Académique Documents
Professionnel Documents
Culture Documents
0 Introduction
can evaluate whether the performance met the pre-set budgets, objectives, and goals
of the company. In this group project, a report is written is to study and evaluate the
Our group has selected Chia Theng Enterprise from manufacturing industry to
study the performance measurement system of the company. Since the company is
located at Perlis, we are only able to conduct phone interview with Ms. Lim Hei Hun
and Mr. Cheah Chi Hua, the Directors of the company. Through the phone interview,
our group has collected useful information about the performance measurement
system of the company. We also obtained extra information needed from the directors
through e-mail.
Perlis. The company is established in 2005 under the company name of Bentat
Enterprise Sdn. Bhd. In 2013, the company changed its name to Chia Theng
by delivering quality products and services to customers. To achieve this goal, the
become the manufacturer and supplier of high quality wooden and other related
products, provide the best service and support to its customers, promote a stable
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environment for the employees, and respect the environment and community in which
products such as door, window, door frame, window frame, furniture, suspended
ceiling, and aluminum for door and window. The main product of Chia Theng
Enterprise is wooden door. The company provides its products to various project sites
located at Terengganu, Kelantan, Perak, Kuala Lumpur and so on. Besides, the
The directors of the company have almost 30-years working experience in this sector
follows:
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Organisation Chart of Chia Theng Enterprise
Director Director
Managing Director
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Revenue Reported
that a manufacturing company can apply, we use balance scorecard (BSC) as our
reference to conduct the interview with the both directors, Mr Cheah and Mrs Lim of
Chia Theng Enterprise. The BSC is used in this interview because it provides a
The measurement of BSC is started with learning and growth perspective, continued
There are three non-financial aspects in the performance measurement system of Chia
satisfaction.
derived from business processes, decisions made, and activities carried out within a
company. Managers need to focus on the critical internal operations which enable
them to satisfy the customers’ needs. The key question for internal processes is to
identify the business processes that impact customer satisfaction the most.
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2.1.1.1 Current Performance Measurement System
Currently, there are six departments in Chia Theng Enterprise which are
Every department has its own head of department. According to Ms. Lim, there are
several processes in producing a wooden door. The sawn timber is cut into size or
size-panel. For the sawn timber which cut into size, it is ready for door installation.
On the other hand, the sawn timber cut into size-panel will be sent for panel
lamination in the next process. Then, it is ready for door installation. In each
production department, the department head will randomly check on the products
before they are being sent for further processes. The department head will do
inspection before sending the products to the next department. It is to ensure that the
products are processed well in each production stage. The inspection conducted by
department head can effectively reduce the defective products of the company.
2.1.2 Employees
“Without any employee, you have no business.” It means that the employee
is needed.
and foreign employees. The salaries of local and foreign employees are different. For
local experienced employees, the company will pay RM 180 per day whereas for
foreign employees with less experience, the company will pay RM35 to 45 per day.
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The working days of the company is from Monday to Saturday, and working hours is
from 8.30 a.m. to 5.30 p.m.. For the build-in-employees which always need to work
for longer time due to the additional customer needs, the company will give overtime
wages to them.
Besides that, the company uses an advanced technology which is finger pad
in order to ensure the punctuality of the employees. Since each employee has unique
fingerprints, cheating on the check-in time can be prevented. Other than that, it is
easier for the managers to identify which employee is always absent or late for work.
Chia Theng Enterprise uses the key performance indicators (KPI) to evaluate
the performance of employees. The KPI in this company is the employees are
required to produce 60 wooden doors per day. When the employees are able to
achieve the KPI set by the company, it means they are performing well. On the other
hand, when the employees do not achieve the KPI, it shows that the employees are not
performing well. For those employees who do not achieve the KPI, Mr. Cheah will
conduct a short interview with them to find out the problems causing to delay of work.
and employees is very important. In Chia Theng Enterprise, the employees are given
the opportunities to express their opinions on how to improve their work performance.
When the managers consider the suggestions given by employees, the employees have
a sense of involvement in improving the company performance. They will feel that
they are in part of the company. Thus, the employees are satisfied and motivated to
work hard which in turn improve the efficiency in working. For example, when the
employees do not achieve the production target, Mr. Cheah will communicate and
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discuss with the employees to obtain feedback on the reasons which cause the
problem. The feedback from employees may be helpful to improve the company
business processes.
Chia Theng uses the mentor-mentee strategy to guide the new employees on
working to increase the employees’ capabilities. All the skills learned by new
employees are taught by the experienced employees, and the performance levels of
new employees are evaluated by the experienced employees. Hence, no extra training
course is provided for the employees. This strategy enables the company to save the
cost and time on providing outside training for the employees. Mentor-mentee
strategy is the internal training provided by the company for its employees. It means
that the employees are being trained when they are performing their jobs. Thus, the
Other than that, to increase the employees’ satisfaction towards the company,
Chia Theng Enterprise gives some fringe benefits for them. The company provides
health insurance to the employees because they are working in the production site
with many heavy woods, and it is dangerous for them to work there. Other than that,
the company also provides living accommodations to the foreign employees who
receive lower wages compared local employees. On other hand, Chia Theng
Enterprise gives bonus to appreciate the employees. Mr. Cheah will give bonus as
reward to his employees based on the performance of employees. For example, each
experienced employee is entitled to receive one to two month bonus. Mr. Cheah also
company to achieve good performance. For instance, he will buy cartons of drinks for
his employees during Hari Raya Haji. Other than that, annual dinner will be organised
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2.1.3 Customer Satisfaction
considering only one factor; the data can be collected from different areas, such as the
speed of service, efficiency when solving problems and ease of use regarding the
customer service platform. Not only will a business be able to find out how satisfied
their customers are with regards to customer service, but they will also be able to see
Based on the interview with the directors of Chia Theng Enterprise, there are
two types of customers in Chia Theng Enterprise which are walk-in customer and
products in smaller quantity. On the other hand, a project or tender that Chia Theng
Currently, Chia Theng Enterprise does not have any system to measure the
customer satisfaction. The company does have their own ways to retain the customer
such as giving discount for customers who buy their products in bulk and after-sales
services. However, in term of measuring the customer satisfaction, the company does
Financial plays a very crucial role in a company in order to measure the financial
scorecard. It can reflect the results of actions that already taken as it complements
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those financial measures with three sets of operational measures having to do with
customer satisfaction, internal processes, and the organization’s ability to learn and
improve the activities that drive future financial performance. It is very important for
a company to keep track of their financial data and meanwhile can implement the
can let the company to know well about their current financial status and assist them
computing the net profit. By computing net profit, it can reflect the total amount of
revenue left over after all the expenses and additional income streams are accounted
for. Normally, Chia Theng Enterprise will mark-up the price of the products which
are the doors in the range of 20%-30%.The net profit margin will reflect a company’s
However, they do not prepare a budget for the revenue expenditure. The
employees still need to control the cost involved in the production process. The
director of Chia Theng Enterprise will estimate the production cost based on their
experiences. For instance, they will estimate the number of timber and other
ingredients needed to produce 60 doors per day. The managing director will mainly
review the number of timber used for the production of doors on weekly basis. Their
raw material of the production is timber and it is the fundamental ingredient in the
in Chia Theng Enterprise weekly. On the other hand, managing directors will review
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the production costs involved monthly. These cost measurement is used to ensure the
production cost is always within the acceptable rate as they trace the cost
instantly.
Furthermore, at the end of each month, the account executive will prepare the
income statement of Chia Theng Enterprise by using standard costing method. The
fixed and variable cost is minus directly with the revenue to identify the profit earned
and understand. If Chia Theng Enterprise is not able to generate profit as expected,
the managing director has to give explanation to director and then they will conduct a
3.0 Evaluation
The reason for using this performance measurement for internal processes is to
make sure that the products are produced according to the standards set earlier. Hence,
the quality of the products is high and consistent. When the company sells good
quality products to its customers, the customers’ satisfaction towards the company’s
products will be maximised and they will loyal towards the company. Therefore, Chia
Theng Enterprise is very particular to make sure its products are always produced in
good quality.
is due to when the company managers monitor and evaluate the internal processes of
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the company, the internal processes can be improved. It is useful in reducing the
defective products of the company. According to Ms. Lim, the timbers purchased
from suppliers are very expensive. During the cutting process in production, the
wastage of timbers occurs. The wastage of timbers as raw materials will increase the
production. Since the establishment of Chia Theng Enterprise two years ago, there are
about ten machines in for the use of production. All machines used by the company
are very expensive whereby the price of machines reaches tens of thousands. Based
on explanation by Ms. Lim, the machines are still in good conditions and there is no
maintenance service until now. In the production environment, there are many
disruptions, such as machine breakdown, rush orders, and so on. Under these
the company is unable to meet customers’ demands on time. The company may lose
its customers since the customers may purchase products from other companies.
3.1.2 Employees
The reason of using KPI in Chia Theng Enterprise is to help the managers to
measure the performance of the employees. It is easier for the managers to review the
employees’ overall performance. By referring to KPI, the managers can evaluate the
is hard to identify. Furthermore, the company uses the overall KPI to give the reward
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for the employees. It is unfair for the employees since the job scope of each employee
Furthermore, KPI also can help Chia Theng Enterprise to measure the
employee capability. The employee capability is important for the company because it
will affect the company’s productivity. The skills and knowledge of employees are
important to the employees in achieving the production target given. Therefore, Chia
Theng Enterprise requires the senior employees to supervise and train the new
employees so that they have sufficient knowledge and skills in production. For
example, the senior employees will share their knowledge and experience to the new
employees on how to operate the machines and equipment, how to cut the woods
accurately and so on. The high employee capability smoothen the production process
as well as increase the productivity. However, the training provided by the company
is depending on the experienced employees. Therefore, the new employees are only
able to learn the limited skills. Besides that, experienced employees may be bias
system to measure the customer satisfaction. Firstly, Chia Theng Enterprise would
not be able to know whether the quality of products and services provided meet the
unable to know whether the customers are satisfied with the products purchased as
well as the services provided by the company. Failing to meet the customer
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requirements opens the door for the competitors in the same industry to serve the
customers even better than them and thus, the company tends to lose its customers.
reveal the area of problems that need to be improved. For example, if the customer is
unsatisfied with the product, there will be many reasons behind it. In order to identify
Enterprise is not able to specifically determine the problems regarding the products
and services that they need to improve because the company does not use any
It is quite surprise that Chia Theng Enterprise does not has budget for the
manufacturing process. They control the cost by using their past experiences. So, the
In fact, a budget can give a better a better financial planning and greater control
over the organisation’s expenditure. They are free to take actions for the unfavourable
variances. If the cost is too high, they might need to investigate the reasons of it in
order to ensure that there is no wastage of raw materials or can consider to change
supplier due to the higher price. It also acts as a benchmark for the performance
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Moreover, the budget can be regularly monitored and proper action can be taken
when it is needed. For example, the expenditure spends in the maintaining of machine
increase due to the increase of the operation hours. Then other expenditure will need
without any budget, it will be risky for their financial planning as it will tend to not be
accurate. This happens when some expenditures increase unexpectedly, it may distort
the estimation and make the management will confuse whether which part they can
4.0 Recommendations
To ensure the high quality of products, we recommend Chia Theng to use Total
measurement system tool that focuses on all stages of value chain in production which
is from receives raw materials from suppliers to transform them into outputs that are
delivered to customers. The steps required in carrying out the business processes are
the company in enhancing the products and thus, customer satisfaction on products
can be maximised.
machines to make sure the machines are functioning well. It is because the machines
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will affect the productivity of the company and the company must take precautions
Chia Theng Enterprise should do maintenance on the machines at least once a year.
technology because the current machines in use may not be enough for the company
to increase its productivity for business expansion in the future. For example, when
the company has machines with advanced technology, the company can produce high-
end products to fulfill the customers’ needs. According to professional market players,
high-end products are produced with high technologies. Thus, we recommend Chia
4.1.2 Employees
timesheet. Timesheet records all the jobs and tasks together with the duration of time
taken by each employee in performing them. By using the timesheet, the manager can
determine the performance level of employees and appropriate corrective actions can
be done when the employees do not perform well. Timesheet also can be used to give
reward for the employees who perform well. It can motivate the employees to perform
Theng Enterprise should provide the external training for the employees as well.
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to the employees which are useful in helping the business to catch up with the
advanced technology. Other than that, it enables the employees to gain extra
company can measure the performance level of the company by obtaining customer’s
feedback. Customer’s feedback needs to be seriously taken into consideration and act
upon reasonable requests. There are several ways that the company can gather the
distributing survey when the customer comes to their showroom, sending e-mail and
using phone calls. By gathering customer’s feedback, the customers can express their
essential for Chia Theng Enterprise in order to have a good financial planning. In fact,
budget is a detailed analysis of how a firm expects to spend money in future time
periods. Basically, it is based on the firm’s fiscal year and then broken down by
months.
With a budget, management can review it on a regular basis and adjust it when
needed as this will help the management to keep an accurate picture of the company’s
financial condition. Budget also can control how much money needed to spend on
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certain operations of job. Meanwhile, management can review the budgets prepared to
determine how well they followed the guidelines and why the budget variances
occurred. If the budget variance is higher than acceptable rate, then the management
will need investigate the causes and solves the problem. Thus, the budget is crucial for
the company as it can provide a financial roadmap for the business operation and
In addition, Chia Theng Enterprise can perform a trend analysis to evaluate the
financial health of the company. For instance, the account executive can compare the
financial data for the past two years by calculating and analysing the amount change
and percent change from year to year. Trend analysis can help a company to ensure
that there will has a gradual increase in the revenue growth by emphasizing cost
reduction.
the costs in the manufacturing stage of the product life-cycle by using the continuous
improvement & operational control. The company can also find the supplier that
provides the cheaper timber as this will help to reduce the cost of production. In fact,
targeted costing and Kaizen are strongly recommended to the company as it can
improve the overall product quality, reduce cost, increase customer satisfaction and
Besides that, the company is also recommended to use the financial ratio to
evaluate the performance of the firm’s business because each ratio provides the
factors such as the earning power, efficiency, solvency and debt load of the business.
The profitability ratios are suitable for the firms to evaluate the financial viability. Net
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profit margin can use to measure the percentage of sales revenue retained by the firm
after minus the operating expenses, interest and taxes. Return on equity provides the
amount of after- tax profit generated for each ringgit of equity. While, the return on
investment cost.
5.0 Conclusion
covers some aspects which are internal processes, employees, and financial aspects.
The company does not focus on other performance measurement aspects such as
customer satisfaction and company growth which are also essential in measuring the
BSC can act as a good performance measurement system for the company. It
business processes, customer satisfaction, and learning and innovation. Thus, BSC is
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When the performance measurement system is more accurate, the company
can determine whether the company’s performance is aligned with the strategies of
the company in order to achieve objectives and goals. Since Chia Theng Enterprise is
expanding its business gradually, it is beneficial for the company to use BSC to
potential as well as existing problems before they get into crises. After all, prevention
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References
Davidson, M. (2013, October 9). 28 Manufacturing metrics that actually matter: The
ones we rely on. LNS Research.
http://blog.lnsresearch.com/blog/bid/188295/28-Manufacturing-Metrics-that-
Actually-Matter-The-Ones-We-Rely-On. Accessed on November 25, 2015.
Wolk, A., Dholakia, A., & Kreitz, K. (2009). Building a performance measurement
system using data to accelerate social impact. International Standard Book
Number (ISBN) paper: 978-0-615 31022-0
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