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 TIEU LUAN MOI download : skknchat@gmail.com 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 TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENT ACKNOWLEDGEMENT. ii LIST OF FIGURES. xii LIST OF ABBREVIATIONS.
Necessity of the thesis. Research aim and objectives. Scope of the research. Significance of the research.
5 CHAPTER 1: OVERVIEW OF CORPORATE DIAGNOSTIC AND MODELS .1 Corporate diagnostic overview .1 Corporate diagnostic definition .2 Why a corporate diagnostic is so important .2 Corporate diagnostic process .3 Corporate diagnostic models .2 Models of consulting firms. 24 CHAPTER 2: ANALYSIS ON F&P DEPARTMENT’S OPERATION OF VINACONEX. Overview of F&P Department-Vinaconex .1 Overview of Vinaconex .2 Overall of Vinaconex F&P. Analysis on F&P’s operations.
32 x TIEU LUAN MOI download : skknchat@gmail. 72 CHAPTER 3: RECOMMENDATIONS TO IMPROVE F&P’S OPERATIONS 75 3. Recommendations of strategy, organization structure, human resources and process. Top 15 Activity Prioritisation.
99 xi TIEU LUAN MOI download : skknchat@gmail.com 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.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 TIEU LUAN MOI download : skknchat@gmail.com 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 TIEU LUAN MOI download : skknchat@gmail. 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 TIEU LUAN MOI download : skknchat@gmail.com 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. 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. 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 TIEU LUAN MOI download : skknchat@gmail.com • 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. 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 TIEU LUAN MOI download : skknchat@gmail.com • 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). 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 TIEU LUAN MOI download : skknchat@gmail.com • Other researchers such as professionals, MBA’s candidates and students who look for a methodology to improve enterprise’s operation. 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 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 1: OVERVIEW OF CORPORATE DIAGNOSTIC AND MODELS 1.1 Corporate diagnostic overview 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. 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.