PERFORMANCE METRICS DESIGN FOR SMALL MEDIUM ENTERPRISE

STUDY CASE: TECHPROMLAB

Ghita Noerma Guphita, Sidhi Razinda Kautsar, Yosua Eka Putra Hermanto

School of Business and Management, Institute Of Technology Bandung (ITB),

Jl Ganesha 10 Bandung 40132, Indonesia.

sidhi.razinda@sbm-itb.ac.id;ghita.noerma@sbm-itb.ac.id;yosua.eka@sbm-itb.ac.id

Abstract

Small medium enterprise has been growing recently in Indonesia. The nature of a small
medium enterprise was so dynamic with a lot of changes happened in the environment. Because
of the dynamic nature, it would be difficult to maintain the performance of the company. One of
the tools to control the performance using the performance measurement system. This paper
would create the performance measurement metrics for the small medium enterprise using
Techpromlab as the study case. The company sells innovative building material product that can
absorb the water faster than other usual concrete. In this paper, the performance metrics design
uses balanced scorecard method with some adjustments. As the company already have strategy in
achieving their goals, then the balanced scorecard perspectives which is financial perspective,
customer perspective, internal business process perspective, and learning and growth perspective
would be used as the performance indicator classification. Since the company do not have their
own performance measurements before, then in order to define the target, writer use benchmark
with competitors and conducted study to define the target. In creating the performance metrics,
this paper use AHP method to define the weight of each indicator by doing pairwise comparison
for each indicator. Then this paper includes the linkage between all indicators using the four
perspective of balance scorecard which is financial perspective, customer perspective, internal
business process perspective and learning and growth perspective. The performance
measurement metrics that have been made can be used by another research in the same segment
in an early business start.

Keywords: Small medium enterprise, Performance measurement systems, Balanced scorecard

Introduction

Company Profile

Tech Prom Lab is a startup company which was founded by Adi Surya Pradipta, S.T.,
M.T. and co. Tech Prob is a brand from PT. Teknologi Kanggo Nusantara Bagja, based in
Bandung, Indonesia. Tech Prob Lab is research company focusing on practical technology
innovation.
Their first product is PoreBlock, a porous concrete blocks that allows water to be
infiltrated into the ground. PoreBlock, is created using geopolymerization process which utilize
waste from coal-fired power plant. Compared with conventional concrete blocks, which are
resistant to water, it promotes percolation, reduces storm sewer loads, reduces floods, raises
water tables and replenishes aquifers.

Table 1 Product comparation

Conventional Concrete Block PoreBlock

Dimension (cm) 10 x 20 x 8 10 x 20 x 8

Weight 3,3 kg 3,5 kg

Strength 174 - 203 kg/cm2 225 kg/cm2

Infiltration <10 mm/day 1000 mm/day

Rate

Colour Natural, coloured Natural, coloured

Provided the comparison of PoreBlock and conventional concrete blocks. The infiltration
rate of PoreBlock is 100x faster than conventional paving blocks, with the strength that is
suitable for use in parking space for four-wheeled vehicles.
The vision of the company is to become the company that thrive for delivering problem
solving with research implementation and technology innovation to support sustainable
development. And to help them to achieve this mission, they have several missions:
 Evaluation and identification of environmental and technological problems.
 Researching technological innovation through collaboration.
 Implementation through technology transfer that produce innovative products.
 Commercialization of innovative products that provides direct benefits for the
environment.

The company consists of six persons with functional organization structure as shown below.
There are only a few numbers of employees because the company is still in the early phase of the
business.

Figure 1 Company structure

 The main customer for the company is property sector such as contractor, developer, and
government. The company will be the supplier of the material for one of those property sectors.
As the company is still in the early phases which is not really known by the market, the company
tends to do some collaboration project with some institutions or architectural consultant. In
managing their operation, the company delegate their operational to some vendors to produce
and distribute the product to the customer. Other than the vendors, the company has a connection
with laboratories to do their research for innovative products and some architectural consultant to
do some collaboration project.

Porous concrete products have been developed by both local companies (without brands) and
national companies (Holcim and Semen Indonesia). There are several porous concrete products
without a brand that are on the market but with lower infiltration and compressive strength than
PoreBlock. Holcim has developed porous concrete products in the form of ready-mix with the
Thrucrete brand and has been installed in pedestrians in the Gelora Bung Karno Area. Until now,
Thrucrete has become a competitor’s product directly from PoreBlock.

Company Strategy

In achieving their vision and mission, the company has focused strategy that already created
with considering the opportunity and threat from the environment changes. The strategy that
generated by the company is project collaboration and going global.

Project collaboration. As a researched based company focused on innovation technology, Tech

Prom Lab have an obstacle to sell their product directly to the customer in their sector since they
need to market their innovative product which still not recognized by the customer. To remove
that obstacle, Tech Prom Lab do an initiative to collaborate with another company such as
consultant or developer to sell their product. For example, using the ready-mix technique allows
the company to do other shapes as well, and they collaborate with designers to build it. The first
one is Studio Singga, a design studio based in Bandung, they collaborate in making a booth for
their upcoming exhibition. Another example collaboration is with Conture Indonesia, a concrete
design studio in Bandung. In this collaboration with Conture, PoreBlock is shaped into a stool
and tableware. If the other collaborations still focus on PoreBlock’s function of water infiltration,
our collaboration with Daylight, another design studio, give a whole meaning of the porous
concrete. The porous is not only let water runs through, this time, we allow light to be
transmitted.

Going Global. This strategy was chosen by the company because of the opportunity of the
market opportunities. Impervious surface which causes flood and drought - in the long term, is a
problem not only for Indonesia, but also for other developing countries. By 2050 more than two-
thirds of the world’s population is projected to be living in urban areas. This rapid increase will
take place mainly in developing countries. Built-up areas in developed countries had relatively
low impervious surface and high public green vegetation cover, with 50-60% urban impervious
surface in Japan, South Korea and Singapore. In comparison, the proportion of urban impervious
surfaces in developing countries is approaching or exceeding 80% in Asia. As the product can
help to solve the problem, the company can exploit the opportunities to widen their scope into
the global market.

The company in the early business phase will experience a lot of possible changes from the
environment as it was so dynamic. On the other hand, the company has a huge goal which
support with a huge strategy too. In order to know whether the company are on the right track or
not, the company should know their achievement in each strategy to achieve the goals. As the
company does not have a performance measurement system in order to know their company
performances, this paper will create the performance metrics that can be used by the company to
measure their strategy.

Methodologies

This paper will use balanced scorecard with some adjustment in creating the performance
measurement system for the company. The adjustment used in this paper is the four perspectives
of the balanced scorecard will be deployed in the indicator for each strategy as the purpose of
this paper is knowing the achievement of each strategies that already generated by the company.

Balanced scorecard

Balance scorecard (BSC) is a performance management tools designed by Professor Robert

Kaplan and Renaissance Solution president David Norton in 1992 from Harvard Business
School. This performance tools contain four measurement perspective, consisting of: Financial
perspective, Customer perspective, Internal Business Process perspective, and Learning and
Growth perspective.
In the concept, technical part of BSC is based on an efficiency logic and improved
organizational performance and focused on opportunities to motivate organizational members to
achieve their goals that support the long-term vision. By long-term strategic objectives with
short-term actions, BSC plays an important role in integrating strategic management systems
with improves quality and higher value. BSC is also used as the basic handling of the company's
efforts in defining and communicating the interests of key importance to managers, employees,
investors and even customers.

Performance Metrics Design

As mentioned in the previous part, the balanced scorecard perspective will be used for the
current strategy and classified the indicators to measure the achievement of the strategy. After
indicator defined for each strategy, then those indicators will have a target which generated from
benchmark through some research or comparison with the competitor. Then, the performance
metrics will be finalized when each indicator have weight which indicates the contribution of
each indicator to the goals of the company.

Balanced Scorecard Indicators.

 The indicator that chosen to measure the strategy derived from four perspectives of the
balanced scorecard. Those indicators will indicate the achievement of the perspective for each
strategy. The indicator for each strategy shown as below

1. Collaboration strategy:

 Financial:
o Gross Margin

 Customer:
o Customer loyalty
o Customer satisfaction
o Response time per customer request

 Internal business process:

o Defect percentage
o On time delivery
o Response time to customer request

 Learning and Growth:

o Employee Productivity
o Employee Turnover

2. Going global strategy

 Financial:
o Profitability ratio
o Liquidity ratio

 Customer:
o Market share
o Frequency (number of sales)
o Brand recognition
o Price relative to competition

 Internal business process:

o Number of positive media stories

 Learning and Growth:

o Training hours
o Leadership development
Indicators Target

The indicators target defined using benchmark from the competitors and some global average
score indicators. The target score uses the traffic light system, when the target is the same with
the benchmark data, then it will be defined as yellow. If the target below the benchmark score
then it will be defined as red, the other else will be defined as green. The indicators target for
each strategy with the reason or the source score shown below.

Table 2 Indicator target for collaboration project strategy

Indicators Red Yellow Green Reason

Gross Margin <40.5% 40.5%% >40.5% [ CITATION Laf19 \l 1033 ]

Customer Loyalty <70% 70-85% >85% Customer Loyalty Index

Index

Customer Satisfaction <86% 86-95% >95% The average global satisfaction

benchmark is 86%

Response time per < 80% 80% >80% Based on Customers Satisfaction
customer request Benchmark by Survey Monkey

Defect percentage <90% 90-95% >95% The average defect percentage of

global industry is 90% until 95%

On time delivery <85% 85% - >90% The average on time delivery for
90% Industry

Response time to < 80% 80% >80% Based on Benchmark by Survey

customer request Monkey

Employee <80% 80% >80% Based on Benchmark by Survey

productivity Monkey

Employee Turnover > 18.5% < [ CITATION Dev19 \l 1033 ]

18.5% 18.5%
Table 3 Indicator target for going global strategy

Indicators Red Yellow Green Reason

Profit <8.60% 8.60% >8.60% [ CITATION Laf19 \l 1033 ]

Margin

ROE <3.6% 3.6% >3.6%

ROA <1.9% 1.9% >1.9%

 Gross <40.5% 40.5% >40.5%
Margin

Operating <12.1% 12.1% >12.1%

Margin

Current <126% 126% >126%

Ratio

Quick Ratio <96.8% 96.8% >96.8%

Cash Ratio <29.02 29.02% >29.02%

%

Market <55% 55% >55% [ CITATION Laf19 \l 1033 ]

share

Frequency < 5.2 5.2 > 5.2 Million [ CITATION Laf19 \l 1033 ]
(number of Million Million m
sales) m m

Brand <8.9% 8.9% >8.9% Top Brand Index Comparation with

recognition competitors[ CITATION Top19 \l 1033 ]
(TBI)

Price > 95.000 - <135.000 Based on average price [ CITATION asi19 \l

relative to 135.000 135.000 / (according to 1033 ]
competition m2 value of
product)

Number of Reputat Reputatio Reputation Reputation index [ CITATION Raf18 \l

positive ion n index = index > 50 1033 ]
media index 50
stories <50

Table 4 Indicator target for going global strategy (continued)

Indicators Red Yellow Green Reason

Training < 61.2 61.2 > 61.2 Average training hour for small
hours hour/ye hour/year hour/year industry[ CITATION EMa19 \l 1033 ]
ar

Leadership Total 20≥Total 32≤ Total Leadership Development Assessment by

developmen score ≤ Score≤32 score≥40 AISEC [ CITATION AIE15 \l 1033 ]
t 20
Performance Metrics
After defining the indicator target, then the indicators need to get weighted in order to know
the contribution for each indicator to the company’s goal. The weight for each indicator defined
using AHP approach which used the pairwise comparison in each indicator. The performance
metrics completed with the weight for each indicator, perspective and the strategy shown in
Appendix 1

Linkage
After the performance metrics created, then the company can create the linkage between
the indicators that already defined. The linkage will help the company to evaluate which
indicators that affect the goals of the company. Not only for evaluating the achievement, but also
the company can get an insight about the contribution of what action they achieve. The linkage
will connect the indicators using the index as below

Table 5 Indicator Index

Index Indicators
K1 Profitability Ratio
K2 Liquidity Ratio
K3 Customer Loyalty
K4 Customer Satisfaction
K5 Response time per customer request
K6 Defect Percentage
K7 On time delivery
K8 Employee Productivity
K9 Employee Satisfaction
K10 Market Share
K11 Number of sales
K12 Brand Recognition
K13 Price Relative to competition
K14 Number of positive media stories
K15 Training Hours
K16 Leadership Development

BSC Perspective Linkage

Financial
K1 K2
Customer

K3 K4 K5 K10

K11 K12 K13

Internal Process

K6 K7 K14

Learning And
growth

K8 K9 K16
K15

Figure 2 Linkage

Conclusion

In conclusion, balanced scorecard was appropriated for this case, because its help the
company to evaluate and measure their performance based on the strategy that they want to
achieve. Besides that, balance scorecard linkage helps the company to know the root cause of the
problem if they can’t achieve the target so company will know the stage that should be done to
improve and solve the problem.
 In this case, in accordance with the strategy to be achieved by TechnoLab namely
collaboration and going global, BSC methodology can provide an overview of projects, products
and services that need to be a priority. To achieve this strategy, TechnoLab needs to prioritize
customer loyalty, customer satisfaction, response time per customer, defect percentage and
ontime delivery that need to be prioritized so that TechnoLab gets the trust of customers who in
this case are designers to be formed and exhibited in their studio designs. This trust will later
bring TechnoLab better known and public knowledge about their products will increase.
From balance scorecard linkage to achieve customer loyalty, customer satisfaction,
response time per customer, defect percentage and ontime delivery TecnoLab must pay attention
to employees such as productivity and satisfactions by increasing both soft skills and hard skills
of employees through training and leadership development so it will be affect to financial
aspect.
 Strategy Perspective
Strategy weight score perspective score weight indicator weight target realisation score
financial 0.492 Gross margin 1 40.51%
customer loyalty 0.571
customer satisfaction 0.286 95%
customer
response time per customer
0.246 request 0.143 80%
Collaboration
0.6 defect percentage 0.17 95%%
project internal
on time delivery 0.69 90%
business
process response time per customer
0.164 request 0.14 80%
Learning employee productivity 0.6 80%
and growth 0.098 Employee Turnover 0.4 <18.5%
Profit margin 0.125 8.60%
ROE 0.125 3.60%
ROA 0.125 1.90%
Gross margin 0.125 40.50%
financial 0.492
Operating Margin 0.125 12.10%
Current Ratio 0.125 126%
Quick Ratio 0.125 96.80%
Cash Ratio 0.125 29.02%
Going global 0.4 Market share 0.154 55%
Frequency (number of sale) 0.308 5.2 Million
customer 0.246
Brand recognition 0.462 8.90%
Price relative to competition 0.077 135000
internal
business Number of positive media
process 0.164 stories 1 50
Learning Training hours 0.4 61.2 hour
and growth 0.098 Leadership development 0.6 between 32 to 40
Appendix 1 Performance metrics
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