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Advancing Metropolitan Planning for Operations: An Objectives-Driven, Performance-Based Approach – A Guidebook

Appendix D. Operations Objectives and Performance Measures in Private and Public Organizations

The use of specific objectives and performance measures to manage operational performance is common practice among private companies and public organizations that are responsible for generating sufficient revenue to meet cost and/or produce profit through delivery of services in a competitive or service-driven context. The experiences of these organizations are a potentially rich source of information on how an objectives-driven, performance-based approach can be used to plan for and manage transportation operations in the public sector.

This appendix provides a brief look at two delivery companies or organizations, a tollway organization, and two power companies. Each organization delivers a service over a physical infrastructure and closely monitors its operations and customer service to maintain and expand its customer base.

Based on the information gathered on performance management in self-sustaining private and public organizations, the following list of activities were developed for consideration in planning and managing transportation operations in the public sector:

Federal Express

Prior to 1989, FedEx assumed that on-time delivery was what their customers expected and valued most; however, input from customers showed them that customers expected much more.42 In an effort to spur progress toward their ultimate target of 100 percent customer satisfaction, FedEx developed a 12-component index, known as the Service Quality Indicator (SQI). Each item in the SQI describes work process failures, and each is weighted to reflect how significantly it affects overall customer satisfaction. The SQI includes the following components/performance indicators, along with their weighting factors (shown in parentheses):43

FedEx uses advanced computers and tracking systems to gather and track data. Rapid analysis of operations data yields daily SQI reports transmitted to workers at all FedEx sites. Management meets daily to discuss the previous day's performance, and weekly, monthly, and annual trends are tracked. Quality action teams (QAT) analyze data contained in the company's major databases to identify the root causes of problems that surface in the SQI reviews.44

To reach its aggressive quality goals, the company has set up one cross-functional team for each service component in the SQI. A senior executive heads each team and assures the involvement of front-line employees, support personnel, and managers from all parts of the corporation when needed.45 In addition, the SQI measurements are directly linked to the corporate planning process. The SQI forms the basis on which corporative executives are evaluated and individual performance objectives are established and monitored.

While the SQI measures internal process performance, FedEx relies on a customer satisfaction survey to measure satisfaction from the customer's perspective. Not only can the customer satisfaction survey capture aspects of service quality that the SQI does not include, it can also capture the changing expectations of customers. This allows FedEx to recheck customer requirements and perceptions and to update its measures and weights accordingly. This ensures that the customer's voice always drives FedEx's actions and processes.46 The customer satisfaction survey consists of a quarterly telephone survey, a targeted customer survey, FedEx comment cards, a customer automation survey, and a Canadian customer survey.

Since being placed in service in the late 1980s, the SQI has enabled FedEx to increase its on-time delivery performance from 95 percent to 99.7 percent in 2003 without adding significant costs.47 FORTUNE has ranked FedEx among the Global Most Admired Companies and America's Most Admired Companies lists since 2002 and 2001, respectively. The company has also been on the list of FORTUNE magazine's "100 Best Companies to Work For" for 12 of the past 13 years.48 The connection between what the company measures and rewards and their industry dominance is solidly linked.49

TNT Express Delivery Services

TNT provides global express delivery services, including parcels and freight. L. Fitzgerald and P. Moon conducted an in-depth study on the role of performance measurement at TNT Express Delivery Services in the United Kingdom (UK).50 This case study summarizes the relevant findings of that research.

The operational system of TNT adopted by the company is structured like a giant wheel, with a central hub and a set of spokes. On the outer rim, there are 28 depots strategically situated around the country. Each weekday, each depot is responsible for the coordination and collection of all packages being sent by customers in their territory. These packages are sorted at the depot and those being sent outside of the territory are packed on trucks and sent to the hub.

TNT's primary objective is to deliver the packages to the right place at the right time, and TNT employs a variety of metrics to measure and track its operational performance. Delivery performance is perceived to be fundamental to the success of TNT, and TNT has a clearly defined method for measuring their delivery performance. They do this using what they call the 7-Star Service Performance Report, which is measured weekly. The seven indicators, or performance measures, included on the report include:

A standard target is set for each of the indicators, and any depot achieving the target or better across all categories would gain a 7 star rating for the week. Reports are generated weekly in the form of a league table, which rank orders the depots according to delivery on-time performance. Reports are circulated so that all depots know how they performed overall and in comparison to the other depots.

Based on an assessment by Moon and Fitzgerald, TNT has been successful at using its performance management system to push the strategic direction of the company into all aspects of its operations. Moon and Fitzgerald identify five properties of their performance management system that have allowed them to do this:

Illinois Tollway51

The Illinois Tollway operates 286 miles of Interstate highway that serves approximately 1.4 million customers a day, about 11.5 percent of which is commercial vehicle traffic. The Tollway's mission is to provide and promote a safe and efficient system of toll-supported highways while ensuring the highest possible level of service to its customers. To provide customers with a premium ride, the Tollway relies on the top-down support considered critical to its overall performance and delivery of service.

The Tollway began developing and monitoring performance in the early 1980s when traffic volumes were growing, and it started seeing congestion at its toll plazas. It also began looking at incidents that were resulting from the increased congestion. In the late 1980s to early 1990s, the Tollway began a concerted effort to manage traffic over the entire network, and this has evolved over time. It began with the use of a computer aided dispatch (CAD) system and then started using an integrated approach of dedicated police as well as maintenance staff to keep things moving. The Tollway created procedures and systems that were later integrated into a centralized traffic operations center.

The Illinois Tollway has worked to measure, monitor, and improve its performance in four key operations areas: overall traffic operations, toll collection, incident management, and construction work zone management.

Overall Traffic Operations

Since the early 2000s, the Tollway has focused on measuring how the system is operating and performing (e.g., locations of back-ups, slow downs, travel times). Performance measures for overall traffic operations include traffic volumes, speeds, travel times, and lengths of back-ups. While there are stated performance targets related to congestion, the Tollway has established levels of tolerance that have been adjusted over time to better meet needs. For example, the tolerance threshold for the length of a back-up has been cut in half.

Toll Collection

Key performance measures for toll collection operations include congestion, number of incidents, and the percent of customers using I-PASS (electronic toll collection). Customer feedback has resulted in the Tollway converting the entire system to open road tolling (ORT). As a result of the ORT, the Tollway has eliminated congestion that used to be at the toll plazas, and crashes have dropped dramatically.

Incident Management

The Tollway's objective is to clear incidents quickly and safely. Key performance measures for incident response include detection, confirmation, communication, response, and clearance times. It tracks these measures regularly with time stamps and weekly reports. The Tollway uses a computer-aided dispatch system integrated with a traffic incident management system to facilitate the process. In addition, it audits and monitors tow activity. The Tollway has numerous (35-45) agreements with private towing and recovery firms, all with response times and other performance criteria that they must adhere to. All towing performance is audited. The Tollway maintains 55 agreements with local fire departments and protection districts that cover emergency services provided on the Tollway.

Internally, the Tollway gains commitment to improved incident response performance through a high level of communication that includes incident debriefing and regular training. All maintenance employees are trained in incident response and are empowered to divert from routine maintenance activity to respond to a reported incident upon notification by central dispatch. Tollway employees are first on the scene in 60 percent of incidents. Externally, the Tollway gains commitment to performance through formal agreements that establish a framework for cooperation. They produce quarterly reports for the Governor's office regarding non-recurrent congestion.

Construction Work Zone Management

The Tollway's focus is on knowing how its system is operating during construction. Key performance measures for operations during construction include traffic volumes, congestion, average travel times, and number of incidents. The Tollway installs sensors prior to construction to establish a baseline, measure performance during construction, and measure improvements after construction is complete. CCTV cameras located at construction zone entrances and throughout the construction zone monitor the effectiveness of maintenance of traffic schemes and allow for quick assessments and adjustments as necessary to facilitate safe and efficient movement of vehicles through construction zones.

Because of this performance monitoring, the Tollway operators know where back-ups are going to be and can get the word out to their customers. The Tollway management strives for a high level of communication with the public both in advance of major construction and continuously throughout the construction season. It notifies the public a minimum of 10 days prior to construction or any major phase changes, provides daily updates, and actively sends messages to customers on work zone status via multiple means of communication, including press releases, email alerts, daily lane closure reports, dynamic message sign and portable changeable message sign deployments, as well as web-based regional automated traveler information system.

Austin Energy

Austin Energy is a community-owned electric utility located in Austin, Texas. The utility provides a portion of its profits each year to help fund city services. Austin Energy produces and delivers energy to approximately 400,000 customers. It is the 9th largest municipal electric company in the United States. Austin Energy generates power through coal, gas-fired, and nuclear plants, captures renewable wind energy, and purchases energy from outside providers. Austin Energy operates a transmission and distribution system.52

Austin Energy has adopted three overarching strategies to maintain a successful organization. In support of these strategies, Austin Energy developed five strategic objectives. The strategies and strategic objectives are as follows:53

Each objective is tracked using one of more performance measures and associated performance targets. Austin Energy measures system reliability with six reliability performance measures. Three measures focus on the delivery of electric services and the other three measures focus on power production. The performance measures that Austin Energy uses to gauge the delivery of electric services are:

The three performance measures that Austin Energy uses to access the reliability of its power production rely on a metric called the equivalent availability factor (EAF), a measure of the availability of power for use. The three measures using EAF include the availability of power at two power generating facilities and the availability of power during peak season.

The organization also aims to have renewable energy comprise 30 percent of its power generation portfolio and to improve energy efficiency by 15 percent by 2020. Austin Energy assesses stakeholder satisfaction with surveys of both customer and employee satisfaction. It aims to achieve a customer satisfaction target of 83 percent by fiscal year 2010, a measure based on the American Customer Satisfaction Index.54

In 2006, Austin Energy's Electric Service Delivery business area began a formal quality management effort and in 2008, achieved certification under the ISO 9001:2000 standard. The ISO 9001:2000 standard specifies the requirements for a quality management system and emphasizes improvements in the effectiveness of processes through numerical performance measures. The Electric Service Delivery business area used a balanced scorecard approach to ensure service quality. It developed key performance indicators (performance measures and numerical targets) in the areas of cost, reliability/regulatory, customer satisfaction, safety, and employee satisfaction. With limited resources, the business area recognized the importance of balancing efforts to improve service with costs.55

The Electric Service Delivery business area divided its key performance indicators into three tiers according to organizational responsibility. The strategic performance indicators are used at the first tier by executives to lead the business area. These measures are aligned with the overall Austin Energy organizational strategies and feed into the organizational performance measures. The second tier key performance indicators are operational in nature and are used by managers to manage the business. Managers are held accountable for achieving the performance targets. The third tier of key performance indicators support the first two tiers and are focused on process and efficiency. They support action plans and are used by supervisors for day-to-day activities.

The first-tier performance measures are reported to the community as part of the overall organization's performance measures regularly through the Austin Energy website, bulletin boards, and a regular newsletter. Performance trends are reported monthly for cost, reliability/regulatory, and safety measures, whereas customer satisfaction and employee satisfaction trends are reported on an annual basis. Austin Energy strongly believes that tracking and reporting performance results is important for successfully managing and improving an organization.

The Austin Energy Electric Service Delivery business area vice president and the business area management meet every 6 months to discuss the effectiveness of the quality management system. As part of these meetings, performance results are examined for the key performance indicators and action plans are initiated for measures that are trending in the wrong direction. The meeting participants also re-evaluate the indicators and targets.

Several benefits have been realized by the Electric Service Delivery area because of its quality improvement effort including improvements in: communications and collaboration between operational work groups, the documentation of issues as they occur, identification of root causes, and action plans developed and carried out to address these issues. The quality improvement effort seems to be winning over many of the impacted employees. Austin Energy reported that the ISO 9000:2001 standard gave it a needed framework to help manage its business. For others working toward developing a quality management system, Austin Energy emphasized the importance of not trying to design a perfect system, but instead of developing a solid foundation that can be continuously improved over the long term.56

A U.S. Power Company

The representative of a power company located in the United States, which requested to remain anonymous for the purposes of this case study, provided information on the objectives and performance measures used at the company for managing operational performance. The company uses four categories of operational performance measures that are typically tracked using a rolling 12-month average:

  1. Safety
  2. Reliability
  3. Customer Satisfaction
  4. Process Improvement

The performance goals are developed according to tiers in the organization. Goals at tier 0, the top level, address the highest level organizational objectives and do not necessarily apply to all departments. A hierarchy of tier 1, tier 2, and tier 3 goals address the objectives in increasing specificity. There are numerous specific tier 3 goals that are managed at the working group level. The company measures reliability primarily through non-storm management indices, measures that do not account for problems encountered during storms. The main index used is the System Average Interruption Duration Index (SAIDI). This is a product of the number of customers with outages and the average duration of outages. The company has an initiative underway to identify customers with frequent outages (5+ per year) and improve their service.

The company collects reliability data on an hourly basis and compiles the data daily. Outage information is collected from call centers and, increasingly, from the grid itself.

The company assesses customer satisfaction through quarterly phone interviews of residential customers. Management sets a specific percentage of customer satisfaction as a goal. The company arrived at this target through benchmarking other power companies' customer satisfaction results, arriving at typical industry number, and adding to it to attempt to out-perform the industry. The company only recently began developing its process improvement objectives.

The company's performance measures were originally developed by benchmarking and analysis of best practices of comparable organizations. Identifying comparable organizations was difficult. For example, some have more underground assets or more network interconnects, making them less prone to outages. The performance measures were developed from the top down. The tier 0 goals were determined by defining the highest level organizational objectives. Tier 1 goals were developed to expand on the tier 0 goals. Tier 2 goals were developed to support the tier 1 goals, and so on.

Company management communicates its performance measures to staff by posting performance information on the company website and through bulletin boards. Operations managers hold monthly meetings to coordinate their activities and each working group has milestones and tracks its progress against them. Typically the top-level goals are simply reported as successes or failures and most performance measures are tracked publicly.

The power company representative reported that the company had benefitted from the performance measurement approach. Despite staff reductions over the last few years, the company has remained above average in national rankings. He also stated that performance measurement has elevated the importance of customer satisfaction.



42 Labovitz, G., Y.S. Chang, and V. Rosansky. Making Quality Work: A Leadership Guide for the Results-Driven Manager, John Wiley and Sons, 1994.

43 Morris, D.D. and R.J. Baker, "Measuring what matters: [want to know how successful your firm is? Take the customer's point of view]," August, 2003. Available at: http://findarticles.com/p/articles/mi_m0ICC/is_2_72/ai_107755417, last accessed December 6, 2009.

44 National Institute of Standards and Technology, "Malcolm Baldrige National Quality Award 1990 Winner Federal Express Corporation," October 17, 2002, http://www.quality.nist.gov/FederalExpress_90.htm (February 25, 2009).

45 Ibid.

46 Howell, M.T. Actionable Performance Measurement: A Key to Success, American Society for Quality, 2006.

47 Morris and Baker (2003).

48 Forbes.com, "FedEx Named Among FORTUNE Magazine's 2010 'Best Companies to Work For,'" January 21, 2010. Available at: http://www.forbes.com/feeds/businesswire/2010/01/21/businesswire134307423.html (accessed February 15, 2010).

49 National Institute of Standards and Technology, 2002.

50 Moon, P. and L. Fitzgerald, "Delivering the goods at TNT: The role of the performance measurement system," Management Accounting Research, Vol. 7, 1996, pp. 431-457.

51 Telephone Interview with John L. Benda, General Manager of Maintenance & Traffic, Illinois Tollway. March 2009.

52 Austin Energy, "Company Profile." Available at: http://www.austinenergy.com/About%20Us/Company%20Profile/index.htm, last accessed December 31, 2009.

53 Austin Energy, Strategic Plan Update, 2008. Available at: http://www.austinenergy.com/About%20Us/Newsroom/Strategic%20Plan/strategicPlanningUpdate_2008.pdf, last accessed December 31, 2009.

54 Austin Energy, Strategic Plan Update, 2008. Available at: http://www.austinenergy.com/About%20Us/Newsroom/Strategic%20Plan/strategicPlanningUpdate_2008.pdf, last accessed December 31, 2009.

55 Telephone Interview with Mercedes Sanchez, Austin Energy. December 3, 2009.

56 Telephone Interview with Mercedes Sanchez, Austin Energy. March 2009.


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