Project on Development of KPIs on ONGC

Development of Key Performance Indicators, 2010

JK BUSINESS SCHOOL, GURGAON

DEVELOPMENT OF KEY PERFORMANCE INDICATORS

Guided By: - Prepared By:-

SHRI D.K. AGARWAL ASHUTOSH KR. DUBEY

GM (F&A) PMBG JK BUSINESS SCHOOL

O.N.G.C. (DELHI) GURGAON

2010


ACKNOWLEDGEMENT

I would like to extend my gratitude to my Project guide and mentor, Mr. D.K.

Aggarwal, General Manager, PMBG, ONGC for his appreciable support and

valuable time and guidance with providence of resources in terms of knowledge,

theoretical gains and practical experience.

A successful project can never be prepared by the singular effort of the person to

whom project is assigned, but it also demands the help and guardianship of some

conversant persons who undersigned actively or passively in the completion of a

successful project. I would like to extend my thankfulness to him for providing me

with excellent guidance and co-operation, which has been of immense help for the

successful completion of this project. I would also thanks to all staff members of

ONGC for guidance and co-operation.



CONTENTS

1. INTRODUCTION……………………………………… .....1

2. ABOUT ONGC…………………………………………......2

2.1 History of ONGC…………………………………........2

2.2 Organization Chart………………………………..........5

2.3 Functions & Duties……………………………….........9

2.4 Vision…………………………………………………11

2.5 Mission………………………………………………..12

3. PERFORMANCE MANAGEMENT & KPIs…………….13

3.1 Management Control System at ONGC………………..14

3.2 Shift to Strategic Management System………………..16

3.3 Characteristics of effective KPIs……………………....19

3.4 Developing KPIs……………………………………....21

4. KPI DEVELOPMENT METHODOLOGY………………….25

5. PPERFORMANCE CONTRACTS FOR KEY EXECUTIVES (2010- 2011)…………………………………28

6. KPI DEVELOPMENT RESULTS…………………………...31

6.1 Assets(Onshore/Offshore/JVOG)…………………………31

6.2 Basins……………………………………………………...34

6.3 CBM Development Project………………………………37



6.4 Plants……………………………………………………...38

6.5 Chief, Drilling Services…………………………………….40

6.6 Chief, Geophysical Services……………………………….43

6.7 Chief, Well Services……………………………………….45

6.8 Chief, Logging Services……………………………………47

6.9 Chief, Engg. Services & Chief, Technical Services……….49

6.10 Offshore Logistics Services………………………………52

6.11 Chief, Materials Management…………………………….54

6.12 Explorations & Development(E&D), Corporate Exploration Centre(EC)……………………….57

6.13 Chief Human Resource Development…………………….60

6.14 Chief, Infocom…………………………………………….63

6.15 Finance…………………………………………………….66

6.16 Chief, Marketing…………………………………………..70

6.17 Other Corporate Services & institute……………………...72

7. SUGGESTIONS………………………………………………...77

8. BIBLIOGRAPHY……………………………………………….83



1. INTRODUCTION

In the last 25 years, driven by rapid development and higher use of machines, world

energy consumption has increased by 70 percent at a world CAGR of 2.1%. More

demand from developing countries over developed countries has led to a shift in

energy consumption centre from West to East (Energy consumption increased at a

CAGR of 4.8% in Asia-Pacific compared to a mere 0.2% in Europe & America).

While the demand side is strong, long term supply seems to be crippled due to the

continuous decline in production from existing oil- fields. Moreover, as the

economy revives and recovers from the present slowdown, the demand for energy

will further strain the demand-supply dynamics.

It thus becomes obvious that sustaining oil supplies to fulfill rapidly growing

energy needs would require continued investment in E&P ventures. E&P sector,

however, differs from other industrial sectors in that the output depends on the

processing efficiency of available hydrocarbon reserves and sustainability

initiatives undertaken to maintain and grow those reserves. For this purpose, it is

very important that the efforts be expended with some performance objectives in

mind. Availability of performance objectives and a performance measurement

system would enable to make focused efforts, reduce waste efforts in non-fruit

bearing initiatives, assess performance, notice deviation between expectations and

results and ultimately, undertake corrective actions and implement them.

With this purpose, ONGC has adopted the approach of a balanced scorecard

which incorporates Key Performance Indicators (KPIs) (linked to the SBU‘s

vision) in 4 important areas: Output/Result, Process, Cost (Financial) and

Learning & Growth. Identification of Key Performance Indicators related to 58

Strategic Business Units, developing them and assimilating them to form

Balance Scorecards for the purpose of performance assessment, benchmarking

and review forms the basis for which this project has been performed.



2. ABOUT ONGC

2.1 HISTORY OF ONGC

1947-1960

During the pre-independence period, the Assam Oil Company in the northeastern and Attock Oil Company in northwestern part of the undivided India were the only oil companies producing oil in the country, with minimal exploration input. The major part of Indian sedimentary basins was deemed to be unfit for development of oil and gas resources.

After independence, the national Government realized the importance oil and gas for rapid industrial development and its strategic role in defense. Consequently, while framing the Industrial Policy Statement of 1948, the development of petroleum industry in the country was considered to be of utmost necessity.

Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and the Oil India Ltd. (a 50% joint venture between Government of India and Burmah Oil Company) was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam. In West Bengal, the Indo-Stanvac Petroleum project (a joint venture between Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored.

In 1955, Government of India decided to develop the oil and natural gas resources in the various regions of the country as part of the Public Sector development. With this objective, an Oil and Natural Gas Directorate was set up towards the end of 1955, as a subordinate office under the then Ministry of Natural Resources and Scientific Research. The department was constituted with a nucleus of geoscientists from the Geological survey of India.

A delegation under the leadership of Mr. K D Malviya, the then Minister of Natural Resources, visited several European countries to study the status of oil industry in those countries and to facilitate the training of Indian professionals for exploring potential oil and gas reserves. Foreign experts from USA, West Germany, Romania and erstwhile U.S.S.R visited India and helped the government with their expertise. Finally, the visiting Soviet experts drew up a



detailed plan for geological and geophysical surveys and drilling operations to be carried out in the 2nd Five Year Plan (1956-57 to 1960-61).

In April 1956, the Government of India adopted the Industrial Policy Resolution, which placed mineral oil industry among the schedule 'A' industries, the future development of which was to be the sole and exclusive responsibility of the state.

Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it would not be possible for the Directorate with its limited financial and administrative powers as subordinate office of the Government, to function efficiently. So in August, 1956, the Directorate was raised to the status of a commission with enhanced powers, although it continued to be under the government. In October 1959, the Commission was converted into a statutory body by an act of the Indian Parliament, which enhanced powers of the commission further. The main functions of the Oil and Natural Gas Commission subject to the provisions of the Act, were "to plan, promote, organize and implement programmed for development of Petroleum Resources and the production and sale of petroleum and petroleum products produced by it, and to perform such other functions as the Central Government may, from time to time, assign to it ". The act further outlined the activities and steps to be taken by ONGC in fulfilling its mandate.

1961 - 1990

Since its inception, ONGC has been instrumental in transforming the country's limited upstream sector into a large viable playing field, with its activities spread throughout India and significantly in overseas territories. In the inland areas, ONGC not only found new resources in Assam but also established new oil province in Cambay basin (Gujarat), while adding new petroliferous areas in the Assam-Arakan Fold Belt and East coast basins (both inland and offshore).

ONGC went offshore in early 70's and discovered a giant oil field in the form of Bombay High, now known as Mumbai High. This discovery, along with subsequent discoveries of huge oil and gas fields in Western offshore changed the oil scenario of the country. Subsequently, over 5 billion tonnes of hydrocarbons, which were present in the country, were discovered. The most important contribution of ONGC, however, is its self-reliance and development of core competence in E&P activities at a globally competitive level.



After 1990

The liberalized economic policy, adopted by the Government of India in July 1991, sought to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. As a consequence thereof, ONGC was re-organized as a limited Company under the Company's Act, 1956 in February 1994.

After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by offering shares to its employees.

During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant and Gas Authority of India Limited (GAIL) - the only gas marketing company, agreed to have cross holding in each other's stock. This paved the way for long-term strategic alliances both for the domestic and overseas business opportunities in the energy value chain, amongst themselves. Consequent to this the Government sold off 10 per cent of its share holding in ONGC to IOC and 2.5 per cent to GAIL. With this, the Government holding in ONGC came down to 84.11 per cent.

In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC diversified into the downstream sector. ONGC will soon be entering into the retailing business. ONGC has also entered the global field through its subsidiary, ONGC Videsh Ltd. (OVL). ONGC has made major investments in Vietnam, Sakhalin and Sudan and earned its first hydrocarbon revenue from its investment in Vietnam.



2.2 Organization Chart

Particulars of Organization

a) Date of incorporation: 23.06.1993

b) Mode of incorporation: Oil & Natural Gas Commission (“Commission) was set up in pursuance of the resolution bearing number 22/29/55-ONG dated August 14, 1956 issued by the Ministry of Natural Resources and Scientific Research, Government of India. In October 1959, the Commission was converted into a Statutory Body pursuant to the Oil & Natural Gas Commission Act, 1959. Pursuant to the Oil & Natural Gas Commission Act (Transfer of Undertaking and Repeal) Act, 1993 (Notified on September 4, 1993), the undertaking of the Commission together with all its assets, movable and immovable properties, contracts, licenses and privileges stood vested in a Company registered under the Companies Act, 1956. The Company was incorporated on June 23, 1993 in order to facilitate the vesting of the undertaking of the statutory body to the Company pursuant to the enactment of the said Oil & Natural Gas Commission Act (Transfer of Undertaking and Repeal) Act, 1993. The Certificate of Commencement of Business was granted on August 10, 1993.



c) Present Status A Government Company within the meaning of Section 617 of the Companies Act, 1956.

d) Administrative Ministry: Ministry of Petroleum & Natural Gas, Government of India 2nd Floor, Shastri Bhawan Dr. R.P. Marg, New Delhi-110001

e) Share Capital

i) Authorized: Rs. 15000.00 crore

ii) Issued and Subscribed: Rs. 2138.87 crore

iii) Paid Up: Rs. 2138.87 crore

f) Present Shareholding: The shareholding pattern as on 16th March 2007 is as follows:

Name %

I. President of India - 74.13

II. Body Corporates - 10.49

III. FII’s / NRI/ FR/Resident Indians - 10.59

IV. IFI’s /Mutual Fund/Banks - 4.59

V. Resident Individuals. - 1.84

VI. Others - 0.14

NOTE: Status of shareholding pattern changes every fortnight .

g) Listing with Stock: The Securities of the Company are presently Exchanges listed with the following stock exchanges:

i) Bombay Stock Exchange, Mumbai

ii) The National Stock Exchange of India Ltd, Mumbai the Company has the following ASSETS /PLANTS/ BASINS/ REGIONS/ INSTITUTES/ SERVICES:



A. ASSETS & PLANTS 1.Mumbai High Asset, Mumbai 2.Neelam & Heera Asset, Mumbai 3.Bassein & Satellite Asset, Mumbai 4.Uran Plant, Uran 5.Hazira Plant, Hazira 6.Ahmedabad Asset, Ahmedabad 7.Ankleshwar Asset, Mehsana 8.Mehsana Asset, Mehsana 9.Rajamundry Asset, Rajamundry 10. Karaikal Asset, Karaikal 11. Assam Asset, Nazira 12. Tripura Asset, Agartala

B. BASINS1. Western Offshore Basin, Mumbai 2.Western Onshore Basin Vadodara 3.KG Basin, Rajamundry 4.Cauvery Basin, Chennai 5.Assam & Assam-Arakan Basin, Jorhat 6.CBM- BPM Basin, Kolkata 7.Frontier Basin, Dehradun

C. REGIONS1.Mumbai Region, Mumbai 2. Western Region, Baroda 3. Eastern Region, Nazira 4. Southern Region, Chennai 5. Central Region, Kolkata

D. INSTITUTES1. Keshava Dev Malaviya Institute of Petroleum Exploration (KDMIPE), Dehradun 2. Institute of Drilling Technology (IDT), Dehradun 3. Institute of Reservoir Studies, Ahmedabad 4. Institute of Oil & Gas Production Technology, Navi Mumbai



5. Institute of Engineering & Ocean Technology, Navi Mumbai 6. Geo- data Processing & Interpretation Center (GEOPIC), Dehradun 7. ONGC Academy, Dehradun 8. Institute of Petroleum Safety, Health & Environment Management,Goa.

9. Institute of Biotechnology & Geotectonic Studies, Jorhat 10. School of Maintenance Practices, Vadodara 11. Regional Training Institutes, Navi Mumbai, Chennai, Sivasagar & Vadodara.

E. SERVICES1. Chief Drilling Services, Mumbai 2. Chief Well Services, Mumbai 3. Chief Geo-Physical Services, Dehradun 4. Chief Logging Services, Baroda 5. Chief Engineering Services, Mumbai 6. Chief Offshore Logistics, Mumbai 7. Chief Technical Services, Mumbai 8. Chief Info-com Services, New Delhi 9. Chief Corporate Planning, New Delhi 10. Chief Human Resource Development, Dehradun 11. Chief Employee Relations, Dehradun 12. Chief Security, Dehradun 13. Company Secretary, New Delhi 14. Chief Marketing, New Delhi 15. Chief Corporate Affairs &Co-ordination, New Delhi 16. Chief Corporate Communication, New Delhi 17. Chief Material Management, Dehradun 18. Chief Technical Services, Dehradun 19. Chief Health, Safety & Environment, Mumbai 20. Chief Legal, New Delhi 21. Chief Medical, Dehradun 22. Chief Internal audit, New Delhi 23. Chief Commercial, New Delhi 24. Chief Exploration & Development, Dehradun



2.3 Functions & Duties

Oil And Natural Gas Corporation has been established to carry out the objectives specified in the Memorandum & Articles of Association of the Company. The main objectives are:

1. To acquire whole or any part of the undertaking, business, the assets/liabilities, rights, obligations, power, goodwill, privileges, functions and associated establishment of whatever nature of the Oil & Natural Gas Commission [Established under the Oil & Natural Gas Commission Act (No. 43 of 1959)] and for that purpose carry into and carry into effect such agreements, contracts, arrangements as may become necessary.

2. To plan, promote, organize and implement programmes for the development of Petroleum Resources and the Production and Sale of Petroleum and Petroleum Products produced by it and for all matters connected therewith.

3. To plan, promote, organize exploit and implement programmes for the efficient development of petroleum and petroleum products and alternate resources of energy, and the production, distribution, conservation and sale of Petroleum and other products/services produced by it and for all the matters connected therewith.

4. To carry out exploration and to develop and optimize production of hydrocarbons and to maximize the contribution to the economy of the country. To carry out geological, geophysical or any other kind of surveys for exploration of petroleum resources; to carry out drilling and other prospecting operations; to probe and estimate the reserve of petroleum resources; to undertake, encourage and promote such other activities as may lead to the establishment of such reserves including geological, chemical, scientific and other investigations.

5. To search for, purchase, take on lease or license, obtain concession or otherwise acquire any estate or interest in, develop the resources of work, dispose off or otherwise turn to account, land or sea or any other place in whole of India or in any other part of the world containing or likely to contain, petroleum, petroleum resources or alternative sources of energy



or other oils in any form, asphalt, bitumen or similar substances or natural gas, chemicals or any substances used, or which is thought likely to be useful for any purpose for which petroleum or any oils in any form, asphalt, bitumen or similar substances or natural gas is, or could be used or to that end to organize, equip or employ expeditions, commissions, experts and other agents and to sink wells, to make boring and otherwise to search for, obtain, exploit, develop, render suitable for trade, petroleum, other mineral oils, natural gas, asphalt, or other similar substances or product thereof.

6. To undertake, assist, encourage or swap or promote the production of petroleum resources and to carry on in all their respective branches all or any of the business of producing, treating, (including the redefining of crude oil) storing, transportation, importing, exporting, swapping and generally dealing in or with, petroleum or other crude oils, asphalt, bitumen, natural gas, refinery gasses, liquefied petroleum gas and all other kind of petroleum products, chemicals and any such substances aforesaid.

7. To carry on all marketing and distribution of all kinds of petroleum products and to purchase or otherwise acquire manufacture, refine, treat, reduce, distil, blend purify and pump, store, hold transport, use, experiment with market distribute, exchange, supply, sell or otherwise dispose of, import, export and trade and generally deal in any and all kinds of petroleum products, oil, gas and other volatile substances.

8. To carry on all or any of the businesses of the sale and purchase of petroleum and other crude oil, asphalt, bitumen, natural gas, liquefied petroleum gas, chemicals and all kinds of petroleum products, treat and turn to account in any manner whatsoever petroleum and other crude oils, asphalt, bitumen, natural gas, liquefied petroleum gas and all kinds of petroleum products, chemicals and any such substance as aforesaid.

9. To establish, provide, maintain and perform scientific, technical, engineering, project management, consulting/contacting services including but without limiting to technical studies, design, construction, maintenance, repair all kinds of works and buildings, procurement, inspection expediting, management of construction and related services



for petroleum reservoir, storage and transportation of oil, gas and other minerals by pipeline in or otherwise, seismic data acquisition, interpretation, logging, drilling, cementing, other oil fields related equipment.

10. To promote, organize, or carry on the business of consultancy services in any field of activity in which the Company is engaged in or connected therewith.

It is a duty of ONGC to do its business operation within the objectives specified in the Memorandum & Articles of Association in a most fair and transparent manner. It is also a duty of ONGC to protect interest of its stakeholders as well as to maximize the wealth of the shareholders. ONGC is committed to achieve its goals as enshrined in the Vision & Mission Statement of the Company, which is enumerated below:

2.4 ONGC’S VISIONTo be a world-class Oil and Gas Company integrated in energy business with dominant Indian leadership and global presence.

ONGC’S NEW VISIONGIVEN BY HON'BLE PRESIDENT OF INDIA DR. APJ ABDUL KALAM“I would suggest ONGC to give world leadership in management of energy source, exploration of energy sources, diversification of energy sources, technology in Underground Coal Gasification, and above all, finding new ways of tapping energy wherever it is, to meet the ever-growing demand of the country.”

STRATEGIC VISION: 2001-2020Focusing on core business of E&P, ONGC has set strategic objectives of:

Focusing on core business of E&P, ONGC has set the following strategic objectives:

Doubling reserves (i.e. accreting 6 billion tonnes of O+OEG) by 2020; out of this 4 billion tonnes are targeted from the Deep-waters.

Improving average recovery from 28 per cent to 40 per cent. Tie-up 20 MMTPA of equity Hydrocarbon from abroad.



The focus of management will be to monetize the assets as well as to assetize the money.

2.5 ONGC’S MISSIONWorld Class• Dedicated to excellence by leveraging competitive advantages in R&D and technology with involved people.• Imbibe high standards of business ethics and organizational values.• Abiding commitment to safety, health and environment to enrich quality of community life.• Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for our people. • Strive for customer delight through quality products and services.

Integrated in Energy Business• Focus on domestic and international oil and gas exploration and production business opportunities.• Provide value linkages in other sectors of energy business.• Create growth opportunities and maximize shareholder value.

Dominant Indian Leadership• Retain dominant position in Indian petroleum sector and enhance India's energy availability.



3. PERFORMANCE MANAGEMENT & KPIs

By definition, performance management is the systematic process by which an

organization involves its employees and all stakeholders in the development

and implementation of a plan to improve organizational effectiveness and

reach organizational objectives. In 1883 Lord Kelvin, a leading physicist of

the early 19th century wrote:

“I often say that when you can measure what you are speaking about,

and express it in numbers, you know something about it; but when you

cannot measure it, when you cannot express it in numbers, your

knowledge is of a meager and unsatisfactory kind; it may be the beginning

of knowledge, but you have scarcely in your thoughts advanced to the

state of Science, whatever the matter may be.”

Performance management is a discipline that aligns performance with strategy.

At the centre of a performance management program is a framework on which

the various alignment programs (measurement, goal setting, compensation, and

investments) are focused. It includes setting performance expectations to realize

long term organizational vision, mission and objectives; measurement,

benchmarking and communication of feedback and recognizing performance

results.



3.1. Management Control System at ONGC

ONGC initially adopted a management control system designed around a financial framework. A schematic outline of the framework is given below:

Figure 1: Historic Management Control System

However, the above system had the following shortcomings which were realised over a period of time:

Financial (and not strategic) nature of feedback: This was the biggest drawback of the budgetary framework initially being used. The performance management feedback and review process concentrates on the control of activities / inputs oriented target fulfillment, instead of strategic growth oriented output parameters on efficiency or cost basis.

Vision Not Translated in Action Plans: The vision of long term growth in terms of reserve accretion and increased production are not translated into short term operational action plans / target goals that guide the activities of the business units at the ground level.

Business Unit Goals and Performance Incentive Not Linked to Strategies for Vision Actualization: Goals of the business unit teams and/or their



members and their performance incentives are not been linked to realization of long-term strategic goals in terms of their contribution for growth of the organization.

Resource Allocation Not Linked to Strategic Goals: Capital allocation and discretionary program funding have been based on line item budgets for activities / inputs and cost plus financial criteria, and not contribution to realization of long-term strategic goals of the organization in terms of efficiency or cost parameters.

3.2. Shift to Strategic Management System



Due to the above shortcomings and also based on the recommendations of the

Corporate Rejuvenation Campaign(CRC), ONGC has now moved from the

financial Management System to the Strategic Management System, at the

centre of which lies the Balanced Scorecard which is linked to all facets of the

management process to ensure that change is focused on the strategy. In

short, the Balanced Scorecard is a technique to translate an organization‘s

strategy into terms that can be understood, communicated, and acted upon.

The Balanced Scorecard approach begins with the premise that financial measures are not sufficient to manage an organization. The objectives and measures (Key Performance Indicators) of the scorecard are derived from an organization‘s vision and strategy. These objectives and measures provide a view of an organization‘s performance from four perspective:-

Output Perspective – Covers indicators directly related to the expected output from the concerned SBU/Chief/Unit.



Process/Operational Perspective – Covers indicators that measure the efficiency of the process adopted by the SBU/Chief/Unit for giving the output. Organizations execute strategy through sets of activities. These activities can be grouped into ―business processes that describe the way work is conducted. While thousands of activities must take place in every organization, only a few are truly strategic. The design of a BSC requires the identification of those critical few activities that affect customer satisfaction and shareholder satisfaction. Value propositions that lead customers to do more business and at higher margins with the company.

Cost & Financial Perspective – Covers indicators that measure the cost focus and efficiency in utilizing allocated funds and minimizing associated costs.

Learning, Growth & Motivation Perspective – Covers indicators that relate to the efforts made for growth and learning, which is an integral part of long term growth and sustainability.

For each of the four perspectives that the balanced scorecard captures while evaluating performance of the concerned business unit, it employs Key Performance Indicators as measures of performance. The only difference between a metric and a KPI is that a KPI embodies a strategic objective and measures performance against a goal. Thus KPIs:

Embody a specific objective Measure performance against specific targets. Targets are defined in

strategic, planning, or budget sessions and can take different forms (e.g., achievement, reduction, absolute, zero) and have ranges of performance and are assigned time frames by which they must be accomplished. Five types of targets have generally been defined:

1. Achievement: Performance should reach or exceed the target. Anything over the target is valuable but not required. Examples include revenues and satisfaction.

2. Reduction: Performance should reach or be lower than the target. Anything less than the target is valuable but not required. Examples include overtime and attrition.

3. Absolute: Performance should equal the target. Anything above or below is not good. Examples include in-stock percentage and on-time delivery.



4. Min/max: Performance should be within a range of values. Anything above or below the range is not good. Example: mean time between repairs.

5. Zero: Performance should equal zero, which is the minimum value possible. Examples include employee injuries and product defects.

Based on targets which are measured against a baseline or benchmark. The previous year‘s results often serve as a benchmark but arbitrary numbers or external benchmarks may also be used. To keep employees on track to achieve those long-term targets, many organizations divide time frames into intervals that are measured on a more frequent basis. In some cases, the benchmark may be completely arbitrary, as with visionary goals.

3.3. Characteristics of effective KPIs

Effective KPIs should have the following characteristics:



1. Sparse: ―“The lesser the better” – Lesser number of more representative KPIs are considered to be better than having a large number of KPIs because most people can only focus on a maximum of five to seven items at once and moreover, there are really only a handful of metrics—perhaps even just one—that can dramatically impact a desired outcome or outcomes. For example, British Airlines ignited a dramatic performance management revolution in the 1980s by focusing on one all- encompassing metric: on-time flights.

2. Drillable: “Users can drill into detail” – The KPIs which appear on top-level executive dashboards should be drillable or expandable into more detail-representative parts more suitable for monitoring activities at lower levels. Thus drill ability of KPIs ensures that the low level KPIs are linked to the top level KPIs and the chain of strategy permeates continuously from the top to the bottom.

3. Simple: “Users must be able to understand the KPIs” - KPIs must be easy to understand. Employees must know what‘s being measured and how it‘s calculated. Complex KPIs consisting of indexes, ratios, or multiple calculations are difficult to understand and, more importantly, difficult to act on. In short, if users don‘t understand the meaning of a KPI, they can‘t influence its outcome. It‘s important to train people on KPI targets.

4. Actionable: “Users know how to affect outcomes” – Users should not only be able to understand the KPIs, but should also know how to affect the outcomes of these KPIs.

5. Owned: “KPIs have an owner” - Every KPI needs an owner who is accountable for its Outcome. Typically, a KPI has a business owner and a data owner. The business owner is responsible for the meaning and value of the KPI. If someone has a question about the origin of the KPI, how it was calculated, or what actions to take should performance drop, they should call the KPI‘s business owner. The data owner, on the other hand, is responsible for populating the KPI with data and adhering to standard



system-level agreements (SLAs) governing the accuracy and scheduled loading of the data, among other things. Both the business and technical owners should be listed in the KPI‘s metadata with contact information.

6. Referenced: “Users can view origins and context” - The data behind a KPI has to be clean, accurate, and most importantly, perceived as accurate. Reference data supporting the calculations, etc. should be provided to engender trust and responsibility among the owners.

7. Correlated: “KPIs drive desired outcomes” – The KPIs should be reviewed from time to time and it must be ensured that they are correlated to expected outcomes based on the organizational strategy.

8. Balanced: “KPIs consist of both financial and non-financial metrics” - Robert Kaplan and David Norton, believe organizations should measure performance across multiple dimensions of a business, not just a financial perspective. They advocate a ―balanced‖ approach to measurement, which helps executives focus on and invest in the key drivers of long-term growth and sustainability.

9. Aligned: “KPIs don’t undermine each other” - It‘s important that KPIs are aligned and don‘t unintentionally undermine each other, a phenomenon that some call ―KPI sub-optimization. For instance, a logistics group that wants to streamline inventory costs may decide to reduce inventory levels. But this makes it difficult for a retail store to prevent stock-outs of fast-moving items—which is a KPI for the store staff.

3.4. Developing KPIs

KPI development is the most important part of the entire exercise of putting in place a good performance management system. The following sequence of steps



can be taken to develop effective KPIs which are well linked to the strategy and measure what should be measured to realize that strategy:

1. Define strategic objectives- Since KPIs align performance to the overall strategy, it is extremely important that the strategy be clearly understood at the initiation of the project.

2. Formulate vision and mission in accordance with the overall strategy – Elaboration of these mission and vision statements are required so as to give the developer a firm understanding of the actual objectives and not merely the stated objectives.

3. Break up the objectives and classify them into 4 broad theme based perspectives: Output/Result, Process/Operational, Cost/Financial and Learning, Growth & Motivation Perspectives.

4. Develop a single representative Key Performance Indicator with respect to each of the stated objectives in accordance with the rules for developing effective KPIs.

5. Define the Key Performance Indicator clearly, present the methodology for measuring/computing it, state the basis of measurement and define its unit.

6. Assign weights to each of these KPIs in accordance with the importance of the related objective with respect to the overall departmental/SBU‘s expected performance.

7. Present the developed KPIs in the form of a balanced scorecard to provide a glimpse of the actual overall performance, notice deviations and initiate corrective/preventive actions wherever required.

Once completed, the balanced scorecard will become the focus of organization change. The Balanced Scorecard changes the premise upon which the Management System is based. People‘s goals, investments, and activities are all linked to the objectives and measures of the scorecard. It is essential, then, that this scorecard is designed in a way that accurately reflects



the organization‘s strategy. The design of a good Balanced Scorecard is based on three principles that link the measures to strategy:

1. Cause-and-Effect Relationships: A strategy is a set of hypotheses about cause and effect. A properly constructed scorecard should tell the story of the business unit‘s strategy through a sequence of cause- and- effect relationships. Every objective selected for a Balanced Scorecard reflected through a Key Performance Indicator (KPI) should be part of a chain of cause-and-effect relationships that communicates the meaning of the business unit‘s strategy to the organization. This means to say that every performance indicator on the balanced scorecard should reflect something in terms of the organization‘s strategy, i.e. with every scorecard we should be able to answer:

What will happen if we do not monitor this Performance Indicator? What will be the consequences of this performance indicator

assuming values that fall outside our consideration range?

2. Outcomes and Performance Drivers: Outcome KPIs—sometimes known as lagging indicators measure the output of past activity. They are often financial in nature, but not always. Examples include revenues, margins, return on equity, customer satisfaction, and employee retention. On the other hand, driver KPIs—sometimes known as leading indicators or value drivers—measure activities that have a significant impact on outcome KPIs. These KPIs measure activity in its current state (number of sales meetings today) or a future state (number of sales meetings scheduled for the next two weeks). The latter is more powerful, since it gives individuals and their managers more time to adjust behavior to influence a desired outcome. A good Balanced Scorecard should have an appropriate mix of outcomes (lagging indicators) and performance drivers (leading indicators) that have been customized to the business unit‘s strategy.

3. Linkage to Financials: With the proliferation of change programs under way in most organizations today, it is easy to become preoccupied with goals (quality, customer satisfaction, innovation, and the like) for their own sake. A Balanced Scorecard must retain a strong emphasis on



outcomes, especially financial ones. Ultimately, causal paths from all the measures on a scorecard should be linked to financial objectives.

KPI based balanced scorecard is apt for use by ONGC due to the numerous advantages it enjoys over other conventional methods and also because of the following unique features inherent in ONGC‘s organization structure:

Complexity arising out of numerous SBUs: ONGC has a complex organizational structure made up of many business units and specialized business units, each with their short term objectives which contribute to the overall ONGC‘s long term growth objectives in a subtle, different way. In the process, synergy which is the overarching goal of organization design is sometimes lost. However, for Organizational performance to become more than the sum of its parts, individual strategies must be linked and integrated. Balanced Scorecard enables establishment of this linkage to the strategy through the common themes that permeates their scorecards. Synergies result from explicit recognition of customer and supplier relationships. The Balanced Scorecard makes the linkages among these different business units explicit so that they can be actively managed. The business units, on the one hand, and the support units, on the other, treat each other as ―customers‖ or ―suppliers,‖ as appropriate to their relationship. In this way, a linkage between each unit is achieved, and their obligations for delivery get well defined. Thus, the following flow takes place:

1. A corporate scorecard which defines overall strategic priorities is developed.

2. Each SBU then develops a long-range plan and balanced scorecard consistent with corporate strategic agenda.

3. Each Support Unit then develops a balanced scorecard aligned to SBU and corporate strategies.



Numerous Business Units and consequent requirement of specific objectives: In today‘s business environment wherein many organizations compete with each other in all kinds of ways, merely developing a strategy is not sufficient; the competence of the organization in converting the strategy to reality through specific actions based on action plans and objectives is more important in realizing long term goals and success. The problem is further complicated in ONGC because the existence of numerous SBUs requires great administrative control and in the process, sometimes, the true focus is lost out just because the existence of so many SBUs makes it difficult to establish objectives for each SBU and monitor each SBU‘s performance against those objectives unless a formal system for this purpose exists. This requires that all members of the organization contribute constructively through a deep understanding of the organization‘s strategy and acting on it. The Balanced Scorecard forms the link between the top-level strategy as developed by the Senior Management and the resulting ground level objectives for each Business Unit in accordance with the overall organizational strategy.

4. KPI DEVELOPMENT METHODOLOGY



The following approach was adopted for the purpose of developing KPIs for the SBUs of ONGC:

1. Understand the roles and responsibilities of the SBU: This is the first and the most important step in the entire KPI development exercise. Due to numerous qualities of effective KPIs cited above, it is extremely necessary that KPIs which serve as a link between performance and strategy should be carefully selected and weighted for the SBU under consideration. Therefore, as a primary exercise understanding each SBU‘s roles and responsibilities through relevant company manuals and discussions with respective team leads and managers provided a firm understanding of the SBU‘s intended and possible contribution in ONGC‘s overall strategy.

2. Decide category-wise objectives: While understanding the roles and responsibilities of the SBU provided a basis to further refine these roles and responsibilities and form KPIs to measure performance for roles and responsibilities which were deemed important, segregating the roles and responsibilities and defining them with respect to Output/Result Perspective, Process/Operations Perspective, Cost/Finance Perspective and Learning, Growth & Motivation Perspective was done to further refine and retain important roles and responsibilities as forming KPIs against insignificant/unimportant roles and responsibilities would not help in achieving the true objective.

3. Selecting KPIs to best represent the objectives under each category: After the objectives of the SBU were divided into categories, a rigorous analysis of existing proposed KPIs (which had been proposed earlier and deleted/incorporated) was done. This was done in discussion with the respective team lead and manager. In the process, efforts were also made to propose new KPIs which would either combine two or more existing KPIs (as the lesser the KPIs the better the monitoring and actions) or measure performance on some front which has been left out earlier.

4. Defining the selected KPIs: At the time of regional workshops held by ONGC to generate KPIs which could be used to measure performance of SBUs, the KPIs were not defined properly. Some of the KPIs could be defined in many possible ways. After selecting the KPIs to be used under



each perspective under the SBUs under consideration, those KPIs were defined in a way which would best capture the essence of the KPI. A proper methodology for measuring the KPI was also defined which can now be used by ONGC to convert raw data into a measure against the KPI.

5. Assigning weights: The weights proposed by ONGC for KPIs under the 4 categories are as follows:

Results/Output : 30-40% Process/Operational : 30-35% Cost/Finance : 10-15% Learning & Growth : 10-15%

This has been done in accordance with the fact that each SBU is primarily responsible for producing some output and maintaining process efficiency while doing so and thus, the weights for Output and Process need to be the highest.

Keeping in mind the above breakup and also the relative importance of the KPI in reflecting the overall SBU results and roles, weights were assigned to the KPIs.

6. Developing balanced scorecard: After the KPI were selected, defined and assigned appropriate weights, the KPIs were presented in the form of balanced scorecard for the SBU under consideration. The format used was designed to be a logical extension of the SBUs roles and responsibilities; linkage with ONGC‘s overall strategy, presentation of KPI against each objective, definition and weight of the KPI and the monitoring plan for the KPI. The exercise of KPI development was carried out for the following SBUs/Executives of ONGC, the detailed results for which are presented later in the order in which they appear below:

1. Assets(Onshore)2. Assets(Offshore)3. Joint Venture Operational Group(JVOG)4. Basins5. Coal Based Methane Development Project (CBM Development Project)6. Plants : Hazira Plant, Uran Plant, C2-C3 Plant7. Chief, Drilling Services



8. Chief, Geophysical Services9. Chief, Well Services10.Chief, Logging Services11.Chief, Engineering Services12.Chief, Technical Services13.Chief, Offshore Logistics Services14.Chief, Materials Management15.Explorations & Development (E&D)16.Corporate Exploration Centre (CEC)17.Chief, Human Resource Development18.Chief, InfoCom19.Chief, Marketing20.Employee Relations (ER)21.Institutes: GEOPIC, IDT, IRS22.Legal Department23.New and Marginal Fields Development24.Corporate Finance25.Company Secretary26.Internal Audit27.Commercial

5. PERFORMANCE CONTRACTS FOR KEY EXECUTIVES(2010-2011) APPROVED BY : ED-CP



1. Background:a) PMBG has taken up Performance Controls as an active instrument for

Performance Management & Benchmarking. The performance contracts is prepared by identification of Ker performance Indicators of the respective Business Unit(SBU), and assignment of targets and weights for their performance evaluation. The targets for the SBUs emanates from MOU signed with MOP&NG for the year 2010-11.

b) EC in its 338th meeting held on 17-18 November, 2009, desired that:-

I. PCs be so developed that the performance of SBUs reflect the performance of ONGC;

II. Performance Evaluation Parameters be revisited to make them more inclusive foe SBUs, specially for Services and Institutes;

III. Exploratory success be benchmarked with international norms;IV. Sales besides Production should also be a PC Target and

reconciliation factor should be tracked separately; andV. PCs comprise 2 groups of KPIs, the first one directly to MOU

signed with Government of India and the other related to key KPIs.

2. Proposal:I. Accordingly Performance Contracts (PCs) are proposed for Key

Executives for the year 2010-11. These Performance Contracts submitted have been proposed for the following installations/work-centers:

1) Basin(CBM Included) : 08 2) Assets(JVOG Included) : 12 3) Plants : 03 4) Field Services : 04 5) Institutes : 09 6) Corporate Services : 24

II. These PCs have been evolved through the following process:



Work shop of Nodal officer from SBUs was organized at ONGC Academy from 5-10 November 2009

Submission of draft performance Contracts to respective Key Executives were submitted to respective SBUs soliciting their response;

Second draft after incorporation feedback from respective Key Executives were submitted at KEM held on January 17, 2010, and

Subsequent to singing of the MOU between ONGC & the MoPNG on 15.03.2010, focused KPIs reflecting the MOU parameters have been added to 2010-11 PCs.

III. The proposed KPIs are in 2 groups; first those derive from MOU, and second others that are critical to Performance of ONGC. All the performance Contracts have been drawn up into quadrants representing the output Perspective. The over-all score for each Performance Contracts is assigned a value of 100. The break-up in respect of the four perspective has been broadly kept as under;

Output Perspective : 30-40

Activities Perspective : 30-35

Finance Perspective : 10-15

Learning & Growth Perspective : 10-15

3. Performance Contracts Proposed for 2010-11

SBUs Performance Contracts incorporation their KPIs and weight assigned are placed at annexure-1 of the agenda. The MOU targets for Production of Crude, Gas, and VAP have been drilled down to respective Producing Units on the same scale. Other targets have been taken from Annual Plan/Budget. As per decision of 4.4.2010, it is proposed to monitor internally production and gas sales based on higher of BE and MoU targets.

4. Peer Comparison Benchmarks;



I. As for EC directive to benchmark exploratory success with international norms, it is proposed to take up following KPIs:

a) Reserve Growth Trend(CARG-3/4 years Rolling Averages)b) Production Growth trend(CAGR- ¾ years rolling averages)c) Reserve Placement rated) Reserve to production Ratio( years) ande) Exploration success ratio( % Hydro carbon Bearing Wells Drilled )f) Seismic Survey, Processing & interpretation ( API)- G & G Costs( $/ boe)g) Drilling Costs($/boe)h) Finding Cost( $/boe)i) Lifting Costs($/boe)j) Production Costs($/boe)

II. Leading energy consultants having their own data banks like – Woodmac, PFC and Global data have been requested to confirm whether they would be able to identify the peer group and confirm above and/ or other suitable KPI’s to benchmark ONGC’s SBUs actual performance with similar units within India and globally and the study would be completed during current year .

5. Approval Sought:

Approval of EC is sought in respect of the following : Proposed Performance Contracts, 2010-11 for key – executives, Approvals of KPI’s at 4.1 above towards bench-marking performance vis-

à-vis peers through energy consultants like Woodmac, PFC, and global Data etc, and

Alignment of performance rating on the same scale as applicable for Performance Evaluation of ONGC against MOU targets.

6. KPI DEVELOPMENT RESULTS

6.1 Assets (Offshore/Onshore/JVOG)



Roles & Responsibilities:

Major roles and responsibilities of the asset managers are presented below:

1. Undertake overall responsibility for overall operational management of the asset.

2. Prepare PCs for the asset and review it with Director(onshore/offshore) which include

Production and reservoir management Costs SHE Special tasks

3. Approve and monitor all major asset activities and plans.4. Release of development drilling locations.5. Undertake leadership position on behalf of ONGC at the location in case

of issues affecting assets as well as services.6. Oversee support functions and services(for administrative purposes only)

at the asset.7. Interact with service managers regarding asset plans through periodical

review meetings and ensure scheduled availability of service

“This function of the assets links assets’ performance with support and services. Because asset managers must interact with service managers regarding asset plans and accordingly, availability of services, under ideal conditions, the services must be available for the assets when required (because the asset plans being fixed in advance, the planning with the services is possible in advance)”

8. Interact with basin manager regarding priority of services of basin manager

Based on the above set of roles and responsibilities developed after referring to some internal sources and consultation with senior managers, the following objectives can be considered under the four major categories:



Output/Result: Maximize oil and gas production; enable sales and contribute to reserve accretion.

Process/Operational: Enhancing the work-productivity, maximize the output for a given input and save time and effort.

Cost/Financial: To carry out the operations with a cost focus (minimize drilling and lifting cost, minimize inventory carried).

Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for Onshore Assets and Offshore Assets and JVOG (Joint Venture Operational Group which is also an asset where ONGC has a controlling stake in the form of a joint venture and carries out operational activities through Technical and Operational Committees) are presented below:-

6.2 BASINS




Major roles and responsibilities of basin managers are presented as below:

1. Undertake overall single point responsibility of all exploration related activities in the basins including release of exploratory drilling locations. The responsibility of the basin manager will inter alia include:

Reserve accretion Assessment of requirement of seismic data acquisition and

processing Interpretation of seismic, logging and reservoir data Geological modeling Acreage acquisition and disposal

2. Prepare and update exploration portfolio.

3. Assist Corporate in bidding process for exploration blocks.

4. Prepare performance contract for Basin and review it with director(exploration).

5. Approve and monitor all major exploration projects and activity plans.

6. Oversee support functions including services, through head of regional office at the basin location(wherever applicable).

7. For basins including significant production activities: Prepare work-plans, budgets and activity plans for the

producing areas reporting to Basin Manager Undertake operational management of production facilities

and reservoir optimization of producing areas reporting to Basin Manager

Oversee services at these locations Interact with service managers regarding work plans for

Basin and monitor scheduled availability of service Assume responsibility of resource planning and its availability

for the Basin except those covered under SLAs



8. Undertake leadership position on behalf of ONGC at the location in case of issues affecting Basin as well as services.

Interact with asset manager for obtaining priority for work related to reserve accretion as per priorities of Basin.

Based on the above set of roles and responsibilities developed after referring to some internal sources and consultation with senior managers, the following objectives can be considered under the four major categories:

Output/Result: Carry out exploration; assist in production and reserve accretion.

Process/Operational: Enhancing the work-productivity, maximize the output for a given input and save time and effort.

Cost/Financial: To carry out the operations with a cost focus (minimize survey cost, finding cost, exploratory drilling cost, penalty and inventory carried).


Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for basins are presented below:-

6.3 CBM Development Project




The Memorandum & AoA of the company state the following as one of the objectives for the organization‘s existence:

“To carry out exploration and to develop and optimize production of hydrocarbons and to maximize the contribution to the economy of the country. To carry out geological, geophysical or any other kind of surveys for exploration of petroleum resources; to carry out drilling and other prospecting operations; to probe and estimate the reserve of petroleum resources; to undertake, encourage and promote such other activities as may lead to the establishment of such reserves including geological, chemical, scientific and other investigation.”

It is here that CBM gains importance and contributes to ONGC‘s goals and objectives.

The following objectives have been evolved under the 4 major categories:

Output/Result: To maximize the development of methane for various purposes such as reserve accretion, subsequent production of O+OEG and enable sales.Process/Operational: Enhancing the work-productivity, maximize the output for a given input and save time and effort (act as per work-plan and maximize drilling efficiency).Cost/Financial: To carry out the operations with a cost focus (minimize finding cost, exploratory drilling cost, penalty and inventory carried).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for the CBM Development Project are presented below:-

6.4 PLANTS




The functional role of plants in ONGC comes after the oil and gas output is produced by the Assets. Plants are mainly used for production of Value Added Products as per the MOU with the Ministry of Petroleum & Natural Gas (MoP&NG) and also for refining of oil and gas produced by the assets. ONGC currently has 3 plants: Uran Plant, Hazira Plant and C2-C3 Plant. C2-C3 Plant is currently in the development phase and hence KPIs are significantly different for C2-C3 Plant.The objectives for Hazira and Uran Plant under the 4 categories are as follows:-

Output/Result: To maximize production and enable sales of VAP. Process/Operational: To maximize efficiency through system availability and conversion efficiency. Cost/Financial: To carry out operations in a cost effective manner (minimizing production cost of VAP and power) and reducing the amount of inventory held.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

The objectives for C2-C3 Plant under the 4 categories are as follows:Output/Result: To effectively manage projects and ensure completion as per plan. The KPI being used to monitor this objective (Projects Management which measures the date of completion versus planned date) i s the single KPI being used under this head for C2-C3 Plant and is given a weight age of 50 percent owing to the importance of projects management for C2-C3 Plant.Process/Operational: To form MDT teams for efficient handling of works and carry out work processes with full efficiency in accordance with global standards.Cost/Financial: To maximize budget utilization and generate savings wherever possible.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for the Plants are presented below:-

6.5 Chief, Drilling Services




Enhancing performance of drilling services by:-

1. Developing vision and group strategy for all services constituting Drilling services (Drilling, Mud, Cementing) and ensuring their strategy is aligned with ONGC‘s overall strategy.

2. Lead responsibility for performance management of drilling services.

3. Planning and allocation of resources to the services viz. Drilling, mud, cementing in respect of budgeting (capital), and for operational involvement including all up gradation / refurbishment / replacement.

4. Ensure timely capturing of external opportunities.

5. Break bottleneck by providing guidance to services and users (Assets and Basins).

6. Responsible for : Introduction of new operational technologies in the areas of

drilling, mud and well cementation Exercising functional control on drilling, mud and cementing

service assigned to different assets and basins Coordinating with HR planners for drilling, mud and cementing

services personnel Ensuring linkages with institute of drilling technology for

implementation of R&D recommendations Develop service orientation in people and processes




Output/Result: To ensure maximum availability of drilling rigs; carry out all activities related to drilling (exploratory/development), mud and cementing.Process/Operational: To carry out the drilling and associated activities with full efficiency and make maximum utilization of available resources.Cost/Financial: To carry out the operations with a cost focus.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for Chief, Drilling Services is presented below:-

6.6 Chief, Geophysical Services




Enhancing performance of drilling services by:-

1. Undertake overall responsibility for operational management of geophysical services.

2. Develop specific plan and performance contract for geophysical services (including capacity planning, new business development, partnerships and alliances) and ensure alignment with strategic plan and Performance Contract for exploration.

3. Lead annual Performance Contract exercise for all Heads of Regional Geophysical services and Head, GEOPIC and ensure alignment with Geophysical Services Performance Contract and work plans.

4. Allocate and review deployment of resources across regions, GEOPIC and RCCs.

5. Ensure timely capturing of external opportunities for utilizing Geophysical Service Resources.

6. Facilitate induction and development of new technology and tools to improve efficiency.

7. Developing service orientation in people and processes.

The following objectives have been evolved under the 4 major categories:Output/Result: To acquire and process data and thereby aid exploration and subsequent development. Process/Operational: To assume full responsibility for operational management; include efficient use of available resources.Cost/Financial: To carry out the operations with a cost focus (minimize data acquisition cost, processing cost and inventory carried).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for Chief, Geophysical Services is presented below:-

6.7Chief, Well Services




1. Enhance performance of well services.2. Develop vision and group strategy for all services constituting well

services ( Work over, WSS, Completion & Testing ) and ensure that their strategy is aligned with ONGC‘s overall strategy.

3. Lead responsibility for performance management of the services.4. Allocate resources to the services viz. Work over, WSS, Completion &

Testing in respect of budgeting (capital), and operational improvement.5. Monitor Work over, WSS, Completion & Testing services

performance as per the Performance Contracts.6. Ensure timely capturing of external opportunities.7. Break bottlenecks by providing guidance to services and users (Assets and

Basins).8. Develop service orientation in people and processes.9. Facilitate induction and development of new technology and tools to

improve efficiency.


Output/Result: Ensure resource availability; Maximize oil gain from work over and stimulation jobs; carry out well completion and testing.

Process/Operational: To carry out the Work-Over, WSS and completion activities with full efficiency and make maximum utilization of available resources.

Cost/Financial: To carry out the operations with a cost focus (minimize cost of Work-Over, stimulation or well testing per well and minimize inventory carried).


Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for Chief, Well Services is presented below:-

6.8 Chief, Logging Services




1. Undertake overall responsibility for operational management of logging.2. Develop strategic plan and Performance Contract for logging

(including Capacity Planning, new business development, partnerships and alliances) and ensure alignment with strategic plan and performance contract of Assets and Basins.

3. Lead annual Performance Contract exercise for all Head Logging and ensure alignment with Logging Services Performance Contract and work plans.

4. Allocate and review deployment of resources across regions.5. Ensure timely capturing of external opportunities for utilizing Logging

resources.6. Develop service orientation in people and processes throughout the unit.


Output/Result: To provide logging services as and when required.Process/Operational: To carry out the logging jobs and associated activities with full efficiency and make maximum utilization of available resources.Cost/Financial: To carry out the operations with a cost focus (minimizing logging cost and inventory carried).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for Chief, Logging Services is presented below:-

6.9 Chief, Engineering Services, Chief, Technical Services




1. Enhance performance of Engineering Services including design, works and maintenance.

2. Responsibility for Works including:

Construction of Production facilities and pipelines (both onshore and offshore)

Major revamp of production facilities Construction of sites Approach roads for drilling Work-over services and civil construction works

3. Responsibility for maintenance includes all repairs/overhauls carried out beyond the repairs carried out in-situ. Responsibility includes repairs/overhauls at workshops, dry docking of rigs/OSVs/MSVs etc.

4. Develop vision and group strategy for all services constituting Engineering Services (Design, works maintenance) and ensure strategy is aligned with the ONGC strategy.

5. Allocate resources to the portfolio of services constituting Engineering Services.

6. Lead annual Performance Contract exercise for all National Heads of services constituting Engineering Services.

7. Break bottlenecks by providing guidance to services and users (Assets & Basins).

The following objectives for Chief, Engineering Services have been evolved



under the 4 major categories:

Output/Result: To manage work projects as per the work planProcess/Operational: To carry out work related activities promptly (revision of cost schedule, preparation of tender) and efficientlyCost/Financial: To manage operations with a cost focus (maximize budget utilization and minimize cost savings wherever possible)Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction

The following objectives for Chief, Technical Services have been evolved under the 4 major categories:

Output/Result: To conduct audits (technical and efficiency); assist in projects management. Process/Operational: To assist in technical aspects like rate contracts finalization, framing of specifications and quality inspections with promptness.Cost/Financial: To work with cost focus and minimize project completion costs.


Based on these broad objectives, the balanced scorecards prepared after selecting KPIs for Chief, Engineering Services and Chief, Technical Services is presented below:-



6.10 Offshore Logistics Services

Based on discussions with the managers, the following were identified as key objectives of this SBU under the various heads:

Output/Result: To ensure logistics resource availability when required (i.e. to provide helicopters and other transport units when required, ensure optimum capacity utilization and minimize rig waiting time due to unavailability of logistics support).Process/Operational: To enable efficient utilization of logistics resources and maximize performance. Cost/Financial: To carry out the logistics operations with a cost focus (minimize transportation cost per person and per tonne of material transported, minimize inventory carried and associated costs).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

Based on the above mentioned objectives for Offshore Logistics Services, the balanced scorecard showing all the KPIs selected is as below:



6.11 Chief, Materials Management

Roles & Responsibilities:1. Develop corporate policy for materials management in consultation

with Assets/Basins and Service Managers.

2. Ensure wide communication and implementation of Common MM policies.

3. Responsible for: Physical management of stocked items Tracking items and ownership; inputs to central materials database Ensure disposal of condemned items Inventory management activities including codification, stock

verification, etc. EPC Cell

4. Responsible for: Consolidation of requirements of type I (high value) and type II

purchase items Purchase type I items and form rate contracts/panel for type II items

(regular purchase items) Formation of tender committees Forming purchase forums

5. Undertake vendor management for type I and type II type vendors directly contracted by the Corporate Materials Management group.

6. Maintain central database for all MM data (including database on policies, inventory, purchase status and prices, vendors and their ratings).

7. Conduct analysis of MM data to assess performance of MM and indenting groups.

8. Play an advisory role for Asset/Basin and service managers and performance management forum for improving materials management.



9. Liaison with Information Systems function for obtaining hardware and software services.

10.Formulate and communicate policies for materials management.

11.Prepare tender documents, contract formats, etc. incorporating best practices from users.

12.Staff function to Director (CS) for liasoning with external agencies e.g. Government and industry.

13.Functional responsibility of MM setups of Assets/Basins/Services/ Regional Offices/Institutes.

The following objectives for Chief, Materials Management can be considered:

Output/Result: To carry out purchasing, stocking and management of materials through an effective materials management systemProcess/Operational: To prepare contract formats and tender documents in line with best practices; reduce average procurement times and continually modify MM policiesCost/Financial: To minimize inventory carrying costs and purchasing costs

Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction

The balanced scorecard prepared accordingly is as shown below:-



6.12 Explorations & Development (E&D), Corporate Exploration Centre(CEC)

Roles & Responsibilities (E&D):

The chief roles and responsibilities of the E&D Technology are as follows as enshrined in the company document:

1. Assist in formulating overall Exploratory & Development technology requirements (including that for overseas basins) by undertaking staff-work.

2. Participate in intra-basin forum discussions (on various sedimentary basins in India). Must be a statutory invitee in these forums.

3. Maintain global E&P database and provide relevant expertise and technical support.

4. Work with corporate planning group to ensure exploration and development technology is consistent with ONGC‘s strategy.

5. Liaison with the institutes for introduction of relevant E&P.

As per the above roles and responsibilities, it appears that E&D coordinates the exploration and development process and is responsible for aligning the E&D activities to meet ONGC‘s objectives. The objectives of the SBU under the 4 major categories are as under:Output/Result: To assist in all exploratory and development technology requirements consistent with ONGC's strategy (maximize success ratio and reserve accretion).Process/Operational: Enhancing the work-productivity, maximize the output for a given input and save time and effort.

Cost/Financial: To carry out the operations with a focus (reduce penalty).

The work of the Corporate Exploration Centre is also aligned closely with E&D. However, CEC is more of a planning body for overall exploration related works in ONGC while E&D is more concerned with actual exploration works performance. Based on discussions, the key objectives of CEC appear to be as follows:



Output/Result: To oversee exploration activities (execute work-plan, assist in reserve accretion and maximize exploration/development study projects completed).Process/Operational: To coordinate exploratory work; enable execution of PCs and annual work plan.Cost/Financial: To carry out the operations with a focus (reduce penalty).


The balanced scorecards for E&D and CEC prepared accordingly are as shown below:



6.13 Chief, Human Resource Development


1. Lead responsibility for employee relation functions including corporate establishment responsible for :

Personnel data management Providing inputs to the transfer, job rotation and recruitment

process for corporate level

2. Policy group:Formulate and coordinate all HR policies relating to employee including benefits/compensation, service conditions, recruitment, promotions, welfare and IR

3. Responsibility for recruitment, management of performance appraisal records and management of seniority records/lists

4. Manage corporate IR activities, interact and manage relationship with collectives

5. Administration: Responsible for official language policy implementation, issuing

guidelines and liaison

At HQ responsible for Estate, Welfare and Hospitality functions

Responsible for managing corporate social security scheme

Managing socio-economic development at HQ region

6. PRBS and trusts : Provide staff function and management for these trusts

7. Discipline and appeals : Provide staff function and manage the Discipline and appeals process

8. HQ Grievance Committee: Manage and approve staff function support for the grievance committee process and its meetings



Based on the roles and responsibilities, the objectives of HRD with respect to the 4 categories are as follows:

Output/Result: To contribute to skill gap assessment and bridging; job rotation and minimize attrition. Process/Operational: Timely completion of processes and work promptly as per requirements. Cost/Financial: To carry out the operations with a cost focus (maximize budget utilization and generate savings if possible).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

The balanced scorecard prepared accordingly is as shown below:



6.14 Chief, InfoCom


1. Develop and implement IS and Communications strategy to meet needs of various Asset/Basin, Service Units and Corporate users.

2. Lead IS and communications Investment and budgeting process. Also drive procurement for IT equipment and services.

3. Ensure IS and Communication system maintenance and user support.4. Drive various IS and Communications initiatives/projects.5. Lead responsibility for performance management of the Info-Com

services at Asset/Basin/Services/Corporate.6. Finalize and ensure performance as per Annual Performance Contract

exercise for Info Com service.7. Enhance the application portfolio of the organization.8. Conceptualization and firming up of the organizational needs of the

organization in association with the users.9. Advising on the training and education of Info Com systems and

technologies.

Based on the roles and responsibilities, the objectives of HRD with respect to the 4 categories are as follows:Output/Result: Develop and implement IS and Communications strategy.Process/Operational: To provide support and help to enhance to operational efficiency of system machines as well as end users.Cost/Financial: To carry out all activities (including routine works as well as new implementations) such that the associated costs are minimized.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.




6.15 Finance

4 Strategic Business Units were studied which are classified as Finance SBUs at ONGC. A brief discussion about roles, responsibilities and objectives about the SBUs follows next.

1. Corporate Finance: Major responsibilities of corporate finance at ONGC are considered to be timely finalization and submission of relevant company accounts (including cost accounts) and also settlement of tax arbitration cases. ONGC is also undertaking conversion of company accounts to International Financial Reporting System (IFRS) and the responsibility for timely conversion of accounts also rests with Corporate Finance. They are also responsible for obtaining No Objection Certificates for foreign payments, reduction of corporate tax rate through tax saving efforts and generating some expected income through treasury operations. The objectives as per the 4 categories can be defined as follows:Output/Result: To submit relevant accounts in a timely fashion; maintain optimal cash balance and settle tax cases.Process/Operational: To carry out various activities like audit completion, IFRS implementation and obtaining NOC in a timely and efficient fashion.Cost/Financial: To maximize returns on investments; reduce taxes and costs.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

2. Company Secretary: The Company Secretary is responsible for ensuring compliance as per the Company Law Board, ensure listing compliance and redressing investor grievances. The responsibility for conduct of Company Board meetings and distribution of declared dividend also lies with the Company Secretary. The objectives of the Company Secretary as per the 4 broad categories are defined as under:Output/Result: To ensure compliance with various regulatory bodies and satisfy investor grievances.



Process/Operational: To ensure smooth conduct of Board Meetings and timely flow of meeting information; ensure continual improvement through new initiatives.Cost/Financial: To ensure timely distribution of dividend and unclaimed dividend.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

3. Internal Audit: The objectives of the Internal Audit department whose main responsibilities are to conduct audits timely and prevent non-compliances/generate cost savings through audit interventionsas per the 4 broad categories are presented as below:

Output/Result: To ensure proper functioning through regular audits; take corrective measures and provide feedback.Process/Operational: To promptly settle audit observations; upgrade systems and policies continually.Cost/Financial: To save costs by way of active intervention through audits.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

4. Commercial: The commercial department is mainly responsible for establishing commercial contracts for sale of oil and gas, settling commercial disputes and arbitrations, issue pricing notifications and guidelines. The Commercial department is a regulatory department that sets the norms, guidelines, rules against which marketing carried out its functions. The major objectives as per the 4 broad categories are defined as follows:Output/Result: To sign sale agreements with customers and settle disputes arising due to tax /Commercial issues.Process/Operational: To ensure timeliness with respect to notifications, guidelines and policies.



Cost/Financial: To maximize cash receipt from sales and reduce cash outflows by way of taxes. Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

The balanced scorecards prepared in accordance with the roles, responsibilities and objectives as defined above for the 4 finance Strategic Business Units are presented below:



6.16 Chief, Marketing


1. Responsible for developing new markets, capturing market intelligence and ensuring product off take

2. Responsible for following up with buyers for payment and crediting the concerned assets account

3. Liaison with producing units regarding quality and contractual issues

4. Evolve and implement marketing strategies for ONGC‘s commercial success, in the emerging deregulating scenario

5. CRM – evolving, monitoring and maintaining relationships with various customers

Based on the roles and responsibilities, the objectives of HRD with respect to the 4 categories are as follows:Output/Result: Develop To maximize sales; maintain/ increase market share and continually strategize in accordance with changing govt. regulations and policies.Process/Operational: To carry out regular surveys and market perception studies; execute sales contracts and develop new business initiatives.Cost/Financial: To minimize sales and associated collection costs.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.




6.17 Other Corporate Services & Institutes

In addition to the SBUs described above, some other corporate services and institutes were also studied which are detailed in this section. They are defined as below:

1. Employee Relations(ER) – This SBU is mostly concerned with maintaining employee relations and handling issues related to industrial unrest. Though it works as a supporting unit to or in parallel with HRD. The following objectives have been defined under the 4 major categories:Output/Result: To form fair-wage policy; keep employees motivated and maintain employee relations. Process/Operational: To settle grievances, maintain processes and maximize effort to prevent inefficiencies.Cost/Financial: To manage operations with a cost focus (maximize budget utilization and also generate operational cost savings if possible).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

2. Legal: This SBU works as a support unit to all end users in ONGC. Users inside ONGC refer Legal whenever some opinion/support is required over issues/cases. It is also the responsibility of legal department to close and settle cases (legal/conciliation/arbitration). An important function of the legal department is to generate post-judgment policy decisions on closed cases (in the form of guidelines or directives to the employees) so that cases of such nature do not arise in future and non-compliance does not recur. The objectives of the SBU under the 4 major categories have been defined as follows:Output/Result: To settle pending legal cases.Process/Operational: To minimize time to respond for legal opinions sought; issue directions promptly as and when requiredCost/Financial: To work with a cost focus and minimize expenditure on cases settled.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide



employee satisfaction.3. New and Marginal Fields Development (NMFD): The SBU has been

created to contain, as sub-units, all those fields which have some scope of oil production but which were earlier not developed either because of economical non-viability at that point of time or for some other reasons. However, records are maintained for all such small and marginal fields which can be brought into mainstream production at some later time either due to economical viability at that time or new enhanced technological usage or otherwise. These contain units that are new and have not been worked upon. The objectives of the SBU under the 4 major categories have been defined as follows:Output/Result: To discover producible oil and gas reserves and bring fields to the stream. Process/Operational: To work efficiently - prepare LTOGPs (Long Term Oil and Gas Profiles) and provide back-up support wherever required.Cost/Financial: To carry out the operations with a cost focus and minimize the total lifting cost which is the crucial parameter based on which these fields are developed or not.Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

4. Institute of Reservoir Studies (IRS): This SBU is responsible for carrying out exploratory research.The major objectives under 4 categories have been defined as follows:Output/Result: To Increase in Oil/Gas production through efforts directed towards recoverable reserve discovery, accuracy of exploratory research and redevelopment schemes.Process/Operational: To carry out in-house R&D and technology improvements; benchmark as per global standards.Cost/Financial: To carry out activities with a cost focus (maximize effective budget utilization and generate cost savings wherever possible).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.



5. IDT: This SBU is responsible for conducting trainings and carrying out R&D projects for assets and basins. Their efficiency lies in conducting training programs as per the plan and also carrying out projects which are acceptable to the end users. They are also supposed to carry out in house Research & Development, obtain patents, present research papers and form an interface between industry and academia. The main objectives under the 4 categories have been defined as follows:Output/Result: To impart trainings, complete projects and minimize deviations with the work plan. Process/Operational: To carry out in-house R&D and technology improvements; benchmark as per global standards.Cost/Financial: To carry out activities with a cost focus (maximize budget utilization and generate operational cost savings).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.

6. GEOPIC: This SBU aids the exploratory work and is mainly responsible for processing of the 2- dimensional and 3-dimensional data acquired by other assisting units. GEOPIC also aids OVL in evaluation of foreign acreage if they have additional capacity to do so, or else the work for foreign acreage evaluation is given to geological units outside ONGC. The major objectives of this SBU can be categorized into the 4 major categories as follows:Output/Result: To carry out data processing and interpretation; evaluation of foreign acreage. Process/Operational: To carry out improvements through new technology induction, research, etc. and benchmark with global standards.Cost/Financial: To carry out the operations with a cost focus (minimize processing and interpretation costs).Learning & Growth: To enable an atmosphere which fosters learning, growth and capability building for future organizational needs; provide employee satisfaction.



7. SUGGESTIONS

The following suggestions are proposed in light of the KPI Development exercise carried out:

1. Percentage bottlenecks resolved/doubts responded: Drilling services/Well Services is also responsible for providing consulting to end users (i.e. assets and basins) if problems in the form of bottlenecks and doubts arise. This is an important activity because it reflects the ability of end users and drilling services to resolve bottlenecks in a co-ordinate fashion thereby saving time and costs (because drilling rigs are hired on a very high cost and idle time is simply a wastage of ONGC‘s resources). However, there is no KPI currently being used to measure the activity of Drilling Services against this responsibility. For this purpose the above mentioned KPI can be used. It is elaborated as follows:Calculated as: (No. of bottlenecks resolved/doubts responded by Drilling Services during the period) / (Total no. of bottlenecks resolved and doubts which were communicated to Drilling Services in the review period) * 100Units %.

2. A KPI named “New Technology Induction/Up-gradation‘ is used under the Process/Operational perspective for many services including Drilling Services. The KPI intends to capture the efforts made by the SBU towards process improvement by inducting new technology or making improvements in existing systems and processes. Currently this KPI is measured in terms of number of new technologies being inducted over existing technologies/systems/processes.” However, since every new technology/process/system that is being inducted is done at the expense of some resources either in terms of cost or time which also ultimately leads to some costs. So, merely measuring the number of new technologies inducted may not measure the profitability of those decisions. So, instead of this, the KPI should be modified and stated as ‘Effect of new technology induction/up-gradation’ which would capture the Net Present Value of the decision calculated on the basis of some intended benefit net of costs expected to be incurred on the development of the technology. The estimates being used for calculation of the NPV should be verified by a senior manager in the unit implementing such a change.



This would better capture what is actually intended to be captured because the old KPI over-rewards the SBU when they implement the targeted no. of new processes even when there is not tangible benefit in doing so.

3. The KPI Transportation Cost used under Offshore Logistics Services measures the transportation cost in terms of Rs./person(for people transported offshore through the use of helicopters deployed) and Rs./Ton (for material transported offshore through the use of other logistics vessels). However, the relevant unit should be Rs./person-km and Rs./Ton-km for better monitoring.

4. Reduction in total cost (%) due to consolidation: This KPI should be used under Chief, Materials Management for monitoring the results obtained as a result of consolidation efforts made by Marketing Department. The proposed KPI is elaborated as under: Calculated as: (Original cost per unit material without consolidation - Cost per unit material after consolidation) / (Cost per unit material before consolidation) * 100 Unit: %

5. Variance in inventory (Rs./units) – This KPI can be used under Chief, Materials Management to monitor the effectiveness of Materials Management system being used and efforts being made to maintain it. The KPI is elaborated as under:Calculated as: Difference in inventory value between the system-shown inventory and the actual inventory obtained from inventory counting. The inventory obtained through actual stock-taking activity at the end of the period can be combined with the relevant cost-flow method being used (LIFO, FIFO, Weighted average cost) to arrive at the relevant difference in terms of value of inventory.Unit: Rs. Crore

6. Attrition Rate (%): Retention and acquisition of talent is one of the major responsibilities of the Human Resource Department in an organization. However, no KPI which measures the efforts made by HRD



at ONGC to reduce the outflow of employees is currently being used. Thus Attrition Rate should be used as a KPI under Output/Result Perspective as it related to an output function to be performed by the Human Resource Department. The proposed KPI is elaborated as under: Calculated as: (Number of employees leaving the organization for reasons except retirement/termination of service) / (Total employee base at the starting of the review period) * 100 Unit: %

7. Average time taken to resolve complaints/queries (hrs/log) : New KPI proposed to monitor the responsiveness of InfoCom to requests and complaints by end users, i.e. it is used to measure the promptness with which the SBU handles complaints and system breakdowns at end-users and thus aids in allowing users to work in an uninterrupted fashion.Calculated as: (Total time elapsed between request logging by user and log closing by the SBU after resolution) / (Total no. of logs completed and closed during the review period).Unit: Hr/Log

8. User Satisfaction Index: To be measured on a 5 point scale by carrying out a survey of the end users asking them to rate the SBU for its services, working of IT assets and various related aspects. This is very important for a service SBU like Info Com because surveys of this kind will bring out need and availability gap and the problems experienced by users and also provide feedback.

9. Assets locked in Account Receivables (% of total assets): Excessive amounts of assets locked in accounts receivables which are relatively non-liquid reduce an organization‘s ability to respond to immediate cash needs and reduce its quick ratio. For this purpose, sales which result in higher accounts receivables and not cash inflow should be checked. This KPI is thus proposed for marketing. It is elaborated as under:Calculated as: ((Average accounts receivables/Average total assets) * 100) (by taking into consideration the balance sheet values at the start and end of the review period) Unit: %



10. Bad Debt Expense: Sales which result in higher bad debt expense due to outstanding sales receivables which are uncollectible are useless and overall a wastage of sales effort. For this purpose, this KPI is proposed for Chief, Marketing to monitor the quality of sales made to retail customers. It is elaborated as under:Calculated as: (Total uncollectible amount/ Total amount supposed to

be collected during the review period as per company policy) * 100Unit: %

11. Average accounts receivables period (months: The efficiency of marketing department lies in collecting pending sales amount (or accounts receivable) within the expected/norm period. For this purpose, this KPI should be used which measures the average receivables period in months. It is elaborated as under:Calculated as: Average actual accounts receivable period based on actual collections done. Unit: Months

12. Selling, General & Administrative Expenses (%): The marketing department incurs some expenses to materialize the sales. Sales, general and administrative expenses measure the efficiency of the marketing department in carrying out their activities. It is elaborated as under:Calculated as: (Sales, general and administrative expenses incurred during the period)/(Sales realized during the period) * 100 Unit: %

13. Foreign Acreage Evaluation (No.) should be changed to Foreign Acreage Evaluated (SKM/LKM): The no. of projects related to foreign acreage evaluated during the review period do not tell much about the scale of actual work performed: the SBU may be over-rewarded if the no. of projects evaluated is high even if those projects are actually very small and vice-versa. Moreover, setting up targets in terms of number of projects to be evaluated during the review period is difficult as the scale of available projects may not be known in advance. For this purpose, the relevant unit should not be number of projects evaluated but the actual data



processed/interpreted related to foreign acreage.

14. Institutes are responsible for undertaking and completing Research & Development projects to be implemented by the end users (assets and basins). To measure the utility of effort expended by institutes for this purpose and also to motivate them to undertake projects which are more accepted by the end users (and indirectly reduce overall waste effort expended), a KPI named Field Implementation of Projects(%)‘ is being currently used which indicates the percentage of R&D projects completed by the institutes which were taken up for implementation by the end users. However, in the process, the units may be over-penalized if the number of projects unacceptable to end users is high but the scale is small. So to measure what is intended to measure, the KPI should be changed to Total cost/effort(man-days) expended on implemented projects(%)‘ which is elaborated as follows: Calculated as: (Total cost incurred on acceptable projects during the review period or total effort in terms of man-days spent on acceptable projects during the year) / (Total cost of effort expended in completion of all projects taken up for completion during the review period) * 100% units.

15. A KPI named Finding/Production Cost (Rs./MTOE)‘ is proposed for the SBU Corporate Finance. However, Corporate Finance has no control on the finding and production costs (which are more a function of efficiency of exploratory work, development work, drilling, logging and well services). For this purpose, the SBU Corporate Finance will be either unnecessarily rewarded or penalized because it has no or very little contribution in the results of finding and production costs and hence this KPI should be removed from Corporate Finance.

16. Cost of Capital (%): Ensuring a low cost of capital is a key responsibility of the Corporate Finance division in an organization. However, no KPI to this end is being used in ONGC. Thus this KPI should be used, maybe with a low eight initially so that the focus is not lost.



17. The KPI named Inventory Reduction‘ does not make much sense for Corporate Finance group because it cannot claim ownership for overall inventory reduction at ONGC since the inventory levels are more controlled by the production units and end-users. Thus for very little or no control over inventory, the group is being unnecessarily rewarded or penalized for actions and decisions taken by other units who actually control inventory.

18. Ensuring compliance with company law and listing requirements is a primary responsibility of Company Secretary and are very important activities which can have significant effects on the company‘s reputation and share price even on a single event of non-compliance. For this purpose, the targets for both of them should be 100% and the scoring methodology to be used should be such that a score of zero is given for even a single deviation from the target of 100% compliance.



8. BIBLIOGRAPHY

1. Kaplan, Robert and Norton, David, ―The Balanced Scorecard – Measures That Drive Performance Harvard Business Review, Jan-Feb -1992.

2. Kaplan, Robert and Norton, David, ―The Strategy Focused Organisation – How Balanced Scorecard Companies Thrive in the New Business Environment, 2000

3. How to Improve Government Performance by Dr. Prajapati Trivedi, Secretary, Performance Management, Cabinet Secretariat

4. Performance management strategies : How to create and deploy effective metrics by Wayne W.Eckerson

5. Performance Metrics Repository by Lifecycle Performance Professionals

6. Performance Management Fundamentals Guide by Lifecycle Performance Professionals

7. Relevant company manuals and presentations


Project on Development of KPIs on ONGC

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Transcript of Project on Development of KPIs on ONGC