Measuring and Improving Strategic Performance of Contractors
- Alternative Title
- 건설계약자들의 전략적 수행을 위한
- Abstract
- The current business environment in construction is characterized by fast change and severe competition. This research reports on the design, implementation and evaluation of a dynamic performance measurement framework, as an attempt to better match the business environment. System dynamics (SD) and Balanced Scorecard (BSC) is integrated to meet research objectives. The development of a dynamic BSC (DBSC) is a logical extension to the Balanced Scorecard to address above problems.
The major objective of this research is to describe how the BSC and Strength-Weakness-Opportunity-Thread (SWOT) matrix can be used to formulate the business strategies and to measure the strategic performance of construction. Angiang Construction Enterprise (ACE) is selected as a case study to measure the strategic performance. An applicable simulation model of a construction enterprise was built using system dynamics methodology. The DBSC model was calibrated to a construction enterprise to measure the strategic performance and to formulate and evaluate practical policies to improve its performance. In order to considerably improve performance, some integrated policies combining the separate policies having the most effects were evaluated.
This research reveals that the DBSC model should be considered as a promising tool for the construction enterprise to experiment with the effects of its strategies and policies prior to implementing them in the real project. This also proves that the integration between SD and BSC has enormous potentials in the performance measurement of construction organizations.
The findings imply that the low training frequency of human resource and high proportion of direct costs and administrative expenses to turnover are generally “Achilles’ heel” of medium-sized construction enterprises in Vietnam and very likely in other developing countries. The findings from this case study provide valuable lessons for practitioners in the application of new management frameworks (i.e. BSC and SWOT) in managing their strategic performance in other developing countries and region. The integration of BSC approach and SWOT analysis can help medium-sized construction enterprises in developing countries identify short-term objectives and long-term strategies, establish the performance measurement.
As the Asian saying goes, “to know oneself is true progress”. Therefore, based on the research findings, Korean construction firms can gain insights into Vietnamese construction firms. As a result, thorough understanding of competitors in Vietnam is the best way so that Korean construction firms can win construction contracts in Vietnam. For that reason, the research findings are very useful for Korean construction industry. Since a medium construction firm from a country to the other country may have the same principles to formulate their strategies, the research framework and the model in this study can be applied to medium construction firms in Korea with minor adjustment. For those reasons, this study is useful not only to practitioners, researchers, and clients in Vietnam but also to those in Korea.
- Issued Date
- 2009
- Awarded Date
- 2009. 2
- Type
- Dissertation
- Publisher
- 부경대학교 대학원
- Affiliation
- 부경대학교 대학원
- Department
- 대학원 건설관리공학협동과정
- Advisor
- 김수용
- Table Of Contents
- CHAPTER 1 INTRODUCTION = 1
1.1 Background of the study = 1
1.2 Problem statement = 2
1.3 Objectives of the study = 4
1.4 Scope of work = 5
1.5 Expected contribution = 6
1.6 Expected contribution to Korea Construction Industry = 7
CHAPTER 2 LITERATURE REVIEW = 8
2.1 General = 8
2.2 Characteristics of construction industry = 8
2.3 Strategic performance of organizations = 9
2.3.1 Definition of performance measurement = 9
2.3.2 Background to strategic performance measurement = 11
2.3.3 The evolution of modern performance measurement = 12
2.3.4 Balance Scorecard (BSC) = 25
2.4 Previous studies on organizational performance measurement in the construction industry = 29
2.5 System thinking and system dynamics = 32
2.5.1 System thinking = 32
2.5.2 Systems thinking techniques = 35
2.5.3 Systems dynamics (SD) = 35
2.5.4 System dynamics models = 39
2.6 Applications of system dynamics in management = 40
2.6.1 The roles of system dynamics = 41
2.6.2 System dynamics in performance measurement = 42
2.6.3 System Dynamics in construction management = 45
CHAPTER 3 RESEARCH METHODOLOGY = 48
3.1 General = 48
3.2 Research method framework = 48
3.3 Stage 1: Developing the performance measurement system using the BSC approach = 50
3.3.1 Enterprise strategy formulation = 50
3.3.2 KPIs identification = 52
3.3.3 KPIs validation = 53
3.3.4 The strategic performance measurement and evaluation = 53
3.4 Stage 2: Developing a dynamic-BSC (DBSC) model using the SD approach = 55
3.4.1 Principles of system dynamics modeling = 55
3.4.2 System dynamics modeling process = 56
3.4.3 Research methodology for stage 2 = 58
3.4.4 System dynamics modeling = 58
3.4.5 Model testing = 65
3.4.6 Policy design and evaluation = 65
3.5 Tools for the research = 65
CHAPTER 4 ENTERPRISE STRATEGY FORMULATION = 67
4.1 General = 67
4.2 Brief overview of the Vietnamese construction market (VCM) = 67
4.3 Analyzing internal environment of the enterprise = 69
4.3.1 Introduction to An Giang Construction Company (ACC) and AnGiang Construction Enterprise (ACE) = 69
4.3.2 Financial performance analysis = 76
4.3.3 Human resource analysis = 76
4.3.4 Current performance measurement analysis = 78
4.3.5 Procurement management analysis = 78
4.3.6 Construction site management analysis = 79
4.3.7 Tender activity analysis = 79
4.3.8 Organizational culture analysis = 80
4.3.9 Summary of strengths and weaknesses of ACE = 80
4.4 Analyzing external environment of the enterprise = 82
4.4.1 Integrating Vietnam economy into the global economy = 82
4.4.2 Legislation factor = 83
4.4.3 Macroeconomics analysis = 85
4.4.4 Impact of foreign direct investment (FDI) to the Vietnamese construction market (VCM) = 88
4.4.5 Summary of opportunities and threats of ACE = 89
4.5 SWOT matrix of ACE = 92
4.6 Determining the ACE’s vision and strategies = 97
CHAPTER 5 KPI DEVELOPMENT AND KPI IMPLEMENTATION = 99
5.1 General = 99
5.2 Developing KPIs = 99
5.2.1 Translating the enterprise strategies based on 4 perspectives of the BSC concept = 100
5.2.2 Developing preliminary KPIs corresponding to each perspective = 102
5.2.3 KPI validation = 103
5.2.4 Developing an enterprise strategic map = 108
5.3 Computing KPI weighting = 116
5.4 Data collection on the ACE strategic performance = 124
5.4.1 Preparing data collection = 125
5.4.2 KPI data collection = 126
5.5 KPI evaluation = 131
5.6 The enterprise performance analysis = 138
5.6.1 Performance scale = 138
5.6.2 The performance scale computation = 138
5.7 Discussion on the enterprise performance = 146
5.7.1 Discussion on results of the performance scale computation = 147
5.7.2 Discussion on cause-and-effect relationship among KPIs = 148
CHAPTER 6 DEVELOPING THE DYNAMIC BSC (DBSC) MODEL = 152
6.1 General = 152
6.2 Reference modes = 152
6.2.1 Profit margin percentage (PMP) = 153
6.2.2 The proportion of interest to profit after tax = 153
6.2.3 Turnover = 154
6.2.4 Profit after tax = 155
6.3 Key feedback structures of the strategic performance of construction enterprises = 157
6.3.1 Investment in R&D = 157
6.3.2 Investment in machinery = 158
6.3.3 Investment in employee training = 159
6.3.4 Quality-customer satisfaction factor-investment in R&D = 159
6.3.5 Quality-customer satisfaction factor-investment in machinery = 160
6.3.6 Quality-customer satisfaction factor-investment in employee training = 161
6.3.7 Competitor-goodwill-investment in R&D = 161
6.3.8 Competitor-goodwill-investment in machinery = 162
6.3.9 Competitor-goodwill-investment in employee training = 163
6.3.10 Quality-customer satisfaction factor-costs-investment in R&D = 163
6.3.11 Quality-customer satisfaction factor-costs-investment in machinery = 164
6.3.12 Quality-customer satisfaction factor-costs-investment in employee training = 165
6.4 Model boundary = 165
6.5 Model Structure = 169
6.5.1 Causal loop diagram of the DBSC model = 169
6.5.2 Stock-and-flow diagram of the DBSC model = 171
CHAPTER 7 DBSC MODEL TESTING = 177
7.1 General = 177
7.2 Model behavior = 177
7.2.1 Introduction = 177
7.2.2 The construction market in Angiang and market share = 178
7.2.3 Profit after tax = 179
7.2.4 Turnover = 180
7.2.5 Goodwill = 181
7.2.6 Efficient level of the whole operation = 182
7.2.7 Costs = 184
7.2.8 Profit margin percentage = 186
7.2.9 Summary of model behavior = 187
7.3 Model testing = 188
7.3.1 Boundary adequacy tests = 189
7.3.2 Structure assessment tests = 189
7.3.3 Dimensional consistency = 189
7.3.4 Parameter assessment = 190
7.3.5 Extreme condition tests = 191
7.3.6 Integration error tests = 193
7.3.7 Behavior reproduction tests = 194
7.3.8 Sensitivity analysis tests = 196
7.3.9 Model testing summary = 197
CHAPTER 8 POLICY ANALYSIS = 198
8.1 General = 198
8.2 Implications of the base run and the enterprise practice = 198
8.2.1 Construction market and market share = 198
8.2.2 Growth rate of turnover = 199
8.2.3 Proportion of direct costs to turnover = 200
8.2.4 Proportion of administrative expenses to turnover = 201
8.2.5 Cost reduction rate = 202
8.2.6 Investments in R&D, machinery and training = 202
8.2.7 Interest rate, loan rate and inflation = 202
8.3 Policy alternatives = 203
8.3.1 Adjustments of the construction site performance = 204
8.3.2 Adjustments of investments in machinery, R&D and training = 206
8.3.3 Adjustments of maximum rate of reduction = 207
8.3.4 Summary of the policy alternatives = 209
8.4 Policy evaluation = 210
8.4.1 Evaluation of separate policies = 210
8.4.2 Evaluation for integrated policies = 217
8.5 Scenario analysis = 221
8.6 Summary of the chapter = 229
CHAPTER 9. CONCLUSIONS AND RECOMMENDATIONS = 231
9.1 Summary of research execution = 231
9.2 General conclusions = 232
9.3 KPIs for performance measurement system of the construction enterprise = 233
9.4 The strategic performance analysis = 234
9.5 Major findings and discussion about the DBSC model = 235
9.5.1 The reliable level of the DBSC model = 235
9.5.2 The dynamics of interaction between improvements in the enterprise operation and turnover = 236
9.5.3 Feedback structures in construction enterprises = 236
9.5.4 Policies for improvement in performance of the enterprise investigated = 237
9.6 Contributions of the study = 238
9.6.1 Lessons learned for Vietnam Construction Industry = 238
9.6.2 Lessons learned for Korea Construction Industry = 240
9.6.3 DBSC model - a promising tool for construction enterprises = 241
9.7 Limitations of the study = 242
9.7.1 Limitations of the performance measurement system = 242
9.7.2 Limitations of the DBSC model = 242
9.8 Recommendations for future research = 243
REFERENCE = 245
APPENDIX = 267
APPENDIX 1 QUESTIONNAIRE 1 (Investigation into factors affecting the strategic performance of medium construction firms) = 267
APPENDIX 2 Questionnaire 2 (Investigation into degree of importance of KPIs for strategic performance of ACE) = 272
APPENDIX 3 WEIGHT RESULT OF KPIs = 276
APPENDIX 4 KPIs DATA COLLECTION FORM = 281
APPENDIX 5 COMPLETED PERFORMANCE EVALUATION FORM = 288
APPENDIX 6 THE EQUATIONS OF THE DBSC MODEL AND THEIR PARAMETERS = 292
CURRICULUM VITAE = 303
- Degree
- Doctor
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