(Luận văn thạc sĩ) lựa chọn mô hình rà soát chẩn đoán doanh nghiệp và áp dụng cho ban tài chính kế hoạch vinaconex

VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS

Dao Quynh Anh

REVIEWING CORPORATE DIAGNOSTIC MODELS
AND APPLYING FOR FINANCE & PLANNING
DEPARTMENT- VINACONEX

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi – 2011


VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS

Dao Quynh Anh

REVIEWING CORPORATE DIAGNOSTIC MODELS
AND APPLYING FOR FINANCE & PLANNING
DEPARTMENT- VINACONEX

Major: Business Administration
Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr. Vu Anh Dung

Hanoi – 2011

TABLE OF CONTENT
ACKNOWLEDGEMENT .................................................................................................... i
ABSTRACT ............................................................................................................................ ii
LIST OF FIGURES ............................................................................................................. xii
LIST OF ABBREVIATIONS........................................................................................... xiii
INTRODUCTION ................................................................................................................. 1
1.

Necessity of the thesis ............................................................................ 1

2.

Research aim and objectives .................................................................. 2

3.

Research questions ................................................................................. 2

4.

Research methodology ........................................................................... 3

5.

Scope of the research ............................................................................. 3

6.

Significance of the research ................................................................... 4

7.

Thesis structure ...................................................................................... 5

CHAPTER 1: OVERVIEW OF CORPORATE DIAGNOSTIC AND MODELS . 6
1.1

Corporate diagnostic overview ........................................................... 6
1.1.1 Corporate diagnostic definition ....................................................... 6
1.1.2 Why a corporate diagnostic is so important .................................... 7

1.2

Corporate diagnostic process .............................................................. 8

1.3

Corporate diagnostic models .............................................................. 9
1.3.1 Theoretical models ......................................................................... 10
1.3.2 Models of consulting firms ............................................................ 19

1.4

Chapter Review ................................................................................. 24

CHAPTER 2: ANALYSIS ON F&P DEPARTMENT’S OPERATION OF
VINACONEX ...................................................................................................................... 27
2.1.

Overview of F&P Department-Vinaconex ....................................... 27
2.1.1 Overview of Vinaconex ................................................................. 27
2.1.2 Overall of Vinaconex F&P ............................................................ 30

2.2.

Analysis on F&P’s operations .......................................................... 32
x


2.2.1 Strategy .......................................................................................... 32
2.2.2 Organization structure ................................................................... 33
2.2.3 Process ........................................................................................... 35
2.2.4 Human Resources .......................................................................... 64
2.3.

Chapter review ................................................................................. 72

CHAPTER 3: RECOMMENDATIONS TO IMPROVE F&P’S OPERATIONS 75
3.1.

Recommendations of strategy, organization structure, human

resources and process ........................................................................................ 75
3.1.1 Strategy .......................................................................................... 75
3.1.2 Organization structure ................................................................... 75
3.1.3 Process ........................................................................................... 76
3.1.4 Human resources ........................................................................... 82
3.2.

Action Plan ....................................................................................... 82
3.2.1 Strategy .......................................................................................... 83
3.2.2 Organization structure ................................................................... 84
3.2.3 Process ........................................................................................... 84
3.2.4 Human resources ........................................................................... 88

3.3.

Top 15 Activity Prioritisation ........................................................... 91

3.4.

Chapter review ................................................................................. 92

CONCLUSION .................................................................................................................... 94
APPENDIX

...................................................................................................................... 97

REFERENCES ..................................................................................................................... 99

xi


LIST OF FIGURES
Figure 1.1: Corporate Diagnostic Process

8

Figure 1.2: Star model of Jay Galbraith

10

Figure 1.3: Organizational performance model of David P. Hanna

15

Figure 1.4: Diamond model of Leavitt

16

Figure 1.5: Organization intelligence model of Falletta

17

Figure 1.6: 7S model of McKinsey

20

Figure 1.7: Governance framework of KPMG

22

Figure 2.1: Vinaconex’s output from 2005 to 2010

30

Figure 2.2: Vinaconex’s organization chart

31

Figure 2.3: F&P’s organization chart

35

Figure 2.4: Lending procedure

38

Figure 2.5: Prepare principal &interest payment request and report procedure

39

Figure 2.6: Cash payment via Bank

41

Figure 2.7: Investment procedures

43

Figure 2.8: Divestment procedure

44

Figure 2.9: Capital Contribution and Financial Ratios Report

45

Figure 2.10: Project management process

47

Figure 2.11: Fund sourcing process

48

Figure 2.12: HO Financial statement preparation process

50

Figure 2.13: Financial Report Consolidation process

51

Figure 2.14: Reporting and planning process

53

Figure 2.15: F&P’s staff demographic

67

Figure 2.16: F&P’s staff strength

68

Figure 2.17: F&P’s staff weaknesses

69

Figure 2.18: Positive comment on working conditions

70

Figure 2.19: Negative comment on working conditions

71

xii


LIST OF ABBREVIATIONS
1 AR/AP: Account receivable/ Account payable
2 BOM: Board of Management
3 CEO: Chief executive officer
4 ERP: Enterprise resource planning
5 F&P: Finance and Planning Department
6 FS: Financial report
7 GD: General director
8 HO: Head office
9 HOD: Head of department
10 IFRS: International Financial Reporting Standard
11 KPI: Key Performance Indicator
12 L&B: Lending and borrowing
13 PMO: Project management office
14 PMU: Project management unit
15 VAS: Vietnamese Accounting Standards

xiii


INTRODUCTION
1.

Necessity of the thesis
Vinaconex is one of Vietnam’s leading organizations, in terms of size, brand

and quality. As the world’s global marketplace emerges from the recent financial
crises, it will be a key task of Vinaconex to continue its focused expansion,
concentrate on profitable business ventures and core-business strategy, and manage
its internal and external capital appropriately.
Vinaconex governance structure was developed since privatisation of the
corporation late 2006. The structure and culture, as a result, inherited several
characteristics of the old regime. On one hand, this inheritance could be
advantageous to maintain stable structure to support growth. On the other hand,
Vinaconex management should always beware of the characteristics which are no
longer suitable in the new business context and need to be replaced gradually to
allow stronger development.
F&P’s function is planning, budgeting and managing financial issues of
Vinaconex in order to support the decision making procedure. Therefore, a key
success factor will be a competent, value-added and proactive F&P function to
support Vinaconex’s business objectives.
It is noted that F&P department has been changing rapidly in performance and
cooperation with both other departments at HO and subsidiaries for the last two
years. The feedback from service users which F&P provides is relatively good.
However, there is several areas to improve in F&P functions to achieve both F&P
objectives and the Board expectations.
Therefore, the diagnostic assessment to identify F&P’s areas for operation

improvement is essential. By diagnostic reviewing, the thesis will provide
recommendations and action plans for increasing F&P effectiveness.

1


The diagnostic models reviewing is not only useful for F&P application but
also can be applied for a number of other enterprises. While Vietnam has joined
WTO and the competitiveness of domestic and foreign enterprises is increasing, it is
essential that Vietnamese enterprises have to raise their performance to boost
competitiveness. However, it is the fact that many Vietnamese companies are
operating inefficiently due to their old inappropriate structure; process and weak
capacity or the business are developing too fast which leads to uncontrol of BOM.
In addition, Vietnamese firms have little experience in diagnostic assessment; this
thesis would be a good practice for other businesses to apply for improving their
performance.
2.

Research aim and objectives
The objective of this thesis is reviewing corporate diagnostic models and

chooses one model which is appropriate for applying into F&P, Vinaconex. By
reviewing its operation, this thesis will show F&P’s gaps and give recommendation
to improve F&P’s effectiveness. To achieve this goal, the thesis will (1) research
diagnostic process as well as reviewing diagnostic models in both theoretical and
practical side and choose one suitable model for applying F&P. (2) give an
overview of F&P and its operation in some fields which is shown in the chosen
model. In particular, the author presents the findings of weakness and causes of the
problem. (3) The author offers recommendations for improvement operation and a
proposed an action plan in the short, medium and long term to solve the root cause.

Finally, the authors have compiled a list of priority actions.
3.

Research questions

To find out the weakness in F&P’s operation, this thesis should answer the
following questions:
•

Major research questions:
o Which diagnostic models should be used to review F&P?
o How to improve the operation of the F&P?
2


•

Minor research questions:
o What are diagnostic assessment and its process?
o What are the weaknesses of F&P’s operation?
o What are the root causes of these gaps?
o What actions is needed to improve the operation of F&P
o Which one should be prioritized?

4.

Research methodology
The research methodology is used in this thesis is case study and this

methodology meets the research’s objective. Data used in the thesis were taken

from both realisable secondary data about F&P’s operation collected in the process
of working with F&P and primary data collected from interviewing head and staff
of F&P about its strategy, structure, processes and human resources and from
author’s observation.
There are a number of techniques used to conduct a case study research which
including:
•

Interviewing staff and expert

•

Economic statistic method

•

Methods of description and comparison.

5.

Scope of the research
The thesis focused on diagnosis assessment for F&P, Vinaconex before 2011

and to propose recommendations to improve its operation’s effectiveness.

To

conduct this thesis, the author has collected documents about business operation of
F&P and researched about diagnostic models in both theory and practice of well
known consulting firm as well as best practices in the world. The purpose is to

compare and analyze these models to find the one which is suitable and appropriate
to apply in this case of F&P, Vinaconex. The thesis focuses on the following main
points:

3


•

Find the definition and process of corporate diagnostic. In addition, the thesis

reviews six diagnostic models including four commonly used diagnostic models and
two models of McKinsey and KPMG- two big firms in consulting industry. After
analyze these models, the author choose the most appropriate one to apply for F&P.
•

Conduct a fact-finding about strategy, structure, processes and personnel. Find

out the weakness point and root cause of the limitation.
•

Propose recommendations for improving strategy, structure, processes and

personnel. In order to make these recommendations more practical, the authors
proposed an action plan with specific time frame for short term (three to six
months), medium (less than 12 months) and long-term (one to three years).
6.

Significance of the research
This thesis has significant theoretical and practical value. In this thesis, the

author has provided a number of well known corporate diagnostic models from
1955 to 2008. Additionally, the author has compared these models to see the
difference and change in the perspective of reviewing a business diagnostic after
half a century. Besides, by providing the methodology of the famous consulting
firms has brought the real insight and to make the thesis be more practical to real
business world. As well, this is a very new topic for Vietnamese thesis and the
number of research about this topic is so limited. This thesis is useful for:
•

Management of Vinaconex in general and of F&P in particular. By

conducting a diagnostic assessment, F&P’s leaders can see the gaps and solutions to
improve these issues.
•

Managers of other companies: the thesis provides a methodology of

corporate diagnostic for other enterprises to conduct diagnostic assessment. Based
on the same business environment and same old style of management, most of
Vietnamese enterprises suffer the same issues in operation. Therefore, managers of
other businesses can see the case of F&P as an typical case to study and consider to
apply a number of recommendations to improve their businesses.

4


•

Other researchers such as professionals, MBA’s candidates and students

who look for a methodology to improve enterprise’s operation.
7.

Thesis structure
Besides the introduction and conclusion, the thesis includes three chapters

with the following contents:
Chapter 1: Overview of corporate diagnostic and models. This chapter
provides the definition and process of corporate diagnostic as well as reviews six
models and choose one to apply for F&P’s diagnostic assessment.
Chapter 2: Analysis on F&P Department’s operation of Vinaconex. This
chapter conducts a fact-finding about strategy, structure, processes and personnel.
Find out the weakness point and root cause of the limitation.
Chapter 3: Recommendations to improve F&P’s operations. This chapter
proposes recommendations for improving strategy, structure, processes and
personnel in short, medium and long term.
Chapter 1: Overview of corporate diagnostic and models

Chapter 2: Analysis on F&P Department’s operation of Vinaconex
Chapter 3: Recommendations to improve F&P’s operations

5


CHAPTER 1: OVERVIEW OF CORPORATE DIAGNOSTIC AND
MODELS
1.1 Corporate diagnostic overview
1.1.1 Corporate diagnostic definition
Organizational diagnosis is a process based on behavioral science theory for

publicly entering a human system, collecting valid data about human experiences
with that system, and feeding that information back to the system to promote
increased understanding of the system by its members. The purpose of
organizational diagnosis is to establish a widely shared understanding of a system
and, based on that understanding, to determine whether change is desirable (Clayton
P. Alderfer, 1976).
Inevitably, the organizational diagnosis has a tendency to provoke change in a
human system, but the perspective presented here distinguishes the aims of
diagnosis from those of planned change. According to the present view,
diagnosticians attempt to change an organization only as far as is necessary to
accomplish the purpose of diagnosis. Otherwise they do not attempt to promote
change, no matter how promising are the opportunities that seem to present
themselves.
This stance regarding change during diagnosis combines an understanding of
organizational behavior with a value position regarding effective professional work
in applied behavioral science. The work of organizational diagnosis may require the
professional to work with the organization as a whole—including organizationenvironment relations, groups inside and outside the organization, and individuals
whose lives are shaped by the organization and who in turn determine the nature of
the organization.
As a result, theory relevant to individuals, groups, and the organization as a
whole is crucial to diagnostic work. Simply to survive, the professional must know

6


how to develop and to maintain working relationships with the system and its major
components. To complete the work of understanding a system, the professional
must know what data to obtain, how to collect it, and how to feed it back to the
system to promote understanding.
Because resistance to inquiry is a common human characteristic,

diagnosticians are ill equipped if they cannot identify and work through resistances
to their work.
Therefore, without skills to effect change, diagnosticians' capacity to complete
the diagnostic mission may be blocked by the very processes they are attempting to
understand. On the other hand, normally occurring client resistance cannot become
part of the consultants' justification for acting unilaterally and arbitrarily in the face
of that resistance. Consultants who aspire to excellence in their diagnostic work
cannot achieve this goal without client cooperation.
By stating and then maintaining that the initial work with a client system is
diagnosis, consultants provide clients with bases against which they (the
consultants) can be held accountable. Consultants also provide a means for
protecting themselves against excessive and unproductive demands by clients
during diagnosis. This approach sets limits on how consultants will use their skills
and knowledge during diagnosis and, in general, develops expectations about what
consultants and clients can count on from one another during the diagnostic process.
1.1.2 Why a corporate diagnostic is so important
Corporate diagnostic is so important because of these reasons:
•

Most entrepreneurs who run owner/operated businesses have major blind spots
i.e. very strong in sales and marketing but very weak in administration

•

They are usually too caught up in daily challenges to see the ‘forest from the
trees’

•

They often don’t know (or care!) what’s going on ‘in the trenches’

•

They are often too emotionally attached to the status quo to objectively
champion corporate change
7


•

They are not equipped to drive efficiency improvements

•

Proactive change is less disruptive and costly than continuously ‘putting out
fires’ i.e. an ounce of prevention is worth a pound of cure!

•

A proactive approach to organizational change can significantly improve the
entrepreneur’s quality of life and peace of mind

1.2 Corporate diagnostic process
Corporate diagnostic includes three main steps as follows:
Entry

Data collection
•

Questionnaire survey

•

Interview

•

Document review

•

Data analysis

Feedback

Figure 1.1: Corporate Diagnostic Process
Sources: Clayton P. Alderfer (1976)
Step 1: Entry
This step is to find out initial information about the enterprise. This step is
aimed at understanding business situation to determine the expectations of the
business, the gap and need-to-improved points, to define business scope,
management style and other information. Planning and the survey approaches were
established after this step.
Step 2: Data collection
In this step, information is collected through these tools such as:
•

Questionnaire survey
The questionnaire was designed to collect the replies from the management

and employees, customers and suppliers. The response is processed to give the

8


statistical results, which are then analyzed according to the chosen diagnostic
model.
•

Interview
The consultant will directly interview the managers and staff to learn about the

operation and management of enterprise. Comments must be verified and proven
by document evidence.
•

Document review
The records of the business are in form of writing about the organization,

plans, reports and documents.
•

Data analysis
These data should be collected and analyzed are: financial data, marketing,

sales, human resources, manufacturing...These data were analyzed to determine the
effectiveness and efficiency of operation.
In many cases, the surveys are required consultants to implement field work.
It may be the normal record/minutes or may be a market survey in large scale,
depending on corporation’s need.

Step 3: Feed back
The consultant must analyze the information gathered through the survey and
make a final report to present to the enterprise management. The report includes
describing the current operation, some issue raised from consultant’s observation,
the gap or weakness of enterprises and giving recommendations for operation
improvement.
This report helps companies raise awareness on the status of their operation
and effectiveness of their decisions. it is the basis for the company’s action plan to
improve its performance.
1.3 Corporate diagnostic models
There have been many diagnostic models for business review in both theory
and business practical. Due to time limitations, the authors would like to present

9


some typical models which are well known around the world. These models are
presented in published books or proven over the years by applying in famous
consulting companies in the world.
1.3.1 Theoretical models
In this part, the author is presenting four models from 1965 to 2008. They are:
star model of Jay Galbraith (1977), Diamond model of Leavitt (1965),
Organizational Performance Model, David Hanna (1988) and Organizational
Intelligence Model of Falletta (2008).
a. Star model of Jay Galbraith

Figure 1.2: Star model of Jay Galbraith
Sources: Jay R. Galbraith (2007)
Strategy
Strategy is a company’s formula for success. It sets the organization’s

direction and encompasses the company’s vision and mission, as well as its short
and long-term goals. The strategy derives from the leadership’s understanding of
the external factors (competitors, suppliers, customers, and emerging technologies)
that bear on the firm, combined with their understanding of the strengths of the
organization in relationship to those factors. The organization’s strategy is the

10


cornerstone of the organization design process. Without knowledge of the goal, no
one can make rational choices along the way. In other words, if you do not know
where you are going, any road will get you there. The purpose of a strategy is to
gain competitive advantage: the ability to offer a customer better value through
either lower prices or greater benefits and services than competitors can. These
advantages can be gained through external factors such as location or favorable
government regulation. They can also be secured through superior internal
organizational capabilities. We define organizational capabilities as the unique
combination of skills, processes, technologies, and human abilities that differentiate
a company. They are created internally and are thus difficult for others to replicate.
Creating superior organizational capabilities in order to gain competitive advantage
is the goal of organization design. We will also refer to transferring capabilities. To
transfer and, when necessary, adapt a company’s capabilities or advantages is one
of the key jobs of any manager when opening up a new location or unit.
Structure
An organization’s structure determines where formal power and authority are
located. Typically, units are formed around functions, products, geographies, or
customers, and are then configured into a hierarchy for management and decision
making. The structure is what is shown on a typical organization chart.
Organization design is not limited to structural considerations, and many variations
of a structure can be made to work. But if the structure is not approximately right,

then it will be harder to align the other design elements with the strategy. The
structure sets out the reporting relationships, power distribution, and communication
channels. It determines who comes in contact with whom. The structure projects a
message about what work is most important. If the structure does not at least
nominally support the strategy, then everyone in the organization will find
themselves working around a formidable obstacle.
Process

11


We use the term process to mean a series of connected activities that move
information up and down and across the organization. This includes work processes,
such as developing a new product, closing a deal, or filling an order. It also includes
management processes, such as planning and forecasting sales, business portfolio
management, price setting, standards development, capacity management, and
conflict resolution. Processes that cross

organizational boundaries force

organizational units to work together.
Their design has a significant impact on how well units work together vertically or
laterally. Clear articulation of roles and responsibilities at the boundary interfaces is
essential for the design of good processes.
Rewards
Metrics and rewards align individual behaviors and performance with the
organization’s goals. For employees, a company’s scorecard and reward system
communicate what the company values more clearly than any written statement can.
Metrics are the measures used to evaluate individual and collective performance.
The reward system motivates employees and reinforces the behaviors that add value

to the organization through salary, bonuses, stock, recognition, and benefits.
In complex organizations, the overriding challenge in designing metrics and
rewards is how to create incentives for collaborative behavior. Rewards based on
simple bottom-line measures that work for self-contained units cannot drive
business results in organizations that depend heavily on cross unit coordination. In
complex organizations, variable compensation (that is, pay above base salary)
typically tends to focus on team, unit, and business performance more than on
individual accomplishment. Some questions to consider in designing rewards are
these:
•

Level. At what level should results and behaviors be measured and rewarded:

team, department or unit, division, or company? How high up in the organization
should results be aggregated before being rewarded? What level will still allow

12


employees to feel they are being measured on the outcomes of their decisions and
actions?
•

Locus of measure. What is the appropriate configuration of profit centers?

Should the product, customer, or geographic unit be accountable for business
results? How does the organization create accountability and transparency and
minimize overhead cost allocations? How does it apportion credit among the
multiple dimensions?
•

Behaviors. What are the behaviors and actions that are essential to supporting

desired strategic outcomes (for example, responsiveness, follow-up and
communication, knowledge sharing, leading and participating in teams, cultural
acuity, relationship building, influence, developing talent, and other organizational
infrastructure contributions)? How do these get acknowledged in the performance
management process?
•

Evaluation process. Who should assess the performance that rewards are

based on? What is the role of customers, peers, direct reports, lower level staff, and
colleagues from other departments? How does the organization create rigor around
what can become a subjective evaluation of required behaviors?
Human resources
By human resources practices, we mean the human resource policies for
selection, staffing, training, and development that are established to help form the
capabilities and mind-sets necessary to carry out the organization’s strategy. The
complex organizations discussed in this book require a sophisticated management
team that understands how to use the organization as a lever for competitive
advantage. But it is not just managers who need to have strong organizational and
interpersonal skills. Complex organizations require employees at all levels to have a
fundamental set of competencies to interact across organizational boundaries,
participate on teams, and make decisions that take multiple perspectives into
account. The competencies that the organization needs to select

13

•

View issues holistically and from cross-functional and cross-cultural
perspectives

•

Negotiate and influence without formal authority or positional power

•

Build relationships and networks and skillfully work through informal
channels

•

Advocate and collaborate without bullying or compromising

•

Share decision rights and resources and make joint decisions with peers

•

Exhibit flexibility and resolve conflicts

b. Organizational Performance Model of David p. Hanna

According to David P. Hanna, the performance of the business will change
based on the business situation, business strategy, culture and business results.

Effective enterprise is formed by six elements, namely:
•

Organizational Structure

•

Rewards

•

Decision-making mechanism

•

Information

•

HR Policies

•

Task
Basically, its factors that affect business performance nearly the same as in

star model. However, the difference lays on the priority of the elements. We can
see the similar elements in the two models are: organizational structure, reward and
personnel policies. In the star model, the decision-making and management of
information flow are two factors that make the process of the company. The role

and responsibilities factor in this model is stressed as an independent factor, while
in the star model; this one is an element of structure factor.
Thus, we can see the two models are quite similar. The difference lies in
assessing the importance of the elements.

14


Figure 1.3: Organizational performance model of David P. Hanna
Source: David P. Hanna (1988)
c. Diamond model of Leavitt

The structure variable refers to the authority systems, communication systems,
and work flow within the organization. The technological variable includes all the
equipment and machinery required for the task variable; the task variable refers to
all the tasks and subtasks involved in providing products and services. Finally, the
human variable refers to those who carry out the tasks associated with
organizational goals (i.e., products and services). The diamond shaped arrows in the
model emphasize the interdependence among the four variables. Leavitt has
postulated that a change in one variable will affect the other variables. For example,
with a planned change in one variable (e.g., the introduction of advanced
technology), one or more variables will be impacted. Such interventions are
typically designed to affect the task variable (e.g., to affect positive changes in
15


products or services). In this example, the other variables would also likely change,
as morale (i.e., people) might increase and communication (i.e., structure) might be
improved due to the new technology.

Figure 1.4: Diamond model of Leavitt
Source: Leavitt, H. J. (1965)
Although Leavitt describes the variables within his model as dynamic and
interdependent, the model is too simple to make any direct causal statements
regarding the four variables. Similar to the other model, Leavitt suggests that a
change in one variable may result in compensatory or retaliatory change in the other
variables; this notion is similar to the opposing forces in Lewin’s model. However,
unlike the Organizational performance model, Leavitt does not address the role of
the external environment in bringing about change in any of the variables.
The Diamond Model does not explicitly identify human capital as a critical
determinant of organizational effectiveness. This may be a bit misleading because
human capital is a critical element with respect to each of the four points of the
diamond. Indeed, it might be better to show the Diamond Model with human capital
as the center. I have already discussed how human capital is critical to the core
competencies and organizational capabilities. I have not pointed out the critical role
it needs to play with respect to strategy and the environment.

16


d. Organizational Intelligence Model

The Organizational Intelligence Model can serve as a diagnostic framework
for Organizational diagnostic purposes as well as to facilitate the design and
interpretation of most employee and organizational survey efforts. In total, the
model includes 11 factors and variables.

Figure 1.5: Organization intelligence model of Falletta
Table: Factor Descriptions of the Organizational Intelligence Model
Environmental

The

outside

conditions

or

situations

that

affect

the

Inputs

company/organization (e.g., Sarbanes-Oxley, government policy,
competitive intelligence, customer feedback, the economy).

Strategy

The means by which the company/organization intends on

17


achieving its overall mission and goals and creating value for its

stakeholders.
Leadership

The most senior level of executives and managers in the
company/organization.

Culture

The underlying values, beliefs, myths, traditions, and norms that
guide team and organizational behavior.

Structure
Adaptability

& The structure is how the company/organization is designed (i.e.,
levels, roles, decision rights, responsibilities and accountabilities)
to execute on the strategy. Whereas, adaptability refers to the
extent to which the company/organization is ready and able to
change.

Information & The business systems, practices, and capabilities that facilitate
Technology

and

reinforce

people’s

work

(e.g.,

IT

infrastructure,

communication, knowledge sharing).
Direct Manager The relative quality and effectiveness of an employee’s
immediate manager or supervisor.
Measures
Rewards

& Measures refer to the ways in which individual and team
performance and accomplishments are measured and managed.
Rewards are the monetary and non-monetary incentives that
reinforce people's behavior and actions, including advancement
and promotion.

Growth
Development

& The practices, resources, and opportunities available for
employee skill development and enhancement, including
development planning, training and learning, and stretch
assignments.

Employee

Employee engagement involves the cognitive, emotional and

Engagement

behavioral relationship employees have with their jobs and
organizations, and effort and enthusiasm they put into their daily
work (i.e., the extent to which employees exert their

18


discretionary energy and effort on behalf of the organizations
they serve).
Performance

The outcomes and indicators of individual and organizational

Outputs

achievement and results.

Sources: Falletta, S. V. (2008)
The Organizational Intelligence Model depicts a top-down causal chain,
making some tentative assertions with respect to cause and effect. The variables in
the upper part of the model (such as environmental inputs) affect the organization
from the outside. Within the organization, the strategic drivers (e.g., leadership,
strategy, and culture) affect key indices that represent organizational climate,
capability, and execution. These include the organization’s structure and
adaptability, effectiveness and quality of the direct manager, and rewards and
growth opportunities, among other factors.
1.3.2 Models of consulting firms

These above models were born in 50,60 years ago. Today, these models are
still used for research or for reference in universities. In real business world, while
the service of counseling business performance is growing, the leading consulting
firms like McKinsey and KPMG also has their own methodology to perform
corporate diagnostics.
a. 7S model of McKinsey
The McKinsey 7S Framework was named after a consulting company,
McKinsey and Company, which has conducted applied research in business and
industry (Pascale & Athos, 1981; Peters & Waterman, 1982). The authors all
worked as consultants at McKinsey and Company; in the 1980’s, they used the
model in over seventy large organizations. The McKinsey 7S Framework was
created as a recognizable and easily remembered model in business. The seven
variables, which the authors term “levers,” all begin with the letter “S”.

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