Nena Tomovi, Sneana Peji-Tarle, Pavle Gladovi

PERFORMANCE MANAGEMENT IN THE TRANSPORT RGANIZATIONS - FROM THEORY TO

PRACTICE

PERFORMANCE MANAGEMENT IN THE TRANSPORT

RGANIZATIONS - FROM THEORY TO PRACTICE
Nena Tomovi, M.Sc.
Serbian Railways, Dep. of Infrastructure, Nemanjina 6, Belgrad, Serbia,
nena.tomovic@srbrail.rs
Sneana PEJI TARLE, PhD
Faculty of Transport and Traffic Engeneering, University of Belgrade, Vojvode
Stepe 305, Belgrad, Serbia, s.tarle@sf.bg.ac.rs
Pavle GLADOVI, PhD,
Faculty of Technical Sciences, University of Novi Sad, Trg Dositeja Obradovica 6,
Novi Sad, Serbia, pavle.gladovic@uns.ac.rs
Borka uni, M.Sc.
Ministry of Transport, Department of Road Transport, Omladinskih brigada 1, Novi
Beograd, Serbia, borka.zunic@ms.gov.rs
ABSTRACT
The concept of sustainable economic development, as well as the significant changes that have
occurred in recent decades in the transport market, has caused a change of the basic suppositions on
which it is possible to build a competitive position in that same market. In the last few years economic
crisis significantly complicates the business, so the requirements and standards, both in terms of
performance management and the methods by which those perforamnces are mesured, are becoming
more and more actual because they become a condition of the organizations survival and success. The
use of traditional performance measurement systems, no longer meets the needs of transport
organizations and demands of the transport market which are more complex. This situation presents a
challenge for a huge number of authors, who are now dealing with this issue, and thatsway the
literature is spacious and diverse. Regardless of the fact that there is still enough space for the
consideration of these issues in a new context. The aim of this paper is to expose the basic principles
of this issue, which would also be suitable for the application in the relatively underdeveloped practice
of performance management, which dominates the transport organizations in Serbia.
Keywords
performance management, performance measurement systems, transport organizations

1. INTRODUCTION
Sustainability as a term can be represented as a manifestation of desire to make life of all
people on our planet better and as such, it should be available to all [1]. It implies the
availability to meet existential needs of the present without compromising the possibility of
future generations to satisfy their own needs in a same or similar way. It should be kept in
mind that the economic crisis during last few years has a strong impact on business of all
organizations, including transport organizations. Therefore, the concept of sustainable
economic development is the dominant research topic for most of authors.
Regarding the transport, the precondition of sustainable economic development is
sustainable mobility of people and goods, whose task is to find appropriate balance between
environmental protection and quality of transport service oriented to customers. It can be
noted that the high level of transport services is a part of the culture of quality of

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contemporary society. In this society, intermodal and acceptable transport service is the right
answer for social and economic demands for mobility [2].
Significant changes occur at the market of transport services in EU (globalization,
liberalization, deregulation and harmonisation). There is a very important question: When and
in which way transport organizations in Serbia will be equally able to fight for place and
position in European market of transport services? This market includes organizations with
longstanding tradition and they can be used as a model for successful business for transport
organizations from countries in transition.
Questions which are related to successful organizations are following: How did they do
it? What they had to do to achieve such results?
The answer is not simple because the problematic regarded to management and
improvement of transport organizations business is complex. However, it can be noted that
successful organizations realized that the market is changeable category and that the business
environment has become very dynamic, interactive with numerous factors which are daily
related to risks and surprises. It is necessary to replace traditional way of business with
modern way of business.
The contribution of EU in preparation of environment for realization of concrete demands
for sustainable development of transport in the future is very important. Creation of this
vision goes from the fact that the transport essentially contributes to development of economy
and society, while the mobility is very important for development of internal market and
quality of social life. Citizens have the right to enjoy the possibility of travel. Also, efficient
and sustainable transport provides economic growth and new jobs. In order to realize that,
global action including intensive international cooperation is needed [5].
Such approach directly and indirectly implies that new demands will lead to changes in
organization and technology of conducting of transport service, because management of these
processes will be more complicated in the future. Also, these processes will be conducted
under the influence of following factors:
Development of international trade: Because of the distribution of cargo through
different states, national regulations and legislations has to be known, including
customs, language of unknown environments, etc.
Tightening of conflict between efficient distribution and transport: In order to
reconcile the conflict between decisions of sales managers and transporters, it is
needed to optimize transport routes.
Market transformations of all kinds of transport: Road and to some extent rail
transport at liberalized transport market are exposed to stricter quality control.
Increased environmental constrains: Transport undoubtedly influences on
environment. Therefore, it is exposed to certain constrains (especially road transport),
Necessity of application of modern technology transportation, trans-shipment and
communication: some of latest distribution systems include satellite
navigation/communication, voice-input computers, on-board computers, software for
planning based on artificial Intelligence etc. [2].
The basis of all changes includes concern for customer and quality of service, which are
placed in function of business success and became important precondition of survival of
transport organization in domestic and European market. [3,4].
Using large number of directives and other documents, EU promotes and supports
improvement of transport service quality. It is impossible to realize it without acceptance of
elements related to competency and productivity, with large investment in Human Resources.
Therefore, the quality of transport service will depend of performance of individual, his/her
dedication and motivation [6]. Also, elements related to security of transport processes and

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protecting the environment are considered as important. They contribute to protection of

interests of consumers and all citizens who suffer the consequences of transport process.
According to presented, it can be noted that defining of strategy for management of practices
regarded to European practice is important for domestic transport organizations. Management
of practices of transport services has become reality because there is increasing number of
private and public companies in sector whose experiences regarded for establishment,
monitoring and continuous improvement of services quality are positive. All of this is
achieved by establishing of appropriate system for management of organizational
performances.
2. A SHORT REVIEW OF THE PERFORMANCE MANAGEMENT THEORY
Performance management is a new term used in organization management theory according
to most of theorists. However, analyzing the meaning of such term, it can be said that origin
of this science can be found in ancient past. The best example is the famous book The art of
War, written by Sun Tzu in 500BC. In this book, the success in war is compared with
success in business: the success in war and business is very similar and depends on: internal
and external data collection, understanding of the patterns and the meaning of data and quick
response to the received information.
Beginnings of serious studying of performance are made by industrial engineers from
year 1900. Their work was led by Frederick Taylor who is considered as author of first formal
system for officer ranking in American military service, before the WWII [7]. He argued
following: One of bases for future performance management was scientific management
method oriented on receiving a higher performance of employees. The concept was ideal for
optimizing and simplifying the tasks. Its main goal was to create a maximum level of
motivation by directly linking gratification with productivity. [8]
In 1922, graphic scales for ranking are introduced. They were used for the assessment of
performance of employees (employee exceeds, meets or does not meet expectations).
Limitation of this approach can be observed in appearance of different standards doe similar
or same positions, which had a strong influence on possibility for objective, systematic and
fair assessment of employees.
The important progress in development of performance management theory was made
by Piter Draker in 1954. He introduced a term Management by use of objectives (MBO)
which includes defining of objectives understandable to managers and employees. These
objectives are used for defining of expectations from employee, while the focus was placed on
objectives and their realization. The application of this concept was not simple because it hard
to define clear and measureable objectives for each employee. The problem was also related
to updating and changing of objectives according to changes in defined period.
Later trends moved performance management focus to assessment and management of
behaviour at. It included the evaluation of behaviour of employee aligned with predefined
standards. During that period, Behaviorally Anchored Rating Scales (BARS) developed. They
were used to place the focus during assessment to quantification of behaviour at work. Using
these scales, performances related to business demands were assessed. Levels of behaviour
with concrete qualitative description were defined within each dimension. Using this way,
managers obtained concrete examples of behaviour types which are connected with certain
mark.
Next phase in development of performance measurement were marks made from
different sources, not only by managers. Klients (buyers, services users), employees from the
same organizational level and employees from lower organizational levels joined in
assessment. It provided creation of 360 degrees scale, which developed and became popular

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PERFORMANCE MANAGEMENT IN THE TRANSPORT RGANIZATIONS - FROM THEORY TO
PRACTICE

in 1990s. This scale included the assessment of employees by all interest groups in
organization: immediate supervisor, colleagues from the same organizational level, coworkers from a lower organizational level and an independent group of evaluators.
During the period 1990-2000, assessment systems based on competencies became
popular in performance management. The basis of the system is a model of competencies.
Beyond their popularity, following questions appeared: what competencies exactly are, what
they include and how they should be assessed. The best practice in performance management
based on competencies claims that they should be defined as behaviour standards. These
standards describe different levels of each competency in the best way.
Latest trends in performance management include orientation toward results which
embraces effective behaviour management and achievement of high results. This principle
implies that each employee is responsible for achievement of results in order to contribute to
organizational success. Defined results include objectives and defined values of key
performances indicators. Therefore, latest best practice includes the assessment of results and
ways of results achievement or behaviour of employee.
Performance management process includes management of success and strategic development
of company through management of behaviour of employees and their assigned objectives.
The process includes quantitative and qualitative measures of success. The basis for creation
of basis elements of system includes mission and vision of company. These elements
highlight values and strategic objectives as key components for defining of behaviour
standards (needed competencies) and objectives or key performance indicators which are
managed in order to realize organizational vision [9].
3. PERFORMANCE MANAGEMENT IN TRANSPORT ORGANIZATIONS
Nowadays, there is large number of organizational performance management models, because
numerous authors in the world studied this topic. The important contribution to development
of performance management is given by the European Commission by financing of numerous
projects in area of transport.
Significant contribution to development of strategy for public transport in cities was
given by the project known as SPUTNIK 1, which dedicated to challenges faced by local and
regional public transport systems in transition. These challenges include the emergence of a
competitive environment, changing institutional frameworks and increasingly scarce financial
resources. Each of the 6th Framework Programmes seeks to help make public transport
systems more attractive and efficient by providing:
support to stakeholders to anticipate and prepare for emerging challenges;
an overview of state-of-the-art knowledge and research;
specific guidelines and practical tools [11].
The project activities cover four priority areas: market organisation, customer relations,
corporate management and equipment and operational aspects. Challenges in the field of
Business Performance Improvement can be determined by using the model which is shown in
Figure 1. The measurement of business performance and measurements are crucial because of
following:
If you cant measure it, you cant control it
If you cant control it, you cant manage it
If you cant manage it, you cant improve it.

SPUTNIK (Strategies for Public Transport in Cities) is a project funded by the European Commission under
the 6th Framework Programme, project start: 26 July 2006, duration: 36 months
4

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A) Cost efficiency measures

The amount of public transportation services produced for the community is related to
expended resources. This measure addresses the question: How many resources were
expended per unit of PT service?. Units of service are measured in terms of service outputs
such as vehicle hours or vehicle kilometres. Resources expended include labour, capital,
materials and services. Primary cost efficiency measures include total operating cost per
vehicle service hour and total operating cost per vehicle service kilometre.

Source: SPUTNIK

Figure 1: Model of business performance improvement in

transport organizations

B) Cost effectiveness
Cost effectiveness is the consumption of PT services in relation to the resources
expended. This concept addresses the question: How many resources were expended per unit
of consumption or how much consumption was received per unit of resource expended?
Consumption is measured by passenger trip or passenger kilometres. Primary cost
effectiveness measures include total operating cost per passenger.
C) Service Quality
Service quality is the relationship between service delivery and customer expectations.
This concept addresses the question: Does the delivery or PT service meet or exceed
customer expectations? Service quality is defined as passengers, clients and the public
receive it. Also, service quality has many dimensions and the importance of each attribute
differs among people. However, the attributes of quality include at least accessibility,
availability, reliability, safety and comfort.
Main challenges with respect to the field of Business Performance management:
to increase overall performance at company and business unit levels in order to
be more successful in fight with existing competition or new competition in the (near)
future;
to improve existing management methods (controlling for example) and/or
introduce new more up-to-date methods like Balanced Score Card, Total Quality

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Management, Management by Objectives

to improve financial performance by further cost reduction, increase of revenues,
to update and make better use of performance indicators on production, finance,
quality and human resources [11].
For transport organizations, continuous increasing of the efficiency of organizations
functioning, accepting of the rules and logic of the transport market, applying of the modern
management methods and continuous success measuring are necessary for the realization of a
quality transport service, with possible engaging of resources (financial, human, time,
material).
These are the requirements, which contain a certain number of conflicting criteria, which
can be overcome by defining of business performances system. This system should present
the support for business goals and strategy of the transport organization.
Business performances system can be defined as a group of different, mutually connected
indicators, characteristics, and values, which describe business system, its resources and
results. These elements represent the measure of its success. Figure 1 describes the business
performances system, which is in the function of business goals and strategy of the
organization [12].

Source: ISPI

Figure 2: Ten principles of business performance improvement

Having in mind the fact that the defining of the system performances significantly
contributes to the successful functioning of the organization, it can be said that choice,
description, measuring process and the way of using performances have the extreme influence
on the process.
That is the reason why literature and practice standards for defining of the performances
are often used. They are defined and published by the International Association ISPI 2 which
deals with performances and considers them from different aspects.
The essence of standards for defining performances is based on ten principles, shown on
Figure 2.
Focusing on the results defining the group of performances which depends on results we
wish to achieve, and for transport organizations. These are mainly satisfaction of users of
transport services, together with the increase of revenues, reducing of passenger or freight
transport costs, proper using and development of the human resources;
2

ISPI International Society for Performance Improvement, www. ispi.org

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Applying of system approach enables realizing of interconnections and influences which

exist between certain elements of the business system, and their relations with the
environment in which the organization operates, including the efficiency of each individual
part of the business system;
Additional value means focusing of the organization on all those business processes which
create additional value, in accordance with the expectations of users; it is desirable for the
organization to make projections of different solutions for business processes, and then to
attribute value to them, possibly in cooperation with users, permanently striving to improving
of its business;
Cooperation with users and other experts it is a necessary precondition for the successful
business of the organization, and it is primarily based on sharing of responsibility in the
process of decision making, forecasting and implementations of business goals, while
respecting the principle of confidence and expertise and knowledge;
Analysis of the needs or possibilities it is the situation when the organization wants to
introduce a new business process, to harmonize its business with demands of users, to check
its business performances. Results of this analysis represent the basis for creation of the new
development perspective, which will contribute to the success of the business;
Analysis of causes enables establishing the difference between the performances or
expectations, and the final goal is identifying and eliminating of weaknesses, which contribute
to improvement of organization's business performances,
Projections means introducing of a new solution into the organization, together with
defining of the new business system structure and explanation of the influence of the new
solution to the business performances of the organization,
Development - looking into elements of a new solution, supporting and coordinating it with
the organizations business objectives and outputs,
Implementation - applying the solution and managing subsequent changes in order to fit the
new solution into existing business processes,
Evaluation assessment of effectiveness and efficiency of the new solution, comparing the
investment against benefits and estimating effects of all previous standards.
Experiences of leading world transport organizations showed that performance management
according defined standards is impossible only using ad hoc actions. It needs systematic
approach, defining of management model which will be implemented and monitored
continuously with active involvement of all employees.
4. BUSINESS PERFORMANCE IMPROVEMENT ON SERBIAN RAILWAY
Business performance management and their improvement are becoming a great
challenge for large transport systems including Serbian Railways. This company should
suggest strategy in a very short time. Using this strategy the organization with big losts would
be transformed into organization which respects modern business principles and obtains
profit. Realization of mentioned objective includes creating of sustainable balance between
economic-finance interests of the organization and socially-ecologic interests of its
environment, which can be achieved using appropriate standards.
Since the main product of transport organization is transport service, it can be said that
Serbian Railways should follow the example of world famous transport organizations which
apply business rules. Within these rules, the quality is the key term and the user of transport
service is a measure of quality of offered transport.
The key question is how to achieve this objective. The answer is impossible without
information about the existing condition in performance management in a large and complex
system such as Serbian Railways. The aim of conducted research was to obtain information

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about opinion of employees. Their opinion is related to practice of organization performance

management. Starting point of each research is the analysis of existing condition, which
should answer the question: Where are we now? Pilot survey has been conducted for this
work. It should represent the assessment of achieved level of performance management in
Serbian Railways. Research is conducted on example of 68 employees who belong to middle
level of management and work on a railway in sectors related to strategy and development,
business plan, finances, transport technology and other activities (informatics and
restructuring). Structure of respondents by organizational units is presented in figure 3. Also,
the figure 4 presents respondents according their employment status in area where they are
experts.

Figure 4: Structure of respondents by

organizational units

Figure 3: Structure of respondents by

organizational units

The survey has been conducted during the March 2013. Respondents answered on
questionnaires in written form. The respond to the survey was excellent, since 97% of toital
number of survey lists was filled in a proper way. The anonymity was guaranteed to
respondents. Information on organizational unit (where respondent works) and number of
working years on a specific job were needed for the survey. Respondents belong to a category
of middle management (heads of departments, coordinators, project managers). They are
experts in their area of work, very familiar with events in organization, not politically
oriented. The politics is present in election and work of top management. Whether the sample
can be concerned as relatively small, survey results can be considered as valid because most
of respondents are experts in their areas of work. The research included questions
conceptualized in order to check practice placed in context of Ten principles of business
performance improvement which are explained in previous chapter.
Results of this survey are extensive since each of ten questions included three to five
additional questions on which respondents had to respond.
For purpose of this work, the presented essence needs to show the opinion of
employees on a level of achieved or applied practice of business performance management.
Respondents have a high level of competencies, since 67% of them have more than 15 years
of working experience, which makes experts regarding familiarity of system and profession.
While talking about the focus on output results of business, application of systematic
approach for work with added value and evaluation, most of respondents think that those
principles are not applied for rail. Cooperation with service users, analysis of needs and
causes and projection are partially applied.

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There are also divided opinions

regarding implementation of solutions and
evaluation. In other words, the same number of
respondents think that it is partially conducted
or it is not conducted at all.
The final result of conducted survey is
presented on Figure 5. According to this figure,
40% of respondents think that principles of
business perfomances management are not
applied, 36 % think they are partially applied,
while 24% think these principles are totally
applied.
Figure 5: Improvement principles of business
performance management on Serbian Railway

At the end of the survey, respondents were asked to rang factors which mostly contribute
to success of the organization. Answers are presented in Figure 6.

Figure 5: The factors that determine the success of the organization

The analysis of obtained results implies that there is a lack of attention dedicated to
performance management in Serbian Railways. Respondents answered with No or
Partially on most of questions, which suggests on a low level of development and
application of performance management in this company. It is important to note that
employees are aware of obstacles to creation of successful organization. As most important
factors on which organizational success depends, respondents mentioned qualified and trained
personnel, depoliticizing of management, teamwork and interpersonal skills, and the
environment in which the organization operates and ultimately rewarding.

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5. CONCLUSION
Presented research of achieved level of performance management in Serbian Railways
implies on the complexity of this problem which received very low attention according to
opinion of respondents. As a consequence of such approach, Serbian Railways are one
inefficient and expensive system, in which resources are irrationally spent, which above all
contributes to negative financial aspects of business. According to that, this is the
organization which belongs to the group of largest debtors in Serbia.
Nowadays, the application of modern organization of work and decision making theory
present the premise of modern management of complex processes within one system.
Changes in way of work and business are necessary. Furthermore, quality decisions making,
based on knowledge and application of modern science methods are the condition of the
existence of the organization.
Conducted research implies to need to immediately conduct reforms in railway sector at
all business levels in order to decrease gap in way and effects of business between Serbian
and European railway administration. Starting point of changes could be defining of
performance management model for Serbian Railways, whose application could be used for
efficient management of success and strategic development of organization.
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