Tài liệu Periodical review policy and procedure for the smooth operation

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ HOANG TUYET MAI PERIODICAL REVIEW POLICY AND PROCEDURE FOR THE SMOOTH OPERATION MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2019 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ HOANG TUYET MAI PERIODICAL REVIEW POLICY AND PROCEDURE FOR THE SMOOTH OPERATION MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR. LE THI THANH XUAN Ho Chi Minh City – Year 2019 Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 2 TABLE OF CONTENT EXECUTIVE SUMMARY ............................................................................................................... 4 ACKNOWLEDGEMENTS .............................................................................................................. 5 A. B. C. 1. 2. 3. D. 1. 2. 3. 4. 5. E. 1. 2. 3. 4. F. 1. 2. 3. G. INTRODUCTION....................................................................................................................... 6 BACKGROUND INFORMATION ........................................................................................... 7 SYMPTOM CONTEXT ........................................................................................................... 11 FINANCIAL STATEMENT ................................................................................................................ 11 ACCOUNTING DOCUMENTS ........................................................................................................... 12 WORK CONFLICTS AND UNSATISFIED EMPLOYEES ........................................................................ 14 PROBLEM IDENTIFICATION ............................................................................................. 16 Manpower cost ............................................................................................................................ 16 Material cost ................................................................................................................................ 18 Policy and procedure development ............................................................................................. 18 Problem definition and consequence ........................................................................................... 21 Initial effect map.......................................................................................................................... 24 CAUSE VALIDATION ............................................................................................................. 25 Problem during initial policy and procedure development of the division ................................. 25 Lack of periodical review, update of policy ................................................................................ 29 Updated cause and effect map ..................................................................................................... 31 Final cause and effect map .......................................................................................................... 33 SOLUTION ................................................................................................................................ 34 Improve analysis and research and enhance communication ...................................................... 34 Improve too general policy and procedure .................................................................................. 39 Periodical review, update of the policy ....................................................................................... 46 CONCLUSION ......................................................................................................................... 50 SUPPORTING DOCUMENTS ...................................................................................................... 51 1. 2. 3. 4. Literature review ....................................................................................................................... 51 Study method ............................................................................................................................. 53 Interview guide .......................................................................................................................... 53 Transcripts ................................................................................................................................. 55 ATTACHMENT .............................................................................................................................. 67 REFERENCE ................................................................................................................................... 76 Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 3 EXECUTIVE SUMMARY Policy and procedure is an important part of each company, it contributes to success of the company. Policy and procedure help the company work smoothly, it is the manual for every employees and through all departments. It is the guideline and the effective training for newcomers. Developing and implementing policy is a process of continuous improvement, there is never a moment because the company continues developing. Policy and procedure periodic review is as important as preparing period. The company with out of date policy and procedure is as no policy and procedure. The thesis focuses on researching the policy and procedure of the external division of AB Petroleum Company. From interviewing managers and employees as well as studying reports, policy and procedure of the division and the company, the author has found out serveral problems during the period of policy development of the Division as well as the lack of periodic review of the policy and procedure. Based on study literatures, researches as well as interview relating personnel, author has given solutions (i) the company should establish a preparing and reviewing team of policy and procedure to enhance communication as well as knowledge share during period of policy development and periodic review (ii) policy and procedure should be detailed to guide users from various departments (iii) set the procedure for periodic review of policy and procedure to always update changes to ensure adequacy and effectiveness. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 4 ACKNOWLEDGEMENTS I would like to acknowledge all who supported me during my study without whom I would not be where I am today. I would especially like to thank my supervisor – Dr. Le Thi Thanh Xuan and professors of ISB for all their advices and guidance. Without their help, this could not have been possible. I also would like to show my gratitude to my colleagues at work and classmates at ISB for their continuous supports. I also send my sincere thankfulness to my parents and friends for their support and encouragement. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 5 A. INTRODUCTION There are many challenges for organization when they want to expand their business. The organization needs to identify the appropriate organization structure and operating mechanism as well as prepare their new policy and procedure for the best management control system. If not, it will impact on the existing operation of the organization. Good new vision and mission allows the organization growth on the right way. Good organization structure equips the organization with the best skilled personnel as well as. Good procedure and policy helps organization always compliant with law and consistent with existing policies and procedures of the company. Moreover, policies and procedures are an essential component of any organization. Policies address important issues, such as what constitutes acceptable behavior by employees. Procedures, on the other hand, clearly define a sequence of steps to be followed in a consistent manner, such as how the organization will respond to any policy violations. All these readiness help the companies succeed to gain their goals and objectives. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 6 B. BACKGROUND INFORMATION AB Petroleum operating company (ABPOC), who was established in 2009, is a branch of Petro Vietnam and an operator of AB project invested by two parties of Petro Vietnam (PVN) and Gazprom International (GP) for exploration, development and operation of gas and condensate offshore Vietnam. In operation period, AB company has two positions as the operator and PVN’s branch. The below chart shows potions of AB company and agreements in which the company must comply during their operation. ABPOC ABPOC as the branch of PVN ABPOC as an operator of PVN and GP for block A&B External Service Division Product sharing contract (PSC) Joint Operation Agreement (JOA) Joint operation Authorized Operation Authorization Contract Service contracts Sole Risk Operations (if any) Source: Created by Author based on function of AB Company Figure 1: ABPOC’s operation position chart Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 7 1.1. Operator position ABPOC is nominated, with consent of GP, as the operator of PVN under Product sharing contracts (PSC) between PVN and GP to operate the block A&B offshore. ABPOC operations based on contracts and agreements including The main activities of ABPOC as an operator are management and conduct of all joint operations, sole risk operation and authorized operations (if any) in the joint operating agreement (JOA) as permitted and required by the parties based on a principle of no-gain and no losses, within the scope of JOA and PSCs. Subject to respective PSCs provisions, all joint property (except petroleum), all joint petroleum allocated to the contractor and all costs and obligations incurred in conduct of the joint operations shall be owned and borne by the parties in proportion to their respective participating interests which at the date are as follows: PVN: fifty one percent (51%) GP: Forty nine percent (49%) Joint operations are all petroleum operation includes management, maintenance and exploiting petroleum (gas and accompanied condensate). This operation is in line with the provisions of PSC and JOA for and on behalf of all the Parties. The cost of this operation shall be chargeable to the joint account. Authorized operations are the operations, other than joint operations which parties authorize the Operator to carry out and on Parties’ behalf. Currently, ABPOC is authorized by Parties (PVN and GP) to the management of gas and condensate selling operation. For avoidance of misunderstanding, costs relating to such operations shall not be directly charge Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 8 to the joint account, but shall be monitored on another account. Profit for authorized operations after deducting of all obligations with government will be transferred to Parties’ accounts. Sole risk operations are operations and activities carried out by less than all Parties. The cost of which are chargeable to the account of Sole Risk Party. Sole risk party is a party who participates in the sole risk operations. Currently there is no sole risk operations carried out by parties. To enable operator to maintain the joint operation, on or before the 28th day of each month, the operator shall furnish each party with a cash call request the advances for month following the next month (“cash call month”). The amount requested in a cash call shall be the Operator’s estimate of the amount required from each Party to enable the Operator to defray the net cash payment, being cash payment less cash receipts, due in cash call month under obligations properly incurred by operator in connection with the joint operations, authorized operations and sole risk operations (if any) separately. This thesis only focuses on the joint operation. Figure 2: ABPOC development stages 2009 2012 2013 2017 2033 Exploration period Development period Drilling period Operation period Source: created by Author based on operation periods of ABPOC Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 9 The development period started in 2009 with the main scopes including feed design, engineering, procurement, construction, installation, commissioning, tie-in and hook-up of 02 drilling platform, 01 processing overhead platform, 03 subsea pipelines and 01 floating storage offloading (FSO) Drilling period started in 2012 with the main scopes including drilling of 16 oilfields. Operation period started in 2013, the products of the project including gas and accompanied condensate. Gas exploiting from oil field after being proceed at overhead platform is transferred to export pipeline for selling. Accompanied condensate after exploiting is directly transferred to FSO for selling. Exploration period works through the project time to (i) provide instruction and information on seismic or geological to drilling campaign and exploiting operation as well as (ii) explore new oilfields. 1.2. Branch of PVN - External Service Division In 2011, ABPOC was authorized by PVGAS to conduct a 26 inch gas export pipeline system from BDPOC platform to 2nd Nam Con Son Pipelines with 3% management fee which are paid after completion of the scope of work. In 2016, authorization contract came into closing out and making payment. In the same year, ABPOC with an approval from PVN established an External Service Division as the branch of PVN which the main purposes are (i) To solve remaining issues to close the authorization contract Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 10 (ii) To seek for opportunities for external supplying service contracts. Company will hire its engineers which have 3 weeks off after completing 3 week working offshore for external call-out jobs. (iii) To optimize internal resources. For example, use internal manpower instead of out-sourcing for maintenance works. Company will hire its engineers which have 3 weeks off after completing 3 week working offshore for internal call-out jobs. Operating costs for this division will be from 3% management fee of authorization contract. The yearly profit after deducting all costs and tax will be transferred to PVN. C. SYMPTOM CONTEXT 1. Financial statement In the role of branch of PVN, AB has established the external division which began to operate since 2015 and had its own financial reports since 2016. Looking at the income statement of the division for three year 2016, 2017 and 2018, they all show that the division had no direct expenses (especially labor cost and material cost), the reports only presents indirect expenses including travelling expense, workshop expense, etc. According to the research of Gunn12 on the goal of tax accounting, the reports of the company may violate the principle of matching of costs and revenues. For this reason, it can be said the financial statement of the external division does not correctly reflect the actual expenses of the division. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 11 Contract name Authoriza tion contract Service contract Total 2016 2017 Reven Expense (mil ue VND) (mil Direct Indirect VND) expens expense e 4,000 0 2,864 Revenue Expense (mil (Mil VND) VND) Direct Indirect expense expense Reven ue (Mil VND) Expense (mil VND) Direct Indirect expense expense 1,500 0 884 0 1,000 0 3,500 0 4,000 2,864 2018 532 232 0 532 884 0 232 Source: created by Author based on financial statements year 2016, 2017 and 2018 of ABPOC Table 1: Data of revenue and expenses 2. Accounting documents On 29 December 2000, the Minister of Finance issued Decision 218 with detailed regulations on the preservation of accounting documents5. Any expenses and costs recorded in accountancy needs supporting accounting documents. According to Circulars 200, accounting document are papers, accounting document is the original documents that illustrate a transaction have occurred. Original records which evidence a financial transaction, such as debit/credit memos, invoices, receipts, orders and vouchers. An accounting document is the original record containing the details to substantiate a transaction entered in an accounting system. A company's accounting documents for its monthly payroll are the employees' timesheets. To record labor cost of the division, the division is lacking of papers such as approved timesheet from manager. It causes no labor expense recorded in financial statement of the company. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 12 A manufacturer's production records will also include source documents such as materials requisition forms. A material cost records will includes source documents such as call out request, material issue ticket, invoice, purchasing contract. The Division is difficult in prepare appropriate papers according to the inventory management. Inventory documentation According to Mr. Hoàng, he is difficult in pro-rating costs between the company and the division. Maintenance works of division are conducted by company’s offshore engineers for equipment of contractor located on the platform of AB Company. Cost for maintenance of equipment of contract must be charged to the division. However, engineers do not distinguish which equipment of contractor and the operator. They use consumables to maintain equipment of both the company and contractor at the same time. And then, costs for maintaining equipment are charged to the company. There is no document record for the cost of the division. All assets including platform, equipment, office and human of operator are contributed by both PVN and GP therefore any profit after liability should be shared according to investment percentage rather than only transferred to PVN. Or else all costs of the Division should be separated and deducted from the cost of the Operator as stipulated in the policy as Division has to separately monitor and record their own expenses. In actually, costs have not allocated for the Division such as cost of manpower, material, administrational expenses,… Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 13 The revenue of the division is small but the division is now operating with the unclear policy/ procedures or does not correctly pursuant to the existing procedures/ policies may lead the company with several problems in the future as following: - The AB company will have negative image with parties (GP and Petro Vietnam) when AB company have not well performed their responsibilities as an operator. - AB Company is the operator who is hired by Petro Vietnam and Gazprom, the parties can change other operator if AB company does not work under agreements, policies and procedures as set and initial approved by parties. - AB company may face legal problems when State audit and 3rd party audit can figure out mistakes relating to procedures and policies which the company does not comply with. 3. Work conflicts and unsatisfied employees Pursuant to the procurement and contract management procedure of the company, commercial and contract department has main function of purchasing and rental of goods and services and/or other equipment of AB Company. In addition to entering into the contract, this function involves the invitation of bidder to register, submit bid proposals, negotiation with bidder and contract signature. In external service division, members of the Division are currently performing the purchasing of goods and services (preparing bids, negotiating with vendors, signing the contracts) which is out of responsibilities as stipulated in the Decision of establishment of external service Division. Interviewing members of the Division shows that they are not satisfied in working and doing jobs relating to the Division. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 14 According to Ms. Cẩm “I have never done the tender and bid before. I have not been trained on tending and bidding but now I have to do the bid” According to Mr. Hoàng “I am an engineer but now I have to prepare tender and bidding” Interview Ms. Cẩm shows that the AB Company has commercial and contract department (“C&C”) which is in charged in tending and bidding, however there no C&C’s employees appointed as the member of Division so they refuse to work jobs relating to the Division. Even though, the deputy C&C director, who must be responsible for purchasing according to procurement policy of the company, do not review and sign purchasing of Division. Division members have no experiences in preparing tendering/bidding/contract document for purchasing. Before working as a planning officer of the P&P department and members of the Division, Ms. Cẩm had worked as secretary for Operation department. It causes that purchasing procedure is not compliance with procurement procedure of the AB Company. The interview shows that members of division have difficulties in working. According to McCullough14, responsibility of manager is to train their employees for well performance. Staffs cannot be expected to carry out the work well without training. Training must be undertaken for one of the following reasons (i) staffs are doing the works incorrectly (ii) staffs cannot do the works at all (iii) staffs cannot do the work well enough. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 15 Moreover, employees’ performance is just good when the right person is assigned for the right job, and the right job is delegated for the right person15. D. PROBLEM IDENTIFICATION 1. Manpower cost According to Ms. Cẩm, the new division includes nine members with organization chart as below. These persons will manage the division’s general affairs. Relating to the maintenance works, they will be conducted by alternate engineers offshore who are not included in the division manpower list. General Director General Division Manager (Deputy Director of the company) Managing Level Division members Working Level Project & Planning Manger Engineer Chief accountant Accountant P&P officer Contract & commercial Manager HR & Admin Manager Operation Manager Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 16 Source: External Division’s data Figure 3: External division’s organization chart All members have their own existing affairs as job descriptions in the role of the Operator, besides they also take part in new affairs from the new established division which is external division. Monthly all members of the division fill in their timesheet online (Attachment 3_form of timesheet), there is a row named OTHER PROJECT where members of external to fill in their timeline for external division. According to Ms. Cẩm, people do not timeline the time for the division because the division has no clear policy for salary payment and the Division has no guidance on filling timesheet. Currently, salaries of members of division are paid and recorded in manpower expenses of the Operator. According to Ms. Cầu: “The manpower cost cannot be allocated to the Division because each members of the division signed labor contract with the AB Company in the role as Branch of PVN which the branch can do many jobs other than the job of the Operator.” No member of division timelines the timesheet of the division because they are worried whether they are paid if they timeline for the division. Mr. Hoàng said: “I have confused how to timeline my timesheet, whether my salary payment is effected if I timeline my time for other project, while the Division do not have clear policy for salary” Offshore maintenance work are carried out by offshore engineer also are difficult in timeline their timesheet because their labor contracts are full time for the Operator during the offshore time. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 17 2. Material cost According to Mr. Hoàng, “procurement and stock of material of Division is referred to the Operators’ policy” that means the Division should annually set the material procurement plan to clearly have their own material for maintaining external works of the Division. However, actually the Division is using material of Operator to perform the maintenance works because the Division doesn’t have their material management system and their clear procurement and material management system. They cannot procure or store their own material, as above said the Division has to follow Operator’s policy which is complicated and not suitable for a small division like external service division. For this reason, from 2016 the Division has carried out several maintenance activities but they have not procured any material but borrowed from the Operator. No clear policy for material management policy between the Operator and Division causes all material cost recorded into Operator’s expense. That the offshore works were not clearly breakdown by the Division leads engineers carried out the maintenance works did not split or record actual materials used for Division’s job and Operator’s job. 3. Policy and procedure development A policy is a guiding principle used to set direction in an organization while a procedure is a series of steps to be followed as a consistent and repetitive approach to accomplish an end result. According to Mr. Tuấn Anh – P&P manager, member of the division, the division was established in Jul 2015 but until beginning of 2016, the finalized policy and procedure for the division was published with most terms and conditions referred to the existing of policy Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 18 of the company According to Mr. Tuấn Anh, the main person in charge in composing this policy. “I cannot be aware the legal operation of the Division against the Operator as well as the future of the Division.” For this reason, most terms in the policy are referred to the current policy of the Operator which is too complicated for the small division to apply. The existing policy is set out for the operator (Operator of PVN and GP) while the division operates as the branch of PVN position. a. Policy and procedure development process Based on interview of Mr. Tuấn Anh, the process of development the existing policy and procedure of the Division is summarized as follows: Step 1: Mr. Tuấn Anh (P&P general manager – member of the Division) composed a draft of the policy and procedure. Step 2: He sent the policy and procedure to department to review and modify their relating parts (commercial and contract department, financial and accounting department, human resource department). Step 3: After departments had revised and modified their parts, he finalized and sent the policy and procedure to get directors’ approval. Step 4: After the policy and procedure was approved, he sent out the policy to department. Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 19 After listening to the steps of policy and procedure development, the author had taken the more detailed interviews and known that during the policy and procedure development: i) no meeting was held between departments, ii) no team was established to prepare the policy and procedure iii) no comment and revise after the first finalization. b. Difficulties in applying the current policy and procedure of Division The existing policy cause many conflicts when conducting the divisional business. For example, pursuant to the existing commercial procedure, all tender plans/ ITBs must be approved by Deputy Director of commercial and contract, but she is not a member of the division so she are not allowed to sign on any divisional documents including bidding documents. Other problem on policy is that there is no clear policy relating to allowances compensating to divisional personnel as well as guidance for timesheet filling. For this reason, personnel have to work both exiting job and divisional business without any allowances while the Division does not have any source document to record their labor cost. On another hand, this unclear policy and procedure causes employees work without motivation and dissatisfaction. Pursuant to Ms. Cẩm, the difficulties of the division is a lack of clear and detailed policy and procedures which cause the cost of the division cannot be recorded, the current costs only relates to workshop/ entertainment. Material, equipment and direct manpower Hoang Tuyet Mai _ Thesis for Master of Business Administration Page 20