DEVELOPMENT Development of Key Performance Indicators, 2010

 OF KEY
PERFORMANCE
INDICATORS

201
0

Guided By: -

SHRI D.K. AGARWAL

GM (F&A) PMBG JK BUSINESS

O.N.G.C. (DELHI)

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BUSINESS SCHOOL, GURGAON
 Development of Key Performance Indicators, 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.

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BUSINESS SCHOOL, GURGAON
 Development of Key Performance Indicators, 2010

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

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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

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 Development of Key Performance Indicators, 2010

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.

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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

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 Development of Key Performance Indicators, 2010

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.

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 Development of Key Performance Indicators, 2010

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.

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 Development of Key Performance Indicators, 2010

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.

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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:

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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. BASINS
1. 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. REGIONS
1.Mumbai Region, Mumbai
2. Western Region, Baroda
3. Eastern Region, Nazira
4. Southern Region, Chennai
5. Central Region, Kolkata

D. INSTITUTES
1. 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

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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. SERVICES
1. 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

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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.

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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,

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 Development of Key Performance Indicators, 2010

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 VISION

To be a world-class Oil and Gas Company integrated in energy business with
dominant Indian leadership and global presence.

ONGC’S NEW VISION

GIVEN 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.”

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STRATEGIC VISION: 2001-2020

Focusing 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 MISSION

World 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.

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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.

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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

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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.

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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.

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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

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• 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.

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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,

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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

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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.

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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

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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.

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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.

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• 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:

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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

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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)

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2. Assets(Offshore)

3. Joint Venture Operational Group(JVOG)

4. Basins
5. Coal Based Methane Development Project (CBM Development
Project)
6. Plants : Hazira Plant, Uran Plant, C2-C3 Plant
7. Chief, Drilling Services
8. Chief, Geophysical Services
9. Chief, Well Services

10.Chief, Logging Services

11.Chief, Engineering Services

12.Chief, Technical Services

13.Chief, Offshore Logistics Services

14.Chief, Materials Management

15.Explorations & Development (E&D)

16.Corporate Exploration Centre (CEC)

17.Chief, Human Resource Development

18.Chief, InfoCom

19.Chief, Marketing

20.Employee Relations (ER)

21.Institutes: GEOPIC, IDT, IRS

22.Legal Department

23.New and Marginal Fields Development

24.Corporate Finance

25.Company Secretary

26.Internal Audit

27.Commercial

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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;

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IV. Sales besides Production should also be a PC Target and

reconciliation factor should be tracked separately; and

V. 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.
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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 rate

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d) Reserve to production Ratio( years) and

e) 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.

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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

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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:-

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6.2 BASINS

Roles & Responsibilities:

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).

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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).

Learning & Growth: To enable an atmosphere which fosters learning, growth

and capability building for future organizational needs; provide employee

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satisfaction.

Based on these broad objectives, the balanced scorecards prepared after

selecting KPIs for basins are presented below:-

6.3 CBM Development Project

Roles & Responsibilities:

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
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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

Roles & Responsibilities:

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:

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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

Roles & Responsibilities:

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).

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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

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

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:-

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6.6 Chief, Geophysical Services

Roles & Responsibilities:

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.

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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:-
6.7 Chief, Well Services

Roles & Responsibilities:

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.

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9. Facilitate induction and development of new technology and tools to

improve efficiency.

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

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).

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, Well Services is presented below:-

6.8 Chief, Logging Services

Roles & Responsibilities:

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.

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

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

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

Roles & Responsibilities:

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

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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 plan

Process/Operational: To carry out work related activities promptly (revision
of cost schedule, preparation of tender) and efficiently
Cost/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:

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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.
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, 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).
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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

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 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. Stafffunction 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.

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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 system
Process/Operational: To prepare contract formats and tender documents in
line with best practices; reduce average procurement times and continually
modify MM policies
Cost/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

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

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

6.13 Chief, Human Resource Development

Roles & Responsibilities:

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:

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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).

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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

Roles & Responsibilities:

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.

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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.

The balanced scorecard prepared accordingly is as shown below:

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

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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.

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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 interventions
as 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

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Business Units are presented below:

6.16 Chief, Marketing

Roles & Responsibilities:

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

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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.

The balanced scorecard prepared accordingly is as shown below:

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

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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 required
Cost/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

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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.

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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:

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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.

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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:

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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

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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.

JK
BUSINESS SCHOOL, GURGAON
 Development of Key Performance Indicators, 2010

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

JK
BUSINESS SCHOOL, GURGAON
 Development of Key Performance Indicators, 2010

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

JK
BUSINESS SCHOOL, GURGAON
 Development of Key Performance Indicators, 2010

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

JK
BUSINESS SCHOOL, GURGAON