National Academies Press: OpenBook

Developing an Airport Performance-Measurement System (2010)

Chapter: PART I - Introduction to Performance-Measurement Systems

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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Suggested Citation:"PART I - Introduction to Performance-Measurement Systems." National Academies of Sciences, Engineering, and Medicine. 2010. Developing an Airport Performance-Measurement System. Washington, DC: The National Academies Press. doi: 10.17226/14428.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Introduction to Performance- Measurement Systems P A R T I 3 Chapter 1 Introduction to the Guidebook 3 Purpose of the Guidebook 4 Applicable Context for this Guidebook 4 Intended Audience for the Guidebook 5 Guidebook Organization 8 Chapter 2 Theory and Practice of Effective Performance-Measurement Processes 8 What Is a Performance-Measurement System? 9 The Airport Performance-Measurement System Framework 11 Relevance of Measuring Performance 12 Benefits of Performance-Measurement Systems 13 Characteristics of an Effective Performance-Measurement System 16 Strategic Plan Elements in Performance Measurement 17 Performance Measures and Areas of Measurement 24 Performance-Measurement System Frameworks 30 Performance-Measurement Systems versus Performance-Management Systems

Chapter 1 of ACRP Report 19: Developing an Airport Performance Measurement System is intended to describe the functionality of the guidebook as it pertains to end users. This chap- ter introduces the user to the purpose, context, intended audience, organization, and relevant media that will be referenced throughout the guidebook. Performance measurement has gained momentum among various industries in both public and private sectors. Because performance measurement is a relatively new business manage- ment tool, many different terms and definitions have been circulating that refer to performance measures. While public- and private-sector organizations have attempted to differentiate among the terms, this can confuse employees’ and stakeholders’ understanding of performance termi- nology and frameworks. The terms “metrics,” “measure,” and “indicator” are commonly used as synonyms. They all are defined as “a standard of measurement” or “an indicator for quanti- tative comparison.” In addition, “key performance indicator,” often referred to as KPI, is a widely used term that was popularized in the 1990s by David Norton and Robert Kaplan, creators of the Balanced Scorecard methodology. This term is commonly used to indicate the most critical strategic metrics. KPIs are used as a select subset of a wider group of measures and are usually tracked through corporate scorecards or other business intelligence tools. The term “key per- formance area,” or KPA, is not as widely used as KPI, but is well understood as the grouping or area used to organize performance measures. Examples of KPAs can include leadership devel- opment, customer service, safety, or other strategic groups. For standardization purposes, this guidebook will use the most common term, “performance measure,” or simply “measure,” to indicate all quantitative and qualitative standards used by airports to monitor performance and as a synonym for various other terms such as “metric,” “indicator,” etc. The term KPI will be used in conjunction with end-outcome measure to describe the overarching indicator of performance. Also, the guidebook forgoes the use of the term KPA and uses instead the term “area of performance measurement” to refer to the groupings of performance measures based on the field of operations in the organization. Purpose of the Guidebook The purpose of this guidebook is to provide a user-friendly tool that airports can use to develop a sound, enterprisewide, performance-measurement system that will genuinely improve how each airport meets the needs of its customers, its community, and all the other stakeholders who benefit from the services of a well-run airport. The guidebook will also allow airports that already have a performance-measurement system to rate its effectiveness and make any necessary adjustments. It is intended that this guidebook will • Assist airport management in understanding the practical benefits of a performance- measurement system, 3 C H A P T E R 1 Introduction to the Guidebook

• Guidethe development and implementation of the most appropriate performance-measurement system, • Identify methods to help airports discern how well they are meeting their customer and stake- holder expectations, and • Provide examples of key performance indicators and how to incorporate them into a system. Performance-measurement systems resulting from this guidebook will also assist with the alignment of strategic elements and enhance the decision-making process to improve service and efficiency in airports across the country. In summary, ACRP Report 19: Developing an Airport Performance-Measurement System will provide a dynamic tool to airport executives interested in improving the efficiency and productivity of their airport by providing a basis on which to initiate and maintain a successful program. Importantly, this report will also serve as a basis for further discussion at meetings and conferences within the industry that will introduce perfor- mance measurement to many airports that do not currently have a program. Applicable Context for this Guidebook The perspectives, priorities, and performance-measurement methodologies contained in this guidebook are a reflection of the U.S. airport industry as it existed at the time of the research effort, 2008 to 2009. The guidebook and its suggested techniques assume an environment in which air- ports are independent of national control and are typically owned and operated by local munic- ipalities or regional/state authorities. The guidebook also takes into account the introduction of commercial and private models of airport ownership—a concept that has changed the scope and significance of performance measurement for airport management, regulators and stakeholders. While this guidebook focuses on the tendencies of the domestic U.S. airport industry, the methodologies described are applicable to airports operating under varying structures and organizational frameworks. North American airports with operational structures similar to those of the United States (e.g., Greater Toronto Airports Authority) are also represented in the guidebook. Intended Audience for the Guidebook The guidebook offers a dynamic tool to airport executives by providing a basis on which to initiate and carry out a successful program. The audience for this product will be executives at airports of all sizes. For airport executives new to performance measurement, the guidebook will provide a theoretical foundation for performance measurement, information on the critical importance of a robust program, and how to develop buy-in from staff and board members. The guidebook will also provide the steps necessary to implement a performance-measurement program. For airports with experience with performance measurement, the guidebook will serve as a resource to improve the program, connect metrics with strategic elements, and intro- duce technology to improve efficiency and optimize results. Overall, the guidebook will assist airports in using performance measurement to proactively adjust current processes and prac- tices for improved services. This guidebook is intended to assist in the process of developing a performance-measurement system at large, medium, and small airports and provides facilitating tools and techniques for airport executives, policymakers, and aviation professionals. In addition, the guidebook reflects the range of resources available to airports. Smaller airports may be interested primarily in performance-measurement methodologies that they can implement quickly and easily, while airports with more staff and funding may wish to understand the theory and underpinnings of 4 Part I: Introduction to Performance-Measurement Systems

performance measurement and develop customized programs that link to their mission and strategic initiatives. By including prescribed tools, the guidebook will be useful to airports at all levels of sophis- tication regarding performance measurement. Programs initiated with the use of the guide- book could range from those in which a handful of key performance indicators are tracked by the airport director to those in which a comprehensive, web-based tool is used daily by airport executives to monitor progress toward pre-set strategic goals. Guidebook Organization The guidebook is organized to be a practical and user-friendly reference tool that can assist users with multiple parts of the performance-measurement system process, including research, imple- mentation, and strategy setting. The guidebook provides information appropriate to specific steps in the process of developing an airport performance-measurement system and provides stand- alone methodologies and techniques for varying components of a performance-measurement system. The guidebook is organized into three parts, with each part providing insight on, and instructions for, developing and implementing a comprehensive performance-measurement system. Part I, “Introduction to Performance-Measurement Systems,” provides a general introduction to performance-measurement systems, background information on the purpose of this guide- book, and a look at the theory and current practices of performance-measurement systems. Part I includes two chapters: • Chapter 1: Introduction to the Guidebook • Chapter 2: Theory and Practice of Effective Performance-Measurement Processes Part II, “Building a Performance-Measurement System,” describes the performance- measurement system development and implementation process step by step and explains what is involved in executing it, and what the results should look like. Examples and case studies are included to depict the development and implementation process through indus- try best practices. Finally, Part II addresses software-based reporting and current and emerg- ing technology to assist in the performance-measurement process. Part II is divided into an introduction and six chapters: • Chapter 1: Prepare to Plan and Measure (Step 1) • Chapter 2: Plan to Achieve Results (Step 2) • Chapter 3. Create the Reporting Structure (Step 3) • Chapter 4. Act and Measure (Step 4) • Chapter 5. Manage Performance Measurement (Step 5) • Chapter 6. Current and Emerging Technology for the Performance-Measurement Process Part III, “Field Research on Performance Measurement,” presents airport case studies from the United States and Canada that are focused on performance-measurement practices and provide information on development and implementation processes, challenges, and successes. In addition, Part III references external sources that can be used by airports to leverage their performance-measurement practices. Part III is divided into two chapters: • Chapter 1. Airport Case Studies on Performance-Measurement Systems • Chapter 2. Regional, State, and Federal Applications of Performance-Measurement Systems Appendix A includes definitions and a glossary of acronyms. Appendix B provides a com- pendium of key performance areas and indicators. Appendix C includes author acknowledgments. Introduction to the Guidebook 5

Affixed to the inside back cover of the guidebook is CRP-CD-79: Workbook for ACRP Report 19, which contains worksheets to assist the reader in developing a performance-measurement sys- tem through a step-by-step process. Periodically, the guidebook directs readers to worksheets relevant to the topic under discussion. The worksheets were designed with fill-out fields so that the user can revisit and edit them as needed. At the end of each worksheet is the Performance- Measurement Assessment Tool, a set of questions to help identify sensitive areas in need of improvement as the development process progresses. A Quick Instruction Guide that presents a summary of the steps involved in the development and implementation of a performance- measurement system is also available on CRP-CD-79. A chart detailing the organization of the guidebook and workbook is given in Exhibit I-1.1. In addition to guiding readers to relevant worksheets in CRP-CD-79: Workbook for ACRP Report 19, the guidebook includes elements that supplement the main text such as case studies, 6 Part I: Introduction to Performance-Measurement Systems Source: Infrastructure Management Group, 2009 *PM = Performance Measurement **PMRS = Performance-Measurement Reporting System ACRP Report 19: Developing an Airport Performance- Measurement System Part I Part II Part III Chapter 1 - Introduction to the Guidebook Chapter 2 - Theory and Practice of Effective PM* Processes Chapter 2 - Plan to Achieve Results (Step 2) Chapter 1 - Prepare to Plan and Measure (Step 1) Introduction to Part II Chapter 4 - Act and Measure (Step 4) Chapter 3 - Create the Reporting Structure (Step 3) Chapter 5 - Manage Performance Measurement (Step 5) Chapter 1 - Airport Case Studies on PM Systems Chapter 6 - Current and Emerging Technology for the PM Process Chapter 2 - Regional, State, and Federal Applications of PM Systems Task 2. Scan Airport Environment Task 3. Commit to Measure Performance Task 4. Confirm Mission, Vision, & Values Task 5. Identify Long-Term Goals Task 6. Identify Short-Term Objectives Task 7. Set Measurement Responsibilities Task 8. Develop & Test a PMRS** Task 9. Implement and Measure Task 10. Baseline Measures & Set Targets Task 11. Report & Analyze Task 12. Manage Performance Players Task 13. Initiate a New PM Cycle Task 1. Assess the Need for a PM System Worksheet 1 Worksheet 2 Worksheet 3 Worksheet 4 Worksheet 5 Worksheet 6 Worksheet 7 Worksheet 8 Worksheet 9 Worksheet 10 Worksheet 11 Worksheet 12 Worksheet 13 WorkbookGuidebook Exhibit I-1.1. Organization of the guidebook and workbook.

hints, and warnings. These elements, as well as references to the worksheets, are labeled in the guidebook with icons. In the worksheets, questions accompany the Performance-Measurement Assessment Tool, and these are also labeled with an icon. The following legend presents each icon and a brief description of the element it represents. Introduction to the Guidebook 7 Case studies illustrate hands-on experience with performance- measurement practices from a representative sample of airports of all sizes scattered throughout the United States and Canada. Relevant excerpts from representative cases have been cited to aid readers as they build an airport performance-measurement system in a step-by-step process. Hints serve as advice to secure the success of proposed processes by identifying advantages and disadvantages and recommend- ing action items. They also introduce airport managers to appli- cations, techniques, and methodologies accepted practicewide to assist with the development and implementation steps of the performance-measurement system. Questions accompany the Performance-Measurement Assessment Tool at the end of each worksheet. Warnings increase awareness of situations that might arise dur- ing the development of the performance-measurement system and could potentially impact its development process. Worksheets are intended to guide the reader in drafting a pro- posed performance-measurement system. They also provide read- ers with the means to conduct a comprehensive analysis of current performance-measurement practices at their airport.

8The basic and most relevant theory about performance measurement that airport managers interested in performance-measurement systems should know is summarized in the following pages. The goal is to assist readers in better understanding the applicability and concepts intro- duced during the development and implementation phase of a performance-measurement system. What Is a Performance-Measurement System? Performance measurement can be defined in the strictest terms as “measurement on a regu- lar basis of the results (outcomes) and efficiency of processes, services or programs.”1 However performance measurement in today’s economy has become a much more strategic, compre- hensive, and high-level process than is revealed in this basic definition. For public- and private- sector organizations, regular measurement of progress toward specified and measurable outcomes is a vital component of any effort at managing for results. In the service-oriented airport environ- ment, specifically, performance measurement also plays a critical role in improving the customer- oriented processes that focus on maximizing benefits and minimizing negative consequences for airport users. Strategic planning and performance measurement should be seen as “two sides of the same coin.” A strong plan cannot be written without performance measures in mind, and a strong measurement system cannot be designed without referencing the organizational strategy. Because performance measures should track and measure the key strategies leading to the right goals and objectives, it is important to link these two concepts and two processes throughout the organization. By putting strategic planning and performance measurement together and giv- ing joint authority over both processes to the same group, airports can gain the most benefit from both areas. A business planner’s and an executive’s definition of performance measurement will center on the connective role it plays between the strategic planning process and the hard work of execu- tion, resource allocation, budgeting, and evaluation. Measurement captures the quantitative and qualitative progress of the strategies, initiatives, products, and services that position the organi- zation to achieve its goals and make definitive progress towards a defined vision. As is stated in ACRP Report 20: Strategic Planning in the Airport Industry, “development of a vision for how the organization will look in the future and definition of the steps and actions that must be executed to achieve the organization’s vision”2 are the centerpiece of business strategy and improvement. However, without a concrete and objective performance-measurement process, this work, while interesting, cannot provide the information to validate or reorient business operations. Just as strategic planning examines today’s reality and plans for the future, performance measurement establishes current baselines for the most important issues, sets long- and short-term targets, and C H A P T E R 2 Theory and Practice of Effective Performance- Measurement Processes Measurement con- nects strategic plan- ning to activities. Planning without measurement limits the airport’s ability to execute strategy.

Theory and Practice of Effective Performance-Measurement Processes 9 begins measuring progress. In this perspective, performance measurement and strategic planning are complementary and echo each other; airport managers should understand both processes in this mutually reinforcing construct. Performance measurement can be defined and observed based on the entity or organization that owns the process. While research has shown that some large airports independently develop their own performance measures to understand and manage their processes and results, other airports may measure discrete activities and results in alignment with larger transportation, busi- ness development, or infrastructure outcomes that encompass the airport as well as other aspects of a larger structure. At a minimum, effective performance-measurement programs do the following: • Measure only areas that fall inside the airport’s mission area; • Measure activities, products, services, and outcomes that move the airport toward its strategic goals; • Measure areas that have been identified as environmental, business, structural, or other bar- riers to success; • Measure an inclusive set of short- and long-term, leading and lagging, and operationally diverse indicators; and • Inform management decisions by linking strategic planning to budgeting, resource planning, and other areas of managerial importance. The Airport Performance-Measurement System Framework Over the years, airport privatization and commercialization outside North America has brought a new perception of an airport as an independent private entity, requiring changes in airport management. Investors in privatized airports require returns on their investments as well as accountability for performance. Such demand from executive boards has propelled airport management to view airports as businesses rather than as venues that facilitate airline and pas- senger activity. Airport management has become more aggressive in pursuing innovative ways to generate revenue, introducing performance-measurement programs and other initiatives to improve organization efficiency and increase revenue. A growing recognition of airports as busi- ness entities has encouraged airport management to adopt best practices from the private sector and various non-aviation industries. Performance-measurement frameworks, such as the Bal- anced Scorecard, have become increasingly popular. In addition, airports have become inter- ested in assessing their performance against others. Today, there is a growing use of performance measures, in one form or another, in most airports in the United States and internationally. Referred to as benchmarking, or simply financial and operational data, performance measures are being put in place and used in the daily operations of airports of all sizes. From general aviation (GA) to large hub airports, the need and relevance of monitoring performance have been manifested. Most commonly, financial and operational data are being tracked due to FAA requirements. Those airports that have not implemented a for- mal performance-measurement system acknowledge the relevance of a fully engaged performance- measurement system and its de facto value as data warehousing for transferability purposes. However, executives at medium size hubs or larger airports, where operations and resource man- agement are more complex, perceive the need to implement a performance-measurement system. Common factors that prevent GA and small airports, with exemptions, from developing and implementing a formal performance-measurement system are time constraints, reduced person- nel, prevalence of urgent matters over all other matters, and an organizational structure that does not seem to need to share data interdepartmentally. Performance measures are being utilized to under- stand, manage, and maximize airport revenue. Airports of all sizes have a need for per- formance measures, but the types and quantity of those measures varies.

The complexity of the performance-measurement system implemented by airports correlates with airport size. GA airports, for instance, focus on four to five key measures that are submit- ted to the city/town or authority on a regular basis to monitor goal achievement. In general, these measures include operational costs (including fuel sales), revenues, and percentage of occupancy through land and terminal leases. Focus on revenues, however, is secondary to mon- itoring costs since the interest in not losing money outweighs increasing gross revenue from an overall financial perspective. However, GA airports also monitor measures directly related to operations that are not necessarily reported to airport owners; these include measures that are not directly under the airport’s control, but impact operations. As airport operations grow, the number of measures also increases and the performance-measurement system is approached in a more formal and documented fashion. A few airports in the United States have implemented a fully documented and well-developed performance-measurement system. Although the hurdles they confront in breaking into an almost new practice in the industry are great, they are already experiencing the benefits of a performance- measurement system not only in improved performance, but also in increased revenues. It is expected that this trend of improving efficiencies will continue in the airport industry at an accel- erated pace. Adopting new management approaches and technologies is increasingly important to maximizing revenues while satisfying stakeholder needs. Airports in the United States are quickly learning from best practices in other industries and abroad and will benefit in the short term from others’ experiences by minimizing the learning curve. Importantly, there’s an under- standing at managerial levels of the relevance of performance measures and interest in adopting them as a system to improve performance. Measuring and managing performance is crucial to airport success. Performance measure- ment is not just about identifying and tracking some numbers; it is ultimately about managing to achieve results. Performance measurement is a cyclical process that starts with identifying the ultimate outcomes an airport wants to achieve, such as safety, customer service, and financial success. Airports need to define the broad goals they want to achieve and then identify the mea- sures they will use to indicate success. Setting enterprisewide targets for success, airports will define the level of achievement desired on each measure and the desired timeframe within which achievement should occur. Airports will then develop supporting goals, metrics, and targets for each measure: the intermediate outcomes (e.g., for safety, runway incursions and runway con- dition), products and services, activities, and, ultimately, budgets and individual contributions that each part of the airport organization will provide in order to achieve the airport’s ultimate goals and targets. These goals and measures cascade down throughout the airport organization so that each and every office—each director, manager, and employee—knows what they are expected to accomplish in support of the airport’s goals. Airport executives and employees then execute the plans and programs, evaluate the results (usually at the end of each year), and then use that information to begin a new performance cycle. The best performance-measurement system becomes ingrained in the airport’s corporate culture. Leaders manage and hold themselves and their employees accountable for achieving results. People from the top of the airport organization to the bottom understand and buy into the airport’s goals, the airport’s definition of success, and what they expect to contribute to that success. They participate in achieving the airport’s goals, and then they help evaluate performance and set new goals for the next performance cycle. Performance measurement is also the basis for benchmarking or comparing performance. Good performance goals identify a baseline (normally, where the airport is when planning begins) and a target to be achieved by a specific time. The first comparison, then, is to see how far the air- port has come from its original baseline level toward its target level. 10 Part I: Introduction to Performance-Measurement Systems While all airports are using data in some manner, only a rela- tively small number have fully developed performance man- agement systems. Cascading goals and alignment from the senior level down to all employees helps ensure execution and furthers staff engagement levels. A common issue is establishing per- formance targets too early in the process, without first estab- lishing a baseline of current performance.

Good performance metrics can then be used to benchmark either within the airport or with the performance of other airports. Most airports have good financial and efficiency metrics. Having a common set of metrics within the airport allows teams or crews to compare their per- formance and efficiency with similar teams and learn what the best teams are doing to make a difference. Having metrics that are used commonly by airports across the country allows air- ports to benchmark their performance with similar airports across the country and, once again, talk to and learn lessons from the airports with best practices. Nonetheless, benchmarking should be approached with caution due to the unique characteristics of airports that directly impact performance measures. Relevance of Measuring Performance Since the 1954 publication of Peter Drucker’s The Practice of Management3, performance measurement has become an established business improvement process. While Drucker’s work focused on the private sector, the introduction of Kaplan and Norton’s Balanced Scorecard4 process in 1992 and the Government Performance and Results Act (GPRA) in 1993 spurred an enhanced understanding and customization of performance measurement in all levels of gov- ernment, business, and non-profit management. Performance measurement for airports consists of more than measuring the most basic financial, safety, security, traffic, and passenger information. A fully functioning performance-measurement framework will allow airports to match both short- and long-term plans with an appropriate set of key indicators and allow for the most critical step, managing for results and improved per- formance. Individual airlines, airports, communities, and executives differ on vision, strategies, strengths, weaknesses, opportunities, threats, and areas of focus. Strategic planning reflects these differences, and performance measures should highlight these differences as well, maintaining a focus on where departments, managers, employees, and partners should direct their attention and resources. It is unlikely that the performance measures adopted by any specific airport will mirror another in exact detail. In fact, while benchmarking efficiency and operational performance against sim- ilar organizations is a positive attribute of any performance system, this should not be confused with the exact duplication of another entities’ entire framework. For leadership and management, thoroughly understanding one’s own strategy and future goals in developing key performance measures is fundamentally more important than simply measuring general indicators against another airport. In the end, benchmarking against an organization’s own, earlier performance is the most important comparison available. Another airport element in beginning the performance discussion is the competing or non- aligned priorities of various airport stakeholders. While organizations ultimately value share- holder value or financial performance over all other performance indicators, a diverse group of stakeholders in the airport community may struggle to find common key measures and accept- able targets. In addition, important in understanding performance measurement is seeing that all indicators have intended and often unintended consequences. Setting performance goals in one area may impede or disturb performance in another part of the organization. Understand- ing these connections and developing a pilot process to observe both intended and unintended results is a key to this management practice. As stakeholders’ roles, perspectives, and intentions are all different, stakeholders often seek to influence strategic planning and performance mea- surement for competing ends. Theory and Practice of Effective Performance-Measurement Processes 11 The proper perfor- mance measures allow management to understand where to move resources in order to gain the most return on investment. Benchmarking per- formance against others, while ben- eficial, needs to be approached cautiously due to the many varying and unique circumstances for individual airports.

For instance, while concerned neighbors may seek to measure noise and flight levels, depen- dent businesses may seek out high airplane and passenger traffic. Both groups’ concerns have to be factored into any airport planning discussion. The key performance measures will likewise need to reflect both groups’ needs and concerns and reflect their differences in indicator selec- tion and target setting. In a similar vein, airports and their stakeholders do not live in consistent and stable environments; changes in the economy, security setting, fuel pricing, and other vari- ables must be factored into a dynamic measurement environment. Among all the reasons that airports pursue the implementation of performance-measurement practices, the following three core reasons have been identified across the board: 1. Demonstrate compliance with regulatory requirements, 2. Drive performance to improve business practices and achieve goals and outcomes, and 3. Transform the management culture by assigning ownership and accountability within the management team and throughout all levels of the organization. Core processes in performance-measurement strategies at airports have been identified as the following: • Strategy Execution. Setting strategies is only useful for an organization if strategy execution and effectiveness can be measured against goals and targets. • Communication and Engagement. External stakeholders and customers and internal audi- ences of employees and partners increasingly expect performance to be a key part of commu- nication and messaging. Engagement, support, and constructive partnerships all depend on a higher level of performance management, metrics, and performance reporting. • Performance-Based Budgeting. Resource allocation and prioritization are often considered the leading rationales for enhanced performance information. While budgeting is traditionally seen as linked to employees and activities, it is still largely disconnected from outcome-based metrics in airports around the country. • Innovation and Optimization. Outcome-based performance metrics focus efforts on actual results and remove the emphasis on traditional work and the traditional processes of operation. Innovation at all levels of the organization is encouraged through results-based performance frameworks. Benefits of Performance-Measurement Systems The benefits of performance measurement are seen through the use of an organization’s per- formance maturity. As Debra Hoffman, Field Engineering Specialist and Member of the National Institute of Standards and Technology (NIST) Modernization Forum, explained in the AMR Research Newsletter, “Performance measurement maturity determines a company’s ability to continuously improve, and is a key determinant of its future performance.”5 Performance-measurement maturity can be determined by answering the following questions: • Is my organization learning from our indicators? • Is measurement a tool we use to interact with our customers, employees, stakeholders and partners? • Are we developing the right measures to integrate performance cross-functionally across the entire airport? • Are we focusing on results-oriented measures in the select areas that will truly make a differ- ence in our success? • Does airport leadership accept measurement as a primary tool for decision-making? • Are employees and others comfortable with the performance environment and free to share objective information honestly and openly? 12 Part I: Introduction to Performance-Measurement Systems Organizations often see unintended con- sequences from per- formance measures, as changes in one area affect other departments.

In achieving performance maturity, the measures themselves are just the first step; moving forward requires addressing the contextual environment surrounding the process and the air- port. The organizations seeing the most benefits from this process have taken performance out of individual departments and adopted an integrated, top-down framework. In addition, they have removed the natural reluctance to report on the most important and sometimes under- performing areas. While no organization is ever going to enjoy reporting or discussing all data in the most honest and open way, this is an integral aspect to creating the interaction and dia- logue presented throughout this guidebook. Ultimately, the benefits of performance measurement can be seen when quantitative data are added to qualitative information to inform discussions, create a positive atmosphere of trans- formation, and ensure successful airport operations for years to come. Characteristics of an Effective Performance- Measurement System The unique nature of every organization’s strategy and performance measures caution against a broad-brush approach to defining a successful system. However, in the 50 years of work since management by objectives began to popularize a quantitative methodology for improving per- formance, the following common characteristics for all types of organizations, including airports, have become evident: • Measurement is a tool for enhanced communication. • Performance measurement improves problem solving. • Regular formalized reviews create a time and space for course correction. Beyond these individual characteristics, which are described below, one strong theme has emerged from the growing evidence. That theme is that strategic planning, while a critical cycli- cal event, is useless if it isn’t tracked, measured, and translated into action. While it is true that the quality of strategies varies widely, what matters more than the quality of the strategy is implemen- tation. There is a tendency not to implement strategies, and implementation, more than the quality of the strategy, is what separates successful and unsuccessful organizations. Successful measurement and management of a few simple strategies trumps a brilliant strategic-planning process that can’t be measured. Why are implementation and execution so difficult? As airports and others have discovered, there are two main factors that jeopardize the success of a performance-measurement system. The first one is related to resistance to change and how well organizations can approach change management. It is not until all levels of staff understand what is in the performance-measurement system for them that the system will be accepted. The second factor that can jeopardize success is if strategies and related initiatives do not follow a planned script. This can occur when the process isn’t well defined or tracked. This soft or undefined process stems from missing leading and lagging measures in a performance-measurement logic model or from making faulty assump- tions about a cause-and-effect relationship between measures and activities. The execution phase can force management and teams to translate a less-than-specific understanding of airport strat- egy into a much more detailed description of how it will all happen: who will take on which tasks in what sequence, how long those tasks will take, how much they will cost, and how they will affect subsequent activities. The three core themes that run through all performance-measurement recommendations (see above) can assist airports in taking the important step from strategic planning to performance man- agement. Further discussion of how these themes might be applied specifically to performance management at airports is provided below: Theory and Practice of Effective Performance-Measurement Processes 13 While many organi- zations enjoy illus- trating what they already do well, the most vital measures focus on the most urgent or poorly performing areas.

Measurement Is a Tool for Enhanced Communication It’s difficult to convey every gradation of a strategic plan throughout a diverse and complex air- port structure. Distill goals and strategies down to the core points, specify the message to individ- ual departments and employees, and then focus on communicating those. At Minneapolis–St. Paul International Airport, for instance, senior staff members from each department meet with the executive director once a week to update him and other department leaders on trends, current and expected performance deviations, and any issues and concerns. These meetings are crucial in ensuring smooth vertical and horizontal communication, as the division directors become aware of issues in other operational areas that may later affect their divisions. These meetings turn data and strategy into practical, useful action plans at the opera- tional level. In other airports, such as Tampa International Airport, the Planning and Develop- ment Division meets biweekly with the Development Committee (IT, Finance, and Operations) to monitor time and expenditures and discuss opportunities and challenges in capital invest- ment projects under way. At Dayton International Airport, management also meets biweekly to discuss strategies and tactics with the participation of the Finance, Safety, Engineering, and Operations departments, the Director of Aviation, and the Deputy Director of Aviation. Numbers alone do not speak to people. Numbers and qualitative information—including lessons learned, mistakes made, powerful stories, and best practices—are what characterize effec- tive performance measurement. Perhaps most importantly, performance indicators set clear goals for all airport employees and partners. As many people have said, “What gets measured, gets done.” However, numbers alone do not engage employees or provide the impetus to take the extra step every day in order to improve the organization’s performance. Organizational communication is greatly enhanced through improved performance mea- surement. Key performance measures can make planning issues more tangible and give employ- ees a better understanding of both what is expected and what challenges they will face. Private and public organizations that utilize measurement effectively have begun to develop outcome measures that better uncover implications and priorities for all of their departments. Employees and managers can then react to these priorities and make the appropriate daily resource- and task-based decisions. This type of real-world data use helps clear up vague generalities and bridges the gap between simply accepting a strategy and actually taking action. Performance Measurement Improves Problem Solving An important use of organizational measures is the creation and testing of hypotheses in the strategic plan. Strategies often assume connections exist among resources, activities, products, services, and results, but only real data can prove or disprove the existence of these connections. While some managers use qualitative information and deeper questioning to discover the story behind the data, others are more comfortable disaggregating data and deploying charts and graphics to help visualize trends. An unexpected and unwanted measurement effect can, unfortunately, move an organiza- tion away from problem solving if the measurement effect is unanticipated. In this situation, “counting” has been substituted for results-oriented measurement, and insignificant indicators have taken the place of meaningful conversation and action. As important as it is to track indi- cators and harness trend analysis, this should never be seen as a way to actually solve problems. It is important to avoid overreliance on quantitative data because it can end up inhibiting mean- ingful conversation on performance. The emphasis on data collection and table population fre- quently threatens to turn the entire process into a compliance exercise, enabling teams to withdraw from understanding why strategies are not producing desired results. 14 Part I: Introduction to Performance-Measurement Systems “What gets mea- sured, gets done” remains true, which only reemphasizes how important it is to choose the right measures. Counting does not equal performance measurement. We can count almost anything, but few of these measures hold strategic importance for the airport.

Contextual and cultural barriers, particularly a purely negative connotation associated with measurement, can become a barrier to honesty in analysis and dialogue. Where measurement leads to better execution, it’s the ability to face reality that appears to make the difference. Ulti- mately, it’s the role of leadership to ensure that measurement is not a compliance or a counting exercise but the beginning of deeper and more meaningful questioning and discussion. The numbers themselves are only the beginning of the story. Regular Formalized Reviews Create a Time and Space for Course Correction Strategic planning and measurement are often seen as infrequent or cyclical activities. In fact, executing a plan that isn’t frequently reviewed is close to impossible. With the tactical and “cri- sis to crisis” environment surrounding many businesses, it is easy to understand why leadership has a hard time meeting regularly to reflect and analyze strategic performance. Without a firm meeting structure and schedule, there is little external impetus to stay on top of managing and analyzing through key performance measures. The consideration of qualified personnel and available resources should be at the top of the agenda at regular review sessions, as these are the management levers in any logic model or strat- egy map. Typically, employee competencies, skills, and development are key to strategy execu- tion in organizations. However, if an airport is convinced that the right people are in the right roles, but indicators continue to show a lack of execution, other resource issues need examina- tion. Do the skilled individuals have what they need to get the job done? Although executive teams are increasingly committed to regular and even daily scorecard or dashboard reviews, they may still miss the rest of the narrative regarding how resources are applied and how the business environment is shifting. To bridge the gap between the high-level metrics and the tough decisions that must be made at the initiative level, managers who excel in execution rely on dashboard tools or summary documents to track resources and objectives. While quarterly reviews have been increasingly popular in organizations utilizing enter- prisewide indicators, the specific tool that works best for an individual airport will depend on its size, complexity, and culture. The goal is to balance executives’ busy schedules with thorough- ness and a full understanding of key issues. Dashboards help move this process along, providing a clear picture of the primary strategies and activities, as well as the key indicators that are impact- ing each of them. Finally, dashboards and regular meetings reinforce accountability, giving bet- ter visibility into actual progress, and enabling more responsive management action. The Eight Characteristics of Effective Performance Measurement There are characteristics of effective measurement in addition to the three large themes dis- cussed above. These characteristics, organized into eight groups, work as a step-by-step model. Many organizations implement the first four to six groups, but only the highest performing organizations fully implement all eight. The eight groups are listed below: 1. Defining and Aligning with Enterprise Strategies. Successful performance-measurement systems are built on a solid strategic foundation in which three strategic components are clearly defined: mission, vision, and values. Based on an environmental assessment, specific strategies should be adopted to achieve organizational results. This requires structural align- ment with enterprisewide outcome measures. Finally, performance measures should be clearly communicated to employees for greater transparency. 2. Developing Meaningful Performance Measures. Selected performance measures should be reliable and report not only on end outcomes, but also on intermediate outcomes. Process Theory and Practice of Effective Performance-Measurement Processes 15 Measuring and dis- playing data without regular discussion, analysis, or dialogue will not lead an airport to improve performance. Organizations using standardized mea- sures and quarterly performance reviews report less time spent explaining problems and more time spent solving them.

measures, such as efficiency, cycle time, and other output and activity data provide the back- bone of any successful performance-measurement system. As such, they should be effective. In addition, goals and measures should be supported by internal and external stakeholders. 3. Increasing Data Availability. The data that will be measured should be identified for acces- sibility and validation purposes. Making data accessible may mean that the information has to be standardized, normalized, and usable for benchmarking and other purposes. However, data availability is different than worthwhile information. Data should have strategic value for measuring end-outcome goals. 4. Maximizing Data Integrity. Data should be collected, managed, and analyzed in a uniform and consistent manner. To ensure data quality, it is recommended that data be validated and verified through sampling or independent means. 5. Enhancing Performance Reporting. Internal reporting should be available to frontline managers and senior decision-makers on a real-time basis so as to contribute to the decision- making process. Therefore, reports should be comprehensive and include measures, analy- sis, trends, and suggestions for improvement. 6. Improving Evaluation and Analysis. Process measures, benchmarks, and service levels are evaluated in cycles of 1 to 2 years. Outcome and strategy measures, on the other hand, are evaluated in cycles of 2 to 5 years to validate cause-effect relationships. 7. Achieving Performance Integration. Integration should be achieved internally and externally. Internal integration relates to support services—human resources, information technology, finance, and so forth—that contribute to the management and documentation of performance. External integration refers to the performance contributions of multiple organizations in a joint measurement area to be tracked and compared. 8. Effectively Driving Decision-Making. Performance measures should provide sufficient information to adopt budgets and make investment decisions. Strategic Plan Elements in Performance Measurement A well-developed strategic plan should contain the basic information necessary to begin the formulation of an integrated performance-measurement system, as shown in Exhibit I-2.1. 16 Part I: Introduction to Performance-Measurement Systems Strategic Plan Element Performance-Measurement Attributes Mission A broad statement, often in legislation, of what the airport has been charged to accomplish and why. Vision A concise, compelling, measurable statement describing the desired future results the airport seeks to achieve. Values These describe how an airport will conduct itself, both internally and externally, while engaging in its business activities. Strategic Goal This is derived from the mission and vision and articulates an enduring end state desired. Objective This describes the outcomes required to accomplish the goal. Strategy This defines how objectives will be achieved. Typically, this contains dates, basis of measurement, and performance targets Tactical Plans These identify the short-term actions or initiatives needed to implement the strategy. Typically, these contain cost, time, milestone, quality, or safety attributes as well as performance targets. Source: Adapted from the Performance-Based Management Handbook6 Exhibit I-2.1. Strategic plan elements and performance-measurement attributes.

With performance measurements collected from the strategic plan (as well as from stake- holders and senior management), an assessment must be performed to determine the quality of information and the current use of existing measures. One of the main objectives is to find out what measures are maintained and monitored to begin moving from occasional performance measurement in some parts of the organization to a true performance-measurement system. Once existing performance measures are mapped to strategies, the result will be a more precise strategy formulation for senior managers. Performance Measures and Areas of Measurement Performance measures are measures of the output of a particular process or procedure. Per- formance measures can represent a single dimensional unit such as costs, revenue, or length of time. Performance measures can also be multidimensional, such as ratios of two or more underlying units: costs per passenger, revenue per work load unit, and so forth. Each airport selects performance measures for different reasons, but selection of perfor- mance measures usually is based on an airport’s strategic objectives, specific environment, and other organizational intricacies. Properly selected performance measures indicate relevant information about airport service, operations, and processes. Performance measures are impor- tant tools in helping to understand, manage, and improve certain outcomes by making well- informed decisions. The result of performance measurement will tell how well the airport is doing against predetermined goals, assess strengths and weaknesses, and help establish per- formance standards. Performance measures can be, and increasingly are, applied to all aspects of airports, not just financial and customer satisfaction or airside and landside operations. Airport management employs performance measures within its core functions: planning, organizing, staffing, coor- dinating, reporting, budgeting, and evaluating. However, the areas of measurement at airports have expanded to reflect a more balanced approach and ensure that all airport activity per- formance is accounted for. A balanced approach considers the financial and nonfinancial drivers of an organization’s achievements. Airports across the United States and Canada mea- sure a broad array of areas. Exhibit I-2.2 summarizes the most common areas of performance measurement together with the corresponding sample performance measures. Vertical and Horizontal Integration of Performance Measures Performance measures need to be integrated in both vertical and horizontal directions. Vertical integration of performance measures involves organizational units and their indi- vidual staff members and aligns organizational activity with the strategic objectives. A strate- gic plan initiates vertical integration and selection of corresponding measures and thereby enforces strategic objectives down through all levels within the organization, as explained above. A strategic plan establishes strategic goals, which are then linked to strategic measures to assess progress toward the strategic goals. Further, each subsequent level of the organiza- tion establishes performance measures that must fit into the strategic agenda. Full deployment of performance measures occurs throughout the organization until it reaches individual staff members. A vertical integration framework of different levels of performance measures is illus- trated in Exhibit I-2.3. This deployment of measures is not limited to the operational and staff individual levels, as depicted in the exhibit, and may be divided according to organizational design as long as those levels and measures support the upper-level measures and eventually the strategic objectives. Theory and Practice of Effective Performance-Measurement Processes 17

18 Part I: Introduction to Performance-Measurement Systems Area of Measurement Performance Measure Performance Measure Component Construction Injuries Lost Time Injury Rate Runway Incursions Runway Condition FAA Safety Compliance Violations Warning Citations Issued Security Incidents and Violations Security Badge Breaches Security Efficiency Security Wait Times Total Revenue per EPAX* Aeronautical Revenue per Outbound Operation Non-Aeronautical Revenue % of Total Revenue Commercial Development Acres Leased Retail Sales per EPAX Operating Cost per EPAX Capital Expenditures Airline Cost per EPAX Debt Service Coverage Ratio Debt per EPAX Credit Rating Return on Assets Revenue to Expenses Ratio Days Unrestricted Cash on Hands EPAX per Gate Slot Utilization Parking Turnover Rate Operating Expenditures per Work Load Unit Delays per Operations Workers' Compensation Claims Baggage Cart Retrieval Taxi Out Times Terminal Cleanliness Concessions Quality and Variety Security Timeliness Signage/User-Friendliness of Terminal Number of Carriers Serving the Airport Number of Direct Destinations Served Ground Access Availability (bus, rail, taxi) Average Fares ACI Survey Rank J.D. Power Rating Customer Complaints Violations Identified by Regulatory Agency De-Icing Material Discharge Frequency and Severity of Spills Emissions per Aircraft Movement Air Quality at the Airport Noise Levels Noise Complaints Total Weight of Recyclable Waste % of Water Recycled and Reused Electrical Power Consumption Water Consumption per Passenger Job Satisfaction Index Employee Turnover Employee Engagement Index Wellness Program Participation Training Hours per Employee % Employees in Career Development Program Men and Women Salary Ratio Minority Representation in Workforce Contracts Awarded to DBE Community Donations Scholarships Service Delivery Baggage Processing System Faults Transaction Check-In Kiosk Usage People Community Relations Cost Performance Debt Management Operating Performance Service Quality Operational Efficiency Customer Value Customer Service IT Noise Reuse and Recycle Environmental Compliance Energy and Water Efficiency Workforce Diversity Learning and Growth Environmental Sustainability Social Responsibility Employee Accidents and Incidents Revenue Management Financial Customer Satisfaction Airfield Violations Safety Security Productivity Employee Engagement Employee Satisfaction Air Quality Source: Infrastructure Management Group *EPAX - Enplaned passengers Exhibit I-2.2. Common areas of performance measurement and performance measures.

Vertically integrated performance measures have the following characteristics: • They have a clear or at least a cause-and-effect relationship to the strategic goals. • All measures contain performance targets. • Ownership of each measure is assigned to the appropriate level of the organization. Horizontal integration of performance measures ensures the optimization of workflow across all process and organizational boundaries.8 Horizontal integration ensures that the final out- come is achieved no matter how complex the process is and how many organizational units are involved. A customer satisfaction scenario can provide a simple example of the importance of horizontal integration. It is often said that airport customers complain about the cleanliness of airport bathrooms. The reasons for the complaints could originate in several departments. Per- haps the procurement unit did not order enough cleaning supplies, or the maintenance unit has issues with the cleaning equipment, or the airport cleaning crew is understaffed. The final out- come is that the bathrooms are not clean and the customer is not satisfied. Horizontal integra- tion of performance measures assists management in understanding the roles of units across the organization in implementing a particular process and thereby allows management to allocate resources more effectively and synchronize the efforts of multiple departments to achieve over- all organization goals. Types of Measures Most performance measures can be grouped into various types based on their purpose and the type of information used. Types of performance measures frequently cited by airport manage- ment and performance-measurement experts are described herein. Attention should be given to selecting the right balance of performance measures among the several types of measures. The mix of measures chosen will depend on how the measures will be used in the organization; how- ever, failure to acknowledge the various types of performance measures may limit management’s ability to objectively assess performance and take an active role in improving it. The following sec- tions describe leading and lagging measures; input, output, and outcome measures; quantitative and qualitative measures, and timing and progress measures. Leading and Lagging Measures To date, performance measurement has been used mostly to monitor past performance in order to stimulate future action. Measures that evaluate what has happened in the past, i.e., operating Theory and Practice of Effective Performance-Measurement Processes 19 Exhibit I-2.3. Framework of vertical integration of different levels of performance measures within the organization. Source: Performance-Based Management Handbook7 Strategic Measures Operational Measures Staff Individual Measures Increase Airport Service Performance Rating (ACI Survey) Increase Satisfaction with Bathroom Cleanliness by 5% Increase % of Time Cleaning Bathrooms Strategic Goal: Increase Customer Satisfaction

expenses or aeronautical revenue, are called lagging measures. Lagging measures are beneficial in reviewing performance after the fact, ascertaining the impact of certain actions or program implementations, and indicating the areas of improvement. Lagging measures only allow man- agement to take reactive action. Airport operators have increasingly expressed a need for leading measures, which are mea- sures that can predict future performance and which allow management to act in a proactive manner. Currently, few leading measures are used at airports, and they are most valuable when there is a specific need within an organization. A number of contracts to be expired, for instance, is a leading measure that could be helpful in building future costs into budgets. Managers could annually track the status of contracts and identify the ones set to expire in the short term and the long term. In anticipation of a contract’s expiration, airport management could assess the costs and benefits of the current provider, enter into negotiations with a new service provider, or pre- pare for the requested variances in the contract with the current provider. In addition, airport management can turn to external sources such as airline and hotel bookings to predict future airport passenger traffic. Leading measures could be especially important for safety and security areas since they would allow airport management to foresee a fault or risk before it occurs, which could help prevent accidents and injuries. For instance, instead of tracking a lagging measure such as worker injuries and accidents, airports could track leading measures such as unsafe-on-job acts, training hours, or useful life of safety equipment. Both types of measures have their advantages and disadvan- tages. It is difficult for managers to predict future performance and risks if they only use lagging measures. On the other hand, emphasis on the use of leading performance measures can be spec- ulative since overall airport performance not only should be assessed based on expected future performance, but also based on the analysis of past performance. In order to have the clearest view of an organization’s past and future performance, a balance between lagging and leading measures needs to be established when selecting performance measures. An advantage of dealing with leading measures is that a map can be made linking leading measures to corresponding lagging measures. A leading measure is supposed to indicate a pos- sible outcome of lagging measures depending on a direct or inverse relationship between them. Managers aware of this relationship could take an action to prevent or stimulate those outcomes. Exhibit I-2.4 is a sample map for safety performance measurement that depicts the correlation of leading and lagging measures. Input, Output, and Outcome Measures Airports provide a public transportation service that requires extensive resources, pro- duces several units of output, and generates certain effects. With that in mind, The Interna- tional Civil Aviation Organization’s (ICAO’s) Airport Economics Manual,9 in an effort to set 20 Part I: Introduction to Performance-Measurement Systems Leading measures can predict future performance and allow management to act in a proactive manner. Lagging measures are typically easier to identify and collect than leading measures. Organi- zations that use too many lagging mea- sures, however, risk seeing evidence of a problem only after it occurs. Exhibit I-2.4. Leading and lagging measures map. Source: Infrastructure Management Group * EPAX - Enplaned passengers Leading Measure Lagging Measure Safety Training Hours Incident and Injury Rate Compensation Claims Lost Time Injury Rate Cost per EPAX*

a standard for the application of principles of best commercial practices for airports, catego- rizes performance measures by input, output, and outcome. In some instances in the indus- try, the fourth measure of efficiency is added to assess how efficiently inputs are being used to produce outputs. Input measures represent airport resources allocated to the execution of activities and work processes. Input measures record capital assets, employees, supplies and services. Capital inputs are airport infrastructure and can be classified into the following: • Airside assets (e.g., runways, taxiways, and navigation aids) • Landside assets (e.g., terminals, parking spaces, and hangars) • Airport support facilities (e.g., aircraft maintenance area and rescue and firefighting station) Employees may include administrative staff, air-traffic controllers, maintenance technicians, security personnel, and the cleaning crew. Supplies and services may consist of communication and maintenance services, electric power, and fuel. Inputs are mostly one-dimensional measures and while they do not reflect actual performance, inputs do provide context for calculating other measures. Data sources for inputs should be easily available within the responsible units of the organization. Output measures represent the amount of service provided. They are often referred to as work- load measures and provide valuable feedback on the demand for service and the quantity of clients being served. Examples of outputs are the number of passengers, the number of aircraft operations, and the cargo weight handled by an airport. Revenues and costs can also be outputs. Data sources for outputs are operational and financial records. Outcome measures provide feedback on the quality and efficiency of services or on the intended performance of the organization. These measures are often referred to as effective- ness measures. Outcome measures indicate accomplishments or results that occur (at least partially) because of services provided. While the airport itself may control the number of parking lot spaces, their ultimate result is getting passengers to their planes in a timely fash- ion. An integrated performance-management system requires the use of both output and out- come measures, with the output measures supporting long-term changes in the outcomes. Outcomes provide the relationship between input and output measures and almost always are measured in multidimensional units. There are some exceptions to this, however, such as when the outcome is customer service levels, which are usually measured by surveys in per- centage of satisfaction unit. Typical outcome measures are runway incursions in safety area per million operations, passengers per employee in productivity area, and variable costs per aircraft movement in cost performance area. End-outcome measures demonstrate whether the airport’s customers and stakeholders have seen the results and benefits expected from the airport’s work. All end-outcome measures should be phrased in terms of this external perspective. An end outcome would not measure how many square feet of carpet were cleaned daily, but whether the customer viewed the airport as clean and attractive. An end outcome would not measure whether the airport had offered gates to international airlines, but how many international cities the airport served. The most important end-outcome measures for each goal are the KPIs for the airport. Efficiency measures describe how successful an airport is at producing the most outputs pos- sible with the lowest possible utilization of resources. An efficiency measure indicates the unit cost of an airport service or program (how many dollars, staff members, or other resources it takes to produce a particular activity or outcome) or a nonmonetary measure of how well an organization is doing in carrying out its activities (as measured by on-time performance, the ratio of staff to workload/caseload, and so forth). Theory and Practice of Effective Performance-Measurement Processes 21 Many organizations count “inputs” as a performance mea- sure. An input is simply a resource. End-outcome measures should be developed and viewed from the perspective of the customer.

Quantitative and Qualitative Measures Performance measures can be sorted into quantitative and qualitative. Quantitative measures deal with pure statistics and numbers. Examples of quantitative measures are operating expenses, revenues, terminal area leased, landing fees, and so forth. Quantitative measures are preferred because the data are easily and more frequently obtainable and comparable. In some cases, quan- titative measures are the only way to assess performance. Airports frequently use quantitative performance measures. The opposite of quantitative measures are qualitative measures, which cannot be easily quantified. Qualitative measures evaluate intangible aspects of operations such as employee satisfaction, process efficiency, the value of certain programs, and so forth. Such information is hard or impossible to capture with statistics, thus it is difficult to measure. Tools used to acquire qualitative data include surveys, feedback, observations, established rules, guidelines, and pro- grams, and so forth. A well-known qualitative measure in airport operations is customer service or satisfaction, which has gained popularity over the years through customer surveys. Qualita- tive measures can predict the results of quantitative measures: if customer satisfaction is poor, sales and revenue will decrease; if employee engagement is low, employee turnover will most likely increase. In the same way, quantitative measures can predict the results of qualitative mea- sures: if the number of maintenance staff decreases, most likely the appearance of the airport will degrade, negatively impacting customer satisfaction. Timing and Progress Measures Other categories of measures deal with timing and progress of the organization: • Long-Term Outcome Measures indicate the goals or results that the airport is striving to achieve in the long term. While the process for achieving these goals is usually expected to take at least 3 years and the outcome may be considered challenging to measure, these goals rep- resent the long-term results that are expected to occur if airport efforts are successful. • Intermediate Outcome Measures indicate changes the airport must see first in order to achieve longer term goals. Intermediate outcome measures begin with a specific action verb such as “increase,” “decrease,” or “reduce.” These intermediate measures reflect the airport’s strategies and are key to measuring strategy execution. • Activity Measures indicate the progress of projects and programs that will produce outputs. Progress is tracked by measuring the deviation of scheduled and budgeted metrics from the actual numbers. Functionality of Measures A single measure can simultaneously be one or more of the types of measures discussed above. For instance, sale of fuel is a leading quantitative output measure. It is leading because it can pre- dict the future behavior of other measures such as aircraft operations and origin and destination (O&D) versus connecting traffic. It is also a quantitative measure because it represents the mon- etary value of a sold commodity that can be easily measured in numbers. Finally, it is the output, or result, of the service provided to airlines and aircraft owners in the sales of a commodity. However, measures categorization is not always so strict. Customer satisfaction could be for the most part a lagging qualitative outcome, but in some instances it could also behave as a leading measure. It will be lagging when it is a consequence of inputs that contribute to the cus- tomer experience. For instance, a reduction in the supply of cleaning products as part of a cost- savings program could impact customers’ perceptions of airport cleanliness, which could lead to a decrease in customer satisfaction. Customer satisfaction is also a qualitative measure because it depends on customer perceptions that are not directly measurable with numbers, and it is an outcome measure because it is the result of the quality and efficiency of a service. Finally, cus- tomer satisfaction is a leading measure because a decline in customer satisfaction at an airport 22 Part I: Introduction to Performance-Measurement Systems A true quantitative measure must either use numbers or a yes/no format to display data. The most complete sets of organizational performance mea- sures use activity, output, intermediate and end-outcome measures. One measure can simultaneously be both a leading and a lagging indicator depending on the perspective of the analysis.

could predict a decline in the number of enplaned passengers at that airport and an increase in enplaned passengers at competitor airports given the same flight schedule and fare conditions. Exhibit I-2.5 summarizes the types of performance measures and provides some examples. Structural Alignment with Enterprisewide Outcome Measures The airport’s management structure can greatly help or hinder performance-measurement success. As airports develop outcome measures, it becomes apparent that in many cases the true performance indicators are the result of multiple processes and multiple departments. Unfortu- nately, in most large organizations a “silo effect” exists, where the organization is very effective vertically within the individual area, yet lacks a focus on outcomes across these silos, most of which require cross-departmental cooperation. True outcome measures rarely exist within any one department, and enabling airportwide change and improvement in areas like service quality, customer satisfaction, and even IT requires cross-functional teams to succeed. Some very successful organizations have adopted this philos- ophy and created “matrix” organizational structures. These structures work to break down silo walls by creating reporting structures based on both operational function and market or prod- uct. Ultimately, more than one area will have an impact on measurable success, creating a more transparent and innovative approach to problem solving and a better understanding of the strategic goals of the entire airport. Theory and Practice of Effective Performance-Measurement Processes 23 Source: Infrastructure Management Group Type of Measure Description Examples Activity Measures that indicate the progress of the projects and programs that produce outputs. Scheduled vs. Actual Timeline of Terminal Improvement, Budgeted vs. Actual Employee Compensation Claims Quantitative Qualitative Lagging Leading Input Output Intermediate Outcome Efficiency Measures that evaluate what has happened in the past and allow management to take reactive action. Revenue per Enplaned Passenger, Operating Expenditures, Runway Incursions Measures that may predict future performance and allow management to take a proactive action. Analysis of the Safety Management System, Percentage of Emplyees Recommend Airport Job to a Friend, Total Accounts Receivable Measures that record the resources used to produce an output Measures that represent capacity provided and the quantities of service produced Long-Term Outcome Outcome Number of Parking Spaces, Number of Employees (air traffic controllers, security personnel), Number of Gates, Amount of Investment Number of Passengers, Number of Aircraft Operations, Aeronautical Revenue Number of Delayed Aircraft, Total Airport Costs per Passenger, Aircraft Movements per Gate Measures that are pure statistics and numbers Employee Injuries, Operating Income Margin, Terminal Square Feet Per FTE Measures that describe improvement or success in achieving a goal. Outcome measure is a ratio of input and output measures Measures that cannot be quantified and measure intangible aspects of organization Workforce Diversity, Employee Satisfaction Measures that indicate the goals or results the organization is striving to achieve over the next several years Improve Customer Satisfaction, Increase Operating Liquidity, Increase Bond Rating Measures that indicate changes the organization must meet to achieve long-term goals Measures that assess how well the organization is doing in carrying out its activities Increase Non-Aeronautical Revenue, Decrease Number of Accidents and Incidents Labor and Contractual Expenses per Work Load Unit, Total Passengers per Full-Time Employee (FTE) Exhibit I-2.5. Summary of types of performance measures. The best outcome measures involve multiple departments working together and being held jointly accountable for results.

Performance Measures Clearly Communicated to Employees for Greater Transparency While today’s business environment has focused increasingly on financial transparency to shareholders and regulators, performance transparency has also become increasingly important. Organizations with performance transparency have conveyed to employees, stakeholders, and partners exactly what success means in quantitative terms. While performance measurement is an organizational effort, the actual prioritization and integration of measures into daily activi- ties happens at the individual level. Many organizations evaluate the transparency of their performance efforts with an emphasis on engagement and performance integration in everyone’s work. In addition, greater perfor- mance transparency can encourage better vertical communication on what drives the airports’ performance, significantly contributing to the main goal of performance-measurement efforts. Key transparency questions that organizations pursue through performance measurement include the following: 1. What is our most effective path to enhanced revenue and sustainability? Without accurate measures integrated with strategy, surprisingly few people can answer this question correctly. In a transparent organization, no one has to guess how the airport makes money or how what they individually do in their jobs affects bottom-line performance. 2. Why do our customers do business with us? What are the reasons the airport’s customers use it and not an alternative? Price? Convenience? Quality? Need? Aesthetics? Habit? Lack of choice? Customer-focused outcomes can reveal behaviors and identify what is important to the customer. 3. What makes our airport or travel experience worthwhile and truly different from others? What’s in the airport’s cultural and behavioral patterns that give it a competitive advantage? These issues should be understood through key performance indicators and become the focal point of resource investment and management attention. Performance-Measurement System Frameworks Below is a description of the major performance-measurement system frameworks that are most commonly used by organizations. The main goal of all the frameworks is to guide organi- zations in determining the best way to reach outcomes that support their organizational mission and vision. Selection of a framework will depend on each airport’s business practices, the devel- opment level and characteristics of the individual performance-measurement system, and the expected outcomes of the system. Airport business models differ in many ways, so there is no one framework that fits all airports. The performance-measurement system frameworks to be described are the logic model, Balanced Scorecard, The Malcolm Baldrige National Quality Award, and Dashboard. Logic Model A logic model is a top-level depiction of the flow of materials and processes required to pro- duce the results desired by an organization. The model can be very useful in organizing planning and analysis when designing programs and systems or when designing outcomes-based evalua- tions of either or both. Although logic models can be used in whatever application the designer chooses, it is more effective to use logic models to depict major, recurring items in an organization or program than to depict one-time items. Using a logic model for one-time activities intended to build an organi- 24 Part I: Introduction to Performance-Measurement Systems Transparency and performance are related concepts, but are not the same. Transparency highlights exposing where resources are going, while performance high- lights the results. Logic models graphi- cally represent the rationale and logic behind a program’s design. By illustrat- ing the logic, flows and disconnections can be exposed and resolved.

zation or program may not be helpful. However, using logic models to analyze and describe major, recurring activities in the organization or program that produce the results desired for clients and the community can be beneficial. Logic models typically depict the inputs, processes, out- puts, and outcomes associated with an organization and its programs:10 • Input is the material the organization or program takes in and then processes to produce the results desired by the organization. Types of inputs include people, money, equipment, facilities, and ideas. Inputs can also be major forces that influence the organization or program. Obtaining and using inputs often involves a cost. • Logic models are usually concerned with the major recurring processes associated with pro- ducing the results desired by the organization or program. • Outputs are usually the tangible results of the major processes in the organization. Usually, out- puts are accounted for by number, for example, the number of people who received training. • Outcomes are the impacts on the people whom the organization wants to benefit with its pro- grams. Outcomes are usually specified in terms of learning, including enhancing knowledge, understanding/perceptions/attitudes, skills (ability to accomplish results or capabilities), and conditions (increased security, stability, and so forth). In order to retain focus and engage all employees in a common vision, it is important to limit the number of goals and key performance measures. If the vision is to make the airport an “inter- national gateway,” there should be three to five key long-term objectives taken from the vision with their corresponding end-outcome measures to evaluate success. These three to five long-term objectives and their measures would cascade to be transformed into performance targets for all of the airport’s products, services, activities, and employees. All end-outcome measures would be expected to meet their performance targets within the long-term planning cycle, typically 5 years for most businesses and public organizations. In order to understand the relationship between end outcomes and intermediate outcomes— output and activity measures that cascade from the vision—it is useful to graphically illustrate the relationship with a somewhat revised version of the performance logic model (see Exhibit I-2.6). Performance logic is the underlying framework that aligns measures with organizational goals and ensures that all strategies and activities are properly organized and understood. As Exhibit I-2.6 demonstrates, outcomes are the results of the airport’s work and outputs. Outputs are airport products and services; activities are the projects and programs; and inputs are the time, money, and human resources used in activities. Performance measures should exist for each aspect of the logic model, with the exception of inputs or resources, which themselves do not measure any aspect of performance. While some organizations initially are unable to measure end outcomes, these end outcomes must be determined up front to guide subsequent measurement develop- ment. Where data are not available to populate these outcome measures, data collection should begin as soon as possible. The performance logic model works by asking airports to plan with the end in mind. You should not set performance measures and targets starting from now and moving into the future; start with where you want to be in the long term and work back. Ask, for example, what your capacity needs will be 10 years from now and the long-term targets, and then set annual per- formance targets based on implementation of your plans and programs. Usually, improvement will not proceed in a straight line. For example, if you plan to build a new runway in 5 years, you Theory and Practice of Effective Performance-Measurement Processes 25 Source: The Performance Institute11 Exhibit I-2.6. The performance logic model. Beginning with the end in mind, the logic model follows standard planning principles. The end outcomes are estab- lished first, and only the strategies and activities that con- tribute to those out- comes are measured and emphasized.

will see virtually no benefits from that runway until it is built and equipped, sometime in Year 5. Also, there are often lags between implementing a program and gaining its full impact. You won’t succeed unless you know what success looks like: in other words, what outcomes you propose to achieve. A good performance goal tells you that. Good performance goals, in addition to being primarily outcome oriented, have the following attributes: • An improvement verb (increase, reduce, etc.). • A measure (the “yardstick” you will use, for example, on-time arrivals). You’ll want to describe the measure in detail, a point to which we will return. • A target, the level you want to achieve. Having at least 80% of flights arrive on time is an exam- ple. The target can be as simple as having something in place. • A target date, that is, when you propose to achieve your target. • Usually, you’ll also want to specify a baseline (improvement from what level). Normally, the baseline will be today’s level or a level in the recent past. The baseline puts your performance target in perspective by letting people know how big an improvement would be. In order for performance measures to tell you what you need to know to gauge success—that is, what you have achieved and by when—they will need to conform to the following “SMART” criteria: • Specific. Is the measure’s definition so specific that there will be no confusion in calculating it? Will someone else, calculating the measure as described, get the same result? • Measurable. Is the measure quantifiable? • Accountable. Does the airport have the ability to influence the measure? • Realistic. Is it doable? Does it fit with the overall strategy and goals of the airport? • Time-Bound. Is it understood how frequently we need to measure and when we can expect to see movement? Balanced Scorecard The Balanced Scorecard is a strategic planning and management system that helps employees in an organization understand and work toward a shared vision. The scorecard system helps align the organization’s picture of the future (shared vision) with its business strategy, desired employee behaviors, and day-to-day operations. Also, strategic performance measures are used to better inform decision-making and show progress towards desired results, so the organization can then focus on the most important aspects necessary to achieve its vision and satisfy customers, stake- holders, and employees. Other benefits include measuring “what matters,” identifying more effi- cient processes focused on customer needs, improving prioritization of initiatives, improving internal and external communications, improving alignment of strategy and day-to-day opera- tions, and linking budgeting to strategy. Exhibit I-2.7 illustrates the four major areas of activity considered in the Balanced Scorecard approach and examples of related measures.12 According to the Balanced Scorecard Institute, there are nine steps an organization or com- pany needs to go through to “connect the dots” between strategic planning and management and the mission.13 1. The process starts with an assessment of the organization’s mission and vision, challenges, enablers, and values. The start of the process also includes preparing a change of management plan for the organization and conducting a focused communications workshop to identify key messages. 2. Elements of the organization’s strategy, including strategic results, strategic themes, and per- spectives, are developed to focus on customer needs and the organization’s value. 3. The strategic elements developed in Steps One and Two are broken down into strategic objec- tives, which are the basic building blocks of strategy and define the organization’s strategic 26 Part I: Introduction to Performance-Measurement Systems

intent. Objectives are first categorized on the strategic theme level, which is sorted by perspec- tive. Each strategic theme is matched with “cause-and-effect linkages,” and then later com- bined to produce one set of strategic objectives for the entire organization. 4. The cause-and-effect linkages between the companywide strategic objectives are formalized in an enterprisewide strategy map. 5. Performance measures are developed for each of the enterprisewide strategic objectives. This process helps identify leading and lagging measures and establishes expected targets and thresholds. Also, baseline and benchmarking data are developed. 6. Strategic initiatives (supporting the strategic objectives) are developed. To build accountabil- ity throughout the organization, performance measures and strategic initiatives are assigned to the appropriate staff and documented in data definition tables. 7. The implementation process begins by using performance-measurement software (described later in this document) to get the right performance information to the right people at the right time. The software helps people make better decisions because it offers quick access to actual performance data. 8. The enterprise-level scorecard is cascaded down into business and support unit scorecards, meaning the organizational level scorecard is translated into business unit or support unit scorecards and then into team and individual scorecards. Cascading translates high-level strategy into lower-level objectives, measures, and operational details. 9. An evaluation of the completed scorecard is conducted to answer questions such as the fol- lowing: Are our strategies working? Are we measuring the right things? Has our environment changed? Are we budgeting our money strategically? Exhibit I-2.8 presents the Salt Lake City Department of Airports final version of a balanced scorecard. The Malcolm Baldrige National Quality Award The Malcolm Baldrige National Quality Award is given by the United States National Insti- tute of Standards and Technology. It was established by the Malcolm Baldrige National Quality Theory and Practice of Effective Performance-Measurement Processes 27 Financial Sustained Profitability Spread of Income Recurring Income Income from New Products Customer New Customers Won Lost Customers/Prospects Complaints Referrals Learning and Innovation No. of Training Days Days Visiting Other Firms Experience of New Staff New Tools/Techniques New Ideas/Suggestions Use of Knowledge/Corporate Memory Databases Internal Business Processes How You Do Your Business Backlogs and Shortfalls in Work,Stock Sales Prospects Internal Faults and Errors Source: http://sydstewart.com/balancedscorecard.htm Balanced Scorecard Exhibit I-2.7. Balanced Scorecard.

Improvement Act of 1987—Public Law 100-107 and named for Malcolm Baldrige, who served as United States Secretary of Commerce during the Reagan administration. The program recog- nizes quality service in the business, health care, education, and non-profit sectors and was inspired by the idea of Total Quality Management. This is the only quality award that is actually presented by the President of the United States. The current award criteria are described as having three important roles in strengthening U.S. competitiveness: • Helping to improve organizational performance practices, capabilities, and results; • Facilitating communication and sharing of information on best practices among U.S. orga- nizations of all types; and • Serving as a working tool for understanding and managing performance and for guiding plan- ning and opportunities for learning. The criteria are designed to help organizations use an aligned approach to organizational per- formance management that results in delivery of ever-improving value to customers, contribu- tions to market success, improvement in overall organizational effectiveness and capabilities, and organizational and personal learning.14 The seven categories of the criteria are the following: 28 Part I: Introduction to Performance-Measurement Systems Source: Salt Lake City Department of Airports Responsive Government Capital Investment/ Resource Mgmt. Public Safety Growth/Quality of Life Community Building/ Diversity Revitalization of Downtown/ Neighborhoods Transportation EconomicDevelopment Excel in Municipal Services & Continuously Improve Service Delivery C us to m er Reduce Crime Against Property/ Persons Increase Perception of Safety Provide Safe & Efficient Transportation Facilitate Economic Opportunity Improve the City's Economic Base Strengthen Neighborhoods Protect & Enhance the Environment Fi na nc ia l Budget Responsibly Maintain Financial Stability Protect Bond Ratings Ef fic ie nc y/ Ef fe ct iv en es s Create High Performance Services Promote Professional Customer Interactions Promote Community- Based Problem Solving Improve Infrastructure Condition W or kf or ce Q ua lit y Attract & Retain Qualified Employees Improve Employee Job Skills & Knowledge Increase Diversity Educate Employees Regarding Diversity Involve Employees in Performance Planning & Goal Setting Measure & Evaluate Employee Performance Provide Tools & Technology Promote the well-being of the public by continuously improving municipal service delivery Conserve resources and proactively manage environmental issues Revenue projections are based on conservative, yet realistic assumptions Ensure each Airport fund is financially secure Analyze debt capacity prior to issuing bonds and maintain modest debt levels to protect and enhance the Airport's overall credit worthiness Provide customers with best-in-class services Provide Airport employees with customer service training to raise customer satisfaction level Balance between new opportunities and maintenance of existing infrastructure Attract and retain qualified employees to ensure effective delivery of Airport services in a cost-effective manner Identify organizational-wide training priorities for the next 2 years to sharply focus training resources on skills and competencies required to excel at providing Airport services Increase diversity of the Airport's workforce to match or exceed the labor force of the Wasatch Front Provide training for all managers, supervisors and employees regarding the value of a diverse workforce Involve employees in performance planning and goal setting to establish clear job related expectations, link employee's goals to corporate goals and improve communication Conduct semi-annual performance evaluations FOCUS AREAS Salt Lake City Department of Airports Provide for the safe and efficient movement of people to the Airport. Exhibit I-2.8. Salt Lake City Department of Airports Balanced Scorecard.

1. Leadership—Examines how senior executives guide the organization and how the organization addresses its responsibilities to the public and practices good citizenship. 2. Strategic planning—Examines how the organization sets strategic directions and how it deter- mines key action plans. 3. Customer and market focus—Examines how the organization determines requirements and expectations of customers and markets; builds relationships with customers; and acquires, satisfies, and retains customers. 4. Measurement, analysis, and knowledge management—Examines the management, effective use, analysis, and improvement of data and information to support key organization processes and the organization’s performance-management system. 5. Workforce focus—Examines how the organization enables its workforce to develop its full potential and how the workforce is aligned with the organization’s objectives. 6. Process management—Examines aspects of how key production/delivery and support processes are designed, managed, and improved. 7. Results—Examines the organization’s performance and improvement in its key business areas: customer satisfaction, financial and marketplace performance, human resources sup- plier and partner performance, operational performance, and governance and social respon- sibility. This category also examines how the organization performs relative to competitors. For many organizations, using the criteria results in better employee relations, higher produc- tivity, greater customer satisfaction, increased market share, and improved profitability. Dashboard A performance dashboard is a performance-measurement system commonly used to gauge performance and progress toward business goals. Dashboards can be designed and developed to address a wide range of objectives, from monitoring the viability of a global organization’s business strategy, to keeping a check on a department’s ability to achieve service-level targets. The visual display of information is characteristic of this framework, as can be observed in Exhibit I-2.9. Theory and Practice of Effective Performance-Measurement Processes 29 Source: San Diego International Airport Exhibit I-2.9. Snapshot of a dashboard implemented by San Diego International Airport.

There are many of providers of performance dashboard software, also referred to as “perfor- mance management automation development companies.” Some solutions are specifically based on performance management in general, and others use the Balanced Scorecard. Dashboard can also offer tools for business intelligence, analytics, or data warehousing. The dashboard frame- work guides businesses to • Communicate key objectives by using performance maps, programs, and initiatives—and the relationship among them. The maps help visualize key linkages between agency objectives and results and can also provide insight into performance from several perspectives. • Monitor business processes and activities by using metrics of business performance. The sys- tem also alerts companies when potential problems arise. • Analyze the root cause of problems by using several timely sources of information. • Manage people and processes to improve initiatives and decisions, as well as optimize per- formance and guide the organization in the right direction. Performance-Measurement Systems versus Performance-Management Systems While an exponential increase in computer power and connectivity has allowed organizations to store, recall, and process an increasingly large number of performance measures or amount of data in recent years, true accountability, transparency, and actual performance management has remained more challenging across both the private and public sectors. This difference between a performance-measurement system and performance management is critical in understanding why simply collecting organizational data does not necessarily lead to management improve- ments. Since the invention of computerized spreadsheet technology in 1978, most organizations have increasingly collected quantitative data on almost all aspects of their business. An organi- zation’s financial, customer, human resources, and operational data reside in pockets of individ- ual computers and servers, and today it is largely used as simple historical or trend data, if at all. Even organizations making a concerted effort to use analytics and measures to drive decisions report a continuing inability to change management and organizational culture. The effective use of performance management to drive and execute strategy is premised on one core truism: the ability to understand and apprehend the interrelationships of key indica- tors throughout the business is based on carefully reported data. Aligning data thoughtfully and understanding cause-and-effect relationships are the essence of performance management. Characteristics of Performance-Measurement and Performance-Management Systems In summary, the main characteristics of a well-defined performance-measurement system are the following: • Organizational performance measures are gathered and displayed in a system or systems. • Measures are designed to ensure that past practices are analyzed, and lessons are learned from prior decisions. • Measures are utilized to gauge whether current actions are moving the organization toward a desired future state. • The organization may use measures from a largely reactive and tactical perspective, but the long-term goal is for more proactive, strategic use. • The organization consciously uses data to challenge management decisions, pre-conceived notions, and past practices. • Quantitative and qualitative information are used together to provide accurate and rich inter- pretations of organizational activities, outputs, and outcomes. 30 Part I: Introduction to Performance-Measurement Systems

• Measures are analyzed by multiple observers with multiple interpretations. • Hypothetical questions, varying resource allocation models, and other scenarios are employed to understand the driving causes behind the performance measures and to make better decisions going forward. Moving to Performance Management Performance management stresses the timely delivery of data to decision-makers and the actual use of measures to drive management decisions throughout the organization. Performance management moves organizations from a process in which measurement and analytics are used to discover long-term trends to a process that must quickly reveal perfor- mance shortfalls and provide corrective action before tactical misalignment becomes a bigger organizational issue. Modern business intelligence applications allow information to be pre- sented in whatever timeframe is appropriate (daily, weekly, monthly, and so forth) and to be accessible to the proper personnel, directors, and/or managers so that they not only have an up- to-date view of the current situation, but they can also make data-driven decisions on the latest and most accurate information. Performance management also emphasizes a drill-down hierarchy that reflects organizational strategic thinking in almost every type of information and data reporting, something that is now expected to be present in all data-visualization models. Beyond ease of use and clarity is the importance of tailoring performance information to match the strategic framework utilized by the individual organization. Matching performance reporting to the strategic framework ensures consistency in tracking and evaluating information in appro- priate timeframes, accurately customizing the way information is presented, and correctly choos- ing the types of reports to be produced. Performance management and strategic planning are two sides of the same coin: where the organization is heading and is it on course to arrive on time and on budget. Spreadsheets capture a slice of this story, but fail to create the linkages between strat- egy and the vibrant daily measures that are so important for execution at all levels. Effective Performance Management—Gauging Your Airport’s Performance Maturity Do you know how mature the performance-measurement system is at your airport? On a scale of 1–10, where 1 indicates the preliminary stages of developing a performance- measurement system and 10 indicates a mature performance-measurement system, gauge your airport’s performance maturity. 1. Interaction among management, staff, and stakeholders on what the measures mean and how to improve performance. – Your airport’s leadership uses performance measures to encourage discussion and feedback Score: 1–10 _____ – Your airport matches data with pilot projects or new practices to gauge their impact Score: 1–10 _____ – Your airport encourages employees to analyze performance measures to enhance organi- zational learning and growth. Score: 1–10 _____ – The measures chosen by your airport are actionable for management and employees, meaning management and employees are accountable and able to take action and improve performance. Score: 1–10 _____ Theory and Practice of Effective Performance-Measurement Processes 31

2. Integration – Performance measures are used to understand cross-functional relationships and the link- ages between departments. Score: 1–10 _____ – Performance measures are tested to see their effect and relationship to customer and financial outcomes. Evaluation leads to refining or changing performance measures over time. Score: 1–10 _____ Add each score. Total: ______ So how does your airport measure up? 45–60: High Performance Maturity 35–45: Developing Performance Maturity 25–35: Average Performance Maturity 25 and below: Airport still in performance-measurement system or measurement stage 32 Part I: Introduction to Performance-Measurement Systems

Next: PART II - Building a Performance-Measurement System »
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TRB’s Airport Cooperative Research Program (ACRP) Report 19: Developing an Airport Performance-Measurement System provides guidance on developing and implementing an effective performance-measurement system for airports. The report’s accompanying CD-ROM provides tools designed to help users complete the step-by-step process for developing an airport performance-measurement system as presented in ACRP Report 19.

The CD-ROM is also available for download from TRB’s website as an ISO image. Links to the ISO image and instructions for burning a CD-ROM from an ISO image are provided below.

Help on Burning an .ISO CD-ROM Image

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