Introduction

The organization that we have selected in the report is Kam Thye Engineering Sdn. Bhd. It
is a limited liability company incorporated under Malaysia and form under law governing
formation of Companies Act 1965. The company is principally engaged in the business of
manufacturing of engineering products. Kam Thye Engineering Sdn.Bhd. is owned by three
siblings, the business was set up by their father, Mr. Mak Kam Thye and the company was
named after his name. The company then inherent to his children and continue doing their
business until today. An interview was conducted with the companys managing director, Mr.
Mak Tuck Wah to acquire related information on the companys management accounting system.
There are three directors currently in Kam Thye Engineering, out of two are non-executive
directors which do not involve directly in the day to day business operation. Kam Thye
Engineering Sdn. Bhd. is formed by 20-25 workers. The workers are aged between 19 years old
to 60 years old. The organizational structure of Kam Thye Engineering Sdn. Bhd. consists of
three departments which are Operation Department, Sales Department and Administration
Department. Each of these departments are in charged by one manager. Operation Department is
responsible for company internal manufacturing process. Sales department take charge of dealing
with customers, maintaining good relationship with clients and monitoring the sales activities in
the company. Whereas Administration Department involves in human resource activities such as
payroll activity and employee hiring activity. According to the director, the experienced workers
are needed to produce quality products because their experiences help a lot in the manufacturing
process. Beside this, experienced workers are also needed to provide guidance to the new
workers to make sure that the new workers are doing their work in a correct manner. Other than
this, the new workers are important as well because new work forces are needed to make sure
that the business keeps going even when the experienced workers leave the company when they
retire.

Kam Thyes Organizational Structure:

Executive
Director
Nonexecutive
Directors
Operation
Manager

Sales
Manager

Administrati
on Manager

Kam Thye Engineering is located in the industry area of Ipoh which is Menglembu.
Menglembu is one of the main industrial areas in Perak. The strategic location of their factory
enable them to have a close relationship with their suppliers and customers as most of them are
located in the same area. It allows them to get their order in a shorter period and also deliver their
products to their customer on time. Kam Thye Engineering does general civil engineering works.
They manufacture products with steel, for example gate, fencing, and staircase. The technologies
used by Kam Thye Engineering are welding, melting, soldering, brazing. They also provide
installation services to their customer. Kam Thye engineering maintain the quality of their
products in a high level in order to satisfy their customer. Quality costing is applied in the
company as they incurred maintenance cost and inspection cost to make sure that their products
meet the targeted quality.
Kam Thye Engineering Sdn Bhd does only project works and retailing service is not
available in the company. With this advantage, it allows them to get supply from their supplier
with a lower price compare to others because they demand a huge supply from their supplier.
Kam Thye Engineering Sdn. Bhd. supplies civil engineering products to one of the biggest
developer in Perak which allowed them to have a big market share in the industry. However, they
also face competition from other similar company in the industries. The price of the steel is
increasing in recent years due to weakening Malaysia Ringgit and increasing demand in the steel

market. In order to reduce the adverse effect brought by the fluctuation of raw material (steel)
price, Kam Thye Engineering established contractual relationship with their suppliers to set a
fixed price for the raw material for a certain period. Being one of the most experienced civil
engineering company in Ipoh is their competitive advantage as it confident their customers. Most
of their customers recognize Kam Thye Engineering Sdn. Bhd as one of the most trust worthy
engineering company in Ipoh.
Balanced scorecard (BSC) is used as the topic discussed in this report. Balance scorecard
is important for Kam Thye Engineering as it helps to facilitate the strategic decision making
within the company. Balance scorecard consists of four different perspectives which are internal
process, learning and growth, customer satisfaction and financial perspective. BSC helps
company to better keep track and understand the overall growth and development of the
company. The information gathered from BSC can provide a clearer picture on how the current
strategic planning within the company affect the long-term goal of the company. BSC also
provides a set of financial and non-financial measures which is critical to the success of the
company.

Current performance measurement system used by the organisation for measuring and
evaluating performance of the organisation.
There are several performance measurements used by Kam Thye Engineering currently to
measure and evaluate the performance of the organization. Firstly, Kam Thye Engineering
measures their companys performance by evaluating the level of conformance to the companys
standards. Standards include company goals and targets. According to example given by Mr.
Mak, the company targets to increase their profit by 5% next year, the actual profit growth will
then be compared with the targeted growth. The company is said to be achieving their target if
they meet the targeted growth of 5%, however, the company will be considered as
underperformed if the growth of the company does not exceed 5% or they experienced losses in
that year. Underperformed will be considered as poor performance and the management will then
start to implement other strategies which could help the company to perform better.
Kam Thye Engineering also evaluate the company performance by looking at the quality
achieved by the production of the company. Inspection will be done regularly to inspect on the
condition of machinery as well as the quality of the products. Any defects or non-conformance
on products specifications provide an indication that the performance of companys
manufacturing process is poor. The quality of the products will also be measured by the
complaints received from customer as well as the returned products which has been rejected by
the customer. The more complaints and returned products received from the customer, the poorer
the company performance.
In order to measure the performance of their employees, Kam Thye Engineering focuses on the
punctuality of employees by measuring the clock in time of their employees. The salary of the
employees is based on hourly basis which means that they will receive higher pay if they work
for longer hour. Hence, the performance of the employees will be measured by the efficiency of
the employees, employees are usually required to complete a certain level of production within a
certain time period. Employees which do not complete their work on time is consider as
performing badly. Other than this, the production manager or Mr. Mak will also conduct random

check on each employee, this is the make sure that they are capable of producing quality works.
Employees who shown a negative working attitude during the random checkup indicates a poor
performance.
The performance measurement used by Kam Thye Engineering currently to evaluate their
customer relationship is by enquiring the feedbacks from their customer. According to Mr. Mak,
there is a dining session every week with few of their major customer to discuss about the
progress of their supplies to the customer. Any problem of unsatisfactory comment will be
informed by the customer to Mr. Mak during the session. Mr. Mak will them improvise their
products and services accordingly to make sure that their customers requirements are met. This
dining session will also act as a medium for exchange of ideas and comments.
The current performance measure used by Kam Thye Engineering can be summarized as below:

Customer Satisfaction
Customer feedback
Production quality
Punctuality of employees
Inspection on machinery

Internal Processess
Learning and Growth

Balance
Scorecard

Efficiency of employees
Proft Growth

Financial
The Strengths of Current System used by Kam Thye Engineering Sdn. Bhd.

Learning and Growth

Kam Thye Engineering Sdn Bhd always keep track on their technology used with the
latest technology available in the market in order to improve their manufacturing process.
However, some of the manufacturing processes are still labour intensive. Inexperienced
employees are guided by experienced employees to avoid problems with the production
processes and it also facilitates the learning process for inexperienced workers. All of the
employees are required to attend courses under Construction Industry Development Board
(CIDB) to improve their knowledge on construction process. Employees who have higher
technical skills will be rewarded with high salary to encourage growth in the company. The
company also have their own design of gates and fencing to offer more choices to their customer.

Internal Processes
i.

Good relationship with employees

The company also have strong relationship with their employees. The company make

sure that their employees get their payment on time and they are also provided with allowances
and bonuses every year to motivate their employees. According to Mr. Mak, it will help to
increase the employees effectiveness and efficiency in production as there are more motivated.
Gathering will also be organized frequently to improve the bonding between employees and top
management. The good relationship with the employees is important in order to create a
comfortable environment which helps to provide motivation and improve morale of employees.
The production of company will be more effective and efficient with the highly-motivated
employees and this will help to increase companys earning indirectly.
ii.

Cost effective production process and competitive price

One of the companys strength is the cost-effective production process which help to

reduce wastage to minimum level in order to cut cost of productions. It means that the company
will utilize all the materials to the maximum level. The company also outsource some of their
process to outside party in order to reduce the cost. This is because the outsourcers are more
experienced as well as specialized in the specific production area. Kam Thye Engineering also

build good relationship with their supplier to ensure that they can purchase the raw material with
the lowest cost and good quality. The cost-effective production process helps company to offer a
competitive price to their customer. Beside this, the company also monitor and pay attention
about their competitors price to adjust their price of product accordingly. Budget will be
prepared by the company for each project to make sure the cost of project does not over budget
and contribute to increase revenue of company. The Company also use target costing in order to
achieve their targeted profit.
iii.

Quality products
The quality of products is the major strength of Kam Thye Engineering to compete with

their competitors. Most of the Kam Thyes employees are experienced in the industry and they
also attended courses under Construction Industry Development Board (CIDB) to improve their
skills and knowledge. A better skill level of the employees help to ensure the quality of their
products. Even though the company seek for the lowest cost of raw material, but the quality of
products is more important for them. Hence, the company will never forgo the quality of
products for a lowest cost. The products with poor quality will not be sent out to customer. They
will ensure that the products delivered to their customer is the product with the best quality they
can offered.

Customer Satisfaction
i.

Deliver on time and special privilege for major customer

Currently, Company have five big tracks to ensure that all of their products delivered to

customer on time. The location of Company is closer with the customer and this will make
Company able to deliver the products to customer on time. The Company also give special
privilege for a major customer. Customer will get the discount with this special privilege. They
also give a retention which is the customer able to make a payment in years later with this special
privilege. The major customer with the special privilege will give priority for their order.

The Weaknesses of Current System used by Kam Thye Engineering Sdn. Bhd.
Financial
i.

High Quality Cost

Prevention and appraisal cost
Kam Thye Engineering uses a lot of machine for the production activities. Due to the
high level of machinery intensive activities, the company need to spend more in
prevention cost for the maintenance of machines. If machinery maintenance is not
performed regularly, the production process will be affected by machine downtime. Kam
Thye Engineering also incurred cost of machinery audit which will be carried out once
every 3 months. Machinery audit aims to inspect problematic machines and the cost
incurred increase the cost of production of the company.

Internal and external failure cost

Despite the companys policies of minimal allowance of wastage, there are still scrap or
rework need to be done due to some of the non-conformance of production which does
not meet the requirement and the expected quality. For example, the products produced
by inexperienced employee does not meet the specification required, in such cases, the
products have to be rework and it incurred a higher cost for the production. A higher cost
of production will give negative impact towards the price and profit of the company. The
loss of reputation and loss of confident of customers can give negative consequences
which affect the companys sales and profit.

Recommendations
Balanced Scorecard

Non-Financial Aspects
Learning and Growth
To improve the performance measurement of employees, we recommend Kam Thye
Engineering to monitor the performance of each employee by using 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 as measure to reward the employees who perform well. Ultimately, it
can motivate the employees to perform better in daily working and improve their productivity.
Furthermore, Kam Thye Engineering shall improve the communication skills of their
employees. Customer service training shall be given to the sales representatives, as they are
having the responsibility of making the name of company popular and promoting their services

and products amongst the users. As the company is operating make-to-order production process,
they are responsible to understand the problem of customers, suggest solution and close sales
deals in favour of the company. Healthy communication between the sales representatives and
the customers is crucial to the success of the company.
In addition, communication in workplace improves the overall workplace culture. There
is often a communications void between sales and production. However, the two departments are
inter-related and need to work together in order to provide the customer with the best possible
product. Hence, the company should establish an effective communication channel, such that
regular meetings shall take place within the company that include managers of production and
sales. Also, these meetings should be open for discussion .With this, it will eliminates those
barriers and resolve problems. While at the same time builds stronger workplace relationships
and increased productivity.

Internal Processes
To ensure the high quality of products, we recommend Kam Thye Engineering to use
Total Quality Management (TQM) as performance measurement system. TQM is a 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 defined, and performance measures are
continuously monitored in order to detect unexpected variation. When the company implements
TQM system, it is beneficial to the company in enhancing the products and thus, customer
satisfaction on products can be maximised.

Furthermore, Kam Thye Engineering also can purchase more machines in advanced
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 the company to purchase machines with advanced
technology as the company is expanding its business gradually.
Despite focusing on production process, the company shall also put the stress on the
safety and health of members of company. Incident-free environment and occupational illness
and injury are preventable and unacceptable. Safe and healthy work environment is both an
individual and company responsibility. Thus, Occupational Safety and Health programme shall
be implemented and each employee is required to prioritize health and safety and constantly
demonstrate careful workplace behaviour. The company should understand the importance of
developing a safety first culture and foster this through guidelines, programs and policies
relating to risk avoidance, workplace violence and stress.
Customer Satisfaction
Companies need to develop processes that attract, convert and retain customers in order
to be successful in the long run. Other than the ongoing customer loyalty program, Kam Thye
Engineering is recommended to implement strategy to attract new customers. If the company is
seeking to grow their business, increasing its customer base is essential. Customer acquisition
could be measured by either the percentage of increment of new customers or the total revenue to

new customers. Activities can be taken including advertisement, free consultation provided to
potential customers, and cash voucher given to new customer to encourage reorder.
Financial Aspects
To improve the financial performance of the company, Kam Thye Engineering can
perform a trend analysis to evaluate the companys financial condition over a period of time. It is
significant 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 have a gradual increase in the revenue growth by emphasizing cost reduction.
Besides that, the company is also recommended to use the financial ratio to evaluate the
performance of the 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 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 can measure the amount of return on an investment relative to the
investment cost.
Implementation Plan
A simple cycle of processes linking the four (4) perspectives of balanced scorecard can be
modified to provide an implementation plan for Kam Thye Engineering. The implementation
plan provide a procedural process and details of each process. The implementation plans steps
are:

1. Creating the Vision and Support

First, Kam Thye Engineering have to create a vision. This means that an idea must be
made by top management of Kam Thye Engineering. In this case, the balanced scorecard
is envisioned to be implemented. At the same time, a background information or, a
rationale, must be provided for individuals in an Kam Thye Engineering to see a need for
this plan to be executed.

2. Set Goals and Communicate

Second, specific goals must be set and communicated to members of

Kam Thye

Engineering. Goals should be set to incorporate the SMART principle which is: specific,
measurable, achievable, relevant, and, time-bound. The setting of these goals should
ideally incorporate feedback from individuals in the Kam Thye Engineering as it would
gain buy-in. But this is dependent on the management strategy of the Kam Thye
Engineering. The goals should then be explicitly communicated to all members of the
Kam Thye Engineering. In this case, the whole organization needs to know that the
balanced scorecard is to be implemented and measured for success.
3. Execution and Measurement
Third, this is the execution phase. This would mean setting targets and implementing
operational changes across the organization. It would mean the creation of policies and
enacting them. In this current case, the specific actionable items associated with the
balanced scorecard is implemented. Depending on the organization, it may mean

providing individual departments, and even individual employees with an individual

scorecard to track their progress.
4. Review and Feedback
Fourth, this is the evaluation phase. This is the review of the performance measures as
set in the execution phase. These performance measures should directly point to the
overarching organizational SMART goals as set in the second phase. The results should
show whether or not the initial goal has been successfully achieved. If not, it would mean
restarting the cycle. In the case of implementing the balanced scorecard, it would mean
re-examining the tools and measures employed during the first cycle.
5. Creating the Next Cycle
Lastly, if the Kam Thye Engineering implementation of a goal is successful, newer, and
more progressive goals should be set. If the goal is not successful, re-examination should
be made and a new set of goals be created in a new cycle.

Reason Choosing the Designed Balance Scorecard.

A Balanced Scorecard initiative represents a watershed event in an organizations evolution. It is
a challenging, inter-disciplinary process of cultural change. To be successful, an organization
needs a defined, multi-faceted approach that embraces education, communication, scorecard
development, and ongoing implementation. Our designed Scorecard Framework meets these
criteria:

 Its align the Kam Thye Engineering business activities to vision and strategies.
It provides Kam Thye Engineering Management with comprehensive picture of operation
activities of their company.
It involves all person in the Kam Thye Engineering include leader, manager and also
employees of the company.

Finding
Kam Thye has become a company people admire in around Ipoh City for their financial growth,
their customer ratings, the efficient employees and their innovation. Throughout our research we
have found that in all four areas Google strives to be the best and have several measures put in
place to achieve their goals and targets. Financially they are constantly trying to find ways to
reduce their costs and find new acquisitions to put their brains into. Their customers are an
important asset to them and they are constantly finding ways to improve the speed and security
of their products and services which has kept them ranked high on the Customer Satisfaction
Index. Kham Thye Engineering is also known for their discipline employee who always punctual
in doing work that help in better performance in the jobs. Innovation is something Kam Thye
Engineering has been implement in company by use up to date and latest technology in the
production. Kam Thye Engineering need to consider on their internal and external failure
especially the external failure because it related to their customer satisfaction rating. So, Kam

Thye Engineering need to provide better training and benefits to their employees in order for
them to have better knowledge and skills.

Conclusion
Based on the evaluation of current performance measurement system of Kam Thye
Engineering, we conclude that the performance measurement system is important in helping the
company to achieve its objectives and goals.
The current performance measurement system of Kam Thye Engineering only 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 overall company performance. Hence, we
would like to suggest Kam Thye Engineering to measure its company performance by adopting
balance scorecard (BSC) in order to improve the performance measurement system.
BSC can act as a good performance measurement system for the company. It is a
strategic-based performance management system that measures the companys performance in

four key perspectives which are financial performance, internal business processes, customer
satisfaction, and learning and innovation. Thus, BSC is able to cover more perspectives
compared to Kam Thye Engineerings current performance measurement system.
When the performance measurement system is more accurate, the company can
determine whether the companys performance is aligned with the strategies of the company in
order to achieve objectives and goals. Since Kam Thye Engineering is expanding its business
gradually, it is beneficial for the company to use BSC to measure the company performance.
Performance measurement system is important for a company since the overall company
performance will bring significant impact on the company succession. Hence, periodic
performance measures can help a company identify potential as well as existing problems before
they get into crises. After all, prevention is always better than cure.