Developing indicators for measuring performance of Vietnamese construction enterprises

829 International Conference on Finance, Accounting and Auditing (ICFAA 2018) November 23rd, 2018 Hanoi City, Vietnam Developing Indicators for Measuring Performance of Vietnamese Construction Enterprises Le Hong Nhunga, aSao Nam Joint Stock Company Submission day: 30/10/2018 Review day: 10/11/2018 Acceptance day: 15/11/2018 Abstract The study highlights some of the characteristics of the Vietnamese construction industry, and is an extremely important role for the national economy. Some industry characteristics affect the performance measurement system of a construction business. 50 indicators are included in the theoretical model of performance indicators of Vietnamese construction firms. Following in-depth interviews, 28 indicators were selected from 50 indicators. Quantitative analysis of the reliability of these 28 variables by Cronbach's alpha test showed that only 23 variables were satisfied. Based on the results of the study, the author provide recommendations for Vietnamese construction firms, shareholders, investors, state management agencies, universities and training institutions Keywords: Efficiency, Vietnamese construction enterprises 1. Introduction In Vietnam, there is no model to present a system of performance measurement indicators for building enterprises. Evaluating the necessity of indicators in the metrics system for each group of enterprises of different sizes is the case that previous studies have not yet been conducted. A number of studies have dealt with the impact of the use of performance measurement systems but no studies have been conducted in the building industry. Furthermore, there have been no studies to assess the impact of using measurement measures when making management decisions on the performance of Vietnamese enterprises. The objective of this study was to find a set of indicators, a performance indicator system, of Vietnamese building enterprises on the basis of the indicators mentioned in the 830 previous studies. The characteristic of this study is that it is not based on a particular theoretical model but rather the synthesis of several theories of performance measurement: BSC theory model, EFQM theory model, KPIS theory model for building enterprises. From these major theoretical models, specific studies for building enterprises around the world and Vietnam have been developed. In fact, these theories have been put into applied research in the building industry because their usefulness has been demonstrated by previous studies. Moreover, indicators included in these study are not included in a particular study or theoretical model but they have been synthesized and chosen from various studies on the indicator system of building enterprises in the world and in Viet Nam. 50 indicators are included, including 11 financial indicators and 39 non-financial indicators. 2. Data collection on performance measurement’s indicators Data collection is realized in two steps: personal interviews and extensive survey through questionnaire. In the first place, 43 experts were interviewed. They had to complete a questionnaire, named “Expert Personal Questionnaire” to test the necessity of the indicators given in the original theoretical model. If one indicator is considered necessary by more than 50% of expert, it will be retained in the performance measurement system. A total of 1,500 questionnaires were sent to VCCI member companies in order to collect data on indicators that have been retained by the experts after the interview. 3. Analysis of data on performance measurement’s indicators system After the collection of the “Expert Personal Questionnaire”, 28 indicators have been retained. Table 1: 28 indicators encoded Biến Indicator CT1 Percentage of satisfied customers in terms of quality of works CT2 Percentage of satisfied customers in term of the price of the works CT3 Percentage of satisfied customers on time of handover of works CT4 Percentage of satisfied customers about service attitude CT5 Percentage of regular customers CT6 Overall satisfaction of customers CT7 Percentage of handover on time CT8 The number of methods, innovations, inventions, patents applied in construction CT9 Percentage of delay in handover CT10 Troubleshooting time (repairs damaged) CT11 Quality of construction works CT12 The percentage of works to be repaired (calculated according to the number of works) CT13 Number of fatal accidents in a year 831 Biến Indicator CT14 Numbers of times reminded by the Labor Department in a year CT15 Number of incidents causing damage to public works CT16 Number of times injured accidents in a year CT17 Average productivity CT18 The rate of employees trained annually CT19 Percentage of employees attending training courses on new construction techniques CT20 Proportion of supervised buildings with certificates CT21 The ability to quick payment CT22 Quick ratio CT23 Current ratio CT24 Debt ratio CT25 ROI CT26 ROA CT27 ROE CT28 Gross profit margin Then the following steps has been performed: Verify the quality of the scale (factor) by using the Cronbach's Alpha test for the sum of the variables; Valuation of variables, introducing new aspects of the performance measurement system by Exploratory Factor Analysis (EFA); Reassess the reliability of the scale in each aspect as found; Identify differences in indicators between different size groups of the ANOVA and Kruskal-Wallis non-parametric tests. Table 2: Results Analysis of variance (ANOVA) a Model Sum of Squares Df Mean Square F Sig. 1 Regression 189,113 6 31,519 77,449 0,000b Residual 98,078 241 0,407 Total 287,191 247 a. Dependent Variable: HQHĐ b. Predictors: (Constant), ĐGKHAD, QTNBAD, ATLĐAD, ĐTPTAD, KNTTAD, KNSLAD It is possible to generalize the relationship between the performance of an enterprise and the level of use of the performance measurement system as follows: HQHĐ = 0,362 + 0,192*ĐGKHAD + 0,185*QTNBAD + 0,159*ATLĐAD +0,137*ĐTPTAD + 0,112*KNTTAD + 0,295*KNSLAD 832 In Table 2, with Sig. <0.001, it can be concluded that the model given corresponds to the actual data or in other words, the independent variables have a linear correlation with the dependent variable with confidence level 99 %. Data processing affects the application of the performance metrics system to performance Following in-depth interviews with experts, the six indicators assessed by experts as the most important were used to examine the performance of building enterprises. From the questionnaire survey of 28 questions on the use of 28 indicators of performance measurement when making management decisions, we only use data from 23 indicators in six dimensions to perform the analysis in the following steps: Reassess the value of independent and dependent variables by analyzing the EFA discovery factor; test the reliability of the scale in each aspect as found; model testing by multiple regression analysis. Examine the EFA discovery factor for 23 separations into six aspects. Continuing analysis of ANOVA, Kruskal-Wallis has shown the difference in the system of performance measures by capital size. Following in-depth interviews to determine the relationship between the use of performance metrics and business performance, continue analyzing the EFA and Cronbach's alpha discovery factor for the dataset for applying indicators in the performance measurement system when making management decisions. Table 3: The System of Indicators for Measuring Performance of Vietnamese Construction Enterprises No Aspects Indicators 1 Evaluation of Customers Percentage of satisfied customers in terms of quality of works Percentage of satisfied customers in term of the price of the works Percentage of satisfied customers on time of handover of works Percentage of satisfied customers about service attitude 2 Internal Process The number of methods, innovations, inventions, patents applied in construction Percentage of delay in handover Troubleshooting time (repairs damaged) Quality of construction works The percentage of works to be repaired (calculated according to the number of works) 3 Labor Safety Number of fatal accidents in a year Numbers of times reminded by the Labor Department in a year Number of incidents causing damage to public works Average productivity The rate of employees trained annually 833 No Aspects Indicators 4 Training and Development Percentage of employees attending training courses on new construction techniques Proportion of supervised buildings with certificates 5 Liquidity Quick ratio Current ratio Debt ratio 6 Profitability ROI ROA ROE Gross profit margin 4. Recommendations 4.1. Recommended for construction enterprises Recommendations are made from the perception of indicators in the new performance measurement system for each employee to use and evaluate these indicators. The next step is to maintain and develop a set of measurement criteria suitable for each enterprise to achieve higher efficiency 4.2. Recommendations for other organizations Recommendations for investors, shareholders: Shareholders should rely on the results of the measurement system to make proper and reasonable investment decisions. 4.3. Recommendations for state management agencies The management agencies should put the indicator system into the enterprise report as a basis for assessing and rewarding enterprises. At the same time, it is necessary to jointly organize training courses and disseminate the system of indicators to enterprises. Recommendations for other organizations Schools and training institutions should include this indicator system for performance measurement. The construction and accounting consultancy organizations can consult the indicator system for construction enterprises. Business associations may also apply this indicator system to the assessment, comparison and ranking of enterprises. 5. Research’s limitations 248 samples are not small but not really big for the construction industry. Data collection has not reached a high level of feedback, the indicators of the system have not been fully measured and the indicators for listed companies have not been fully considered. These restrictions open up research directions for the measurement system of listed companies, general firms and other businesses. 834 6. Conclusions The context of the Vietnamese construction industry with the role and characteristics of the existing construction enterprises affects the performance measurement system of Vietnamese construction enterprises. The study highlights some of the characteristics of the Vietnamese construction industry, and is an extremely important role for the national economy. Following in-depth interviews, 28 indicators were selected from 50 indicators. Quantitative analysis of the reliability of these 28 variables by Cronbach's alpha test showed that only 23 variables were satisfied. Based on the results of the study, the authors provide recommendations for Vietnamese construction firms, shareholders, investors, state management agencies, universities and training institutions. Limitations of the study were also given, suggesting future research directions. 7. Reference Adams, C. and Roberts, P. (1993). “You are what you measure”, Sterling Publications, London, UK. Alarcon, L. 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