Improving KPI evaluation system: a study of DongA Money Transfer Company

TABLE OF CONTENTS LIST OF ABBREAVIATION.................................................................................................................... 4 LIST OF FIGURES .................................................................................................................................... 4 LIST OF CHARTS ..................................................................................................................................... 5 LIST OF TABLES ...................................................................................................................................... 5 I. ACKNOWLEDGEMENT.................................................................................................................. 6 II. EXECUTIVE SUMMARY ............................................................................................................ 6 III. INTRODUCTION .......................................................................................................................... 7 3.1. COMPANY BACKGROUND ..................................................................................................... 7 3.2. INDUSTRY OVERVIEW ............................................................................................................ 8 3.2.1. Remittance market overall .................................................................................................... 8 3.2.2. Competitor landscape............................................................................................................ 9 IV. PROBLEM CONTEXT ............................................................................................................... 10 4.1. BUSINESS CONTEXT .............................................................................................................. 10 4.2. DONGA MONEY TRANSFER ORGANIZATIONAL STRUCTURE .................................... 12 4.2.1. Company organizational chart ............................................................................................ 12 4.3. SYMPTOMS .............................................................................................................................. 13 4.3.1. SYMPTOM 01: Business performance of DongA Money Transfer does not reach the target in 2019: ..................................................................................................................................... 13 4.3.2. SYMPTOM 02: Low employee performance of Customer Service Department in 2019. . 15 V. PROBLEM IDENTIFICATION ..................................................................................................... 18 5.1. PROBLEM 01: KPI Evaluation system is unsuitable................................................................. 19 5.2. PROBLEM 02: Lack of motivation............................................................................................ 22 5.3. PROBLEM 03: Low employee satisfaction ............................................................................... 23 5.4. PROBLEM 04: Personal issues .................................................................................................. 24 5.5. Problem validation...................................................................................................................... 25 VI. CAUSES VALIDATION.............................................................................................................. 27 6.1. CAUSE 01: KPI without SMART Goals.................................................................................... 28 6.1.1. Sub-cause 01: Unrealistic targets (R).................................................................................. 28 6.1.2. Sub-cause 02: Lack of detailed quantitative operation criteria (S) ..................................... 29 6.1.3. Sub-cause 03: Hard to Achievable with Financial Indicators (A) ...................................... 30 6.2. CAUSE 02: Lack of Learning and Development Indicators ...................................................... 30 3 6.2.1. Sub-cause 01: Less Training courses for employees .......................................................... 31 6.2.2. Sub-cause 02: Lack Employee Development Programs ..................................................... 31 6.3. CAUSE 03: Lack of recognition with high results ..................................................................... 32 6.4. Causes Validation ....................................................................................................................... 33 6.5. Cause – Effect map ..................................................................................................................... 34 VII. ALTERNATIVE SOLUTIONS................................................................................................... 34 7.1. ALTERNATIVE SOLUTION 01: Building detailed operation criteria for Customer Service Department ............................................................................................................................................. 35 7.2. ALTERNATIVE SOLUTION 02: Building suitable financial indicators.................................. 37 7.3. ALTERNATIVE SOLUTION 03: Employees Reward Program............................................... 38 7.4. Action plan.................................................................................................................................. 40 VIII. CONCLUSION ......................................................................................................................... 42 IX. SUPPORTING INFORMATION................................................................................................ 44 APPENDIX A – INTERVIEW GUIDE .............................................................................................. 44 APPENDIX B – INTERVIEW SCRIPT............................................................................................. 44 Interview 01: Problem identification ...................................................................................................... 44 References.................................................................................................................................................. 49 LIST OF ABBREAVIATION HR Human Resources DAMTC DongA Money Transfer Company DAB DongA Bank LIST OF FIGURES Figure 1: Organization chart of DongA Money Transfer Company Figure 2: KPI Results of DongA Money Transfer Company in 2019 4 Figure 3: KPI Results of Customer Service Department in 2019 Figure 4: Potential Cause Figure 5: Cause – Effect map Figure 6: Alternative Solutions LIST OF CHARTS Chart 1: The proportion of sales of DongA Money Transfer’s services from 2017 to 2019 LIST OF TABLES Table 1: Results of implementing targets of DongA Money Transfer Company Table 2: Total revenue results of DongA Money Transfer Company in 2019 Table 3: Problem identification – Interviewees list Table 4: Solution 01 – Evaluation Table 5: Solution 01 – Cost structure Table 6: Solution 02 – Evaluation Table 7: Solution 03 – Evaluation Table 8: Solution 03 – Cost structure Table 9: Roll – out plan of building detailed operation criteria for Customer Service Department. Table 10: Interview transcript for justification on Problem identification Table 11: Interview transcript for Cause validation 5 I. ACKNOWLEDGEMENT Firstly, I would like to send my appreciation to Asscoc.Prof. Tran Ha Minh Quan who has always supported me with helpful advice, clear instructions and provided in-depth knowledge for me to complete this thesis. In addition, I would like to express my sincere thanks to managers and employees of DongA Money Transfer Company who are ready to help, advise and provide the necessary support during the process of conducting research for my thesis. II. EXECUTIVE SUMMARY Remittances are an important source of capital for the economy to develop and stabilize the foreign exchange market. In Vietnam, remittances are sent to support families, health care, education, business investments, real estate and personal shopping. DongA Money Transfer Company, under DongA Bank, has had 18 successful years operating in the field of Remittance in Vietnam. However, at present, the employee performance of the Company is at a low level, affecting business performance. According to Bhatti et al (1), employee performance management has an important role in creating a competitive advantage compared to competitors. As a result, organization checks whether it is complying with the orientation, plan and achieving the set goals. For this purpose, employee performance measures are used to assess and monitor the organization's overall business activities. In addition, they are also used to measure and compare the effectiveness of different organizations. Performance assessments are comparable in departments, groups and individuals. 6 Examining external and internal factors and internal data, the researcher identified unsuitable KPI Evaluation System as the main problem. To solve these problems, Dong A Money Transfer Company needs to set up KPI SMART Goals. This thesis will bring insight into the organization in a realistic, objective and accurate way. The thesis aims to accurately identify symptoms, problems and causes, effectively identify feasible and practical solutions to solve problems. III.INTRODUCTION 3.1. COMPANY BACKGROUND DONGA MONEY TRANSFER COMPANY - A SUBSIDIARY OF DONGA BANK - one of the famous remittance/ bank brand in Vietnam. Since its establishment in November 2001, DongA Money Transfer Company has always led the remittance market about the revenue, highly appreciated and trusted by both domestic and foreign customers. In order to achieve such results, DongA Money Transfer has continuously invested in developing the system, applying modern technology to daily operations with payment network of over 220 locations nationwide. Each employee is trained professionally to deliver remittance to customers fast and safe. In addition to focusing on improving the quality of services, DongA Money Transfer Company also builds and implements customer care programs regularly. Promotions with high value prizes are held regularly. Besides, the company has continuously expanded its cooperation with global partners to help customers transfer money from more than 180 countries and territories around the world, through 350,000 transaction locations to Vietnam through DongA Money Transfer Company. 7 At present, the company has continuously made efforts to develop its network of overseas partners and promoted the promotion of DongA brand in potential markets. The company has connected with more than 40 major partners in 170 countries, such as RIA, MoneyGram, Xpress Money, Sigue,.... The company has received prestigious awards as follows: "Excellent brand providing financial services in Vietnam" by Global Banking & Finance and Finance Digest in London (2017, 2018, 2019), “Strong brands in Vietnam” by Economic Times (2018), “Excellent brand of remittance service in Vietnam” by Finance Digest in London (2019). 3.2. INDUSTRY OVERVIEW 3.2.1. Remittance market overall According to the World Bank, in 2017 the amount of remittances transferred to Vietnam was 13.8 billion USD, up 16% compared to 2016 and surpassed Bangladesh to reach the top 10 countries with the largest amount of remittances in the world. In 2018, the number of remittances sent to Vietnam reached US $ 15.9 billion, 100 times more than in 1993. In particular, according to the World Bank, Vietnam ranked 9th in the top 10 countries receiving the most remittances in the world in 2019. The amount of remittance transferred to Vietnam reached 16.68 billion USD, accounting for 6.4% of GDP. The most attractive field of remittance in recent years is production and business, accounting for 60 to 65% of the total remittance transferred to Vietnam. Besides, real estate also attracted a large amount of remittances, reaching 21%. The leading remittance countries for Vietnam are the United States, Canada, Australia, Europe, Malaysia, Taiwan, Korea and Japan. According to data from the Vietnam 8 Association of Manpower Supply (VAMAS), in 2018, more than 131,000 Vietnamese workers went to work abroad, an increase of 10.28% compared to 2017. The main sources of money transfer to Vietnam are Vietnamese labor export workers and Vietnamese living abroad living in other countries. In particular, the United States accounted for 60% of remittances sent to Vietnam, the remaining 20% was from Europe, Korea, Japan and other regions. The official channels most commonly used to remit remittances to Vietnam are via commercial banks, economic organizations, customs and post offices, of which commercial banks account for 72% of remittances to Vietnam. This brings many opportunities for competition among remittance companies, demonstrating their strength to develop in the remittance industry. 3.2.2. Competitor landscape For economic organizations, remittance service is very important because it is a special channel of foreign currency mobilization without having to pay a lot of expenses. Currently in Vietnam, in addition to banks, there are dozens of remittance companies providing remittance services from abroad. This is a service that not only provides revenue sources but also helps banks to buy foreign currencies, increase deposits and cross-sell other products to overseas remittance recipients, and enhance the prestige and brand of bank with customers. Currently, in addition to DongA Money Transfer Company, there are many other banks that offer overseas remittance services such as Vietcombank, Vietinbank, BIDV, Agribank, ACB, Sacombank,.... These are remittance organizations with many competitive advantages with wide payment networks and good agency relations. 9 However, DongA Money Transfer Company still has the optimal competitive advantages, helping the market share always to the top of remittance payment in Vietnam. Firstly, with 18 years of experience in the field of remittances, DongA Money Transfer Company has cooperated with many major partners with the number of annual sales leading the market. Besides, DongA Money Transfer Company also receives many valuable international awards in the remittance market, which helps to increase the reliability of partners and customers. Second, Dong A Money Transfer Company fully develops three remittance payment services for customers in Vietnam, namely home delivery, cash-backup and Bank transfer service. Therefore, DongA Money Transfer Company has fully met the needs of customers when they use remittance services. Thirdly, the creativity in developing smart applications to facilitate transactions with customers has made the service more professional, fast and safe. These competitive advantages help promote the trust of partners and customers to develop DongA Money Transfer Company in such competitor landscape. IV. PROBLEM CONTEXT 4.1. BUSINESS CONTEXT DongA Money Transfer Company is a remittance company in Vietnam, head office’s location in district 3 in Ho Chi Minh City. DongA Money Transfer provides the following services: Home Delivery Service: for the home delivery service, DongA Money Transfer Company employees deliver the remittance to hand at the designated beneficiary’s address with the appointment time in advance. Benefits of service: 10  Beneficiaries receive money safely, quickly, saving travel time.  Beneficiaries staying in the center of the provinces will receive money within 3 hours.  Beneficiaries who live in suburban or remote areas will receive money within 24 - 36 hours.  DongA Money Transfer Company’s home delivery network covers 57 provinces and cities nationwide.  Friendly, reputable home delivery staffs are always on time and enthusiastic. Cash pick-up Service: With 220 transaction pointes nationwide, beneficiary will easily and conveniently received remittances. Benefits of service:  The procedure is simple and fast. Within 02 minute beneficiaries will receive money immediately.  With a wide network, beneficiaries can go to any transaction point of DongA Money Transfer Company and DongA Bank. Bank Transfer Service: deposits will be transferred in VND directly to the recipient’s account with DongA Bank system and inter-bank in Vietnam. Benefits of service:  Beneficiaries can withdraw money (Vietnam dong) at more than 1,400 ATMs and over 100 counters in Banking System at Vietnam.  Enjoy all financial services, cardholder preferential policies from Dong A Bank.  Special beneficiary service policies from DongA Money Transfer Company. 11 According to Customer Service Department’s Annual Report, the proportion of sales of the DongA Money Transfer's services from 2017 to 2019 shows that home services always account for the highest proportion from 62 to 68% of total sales. This shows that, in order to develop in the coming time, Dong A Money Transfer Company needs to focus on developing into main service and bringing many profits. In addition, people development is a resource to perform services with customers to bring reliability, quality and professional. With the current competitive advantage of professional services, efficient and advanced technology, DongA Money Transfer has the potential to further develop in future compared to competitors. Chart 1: the proportion of sales of DongA Money Transfer's services from 2017 to 2019 4.2. DONGA MONEY TRANSFER ORGANIZATIONAL STRUCTURE 4.2.1. Company organizational chart 12 The organizational structure of the company is presented as below: Figure 1. Organization chart of DongA Money Transfer Company The organizational structure of DongA Money Transfer Company is divided into section: business and operating divisions including the head office in Ho Chi Minh City and its branches in Nghe An, Quang Binh, Thanh Hoa. For Customer Service Department, the employees work at head office (Ho Chi Minh City) and DongA Bank's 43 branches nationwide. There are 336 employees in DongA Money Transfer’s total organizational structure. These 336 people are divided into 6 departments and 3 branches, each department, branch plays a crucial role in the organizational process producing product outcomes. 4.3. SYMPTOMS 4.3.1. SYMPTOM 01: Business performance of DongA Money Transfer does not reach the target in 2019: 13 Targets Unit Plan Actual in 2019 +/- compare with plan 1. Sales payment turnover mil USD 1,705 1,485 87.1% 2. Home delivery service turnover mil USD 1,000 974 97.4% 3. Foreign currency exchange mil USD 36.0 46.8 130.0% 4. Revenue before tax Billion VND 12 10.4 86.7% Table 1: Results of implementing targets of DongA Money Transfer in 2019 According to data from Business Development Department of DongA Money Transfer, sales payment turnover only achieved 1,485 million USD that was equal 87.1% plan in 2019. Although home delivery is main service, this turnover remarkably achieved 97.4% of plan with 974 million USD. Profit in 2019 was VND 10.4 billion, only reached 86.7% of the plan. Foreign currency exchange is only index exceeding the plan with 46.8 million USD reaching 86.7%. Targets Unit Plan Actual in 2019 +/- compare with plan 1. Home delivery service turnover mil USD 1,000 974 97.4% 2. Cash pick-up service turnover mil USD 278 243 87.4% 3. Bank transfer service mil USD 427 268 62.8% 14 Total revenue mil USD 1,705 1,485 87.1% Table 2: Total revenue results of DongA Money Transfer in 2019 Ignoring to the elements of business strategy and economic situation, human resource factors and performance of employees are also evaluated as factors that contribute to the reduction of business efficiency. 4.3.2. SYMPTOM 02: Low employee performance of Customer Service Department in 2019. Figure 2: KPI Results of DongA Money Transfer Company in 2019 According to above figure, the highest number of people meet low performance belonged to Customer Service Department (15 headcount target lower than 50%, 125 headcounts reach 50% - below 70% KPI, 75 headcounts get performance from 70% - below 90% KPI, 75 15