices. 2016
was considered as an important turning point of TTT Corporation with
2


fundamental changes in business strategies. The new context requires the
management board of the Corporation to clarify new vision and strategies as
targets and a system of key performance indicators for each department in the
organization.
In terms of both theoretical and practical aspects, therefore, it is pointed out that
the application of the balanced scorecard model aiming to materialize new vision
and strategies into goals and a system of key performance indicators at TTT
Corporation is an urgent issue today. Thus, with my knowledge and learning
experience in the Corporation, I choose the topic "Application of the balanced
scorecard model to establish a measurement system of key performance indicators
at TTT Corporation"as my master thesis.
 Overview of both global and domestic study on the Balanced Score
Card (BSC)
The Balanced Scorecard (BSC) - is a modern strategic measurement and planning
system, first introduced by R.Kaplan and D.Norton of Harvard Business School in
1992. It always receives the attention and research of managers and scientists at
home and abroad. Scorecard balances more than half of the Fortune 1000
companies' applications since 1996 and a balanced Scorecard is rated by Harvard
Business Review as one of the 75 most influential ideas of the 20th century.

Vietnam Report's observation in January 2009, published impressive figures
related to 500 largest enterprises in Vietnam in the process of building a business
development strategy. That is 7% applied and 36% are planning to apply the
Balanced Scorecard (BSC). These are good news because it shows the initiative in
standardizing and modernizing basically the process of corporate governance and
management of Vietnamese enterprises. The fact that enterprises access modern
management science methods does not stop on book theory but through
applications in organizational and executive practices, Vietnamese enterprises are
increasingly integrated and sufficient. Competitiveness with global market.
In the world, there have been many researches on applying card balance to balance
BSC in strategic management. One of the three basic functions of BSC is
application in strategic management. Since forming the concept of BSC model,
there have been many important research projects that make the application of The
3


BSC in strategic management more effective. These studies are mostly based on
the viewpoint of that: The implementation of the strategy is very important.
However, in practice, the leaders are too focused on developing strategies that lack
attention to implementation, leading to unproductive and ineffective strategies. To
solve this problem, researchers began to find out what factors influence BSC
application in strategic management at the enterprise? To what extent can BSC
solve problems in strategic management? How can BSC support the integration of
organization and control mechanisms? Find out how an operational management
system in an organization is used is also an important aspect of research and this
will be linked to important factors that are thought to be relevant. successful
strategic management. In addition, the question of whether or not to use BSC will
achieve the level of coordination and integration of necessary elements for
successful strategic management or the support of some other support tools.
however, BSC cannot help strategic management miraculously organizations still

offer a roadmap from the current starting point to the point that the organization
wants to be in the future, BSC can provide means for the team. officials can go to
that future.
The BSC began to enter Vietnam in the 2000s and was quickly known and
mentioned in many workshops on deploying applications of business
administration models and some articles introducing it. After that, a number of
foreign and domestic consulting companies such as Deloit and MCG ... began to
see the potential of this model and started investment activities to implement
training and consulting activities. .
- In practical terms, some companies in Vietnam have started pioneering in
applying this model such as FPT Corporation, Kinh Do Company, Phu Thai
Group, Garni ... but the results are achieved. not high, not as expected initially.
- In study terms, according to the author's research, it is still quite limited. The
research results only stop at the research level in a narrow range. Studies mostly
stop at the scope of a company, some essays, dissertations and mostly scientific
papers. Some of the following research products include:

4


Doctoral thesis in Business & Management by Tran Quoc Viet (2012): In May
2012, Doctor Tran Quoc Viet successfully defended his doctoral thesis with the
topic "Factors affecting the level accept the balanced score card model in strategic
management in Vietnamese enterprises "at the National Economics University. In
the thesis, the author used qualitative research methods through in-depth
interviews and research. Quantitative research by collecting survey questionnaires
206 surveyed Vietnamese enterprises on the factors affecting the acceptance of
Balanced Scorecard (BSC) in strategic management , the thesis has discovered a
new scale for the dependent variable "BSC acceptance level in management."
strategy ”: measured by three items according to 3 levels of BSC use in

enterprises: (1) application of BSC's ideas; (2) wide application of BSC functions,
and (3) application Using information technology to improve the efficiency of
using BSC, this scale is more suitable for Vietnamese enterprises than the scale of
previous studies.
In addition, the study has confirmed six factors affecting the level of acceptance of
BSC in strategic management at enterprises in the context of the transition
economy in Vietnam, namely: (1) the level participation of senior leaders; (2)
concentration level; (3) the power of the finance department; (4) standardization;
(5) internal communications and (6) market dynamics - products. The impact level
of each factor is different and has been determined specifically. In which, there are
2 factors that have negative impact (opposite direction): centralization and
systematization, the remaining 4 factors positively affect (positive direction). This
result has opened up a research direction on BSC in countries that have just started
applications.
From the research results, the thesis has proposed some suggestions for effective
application of this model in Vietnam, specifically: (1) Enterprises need to consider
and evaluate the influencing factors before deciding. implement BSC model; (2)
Need to focus on improving the factors affecting the successful application of BSC
model; (3) Consider the type and scale suitable for deploying BSC model.
The thesis of Tran Quoc Viet contributed to strengthening the theoretical
framework for the widespread application of BSC model for enterprises in
5


Vietnam. This study has overcome the limitations of previous studies on BSC
model in Vietnam such as research scale, research scope. The results of the
research have opened new research directions on the effectiveness of application
in general or in different fields of BSC model in Vietnam. In addition, the thesis
also opened a research direction to apply BSC model in the specific conditions of
economies of other countries in the world.

Article: "Applying a balanced scorecard at Vietnamese service enterprises" by
Dang Thi Huong published in a scientific journal, Hanoi National University,
Economics and Business Administration 26 (2010) 94 -104. In the study, the
author Dang Thi Huong gave 5 advantages for the implementation of BSC in
Vietnamese service enterprises, including: (1) The initiative in innovation, access
to management tools modern; (2) Awareness of the role of strategy and strategy
implementation;

(3)

Implementing

the

goal

management

(MBO);

(4)

Hardworking, intelligent workforce and (5) The development of information
technology and science.
Besides, the author also gave 5 difficulties including: (1) Lack of awareness and
commitment from leaders; (2) Difficulties in applying the process according to the
balanced scorecard; (3) Limited education and management capacity of leaders;
(4) The culture of enterprises has not focused and (5) Financial difficulties. The
author makes the above statements, but not to mention the scientific basis and
arguments. The article also introduced an overview of BSC model to help readers

better understand this model.
However, the article has not mentioned the differences in the process of applying
BSC in the service sector in general.
Master's thesis in economics by Bui Hai Van (2009): In November 2009, the
master's thesis in economics by Bui Thi Hai Van studied about "Factors affecting
the intention to apply BSC model. into Vietnamese small and medium enterprises”
successfully protected at Ho Chi Minh City University of Technology. By
quantitative analysis method, the author has pointed out three factors (1) perceived
benefits on the organization side, (2) perceived ease of use and (3) general

6


attitude has a positive influence on plan to use BSC. The author also excluded the
perception of personal interests.
Although at the level of a master's thesis, Van's research is highly appreciated by
the method that the author has done as well as the results achieved. Based on a
number of theories as a foundation and the results of qualitative research, the
author has produced a quite stable research model. Quantitative research with the
support of SPSS software is a bright spot of research. However, this study also has
many limitations on sample size limited to small and medium enterprises in Ho
Chi Minh City so it is low representative. The level of research is still limited in
the scope of a topic at the master level so there is a lack of depth. Therefore, the
results of this study have opened some new research directions for the authors
later.
2. Objectives and tasks of the study
 Objectives
On the basis of studying the scientific theory of Balanced Scored Card (BSC) and
KPIs, my thesis has been done to specifically aim at: (1) Building up a strategic
map combining strategic objectives of the Company at the period of 2014-2020

based on aspects of the Balanced Score Card model. (2) Building up the Balanced
Score Card at company and department level to measure the performance of TTT
Corporation in the future.
 Tasks
Refer and research some theoretical issues of experts, scholars and references on the
balanced scorecard and key performance indicators, study objectives of the thesis is
to build up a measurement system of key performance indicators at TTT
Corporation. To perfect above goal, the thesis should complete the following
specific tasks:
-

Study and systematize the theoretical basis of the balanced scorecard model
and apply it to the development of a measurement system of key
performance indicators.

-

Survey and summarize collected data to analyze and assess the current
status of a measurement system of key performance indicators at TTT
Corporation.
7


-

Propose a new system of key performance indicators at TTT Corporation.

3. Subjects and scope of the study
Regarding subjects of the study, my thesis focuses on the application of the
balanced scorecard model in the establishment of a measurement system of key

performance indicators at TTT Corporation.
Survey participants are the Board of Directors, Heads of Departments at TTT
Corporation.
In terms of scope of the study, my thesis focuses on researching in space and time
range as follows:
-

Space: In my thesis, I focus on the system of key performance indicators at
TTT Corporation.

-

Time: My thesis focuses on collecting, researching and using data related to
business strategies, objectives and the system of key performance indicators at
TTT Corporation in the last 3 years, from 2015 to 2017. The KPI system is built
to the level of departments at the Corporation. The Corporation’s internal data
used for analysis is mainly taken from data within 2015 to 2017.

4. Methodology
Data collection and summary method: For research purposes, I determine to
collect primary and secondary data sources. In which, secondary data is collected
from internal and external sources of TTT Corporation such as company
strategies, financial statements, key performance indicators, etc. Primary data is
collected through the sociological survey with managers of TTT Corporation. The
sample size is expected to be 40 samples (equivalent to 40 employees at the
Corporation). The sociological survey is conducted through questionnaires with
the purpose of assessment: (1) current basic conditions for the application of BSC
at TTT Corporation (the availability of human resources, the standardization level
of working procedures, and the completeness of the database system); (2) assess
the work completion level under current KPIs.

Data analysis method: Based on primary and secondary collected data, I will use
the statistical and summary method to process and analyze.
5. Thesis structure
The expected thesis structure is as follows:
8


No
I

Content

Remark/Results

Introduction
The introduction includes: the
In addition, the thesis consists of the
necessity of the study, objectives,
list of tables, abbreviations and
subjects, the scope and the method
figures.
of the study, etc.

II

Content

Chapter 1: Theoretical basis on the BSC model and the application in
developing Key Performance Indicators (KPIs)
1.1

Theoretical basis on the BSC
model

Clarify basic issues on the BSC.

1.2

Theoretical
basis
on
Key
Performance Indicators (KPIs).

Clarify basic issues on KPIs.

Apply

Clarify how to apply the BSC

1.3

the

BSC

model

in -

developing KPIs.

model in developing KPIs.

Chapter 2: The current situation of KPIs at TTT Corporation during 2015- 2017.

2.1

General information about TTT
Corporation

-

The income statement
The business strategies that TTT

-

Corporation has applied
Evaluate changes in the business
strategies at TTT Corporation.

-

General assessment on KPIs at

2.2

The current
Corporation

situation at TTT

TTT Corporation.
Summarize
and
analyze
comments and recommendations
of employees at TTT Corporation
(through the survey) on props
and cons of KPIs at TTT
Corporation.

Chapter 3: Propose KPIs at TTT Corporation during 2018-2020.
3.1

KPIs at TTT Corporation during 2018-2020

3.2

Propose deployment schedule of KPIs into the practice

III

Conclusion and References
9


CHAPTER 1: THEORETICAL BACKGROUND ON THE BALANCED
SCORECARD MODEL AND ITS APPLICATION INTO THE

ESTABLISHMENT OF A MEASUREMENT SYSTEM OF KEY
PERFORMANCE INDICATORS

1.1. Theoretical background on the balanced scorecard model
1.2. Barriers in making and putting into execution to business strategies

Theoretically, making and carrying out strategies plays an important role in the
existence and development of businesses. Through the strategy, it will help
administrators to use and allocate existing resources optimally and efficiently
coordinate functions of the organization to achieve common goals as required.
Besides, analyzing and making business strategies not only helps enterprises
clearly recognize their strengths and weaknesses, but also identify the
opportunities and challenges happening in the present and future. Since then,
enterprises can make full use of their strengths to seize these opportunities, prevent
and minimize risks, helping them have competitive strength to win in the market.
However, the implementation of the company's strategies is always difficult. In
fact, according to a study by Aberdeen Research (The Balanced Scorecard
Collaborative 1999/2001), there are nine out of ten companies failed to implement
their strategies, in which, four barriers pointed out by this study, leading to such
failure in the strategy execution include: (1) the vision barrier that only about 5%
employees know and understand the company's strategies; (2) the resource barrier
that 60% organizations do not connect their budget to the corporate strategies; (3)
The managerial barrier that nearly 85% executives taking less than one hour per
month to discuss about their company's strategies; and (4) finally, the human
barrier that only about 25% managers giving out their ideas matching with
strategies.
Similarly, according to Robert S. Kaplan and David P. Norton ("Using the
Balanced Scorecard as a Strategic Management System" January-February, 1996),
there are four barriers leading to the effective implementation of the company's
strategies, particularly:

10


First, the vision barrier and the strategy can not be transformed into an action.
Indeed, one of the important roles of the strategy is to help businesses clearly see
their goals and orientation in the development of their business activities. It shows
chief executives how to consider and determine where their organizations would
like to go and when they will achieve their desired results. Therefore, if enterprises
cannot turn their vision and strategies into understandable criteria that can be
transformed into actions, their organization will lack consent and clarity, making
different groups to carry out different action programs - quality, regular
improvement, redesign, empowerment - in their own way of thinking about the
vision and strategy. According to Aberdeen Research (The Balanced Scorecard
Collaborative 1999/2001), only about 5% employees know and understand the
company's strategies.
Second, strategies are not linked to the purposes of departments, groups and
individuals. Accordingly, the second barrier appears when the long-term strategic
requirements of business units are not transformed into goals for each department,
group and individual. Instead, the work performance of departments remains to
focus on meeting the established financial budget. And groups and individuals in
each department only associate their purpose with the accomplishment of the
short-term tactical goals of their department, leading to the exclusion of capacity
building enabled for completion of the long-term strategic objectives. According
to Kaplan and Norton, 74% of their senior executives have their bonuses
associated with the organization's annual goals and only about 10% middle
executive and junior staff have their rewards associated with the long-term
strategy of the company.
Third, strategies are not linked to resource allocation: Linking action plans and
resource allocation with long-term strategic priorities is one of the barriers to
effective

strategy

implementation

of

enterprises.

Theoretically,

strategy

implementation will be effective when it helps administrators use and allocate
existing resources optimally. However, each organization has its own procedures
for establishing the annual long-term strategy and short-term budgets.
Consequently, the arbitrary allocation of funds and capital is often not related to
strategic priorities.
11


Fourth, it is the tactical feedback instead of strategic one. According to Ngo Thi
Kim Thanh (Strategic Management Textbook – Publishing House of NEU 2011),
strategy implementation requires inspection, assessment and response to adjust
business strategies in line with changes of market fluctuations, making the basis
for research and development activities of enterprises. However, most of
management systems today provide only short-term performance feedbacks, and
the majority of responses focus only on financial measurements, usually by
comparing actual results with monthly and quarterly budget. There is almost no
time for testing indicators related to the deployment and the success as well of the

strategy. The survey in groups made by Robert S. Kaplan and David P. Norton
found that 45% companies did not spend their time in periodical performance
meetings to evaluate or make strategic decisions. This gap may be due to lacking
of information, as well as the tactical assessment process organized and executed
by Vice President in charge of Finance. As a result, there was no way for
businesses to get feedbacks on their strategies.
1.2.1. Introduction of the Balanced Scorecard model (BSC)

Starting from the barriers impacting to the strategy implementation based on
traditional administration models, Kaplan and Norton developed a Balanced
Scorecard (BSC) model in the early 1990s which was considered as one of the 75
most influential business ideas of the XX century by Harvard Business Review
magazine. Currently, this model has been applied very strongly in the world and in
Vietnam. The BSC model is construed as a system transforming the vision and
strategies of an organization into specific goals and measurements by establishing
a system of key performance indicators in an organization on four perspectives,
including: finance, customers, internal business, study and development.
According to Niven (2009), key indicators selected for measurement will be used
by leaders in communicating to employees and outside stakeholders about the
results and the performance drivers, thereby, the organization will achieve its
mission and strategic goals. Thus, building up a measurement system of key
performance indicators is one of the outcomes of applying the Balanced Scorecard
(BSC) model.
According to Kaplan, four prospects in the BSC model are arranged according to
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the cause and effect principle, in which, emphasizing that strong and sustainable
financial results are highly dependent on customer satisfaction. Meanwhile, the
customer satisfaction depends on the ability to create products and services

meeting the demands of customers. This also depends on the quality and
implementation of internal processes and its efficiency. And for internal processes
to be effective, it is subjected to great impact on the ability to develop knowledge
and skills of human resources, organizational and information capacity. In short,
the application of the BSC model to develop key performance indicators on full
four aspects has a cause and effect relationship with each other and closely
follows the organizational strategy implementation.

Figure 1.1. The Balanced Scorecard model (Kaplan & Norton)
Source: Robert S.Kaplan & David P.Norton - Harvard Business Review (January February, 1996)
Based on Figure 1.1, it can be seen that the use of the vision and strategy as a
guideline, identifying core issues needed to guide for each scope of activities,
establishing related objectives, then proposing measures of work performance,
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particularly:
-

Finance: including traditional financial indicators that can be measured
towards achieving strategic goals, providing financial information to
stakeholders as expected. Kaplan and Norton did not disregard the need of
traditional financial data. However, if the organization focuses too much on
financial issues, it will lead to an imbalance in relation to other prospects in
the BSC model.

-

Customers: including goals related to the customers' perceptions in your
business. It can comprise of criteria such as the level of customer

satisfaction, the number of potential customers or the ability to enter the
market, etc. At present, in the strong competitive environment, strategic
activities of the organization must be oriented to customers and ensure their
satisfaction. It is very important to set up specific objectives and measures
to evaluate the customer satisfaction.

-

Internal process: covering main business procedures of an enterprise such
as production, distribution or sales and then establishing related objectives
such as quality, time/efficiency and cost reduction. The establishment of
indicators in this prospect shows managers the level of business
performance of the company, and the level of correspondence to products
and services requested by customers.

-

Study and development: consisting of the assessment criteria related to the
professional development of employees, the spirit of dedication to the
enterprise and opportunities to practice skills. In addition, we can consider
the criteria for research and development. The focus here is identifying
issues needed to be continuously improved and preserving the values
created by using human resources most effectively in the organization.

The causal relationship between 4 respectives in the balanced scorecard model
(BSC) is described in Figure 1.2:

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Efficiency

STRATEGIC VISION

Result

Financial perspective:
To satisfy shareholder, which financial
factor needs to be improved?

Customer perspective:
To meet financial objective, which
customer’s demand needs to be satisfied?

Internal process perspective:
To satisfy customers, which business process
should be strengthened?

Training and Development perspective:
Reason

To obtain and remain competitive position, which
content does the Company need to improve and train?

Action

Figure 1.2: The causal relationship in BSC model
1.2.2. Advantages of the BSC model

Currently, the widely used traditional management model has mainly still relied on

financial indicators. However, this model has revealed a disadvantage that did not
allow enterprises to react immediately to the market changes, so the management
decision was often ineffective. Overcoming weaknesses of the traditional
management model, the BSC model allows more integration of key non-financial
indicators on aspects or prospects of customers, internal process, study and
development. Thus, the application of the BSC model to the development of key
performance indicators will enable managers to attach operational goals at all
levels with strategies, focusing on key success factors, reasonable resource
allocation. Finally, it also helps managers to have a fair look between activities of
the organization, ensuring objectivity and equity in evaluating their employees’
results.
In addition, the application of the BSC model also helps overcoming the barriers
of the effective strategy implementation, specifically:
First, the BSC model overcomes the vision and strategic barriers that cannot be
transformed into actions. Through the strategic map and target system, BSC helps
making the company's strategy more intuitive and connect the strategic orientation
with operational objectives.
Second, the BSC model overcomes the strategic barriers that are not connected to
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the goals of individuals, groups, and departments. Through the strategic map and
target system, the BSC model helps to achieve goals in a balanced and harmonious
way between objectives related to the final result and the ones making such result.
This avoids over-focusing on short-term financial goals but ignoring the long-term
goals based on planned strategies. This, finally, will help the company grow
harmoniously and sustainably for the long time.
Third, the BSC model overcomes the strategic barrier not linked to the allocation
of resources. Through the target system, the BSC model helps making a basis for
establishing and evaluating performance criteria for departments and individuals.

Therefore, it helps leaders make a basis in human resource planning based on the
strategy and objectives set by the company.
Fourth, the BSC model overcomes tactical feedbacks. Based on the strategic matrix, it
will help managers see the cause and effect relationship between different prospects and
objectives in running the organization towards strategic goals as planned. Therefore,
any factor or objective not meeting the requirements set out will have an impact on
others, thus helping managers avoid providing tactical feedbacks.
In summary, the use of the BSC model not only helps business managers improve
the strategic efficiency of the company, but also helps them build up a
measurement system of key performance indicators of departments and individuals
in the organization.
1.3. Definition and roles of KPIs

1.2.1. Definition and classification of KPIs
According to David Parmenter (Performance Indicators – General Publishing
House of Ho Chi Minh City, 2013), performance measures are the system of key
indicators measuring and evaluating work performance in the organization through
data, ratio and quantitative targets to reflect the work performance of organizations
or functional departments and individuals. In other words, they are objectives in
work that individuals, teams/groups, departments, organizations need to obtain to
meet the general requirement. It has been developed on the basis of the company's
strategic objectives, product and service characteristics, and become a modern tool
for managers to transform leadership strategies into management objectives and
specific action plans for each department and staff (Ms.Nguyen Thi Nam Phuong,
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