VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS

Vu Viet Dung
PERFORMANCE MEASUREMENT BY APPLYING
BALANCED SCORECARD
THE CASE OF MARITIME BANK’S BRANCHES

Major: Business Administration
Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS SUMMARY

Supervisor: PhD. Dao Thi Thanh Lam

Hanoi – 2012


TABLE OF CONTENTS

ACKNOWLEDGMENTS
ABSTRACT
TÓM TẮT
TABLE OF CONTENTS
LIST OF FIGURES
LIST OF TABLES
ABBREVIATION
INTRODUCTION
1. Rationale
2. Research objectives
3. Research questions

4. Data collection
5. Research process
6. Data processing
7. Research scope
8. Thesis structure
9. Limitation
CHAPTER 1: LITERATURE REVIEW
1.1. Performance measurement
1.1.1. The importance of performance measurement
1.1.2. Performance measurement classification
1.1.3. Performance measurement level
1.1.4. Performance measurement models
1.1.5. Deciding the right metrics
1.2. Balanced Scorecard Model
1.2.1. Financial perspective


1.2.2. Customer perspective
1.2.3. Internal Business Perspective
1.2.4. Learning & Growth Perspective
1.3. The Balanced Scorecard: Measurement System
1.4. The Balanced Scorecard development
1.5. The Balanced Scorecard implementation
CHAPTER 2: FINDINGS & DEVELOPMENTS
2.1. Introduction about MSB
2.1.1. Establishment and development history
2.1.2. MSB’s Vision
2.1.3. MSB’s Mission
2.1.4. MSB’s Core values
2.1.5. MSB’s organization chart

2.2. Analysis of findings & developments
2.2.1. Findings
2.2.2. Developments
2.3. Finding summarization
2.3.1. General review
2.3.2. Perspectives review
CHAPTER 3: RECOMMENDATION
3.1. Key results
3.2. Recommendation
3.2.1. BSC Performance measurement
3.2.2. Recommendation
REFERENCES
APPENDIXES


PERFORMANCE MEASUREMENT BY APPLYING
BALANCED SCORECARD
THE CASE OF MARITIME BANK’S BRANCHES
Vu Viet Dung
MBA Candidate, 2008 - 2010
Hanoi School of Business - Vietnam National University, Hanoi
Supervisor: PhD. Dao Thi Thanh Lam

INTRODUCTION
1. Rationale
Performance measurement is always the most interesting topic of all managements in
every industry. Building a relevant indicator system to monitor and evaluate the
performance of a company is a critical job that requires the managers to spend their
efforts to fulfill.


Maritime Bank (MSB) is one of the first joint stock banks in Vietnam, with more than 20
years developing. With strategic consulting from McKinsey Company, MSB is expecting
to become one of the 5 biggest banks in Vietnam in 2013. Performance measurement is
one of the most important initiatives which they must revise to achieve the objective.

Performance measurement of Maritime Bank is assigned in the annual shareholder
meetings. It almost likes financial factors, such as: ROE (return on earning), ROA (return
on asset), EPS (earning per share), asset/credit improving, bad debt rate, etc. Based on
these factors, the CEO will divide to branches of the bank. This measurement is not
useful, because it is not reflect the non-financial factors of the bank like human resources,
customer thinking, etc. and not align with the strategy of the bank.

1


From 2010, MSB started new strategy with consulting from McKinsey (a famous
company in United State), so many initiatives have been implemented. But we can see
the fact that, all initiatives almost has a general term: clear Key Performance Indicator
(KPI) for each personal and unit. MSB’s ambition is becoming top 5 of the largest
banking in Vietnam at 2014 and more professional.

After seeing through the actual situation of MSB and reading reference sources, author
recommended MSB managers that they should apply Balanced Scorecard – a complete
tool for performance which has applied successfully in world banking sector like Scotia
Bank, Bank Niaga, Barclays, Bank of Tokyo-Mitshubishi, Bank of Bahrain & Kuwait,
Ithmaar Bank…

Early in 1990's, a new approach to strategic management was developed by Robert
Kaplan and David Norton. They named the system "Balanced Scorecard ".
Working through the BSC process enables management to define those key perspectives

that will drive the business to success, as well as to define how to measure them. The
BSC helps organizations align multiple strategies, from various units to the organizational
strategy by linking their deliverables to these key perspectives that drive the business.
Balanced Scorecard provides a clear understanding of the company's strategy, and how it
is supported by the commitment to objectives from divisions and functions and functional
units of the organization (Balanced Scorecard Institute, 2006).

I believe that BSC will make an optimistic change in Maritime Bank, the thesis
“Performance Measurement by applying Balanced Scorecard – The case of
Maritime Bank’s Branches” is useful for research.

2. Research objectives
From the fact, MSB has being had an un-useful performance management system and
lacked of perspectives, this thesis has flowing objectives:

2




To review relevant literature about performance measurement and balance
scorecard;

 To apply reviewed literature to analyze the strengths and weaknesses of
performance measurement of MSB’s branches;
 To recommend a new performance measurement indicator for MSB’s branch
based on Balanced Scorecard approach.
3. Research questions
 Which performance measurement literature can be applied?
 How to analyze and find solutions?

 What are the recommendations?
4. Data collection
 Secondary data: the author has depended on the following data resources:
-

Books and references about the Balanced Scorecard;

-

Periodicals, articles, published papers and referred previous studies in
different countries which have been conducted on the same subject;

-

The Internet sites and the available electronic versions.

 Primary data: as the 2nd data was not enough, the primary data was collected by
interviewing line managers of MSB (08) to give comments by 2 ways:
-

Questionnaire & interviewing to assess the current performance and
knowledge of line managers about BSC;

-

Survey with employees in 2 branches of MSB to analyze and develop new
performance measurement based on BSC.

3



5. Research process
Research process

LITERATURE
REVIEW

DISCUSSION

SELF
RESEARCH

QUESTIONAI
RE

DEEP
INTERVIEW

ANALYZING

RECOMMENDATION

SURVEY

6. Data processing
Data would be analyzed in quantitative by Microsoft Excel, Statistical Package for the
Social Sciences – SPSS to measure variable, reliability (Cronbach’s Alpha >=0.7) and
qualitative – the main method to analyzing findings.
7. Research scope
- Objective: Propose new performance measurement by applying BSC

- Geography: two branches in Hanoi, Vietnam
- Timing: at the end of 2011 and 2010
8. Thesis structure
Introduction
Chapter 1: Literature Review
Chapter 2: Findings & Developments
Chapter 3: Recommendation
1.9. Limitation
The study has several potential limitations:
-

The study was conducted only with 2 branches and may not representative of
the bank;

4


-

The questionnaire and survey was answered by officers and manager in 2
branches: Hanoi branch and Dong Da branch, so their perceptions

may or

may not reflect the actual situation.
-

The other possible limitation of the study may be that the indicators in the
questionnaire and survey are not easy to understand for some respondents, so
the answers might be not correct.


5


CHAPTER 1. LITERATURE REVIEW
1.1. Performance measurement
Performance measures or indicators are measurable characteristics of products, services,
processes and operations which the company uses to track and improve performance. The
goal of making measurement permits managers to see their company more clearly, from
many perspectives, and hences to make wiser long-term decisions (Arveson, 1998).
1.1.1. The importance of performance measurement
Performance metrics play a crucial role in four of the most significant leadership
activities: Reporting, Making decision, Implementing strategy, Improving performance.
1.1.2. Performance measurement classification
Performance measures can be put into the following categories: Qualitative or subjective;
Quantitative or objective; Attribute; Variable or continuously variable
1.1.3. Performance measurement levels
There are 3 levels of performance measurement: individual, unit/team and organizational
level.
1.1.4. Performance measurement models
Introduce some models in performance measurement: traditional model, total quality
management, performance prism, service quality model.
1.1.5. Deciding the right metrics
The author introduced three different models to be used in specifying the measures that
matter the most: logic model, process flow, causal analysis.
1.2. Balanced Scorecard Model
The Balanced Scorecard is a system in which the procedure of applying it is a critical
part of it. Some measures may give real picture about the performance of the
company. If they have been designed by a team of planners without the contribution


6


of the different levels of business units and departments and without using the
scorecard as a mean of communication, cascading, and alignment, it would give the
same results of any traditional performance measurement model. "Much of the
success of the scorecard depends on how the measures are agreed, the way they are
implemented and how they are acted upon. So the process of designing the scorecard
is just as important as the scorecard itself" (Bourne, 2002: p. 12).
Financial perspectives
Are we meeting the expectations of our
Shareholder?

Internal Process Perspective
Are we doing the right things?
And doing things right?

Customer Perspective
Are we delighting ( or at least
satisfying) our customers?

Learning and growth Perspective
Are we prepared for the future?

1.2.1. Financial perspective
Financial performance measures indicate whether a company’s strategy,
implementation and execution are contributing to bottom-line improvement" (Kaplan,
1996a: p.25).
1.2.2. Customer perspective
In the customer perspective of the balanced scorecard, managers identify the customer

and market segments in which the business unit will compete and the measures of the
business unit's performance in these targeted segments. "This perspective typically
includes several core or generic measures of the successful outcomes from a wellformulated and –implemented strategy
1.2.3. Internal Business Perspective

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In the Internal Process Perspective of the scorecard, we identified the key process at
which the organization must excel in order to continue adding value for customers. Our
task in this perspective is to identify those processes and develop the best possible
measures with which to track our progress
1.2.4. Learning & Growth Perspective
The question which Kaplan and Norton (1992) suggested to measure this perspective
is: Can we continue to improve and create value? Hence the targets for success keep
changing in an intense global competition, it requires that the companies make continual
improvements to their existing products and processes and have the ability to introduce
entirely new products with expanded capabilities
1.3. The balanced scorecard: measurement system
1.4. The balanced scorecard development
1.5. The balanced scorecard implementation

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CHAPTER 2. FINDINGS AND DEVELOPMENTS
2.1. Introduction about MSB
2.1.1. Establishment and development history
Maritime Bank (MSB) was formally established under the license number 0001/NH-GP
dated June 08, 1991 of the Governor of the State Bank of Vietnam. On July 12, 1991,

MSB officially opened and put into operation in Hai Phong port city, right after the
Ordinance on Commercial Banks, Credit establishment and Finance Corporation became
effective. At that time, the debates on joint stock bank model were still not settled but
MSB still became one of the first joint-stock commercial banks in Vietnam. It results
from the collective strength and consciousness of renewal of its founding shareholders
including: Vietnam Maritime Group, Vietnam Post and Telecommunication Corporation,
Department of Civil Aviation of Vietnam, etc
2.1.2. MSB’s Vision
Maritime Bank strives to be a leading commercial stock bank in providing professional
multi-financial services that meet the international standards.
With the commitment for sustainable development, Maritime Bank keens to become a
leading national commercial stock bank in modernizing, creation and faithfulness in
business operations
2.1.3. MSB’s Mission
The mission which MSB would like to bring to customers will consist of following:
firstly, to create effective relationship with financial group in main industries such as
maritime, telecommunication, aviation, investment, insurance, etc.; secondly, to maintain
sustainable development, trustworthy partner for small and medium business customers;
thirdly, to provide high quality banking services for all customers and finally, to build
effective partnership with international and domestic financial institutions
2.1.4. MSB’s Core values
There are four main core values that MSB build up: firstly, focus on satisfying customer
by service quality; secondly, gain effective results in all business operations; thirdly,
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learning and creating to reach perfectness and finally, cooperation and creditworthiness the motivation to success
2.1.5. MSB’s organization chart
2.2. Analysis of findings & developments
2.2.1. Findings

After interviewed with 8 manager of MSB, I had a result as below:
Order Question
1

Answer

Do you know the factors for annual Yes
performance measurement of MSB’s
branches? If yes, please tell.

2

No

#:08
%:100%

Do they align with MSB’s business Yes

No

target and MSB’s branches?
With MSB’s business target

#:

08

%:
With MSB’s branches


01 #:

#:
%:

3

100%

12.5%

Can they reflect all about operations Yes
and development of the branches?

%:

What

are

the

strengths

#:

and Strengths

weaknesses of current factors?


Enough

10

87.5%

No

%:
4

07

08
100%

Weaknesses
financial Lack of non-


factors

financial
factors,
processes,
etc.

5


What are needed to adjust?

Need to add other
non-financial
factors

6

Do you know Balanced Scorecard Yes
system?

#:
%:

7

8

No

What is your idea about this system?

What is the most important factor?

08
100%

Bad: 0

0%


Good: 3

37.5%

Very Good: 5

62.5%

Financial: 0

0%

Customer: 0

0%

Learning

and 0%

Growth: 0
Internal Process: 0

0%

All: 8
100%
9


Can it be applied to performance Not sure: 1
measurement in MSB?

Yes: 7

11

14.3%
85.7%


10

Other comments

- Apply BSC in branches as pilot to
reflect more reality;
- Improve another performance
measurement.

2.2.2. Developments
Based on literature and comments of manager, I conducted a table of criteria by applying
BSC model:
Variables
Customer
Perspective

ID

Indicators


1

The number of new and active accounts

2

The number of new and active Master cards

3

The number of customer complaint cases

4

The number of products per customer

5

The customer profit per product meet the target as planned

6

The average time between the two purchases of the same
customer

7

The level of customer satisfaction (refer to the data in
Marketing Department)


Internal

8

The number of transactions per customer

9

The total operating income per customer

10

The average number of non-compliance issues that are

Process
Perspective

identified by Compliance Department
11

The new proposals/policies/procedures are approved in time
as planned

12

The number of customer complaint cases on the time and
quality of service delivery

13


The percentage of compliance with internal SLA (Service
Level Agreement) (refer to Quality Department results)
12


14

The new programs/campaigns are introduced in time as
planned

15

The bank responds to the customer's complaints on the first
contact

16

The procedures of affording the newly created services and
products are fast

17

The bank introduces the products/services to the market at
suitable time

18

Using the new technology does not cause any in the cost and
price of the service


19

passed test result ratio is above (%)

Learning and
Growth

The training program is implemented as planned with the

20

The staff satisfaction ratio (refer to the survey result
conducted by HR Department)

Perspective
21

The staff turnover ratios meet the target as planned

22

The staff retention ratio meet the target as planned

23

The A (excellent) ranking staff ratio (refer to the data in HR
Department)

24


The ratio of staff satisfaction with the personal goal
achievement

25

The Research and Development expense

26

The number of ethics violation cases

Financial

27

Deposits meet the target as planned

Perspective

28

Credits meet the target as planned

29

The non-performing loan (bucket 3-5) meet the target as
planned

30


The income before tax meet the target as planned

31

The cost meet the target as planned

32

The earning per share

33

The growth in sales revenue

13


34

The return on investment

35

The revenue per employee

36

The return on equity


2.3. Finding summarization
2.3.1. General review
By using SPSS in analyzing the reliability of collected data, I had Cronbach’s Alpha over
0.7 per each perspective. Over 0.7 is acceptable.
2.3.2. Perspectives review
I had reviews each perspectives, analyzed data to find out 5 of each for new performance
measurement set.

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CHAPTER 3. RECOMMENDATION
3.1.Key results
The research is one of the academic studies on the practical topic: performance
measurement. The real indicators using Balanced Scorecard perception have been put in
the survey to find out the relevant with MSB’s branches. MSB can modify the indicators
basing on the result of the research to drive the operation of the bank to align with the
strategy.
The research has achieved the goals of analyzing the 4 perspectives of Balanced
Scorecard via the MSB’s branches case study as well as explaining the main factors
affect to the performance of the bank.
Firstly, the research has gone through the theory of performance measurement and
Balanced Scorecard standards, a typical example for practice.
Secondly, the research explained the 4 perspectives of the Balanced Scorecard and the
process of applying Balanced Scorecard for an institution.
Finally, the results of survey conducted by the author in MSB’s branch were analyzed to
find out the important indicators that strongly support the 4 perspectives in order to
effectively measure the performance of the bank.
3.2.Recommendation
3.2.1.BSC Performance measurement

Based on finding summarization above, for each perspective I collected 5 factors with
highest mean to make suggested BSC performance measurement for 2 pilot branches of
MSB as table following:

15


Perspective
Customer

ID

Indicators

1

The number of new and active accounts

2

The number of new and active Master card

3

The number of customer complaint cases

4

The customer profit per product meet the target as planned


5

The average time between the two purchases of the same
customer

Internal

6

The new proposals/policies/procedures are approved in time as
planned

Process
7

The new programs/campaigns are introduced in time as planned

8

The bank responds to the customer's complaints on the first
contact

9

The bank introduces the products/services to the market at
suitable time

10

Using the new technology does not cause any in the cost and

price of the service

Learning

11

passed test result ratio is above (%)

and
Growth

The training program is implemented as planned with the

12

The staff satisfaction ratio (refer to the survey result conducted
by HR department)

Financial

13

The staff turnover ratios meet the target as planned

14

The staff retention ratio meet the target as planned

15


The Research and Development expense

16

Deposits meet the target as planned

17

Credits meet the target as planned

18

The non-performing loan (bucket 3-5) meet the target as
planned

19

The income before tax meet the target as planned

20

The growth in sales revenue

21

The return on equity

16



3.2.2. Recommendation
a. Location
This performance assessment should be done in 2 branches which did this research:
Hanoi and Dong Da branch, because now 2 branches have awareness about Balance
Scored Card, so it will be easier to do.
b. Who:
Because this is organizational level, so this performance measurement must be done by
Branch Managers and approved by CEO.
c. When:
I recommend this performance measurement should be assessed 2 periods: after 6 month
and annually as MSB.
After pilot in 2 branches, author and Performance Department of HR and Finance
Division have revised. If the result is better than current performance measurement, I will
recommend MSB to apply in the whole system.
Evaluation of result should be based on satisfaction of members in branches (via survey)
with at least 80% of them agrees with the new result.
d. Where:
Data of this performance measurement should be supported and imputed from:
-

Branch Managers;

-

Financial data: Performance Management Department in Finance Division;

-

Learning and Growth data: from Human Resource Division;


-

Internal data: from Legal Division;

-

Customer data: from Business Analysis and Quality Management Department.

e. Preparation
-

Propose to Board of Directors to get approval in applying new performance

management pilot in 2 branches;

17


-

Build process to apply new performance measurement by applying BSC model.

Ranking of new performance measurement will have 5 levels as current: A1 (Excellent),
A2 (Good), A3 (Fair), A4 (Need to improve), A5 (Not good).
f. Implementation
- Communicate with branches and guide on the new performance measurement to

ensure they understand that. It would be easier, when all the staff in branches had done
the survey before;
- Consolidate data and report as planned;

- Pilot branches will do 2 assessments: new and current performance.

g. Evaluation
Compare with current performance management based on these factors to evaluate which
is better, scale from 1-5:
+ Voice and satisfaction of employees about new and current performance assessment;
+ Voice and satisfaction of managers about new and current;
+ Adjusting question after having result above.

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