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STRATEGIES FOR PUBLIC TRANSPORT IN CITIES

Introduction

Public transport organizations face many barriers when try-ing to execute the strategy formed by their corporate man-agements. Some of these common barriers include:

The visionbarrier, which ariseswhen most managers andemployees do not really understand the organizationsstrategy.

The people barrier, which arises when only a small por-tion of managers have some incentives regarding strat-egy and performance.

The management barrier, which arises when most man-agement teams spend only a small amount of time dis-cussing strategy.

The resource barrier, which arises when most of the busi-ness units fail to link their daily work and therefore theirbudgets to the overall strategy.

Most of these barriers can be overcome by using the Bal-anced Scorecard, which combines the historical accuracy of

financial numbers with the drivers of future performance. The

Balanced Scorecard was developed by Robert Kaplan, a pro-fessor at Harvard University and David Norton, a consultantfrom Boston. They began developing the approach afterleading a research study of a dozen companies exploringnew methods of performance measure. Kaplan and Nortonput together a system that was able to measure a variety ofactivities throughout the organization: customer issues, in-ternal business processes, employee activities and the con-

cerns of shareholders. Under the Balanced Scorecard system,a companys financial results are balanced and interlinkedwith all of these perspectives. This scorecard was successfullyadopted by a number of organizations and the results sum-marized in a book Balanced Scorecard, published in 1996.Since then many organizations have adopted the approachand shown how effectively there are fulfilling their missions.

The system has also grown in popularity among PublicTrans-port companies.

Using the Balanced Scorecard

In addition to financial measures, the Balanced Scorecard

(BSC) employs three other perspectives, each with its own

The Balanced Scorecard Translating

Strategy into Action

Guidelines in corporate management

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C O R P O R A T E M A N A G E M E N T

SPUTNIC (Strategies for Public Transport in Cities) is a project funded by the European Commission under the 6th Framework Programme.SPUTNIC is dedicated to challenges faced by local and regional public transport systems in transition. These challenges include the emergenceof a competitive environment, changing institutional frameworks and increasingly scarce financial resources. SPUTNIC seeks to help makepublic transport systems more attractive and efficient by providing: support to stakeholders to anticipate and prepare for emergingchallenges; an overview of state-of-the-art knowledge and research; and specific guidelines and practical tools.

objectives, measurements, targets and initiatives. All fourperspectives are outlined below. The latest thought in thisregard is that companies cannot be properly managed by fi-nancial figures related to the past (i.e. decisions taken, mar-ket developments, etc.) and which describe the currentsituation merely as a snap-shot. In terms of managing com-panies in a sustainable way, it tends to be more meaningfulto considersofteraspects related for example to customers

and human resources. The strong impact and interrelationsof these various aspectsto a firms financial results have longbeen neglected.Also taking into account company and mar-ket developments, which change much more slowly than fi-nancial results but better describe a firms ability to fulfilfuture performance targets, these perspectives are lifted tothe same level as the purely financial perspective and thus abalance is achieved.

The BSC includes the following perspectives or quadrants:

Financial Perspective

In general, the financial perspective is how a stakeholderviews a companys plans for growth, handling risk and mak-ing a profit. It evaluates how well a strategy is being exe-cuted, as reflected in improved bottom-line results.

Some examples:

Reduced operating expenses: cutting costs is importantif a company is to gain a competitive edge, but this canbe balanced against other scorecard measures such ascustomer satisfaction and quality.

New services or products: these reflect how much rev-enue has been earned from the introduction of newserv-ices within a set time frame.

Customer Perspective

The Balanced Scorecard also measures a companys ability toattain its strategic objectives in terms of customers and themarketplace. For example, a public transport company mightwish to become the market leader in delivering value to pas-sengers. Customer measures are necessary because the onlyroute to long-term financial success is to deliver the servicesdemanded by customers. The basic core measurements couldinclude customer satisfaction, customer acquisition, customerretention and customer profitability.These measuresprovidemanagers with a clearer idea of whotheir customers are, howto earn profits from them and what their customers value.The

ultimate goal is to create a portfolio of services that deliverssuperior value for the targeted customers.

Internal Process Perspective

This category focuses on internal operations and emphasizeshow a company delivers services according to the variousmodes of transportation offered. IN this category, physicalinternal drivers with a direct impact on economics are oftendescribed, such as schedule efficiency, average wage level,absenteeism ratio. Possible measures could include servicequality with possible indicators on accessibility, availability,

reliability, safety and comfort. Several other factors can bemeasured to ensure that a companys internal operations arealigned with its goals.

Balanced Scorecard

Finance

Quality

StrategicProjects

BalancedScorecard

3. InternalProcesses

4. Innovation

2. Clients

Balanced Scorecard in Practice

BalancedScorecard

Step I:Translationof themission clarification and review of

mission statement andstrategy

development of BSC

StepIV:Learning andadjustment

reporting of targetachievement

review of chang-ing environment

feedback andadjustment ofstrategy

Step II:Communicationand breakdown

of goals communication

of strategy

breakdown ofgoals

linking of BSCwith objectivesto themanagement

1. Results

StepIII:Deployment of businessplans development of strategic

measures

planning of resources definition of milestones

Implementation of strategy at Wiener linien BSC according toKaplan/NortonSource: DerNahverkehr7-8/2008, translation and illustration byA. Schuchmann

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C O R P O R A T E M A N A G E M E N T

SPUTNIC (Strategies for Public Transport in Cities) is a project funded by the European Commission under the 6th Framework Programme.SPUTNIC is dedicated to challenges faced by local and regional public transport systems in transition. These challenges include the emergenceof a competitive environment, changing institutional frameworks and increasingly scarce financial resources. SPUTNIC seeks to help makepublic transport systems more attractive and efficient by providing: support to stakeholders to anticipate and prepare for emergingchallenges; an overview of state-of-the-art knowledge and research; and specific guidelines and practical tools.

Learning and GrowthPerspectives/Innovation

A company needs well-trained, highly skilled employees if itis to excel in the first three strategic perspectives. Educationalgoals drive the attainment of other strategic objectives. In-vest in human capital by spending money on employee ca-pabilities, information/knowledge systems and motivation,

empowerment and alignment.

These factors can be measured by assessing employee satis-faction, skills and productivity. Other possible measures in-clude productivity levels, training and skill levels,performance improvement and individual performancegoals that align with the objectives of the Balanced Score-card (BSC).

According to BSC inventors Kaplan and Norton, the key to acompanys long-lasting success is achieving a well-balancedperformance of the above four perspectives.

The Balanced Scorecard in PracticeAccording to Public Transport International (June 2005), Bel-gian public transport company De Lijn decided to introducethe Balanced Scorecard (BSC) in 2003, first at corporate leveland later at the regional and departmental level. Accordingto BSC principles, key performance indicators were definedfor each of the four perspectives: finance/results, customers,processes and innovation.

Public transport companies typically include non-financialkey performance indicators (KPIs) within the finance/resultperspective. Of course, budget compliance and financial per-formance stand at the core of this perspective, but it is

equally important for the company to live up to the com-mitments described in the management contract with thepublic authority.

For example, contributing to traffic safety is an importantob-jective for public transport. De Lijns BSC finance/result per-spective quadrant therefore contains KPIs on tram and busaccidents. Likewise, the steady increase in the number of pas-sengers is a management contract commitment and there-fore appears in the form of a KPI in the finance/resultsquadrant of the BSC.

The process quadrant is made up primarily of human re-sources indicators. This includes data on productivity, butalso on industrial relations, competence management, per-

sonnel flow, etc.

The client quadrant mainly contains KPIs on customer satis-faction as measured by both satisfaction surveys and spon-taneous customer reactions by phone or mail. Theintroduction of the BSC by De Lijn prompted a projecton in-tegration and further development of all quality-related datain a new quality barometer.

The innovation quadrant is intended as a follow-up to variousstrategic projects.These are identified as having a direct linkto the companys strategic objectives and having an impactthroughout the whole organization. De Lijn, for example, de-veloped a new electronic registration, ticketing and onboard

computer system and deployed a new extended release of

its IT-based operations planning system.

To take another example, Viennas public transport companyWiener Linien used the introduction of a BSC to enable theimplementation of its strategy.

In the case ofWiener Linien, the individual business units, es-tablishedas separate profitcentres, hadto achieve some sortof balance to improve the level of economic responsibility at

this organizational level. To optimize the efficiency of theoverall company, a superior system of targets was requiredand the BSC was chosen for this purpose. As a consequenceWiener Liniens scorecard was broken down into separateprofit centre scorecards, leaving the individual units with re-sponsibility for their respective decisions.

Implementation of a BalancedScorecard Program

Phases of Implementation

When starting a Balanced Scorecard program it is essentialto have key performance indicators (KPIs) in place.The com-pany has to reach a consensus about what exactly has to bemeasured and which scores will trigger yellow or red alerts.

This can be a lengthy process, involving discussions at dif-ferent management levels. Also, making good use of the BSCinvolves the willingness and cooperation of all participants.Even if the BSC has been conceived as a management in-strument rather than a control tool, thereis still the risk of theprogram being perceived as a threat to management auton-omy. Diagnosis using the BSC has to be followed up with fur-ther analysis and, where appropriate, targeted action.

The implementation of a BSC program consists of three

major phases: planning, development and communication.The planning phase lays the groundwork for a successfulproject.This phase creates a BSCdevelopment plan and mayinclude the following steps:

a) Development of objectives for the BSC.

b) Determine the appropriate organizational unit fora pilotscheme.

c) Gain the support of top management.

d) Form a BSC project team.

e) Create a project plan.

f ) Develop a communication plan to inform others in the

organization about your project.

In the development phase, the following steps can be fol-lowed:

a) Gather anddistribute backgroundmaterial to give a clearpicture of the organizations competitive position andemployee competencies.

b) Develop or confirm the companys mission, values, visionand strategy, drawing on the findings from step a).

c) Conduct executive interviews to receive feedback on theorganizations competitive position, key success factorsand possible BSC measures.

d) Develop objectives and measures in each of the BSC per-

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C O R P O R A T E M A N A G E M E N T

SPUTNIC (Strategies for Public Transport in Cities) is a project funded by the European Commission under the 6th Framework Programme.SPUTNIC is dedicated to challenges faced by local and regional public transport systems in transition. These challenges include the emergenceof a competitive environment, changing institutional frameworks and increasingly scarce financial resources. SPUTNIC seeks to help makepublic transport systems more attractive and efficient by providing: support to stakeholders to anticipate and prepare for emergingchallenges; an overview of state-of-the-art knowledge and research; and specific guidelines and practical tools.

spectives; organize executive workshops and gather feed-back from middle management as well as employees.

e) Establish targets for the measures to be undertaken, toshow whether improvement efforts lead to acceptableresults; gain a final consensus on the final BSC products.

f ) Draw up a BSC implementation plan, which develops ameasurement tool as the basis forthe new management

system.

Companies should expect to spend six to 12 months on thedevelopment phase. The amount of time involved dependson many factors, including the commitment of the executiveteam, the size and complexity of the organization, and itswillingness to change.

In the communication phase the company must communi-cate its BSC goals in order to build awareness of the BSC at alllevels and encourage participation in the process. Team re-sults must be disseminated rapidly and effectively.

Alignment

Another key to success is to cascade the BSC to create orga-nizational alignment. For example, the Corporate Scorecardfor customer satisfaction can be cascaded down to create aMarketing Scorecard and a Customer Service Scorecard bylooking at internal processes and redesigning them toachieve the same objective. This type of cascading down

within the organizational hierarchy may create dozens of Bal-anced Scorecards within a company, all aligned with thecompanys overall goals but describing key performance in-dicators, which can be influenced at the respective organi-zational levels.

Note:This document is based on both the cooperative deskresearch of Sputnic project partners and input from publictransport practitioners.