Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
A Multidimensional Model of Management Control
In The Italian Public Utilities
Prof. R. Maglio, Dr. F. Agliata, Dr. M.R. Petraglia and Dr. D. Tuccillo
1. Introduction
The present work aims to conduct a critical analysis of control systems and tools of
performance assessment in local public services companies, with particular reference to the
public transport sector.
The interest in this issue arises for various reasons, from the growing economic significance
of the sector on a national level, measurable in terms of production value and number of
operators involved, to the spread of outsourcing policies, liberalization and privatization and
use the logic of standard cost to establish the level of funding.
In our country historically, the local public administration has at the same time the function to
plan the supply, manage the service – usually through an external entity, a private company
– and to regulate the coverage of the costs not covered by the revenues. The concurrent
pursuit of these tasks on behalf of public bodies has so far prevented the development of
industrial organization of the field of public utilities, the containment of production costs and
the achievement of satisfactory qualitative levels of service.
In such perspective, this survey aims to focus on the definition of characteristics and factors
of the competitiveness of public utilities and the study of management control in view of value
creation. The possible changes in the use of new tools for management control will be
analyzed and, in the light of recent regulatory changes regarding fiscal federalism, a new
strategic connotation of standard cost will be shown; with a particular reference to the latter, it
is conceivable a development of standard cost to assess in perspective of performance
targets to be implemented in budgeting operations to benchmark for the funding of the
essential service levels. In the field of public utilities, until a few years ago, the concept of
control was intended only in a "bureaucratic" sense, as the capacity to fulfill the formal
obligations linked to the strong regulatory context, neglecting aspects, become fundamental
today, such as economy, management efficiency and effectiveness.
The urgency for the improvement of performances leads to support the most popular tools of
management with a multidimensional model of control combining the specificity of the
companies considered by expanding the scope even towards strategic variables, not
necessarily quantitative.
The approach used is deductive and it ends with the presentation of the possible implications
of the use of standard cost and the presentation of an application hypothesis of a BSC for
local public transport.
__________________________________________________________________
Roberto Maglio, University Of Naples, Naples , Italy. Emal: Maglio@Unina.It
Francesco Agliata, Second University Of Naples, Italy. Email: F.Agliata@Unina.It
Maria Rosaria Petraglia, University Of Naples, Naples, Italy. Email: M.Rosariapetraglia@Hotmail.It
Danilo Tuccillo, Second University Of Naples, Naples, Italy. Email: Danilo.Tuccillo@Unina2.It
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
2. Distinctive Characteristics of Public Utilities from Business Perspective
The concept of public utility refers to the output of business activity. The term utilities refers to
all the companies involved in the management and provision of public services for a certain
community.
According to Art. 112 TUEL local public services are those dealing with "the production of
goods and activities designed to achieve social purposes and promote the economic and
social development of local communities1"
Studies in business management gave evidence that the key feature of public utilities
companies is represented by the output of the production process regardless of the nature of
the economic entity, balance of governance within the company, profit-making or not.
Therefore, the term public utilities refers to different types of companies using different forms
of management and control.2
Such companies represent a new paradigm for public sector companies, founded on
administrative decentralization and the introduction of competitive market logic in the supply
of public services in order to regain effectiveness and efficiency in public action, and for this
reason, it can be said that the increased scientific interest in corporate management of public
services is progressing parallel to the theoretical development of New Public Management.3
The absence of a precise definition of the concept of public utilities on behalf of the national
legislation left a great deal of attention for the doctrinal interpretation on the issue. In this
regard, it is possible to identify two main approaches:
• the first, subjectivist, that would categorize service as public in relation to any legal
entity that assumes the responsibility of provision. In this way, only the services
provided by the PA would be considered public;
• the second, objectivist, whereby it is believed that the public qualification of a service
needs to descend from legal protection and from the granted right to use or access to
the service.4
For the purpose of this study, it will be taken into consideration the objectivist approach for
the cataloguing of public services and, therefore, a company may be classified as public
utility only if manager of the output as previously assumed.
Consequently, next to the companies operating under market conditions both in the supply of
the inputs and in the provision of the outputs, there are companies aimed at satisfying the
needs of more or less identified social groups.
The production process, however, has common features and what follows, then, will be
referred to public utilities without further specification on its public or private nature.5
1
It was observed that the statutory definition of local public services is extremely fluid and flexible (Ricci 2006: pp. 142 et
seq.).
2
For a further close examination on the topic, make reference to Ricci 2009; Mulazzani Pozzoli-2005; Fici 2004; Padovani
2004;Persiani 2003.
3
On this topic, see the traditional studies: Hood 1991, Barzelay 1992; Osborne-Gaebler 1992; Mussari 1994; PollittBouckaert 2000; Meneguzzo 2001; Hinna 2002; Anselmi 2003; Borgonovi 2005.
4
On the difference between subjective and objective approaches, see: Dugato 2001: pp. 55 et seq.; Pototschnig, 1964: pp.
57 et seq., Villata 2006: pp. 11 et seq.
5
Such nature, moreover, should be identified on the basis of parameters which should be clarified and according to which
the conclusions might be different. For example, in the case of a Joint-Stock Company wholly owned by public bodies, in
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
The production process can be traced back, in brief, to three phases: acquisition of
production factors, processing and provision of product or service. These stages are not
always easy to distinguish, since in the economic field some may occur together, as in
service companies where processing and provision, due to the impossibility to "store"
services, are concurrent in fact. In any case, the output of the production process must have
a higher economic value, or at least equal, to that of the inputs used in the process; when
that does not occur, it does not mean that a part of the utility of resources employed in the
production process has been lost and that there is not value creation but wealth destruction.
The value created by these companies, because of the role of public interest entrusted to
them, is characterized by the presence of a large social component. The social character is
identified in the fact that the service should be equally available to all the members of the
community and set up with standardized characteristics within it. Consequently, such
companies must create a real socio-economic value through production processes
reconciling the need to optimize the use of available resources (mainly public) with that of
ensuring
a
broad
and
generalized
access
to
the
services
provided 6.
To them is assigned the task of ensuring the provision of adequate quality to all those who
require it. This constraint has a direct and immediate impact on the dimensioning of
production capacity and production methods adopted, both these factors introduce a high
degree of uncertainty on the performance of the production process.
The restriction imposed on the sizing of production capacity, which, at least in theory, should
be always able to respond to peak demand, requires a continuous research of better
conditions of use of this capacity; indeed, it is necessary to optimize the significant
investments made - that in most cases have been financed with public resources - through
the adoption of appropriate policies of production management.
In the companies considered, therefore, the ability to create value must be conceived as the
ability to provide a certain predefined level of services by implementing an efficient
production process; in other words, if the objective of maximizing revenues can not be
pursued, the ability to create value must be proven through the effective and efficient use of
resources according to the assigned objectives.
Furthermore, the project of the production process of a public service company able to
generate value requires the knowledge and analysis of the elements founding it. Each
service company is configured as a system, which includes processes of production (service
operations) - where the factors of production are processed or re-processed so as to create
the constituent elements of the service and service delivery where, instead, it takes place
the assembly of such elements and the 'product' is transferred to the economy of the
customer. Certain components of the system are visible to the customer; others remain
hidden, enclosed in a production process, sometimes referred to as technical core, of which
the customer may even ignore its existence.
reference to the owner, it would be qualified a public company; on the contrary, if it is considered the legal form with
which the 'activity is engaged, then the nature of the company would be qualified as a private.
6
For the transport service, for example, the coverage of a certain route should be ensured even in the presence of a low
number of users, because the right to mobility must be ensured even if it is below the break-even point. In terms of
efficiency, this extension would be justified by the presence of a specific interest of public decision that these services are
provided under certain levels and conditions regardless of the opportunity to improve the technical and allocative efficiency
in their production. In general, the connotation of merit good could lead to a public preference for provision and use of
service greater than that of solvent demand from the market is due to the fact that the social objective may diverge from
that of maximizing profits and also because the preferences of the public may differ from those of private individuals.
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
In the production system it is detectable, thus, a visible and an invisible part. The invisible
part of the customer is the system of internal organization, which includes the company's
traditional functions - finance, marketing, human resources management, etc.- but it is also
where they are carried out all the productive activities preparatory or subsequent to the real
provision of the service, which, instead, occurs in the visible part of the company.
A distinctive feature of public utility companies, in order to chain production, concerns the
inability for them to "self-determine" the cost of the service provided. The motivation behind
this limitation lies in the peculiar characteristics of the output produced since it is provided a
service of universal type, that is equally designed to the whole community and in the fact that
the proceeds of sale of such services are defined on the basis of contract terms signed
between the PA and the managing entity (through the so-called service contract).
3. Management and Control Critical Issues for Public Utilities
The system of public services, in general, is regulated by a government authority responsible
for planning and funding of services within the territorial jurisdiction, while the management of
the service is performed by an operator.
In the past, the sector has not been particularly considered by the scholars of management
control, being rather more frequently the subject of interest on behalf of economists and
jurists, involved in analyzing the best forms of management and the related regulation
issues7.
Public utilities structurally denote significant economic and financial stability problems, the
origins of this imbalance must be sought in the contractual terms of the service provision.
Indeed, as previously stated, the utility companies stipulate a service 8 contract with the PA
regulating: - the provision of services; - the fare system; - investments and monitoring.
The fare system determines the criteria through which to calculate the revenues for the
manager companies, through the determination of a so-called fare9. The determination of the
fare by the PA represents one of the main problems of the sector in question since: it is
essential to balance the economic and financial demands of the companies that need to
provide a quality service and meet standards of operating efficiency and the requirement to
ensure accessibility, even in economic terms, for the benefit of all the users. Where fares
were not able to remunerate the costs of production, the PA intervened by providing
operating grants to cover such deficit.
Despite some attempts of reform, the objective of achieving a concrete introduction of
competitive tools to access to market is yet far away: the use of tender procedures for the
assignment of the service was introduced as a rule, but also in the period in which it is not
been weakened by further legislative actions, it has assumed almost in every application only
7
There are, however, significant (and recent) studies conducted by business economists. See, for example, GiuntaMulazzani 2010; Landriani 2010; Mussari-Grossi 2005; Mulazzani-Pozzoli 2005; Padovani 2004; and Liberatore 2001.
8
The service contract is a tool available to the public authority entrusted to regulate relations with the companies managing
(produce and provide) the service. The contract, normally attached to the tender, includes the levels of the services that the
trustee service management company the has to ensure and control tools of the compliance with the qualitative and
quantitative levels of performance expected. The agreement regulates the mutual commitments and obligations (the
activities related to the provision of services, the fare system, investments, monitoring) between the trustee authority and
manager, as well as the objectives of improving standards of service and the level of user satisfaction.
9
The fare is the price of a good or a service established by an authority, a body or a public company.
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
a formal nature because of the coincidence between service and owner of the company that
has historically done it. In fact, it is unclear why a local authority should be available, to
achieve a greater efficiency and save on public transfers, to assign the service to a company
different from that of its ownership, considering that thank to this it may acquire, for example,
important electoral support among employees. The outcome of the tenders made has been,
with very few exceptions and not surprisingly, to entrust again the service on the outgoing
managers or to associations of companies in which the outgoing managers had a dominant
role.
In this perspective, it is important for research to be directed toward the defining of
characteristics and factors of competitiveness of these companies in order to understand the
organizational implications of management control and facilitate the effective pursuit of the
executive and operational objectives.
In light of the recent enactment of Act 42/2009 for the implementation of art.119 of our
Constitution on Fiscal Federalism, the standard cost plays a strategic role in the life of public
utilities, as main benchmark for the regulation of financial/contributory relationships, and not
only, between the Contracting Authority and the service management company.
According to the traditional view of planning and management control of companies, the
standard cost was connected to budgeting and it represented a landmark in the operations of
monitoring based on a logic of feedback, through the tool of variances, allowing to assess the
ability of the company to carry out effectively its own strategic policies (Covino 2009).
On the basis of the new guidelines, on the contrary, the standard cost seems to be the
starting point in defining the action plans of public utilities. In fact, the determination of the
standard cost would affect the calculation of fares and from it, moreover, it would depend the
amount of contributions paid by the PA.
The expression standard costs usually refer to pre-determined costs, obtained by certain
levels of efficiency and price that a company, producing goods or services, wants to achieve
in the use of available resources and in relation to certain operating conditions.
Standard costs represent a benchmark to assess the performance of actual costs and to
provide information for possible reorganization processes. The process of defining standard
cost can not be separated, then, by the different operating conditions in which companies
work and by the performance characterizing the respective activity.
In a sector characterized by a regime of "imperfect competition" (natural monopoly), the
public body introduce a regulation using the standard cost to remedy the lack of competition.
As regards "natural monopoly", in fact, reference is made to "competition in the market "
where prices tend to be oriented to the costs related to an average efficient management.
Conversely, it is in a situation of " competition for the market" when fares are fixed and so
are the service requirements for compensation to be determined based on an average
efficient operator.
The use of the standard cost is hence motivated by the need to compensate for the absence
of competition, in or for the market, thus facilitating the identification of a standard for the
determination of a reasonable cost, meant as the cost that an operator average efficient
should be implemented in a competitive environment.
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
It is, therefore, important to acquire meaningful data, relating to a wide population of
companies operating in the specific field of investigation that is sufficiently representative of
the specific operational situation at the national level.
As a result, benchmarking analysis become motivating to meet the growing need of
management to give a greater to the process of planning and strategic control and face the
competitive comparison. In fact, the benchmarking model in the sense of "control for
comparison" allows you to indirectly measure the intensity of the company's performance by
comparing them with those of the best and most competitive companies - the so-called bestin-class - and makes a significant contribution to management in terms of both strategic
planning and programming of the control (Bocchino 1995).
4. Some Trends in the Management of LPT Companies
Assuming that the identification of any public utility company can be carried out through the
classification of the output to be achieved, it can be noted that the scope of the public
transport service is to guarantee the citizens' essential right to mobility.
Over time we have gone from conceiving the local public transport service from a basic service
– created for the purpose of mobility within the territory, sometimes relegated to a niche
phenomenon aimed exclusively at the poorest or less affluent population groups (AsstraHermes 2008)– to a balanced development and anti-congestion service of local traffic (such as
Piacenza-Abrate 2001).
In light of the above statement, the social function of the service provided can be identified
even for the local public transport (LPT) sector, as well as its universal characteristic. It has to
be highlighted the importance of a correct programming of the territorial plans (2006
Capriello)10 of spreading of public transport as well as correlating the financial resources
required to make the infrastructural investments, thus providing a service suited to the needs
and proportionate the production capacity11.
Another problem specific for the LPT sector is the ownership of the assets provided by the
Public Administration to the managing companies. This was addressed by implementing a
separation between the owners of the property and the management. This possibility derives
mainly from the purpose of resolving any difficulties arising from the creation of natural
monopoly situations, to which a series of shortage of increasing objectives to be achieved
can be traced back, especially in terms of cost of labour, strongly affected by high rates of
unionization.12.
10
The combination of the above mentioned social component and the identification of the territory directly influences the
functional devolution, in politics and the administrative sector, from the central level to the regional one, in accordance
with the principle of subsidiarity.
11
It is important to make the following observation on this issue, according to which the service originates only where
production capacity is used by the citizen-user and up to this moment we are in the presence of a possible and available
potential as a result of sustaining fixed sunk costs, with a significant discrepancy, typically appearing between committed
costs and investment costs.
12
Provisions of Art. 4(234) of Law No 350/2003 specifically limits the scope of investments by operators managing public
utility services, providing that: "the ownership of the network, plants and other assets must be maintained by local bodies,
which (...) may assign such property to a public corporation". Pavan-Reginato assert on the topic that: "Since the greater
concentration of fixed costs, otherwise unrecoverable, lies in networks, assigning the ownership just to one part means
allowing more operators to be in the supply-side (…) thus guaranteeing (…) the competition in the market with its
advantages "(Pavan-Reginato 2009: p. 87-88).
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
With reference to this last aspect it should be specified as in LPT a broad use of human
factor is made and in the comparison with the other sectors of public utilities a relevant
percentage of labour costs emerges; a fact because of which they are considered the
main and crucial variable on which to act 13.
The main purpose of LPT companies lies in the will to increase the level of revenue through
increasing the qualitative threshold of the service supplied, so as to increase the number of
users of the public service.
On the other hand, the main objective for the P.A. would be to develop the LPT, to achieve a
substantial improvement in the quality of life of the end-users and as a consequence of the
entire territorial community14.
To accommodate such different objectives, the organization and the entire cost structure
should be rationalized implementing adequate self-financing policies and investing part of the
revenue towards the growth and improvement of the service provided.
To this end, different strategic intervention solutions directly impacting LPT company
management policies have been announced, such as the choice of fare integration15.
The LPT company is traditionally characterized by a strong imbalance between operating
revenue and costs16. Hence, the importance of an information tool, such as analytic
accounting, of re-elaboration and re-classification of revenues/costs by destination rather
than by nature, which in addition to responding to the information needs typical of private
companies, intended to support an internal operating control system, becomes a cognitive
tool also for the public corporation, in favour of the controlling subject, in view of the so-called
analogous control operations17.
Basically, being an essential service with a strong social content –traceable to the community
socio-economic development role through lower energy consumption and reduction of the
13
It would be rather necessary to appreciate the link/dependency existing among productivity/corporate competitiveness in
relation to labour costs, expanding the overall corporate vision of potential compared to different reference stakeholders
(such as Fraquelli- Piacenza-Abrate 2001: p. 51et seq.).
14
On the topic of likely crucial issues on the direct government intervention in the management of services and the choice of
monopoly, see: Recktenwald 1985.
15
With the above mentioned European traffic revenue regulation policy, an immediate and main effect of a reductio ad
unum of all public transport supplies is produced; with a similar layout, the user acquires the availability through a single
ticket to use in the entire network according to his/her own needs. At any rate, a series of critical elements following
specific substantial implementation are to be noted, such as: the selection of an appropriate methodology for allocation of
revenues deriving from fare; the fear of partial or total loss– by companies involved in the integration process, sometimes
through establishment of a special consortium – of identity and image in the territory and in relation to its users; the
concern of a decrease of the amount of turnover caused by favourable price to customers; the pre-selection of an
appropriate operating as well as managerial structure of rate integration. For a critical observation on the quantitative
outcome of the specific experience of Unicocampania, see: Sannino 2006: p. 24et seq.
16
According to the economical aspect, local public transport companies are experiencing an overall a period of general
crisis. A first empirical proof can be revealed in the peculiar circumstance of the Seventies during which the revenue
covered 70% of the costs; currently, revenue covers approximately 35% of the costs, even if the provision has grown in
terms of lines and served kilometres, but the actual users have constantly decreased. On this topic see: Tuccillo-PirozziAgliata-Maglio, 2010: p. 23et seq.
17
With specific reference to cost analysis, it can be said the main scopes are the following: monitoring of particularly
relevant items, such as the cost of personnel; request for contributions to cover losses divided depending on the type of
service; analysis of convenience between production and outsourcing; identification of managerial accountability
parameters; etc. For a more detailed reading on the topic, please see: Liberatore 2001: p. 145et seq.
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
causes of environmental pollution18 – the main cause of the economic imbalance can be
found in the supply side, generally at a political price and the application of non-remunerating
amounts, that is, insufficient to cover operating costs incurred to ensure the service itself. On
the other hand, the inability to generate revenue sufficient to remunerate used production
factors can be noticed and the inadequacy/incompatibility of the cost structure compared to
the revenue are the two main causes of operating loss19.
These losses were compensated through providing non-repayable public funding or even
through special assistance with an inevitable result of removing responsibility from the
managing companies with regards to the achievable economic results.
It is, however, interesting to recognize the existence of other perspectives of investigation
and intervention with significant potential impact on LPT companies performance levels.
For instance, the adoption of horizontally integrated strategies regarding service,
implemented by means of creating intermodal connections, or using other services
considered collateral with the final scope to increase the amount of turnover through
increasing the variety of the supply. This suggests the search for new markets–that go
beyond the local area, trying to make the best use of the complementarity through using
resources or that refer to economies of scope/scale –i.e. introduction of new categories
of services with obtaining synergies 20.
Using aggregate operations, through the use of alliances and agreements, seems aimed at
reaching positions of competitive advantage during the participation at tenders, using a
variety of formulas such as that of the temporary Association between enterprises (ATI) or of
the Consortium. In other terms, the objective is to equip with adequate requisites in order
to better exploit the advantages which derive from the increased contractual power
towards the P.A. following the drop in importance of existing competitors on the market.
It must be also add the enlargement of competences that can be gained as a result of
the combination of distinct experiences from the different actors involved, raising entry
barriers to new competitors and the substantial attempt to neutralise derivable results
from the reformation process 21.
At the same time, as already stated, there is a tendency to increase the range of
ancillary services to the main transport service (such as: rental; maintenance; tourist
services; school services; services for the disabled; etc.) 22.
18
In fact, the increase of totalrevenues, of the collective welfare and, therefore, of the rate of private motorization is at the
base of the change of assignable purposes to local public transportation. (Mele-Botti-Benedetto 2008: p. 9-10).
19
After all, to entrust one operator to manage the service during the whole period of the concession, means that it will be
the only provider present on the market, covered from the risk that the revenue quotas are removed from it.
20
The distinct position of certain important doctrine studies is interesting, where the concept of a diversification strategy to
implement anti-competitive policies, in the sense of cross-subsidizing different provided services.
21
"If the growth of the considered dimensions of the effects on the experience curve linked to the action of learning
economies, an advantage in terms of cost is achieved, then the consequence is that dimensional growth becomes an
important strategic weapon even in the local public transport sector "(Mangia 2005: p. 78).
22
As proof of these considerations, the results gathered and analysed by the Osservatorio economico sui servizi pubblici
locali (Economic Observatory on local public services) are presented, showing the production values of 171 mono-service
companies operating in local public transport on a national level, composed as follows: revenue from sales (rates) with an
incidence equal to 69.9% of income; public contribution equal to 10.9% and other revenue equal to 19.2%. (MulazzaniPozzoli 2005: p. 12.
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
A further tendency of the LPT company is to improve the quality both of the back and front
office. In that regard, consider the importance of the service contract, in the relation between
the company and P.A., to determine the default quality standard, to which a whole series of
incentive or disincentive systems can be reconnected, i.e. the role of the Service Charter
(Bortolotti-Maino 2003)23, created as a regulatory/information mechanism about the
relationship between the public utilities in question and the user community of the public
transport service.
5. The Standard Cost in the LPT: First Remarks
In the reform project known as federalism, the review funding mechanisms that
manage certain companies public services including the local public transport sector is
scheduled; the financing of these will no longer be based on historical expenditure but
on the calculation of special standard costs for the delivered service 24.
The goal is to empower regional and local administrations, aimed at the economic
and financial balance.
In general terms the accountability includes:
a) as regard to costs, in terms of efficiency and functionality of service delivery
choices, such as the possibility of obtaining lower costs to the standard costs;
b) as regard to revenue, the ability to balance transfers to the standard costs with
taxes and/or fees charged to users for the coverage of any difference between actual
costs and standard costs.
To this end, there are many interpretative uncertainties in the initial phase of the
reform and doubts as to the effectiveness of the reform itself.
For example, it is acknowledged that public companies’ decision-making logic does
not follow purely economic motivations but relies mainly on political considerations, as
well as social choices that are potentially inconsistent, at least in the short term, with the
parameters of efficiency25. In addition to this a political will, it is necessary to modify the
existing balance in the relationships among local bodies, subsidiaries which manage
local public service and the local community.
With regards to the methods of standard cost determination, and specifically, the choice to
refer to ideal or "normal" efficiency conditions, it must be said that LPT companies operate in
23
By way of example, the LPT company in the municipality of Rieti states: "The Service Charter is a document that
identifies the principles, rules and quality standards of services in order to protect the needs of the citizens-users in
compliance with the principles of effectiveness, efficiency and cost-effectiveness. The Charter represents the company's
commitment towards customers and the users of the services. With this document, the company commits to ensure the
provision of a service whose quality meets the standards laid down in the Charter itself." (Azienda Servizi Municipati Rieti
Spa, Charter of Services on the local public transport, April 2011: p.1).
24
It should be noted that the concept of (standard) cost is different from the expense. The first expresses the valuation of
productive factors used in a specific period (e.g. one year) to perform certain functions and for the production of specific
services. The second concept expresses the valuation of factors acquired during a specific period (e.g. one year) or of
factors for which the body has purchase commitments for the same period. Naturally the cost can be seen through financialasset accounting, while the expense data can be recorded through a financial accounting system (which is the one typically
used by central and local public administrations).
25
LPT companies, especially those in the south, have experienced occupational growth policies, which in the calculation of
standard costs could imply significant initial difficulties especially in those areas where the objective was to sustain
occupational levels.
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
very different territorial conditions, not only because of geography or population, but
especially for socio-economic reasons.
In that sense, the key aspect is the identification of a sample on which the reference
performance is to be tracked, and then to determine costs which are to be considered
standard for all other regions.
Another relevant aspects concerns the cost elements which are "subsidized", either
because they are or not included in the standard cost base calculation and those on the other
hand which are borne by the local communities. Such evidence, this aspect has important
implications in terms of vertical accountability (in the relation between Central
Government and local authorities) and horizontal (in the relation between local
administration and local community).
As it is known, different cost elements compose the cost of a service:
- the production cost (or delivery), formed by special costs of production, i.e. direct ly
referable to the calculation. It expresses all production factors (staff, goods, services,
etc.) which are part of the production of the product/service 26;
-a portion of the common costs of the company (administration costs, overheads, etc.)
Production costs should also include a portion of covering the cost of capital.
Investments aimed at creating and maintaining functional structural framework
services (purchase of property and equipment, upgrading buildings, etc.) are, in fact,
mainly financed through long-term debt; the inclusion of interest on debt in the standard
costs highlights the intention that all or part of the cost of borrowing for investment is
supported by the general public, rather than from local taxation. In addition, the inclusion
of the cost of capital (also understood as the opportunity cost of equity capital) might
arouse greater interest by private enterprises in LPTs in the future.
Currently, the technique of direct costing per line is used in the LPT sector, concentrating
on the comparison between traffic revenue (net or gross of the service contract contributions)
and direct variable costs (maintenance, towing) to determine the gross contribution margin of
the line; direct fixed costs should be subtracted from this (drivers, workshop or cleaning staff,
warehouse depreciation), thus obtaining the semi-gross contribution margin per line. In
order to achieve operating income it is also necessary to subtract indirect fixed costs
(coordination staff, workshop costs, warehouse, etc.) which are not split over the
individual lines because of their non-flexibility 27.
The determination of the standard cost, presumably referring to a sample of other
companies representative of industry efficiency conditions, should be weighted
26
Depreciation should be considered among the direct production costs, whose inclusion should allow the bodies to obtain
financial resources to use for the substitution of technical fixed assets used for the provision of LPT services from the State
(and not from the local communities). Clearly, the inclusion of depreciation would make cost levels increasingly
discretional.
27
In line with the advanced direct costing concept, the contribution "gross" margin measures the capability of the line to
produce revenue sufficient to cover, at least the line's direct variable costs. If the gross margin is negative, then the result is
the incapability of the line to cover fixed costs generated in the short period, as for example those of salaries and
depreciation, whose amount does not depend on provision of service. In this last instance, the intensification of the service,
in terms of, for example, number of runs, this could cause a worsening of the general economic result of the company.
Otherwise, if the gross contribution margin is positive, it would express the line's capability to cover, in whole or in part,
the direct fixed costs. For further readings see Aristeia 2003.
Proceedings of European Business Research Conference
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according to the type of service provided (urban, extra-urban) means used (rail, tyre)
and some exogenous shocks to LPT companies such as traffic or even the risk of
vandalism (Canzonetti 2009).
According to the first point of view, urban and suburban transport should be
distinguished. The first, carried out within the boundaries of a municipality, is
characterized by the presence of a fairly circumscribed and dense network (i.e. with
stops at relatively small distances). Since the route is moderately short, passenger
vehicles are built in such a way as to leave more space for standing room favouring a
high load capacity. Fares are usually unique for the whole urban area and mostly
independent of the length of the line.
A suburban transport network operates on a larger and less dense area and must
respond to a demand focused in certain timeslots in which movement to and from the
main urban centre concentrates; the frequency is lower than the urban transport and the
supply of seats is increased depending on the length of routes and tariffs are
differentiated according to the length of the route 28. This distinction is also reflected on
the means of transport that includes: tram, bus, underground, cable rail way and trains.
In fact:
• trams and buses have a much lower capacity compared to underground trains;
• the commercial speed of underground trains is significantly higher than the average
of surface transport due to heavy traffic conditions.
The latter, together with the electricity supply, allows underground trains to have a
relatively lower operating cost per unit of output; on the other hand the construction,
maintenance or expansion of the underground network requires a financial commitment
much higher than a surface line.
With regard to over-ground transport, there are significant differences between road
transport, which guarantees greater flexibility in establishing baselines and in the use of
vehicles and rail transport, more related to the available infrastructure and therefore
characterized by a greater management rigidity.
In general, the supply made by the companies operating in the LPT sector appears in
part conditioned by exogenous factors (e.g. roads) in relation to the company's decision making sphere, or by public choices taken in the past (for example, the more or less
extensive facilities of underground lines).
With regard to the main supply measures, these are represented by vehicles-km,
which corresponds to the total number of km travelled in a year by all cars, and placeskm supplied, which are obtained by multiplying the cars-km for the average capacity of
the vehicles. Although the data on cars-km is widespread, it is not uniform among
companies, as it refers to units with different capabilities. On the other hand, places-km
supplied take into account the different carrying capacity of cars and, therefore, provide
28
Even the cost of fuel and traction is different between urban and suburban services; generally consumption for urban
services is greater for the frequency of stops and the speed set by the urban network (traffic lights, pedestrians and
congestion). On the contrary, suburban services are carried out on a network with a higher commercial speed and with
stops that are more distant, thus allowing lower consumption compared to the urban services. Furthermore, on a national
level, companies may have, within the same type of service (urban and suburban) different consumption, primarily due to
the different structure of the network (e.g. frequency of stops) and the different geo-morphological characteristic of the
network (e.g. mountainous areas or plains).
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
a higher degree of comparability between operators, provided that the capacity of the
cars is calculated with homogeneous criteria. It must be remembered that cars-km and
places-km are indicators that express the productive structure of the undertaking,
regardless of the degree of exploitation of the service 29
Additional items to consider in the cost structure of LPT firms are technicalenvironmental variables which are extremely varied and can significantly affect the size
and dynamics of costs; for example, think of traffic congestion. The commercial speed,
i.e. the ratio of cars-km and hours of service represents an important factor in determining
unit costs, which is what translates the cost per hour of exercise in cost-per-seat-kilometres
supplied. Traffic congestion, the size (and respect) of the lanes, the morphological and
urban characteristics of different municipalities affect the time required and the number
of vehicles needed for carrying out the service and therefore costs, particularly
regarding personnel shifts, fuel consumption and vehicle maintenance due to major
stress. In addition, often the use of means of public transport by the citizen is limited by
the perceived risk of crime, another factor that is not controllable, at least partially, by
the individual company.
Finally, it is important to highlight that the vision of using standard costs as an empowerment
factor of regional governments prevails, the analysis should expand to the method of calculating
costs, reaching to the dynamics of the proceeds (rates or taxes). In this sense, adopting net cost
type contracts would be remarkable ; with this type of contract, the handler receives an
agreed fee ex ante and equal to the difference between operating costs and estimated traffic
revenues. Thereby increasing the risk to be borne by the operator, while the Administration
knows a priori the net burden of provided service. This type of contract leads the service
operator not only to cut costs but also to increase traffic revenues, countering the
phenomenon of tax evasion30.
6. A Model of Balanced Scorecard in LPT
The Balanced Scorecard is a more advanced management control tool than traditional
systems of enterprise monitoring, whereby they are restricted to use exclusively economicfinancial parameters.
It starts from the assumption that company performance assessment methods through
economic and financial indicators have become obsolete and they should be supplemented
by the use of more significant future performance drivers; they usually appear as "nonmonetary indicators" expressed in physical units (not classifiable uniquely), and constitute
target-parameters for "strategic management", intended in view of a "conversion of business
strategy into actions”.
29
The preference for the supply-oriented indicators, more than the demand-oriented, arises also in view of the normally
wasted production capacity (sunk cost) of such companies.
30
In literature at least three types of contracts are identified:
-Management contract, where both risks are borne by the principal entity. In fact, the operator receives a remuneration
which is generally independent from the result achieved;
- Gross cost contract, on the basis of which the industrial risk is borne by the operator, while the commercial is borne
by the principal entity. the operator receives a compensation based on the ex ante agreed costs, and is paid for the
production of a pre-established amount of service. This contract stimulates the company only from the cost aspect and not
from the revenue one, as the latter are managed and collected solely by the entity;
-the already mentioned Net cost contract model.
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
For measuring the degree of achievement of the strategic objectives, defined according to
the typical four perspectives (economic-financial; the customer; internal processes; learning
and growth), the BSC uses a set of indicators divided into logical categories: the lead
indicators (diagnostic indicators – cause) and the lag indicators(indicators of impact – effect).
The first match the performance drivers; the latter, rather, detect if the actions put in place by
management have actually met the needs/expectations of the community.
A crucial aspect of implementing a BSC system lies in the choice of variables to be taken
to reference; otherwise, a standard approach valid for every type of production activities
cannot be implemented.
The main problem that arises, however, when an effort is made to identify an application
hypothesis of BSC in the specific context of local public transport, is connected to the
particular nature of economic entities, on the one hand, the local public transport companies
have elements typical of public companies, for example the ownership of capital and, on the
other hand, those of for profit, given the legal connotation of civil law31. Hence, the two
“souls” of the public service companies must be considered and combine the public and
private needs (Kloot-Martin 2000: p. 231 et seq.).
In this regard, it is necessary to build a strategic map – intended as the architecture
required to make explicit the assumptions made by the company in accordance with the
corporate strategy according to the BSC perspectives32-and only then define the
multidimensional indicators integrated reporting.
Through the identification of the elements of the strategic relating to the four perspectives
of Kaplan and Norton, a crucial element emerged, based on the fact that each action set up
by LPT involves directly and indirectly the whole community and not just the service users.
This means that the strategy set up by the company is not aimed at achieving economic
results exclusively but also social results. In other words, to build the strategic map (Brusa
2007: (Eds.) Liss, New York, p. 48-52) according to cause-and-effect relationships, the
strategic goal remains unchanged but every aspect of community is influenced. This strategic
vision implies that everything the company does, produces results in respect of the
community and the four perspectives do not seem to be sufficient to monitor this. It is
necessary to insert an additional perspective, that of the "community"33, having regard to the
specificity already described regarding the type of service provided and to the purposes of
the operating company, in turn directed at the principal public company.
The perspective of the Community arises from the vision of the LPT company as a subject
dispensing a service aimed to meet the need of the society that considerably affects citizens,
quality of life and it also has a financial impact relating to the desire to reduce the cost of
service, ensuring quality standards, through the promotion of improvement of processes and
the reduction of evasion on behalf of users. In addition to this, there is the desire to increase
the land areas covered by transport service allowing the provision of service to multiple
users, and to increase the frequency of the service and its regularity. These issues affect the
31
This is even more evident if we remember that the Local bodies' financial statements are written following the financial
competence principle, conversely, the public transport company, as a joint-stock company must, on the other hand, follow a
financial-asset type accounting (Marino 2007: pp. 25 et seq.).
32
In other words, the strategic map intends to describe the logical chain used in the cause-effect relationships among the
different indicators chosen of the different perspectives
33
Similarly, Sibilio Parri proposes to add a further perspective to the traditional ones, defined "institutional interests"
(Sibilio Parri 2010: p.310 et seq.).
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
reliability of the local public transport, thereby generating an improvement in the quality of life
of users through both the reduction in the fleet of cars in circulation and through the
introduction of non-polluting vehicles, from an environmental and acoustic point of view.
In the financial perspective definition it is fundamental to consider the main aspects of
performance assessment (turnover, profitability, return on investment, etc.) but, more
specifically, it is necessary to monitor the ability of the company's autonomy. It is good to
keep in mind that these companies place their production on the basis of a service contract
agreed with the P.A.; being this the main "customer" of the company, it is necessary to
monitor the possible degree of financial dependence. It will not be enough to control this
aspect but support policies and promotion of the diversification of risk of loss of autonomy of
the company itself must be implemented.
Moreover, the fact that the companies observed practice political prices and that the
recognition of government grants is associated with their ability to pursue default results in
compliance with the conditions laid down in the service contract must be taken into account.
But in any case, the management objective of guaranteeing company survival through pursuit
of sustainable economic and financial balance still remains a priority.
The user’s perspective instead is based on indicators which can be divided into two
specific areas:
 core measures: in order to measure the company's ability to acquire and retain
profitable customers;
 performance measures: in order to measure the company's ability to meet customer
expectations (Fadda 2004: (Eds.) Liss, New York, p. 68 et seq.)
In this respect it can be observed that in private for profit companies the objective of
ensuring adequate dividends to shareholders appropriate to the level of risk when it was
decided to participate in the business idea takes precedence. Conversely, in public
companies, it can be said that the economic subject (the owners) coincides with the citizens
who, having no profit, will be satisfied only if the quality of the service received is in line with
their expectations, even taking into account the fare paid (cost of the ticket). From this comes
the minor importance of core measures; in fact, the priority lies in the satisfaction of users'
expectations for which LPT service was established.
To this the incidence of the political component in management decisions must be added;
indeed, it is not always possible to find a logical and economic consistency in actions put in
place by LPT companies (2006: Minissale (Eds.) Liss, New York, p. 116 et seq.; Niven 2003:
(Eds.) Liss, New York, p. 25 et seq.).
For what concerns the estimation of quality of the output of the LPT, it must be said that in
services it is often difficult to identify and measure user needs and standard performance,
mainly because it is defined by the user and each user is different from another (EspositoGentili-Zini 2000: (Eds.) Liss, New York, p. 39 et seq.). In any case, the following reference to
indicators measuring the degree of satisfaction of users can be assumed: passenger
satisfaction indices (for quality of service, regularity of service, frequency of service,
availability information, etc.) and indices of quality level measurement perceived by the
passenger and the degree of impact on the level of satisfaction of ancillary services or
personalized services provided.
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
With reference to the internal processes perspective it is necessary to combine aspects of
a production company, aimed at improving the management feature (through the reduction of
costs and inefficiencies), with greater attention to improving the distribution of the service.
Progress resulting from cost containment or reduction of inefficiencies translates into an
effect on fees charged for the service and consequently generates positive effects on
accessibility in economic terms.
Peculiar items relating to the management of an LPT company concerns the programming
feature, the number and the reliability of the means employed, and maintenance activities.
Finally, for the innovation and learning perspective it is considered appropriate to highlight
the professional level of internal staff, using indicators that relate to the measurement of
professional knowledge, increase satisfaction, participation in workgroups and membership
projects promoted by the company. The growth point of view focuses on assessing the
quality of services provided, internal and external communication, innovation, technology and
development of networks with stakeholders targeting both economic and financial results that
achieve improvement for the Community (internal and external).
After the conclusion of this brief summary on global issues/features of a BSC system
applicable to a local public transport company, there is the presentation of a proposal
possibly usable in companies with similar characteristics to those under examination. Below
there is the first strategic map built as described above. The example of the proposed BSC is
not exhaustive, each perspective and aspect analysed could have been developed to further
degree of detail, which for the purposes of research was not included.
User perspective
Internal processes
perspective
Innovation and
learning perspective
Increasing
income
Reducing costs
Increasing
safety
Increasing
satisfaction
Increasing
efficiency
Increasing staff
competencies
Reducing
waiting lists
Reducing
production time
Increasing
coordination
ability
COMMUNITY PERSPECTIVE
Financial
perspective
Proceedings of European Business Research Conference
Sheraton Roma, Rome, Italy, 5 - 6 September 2013, ISBN: 978-1-922069-29-0
INNOVATION AND LEARNING PERSPECTIVE
OBJECTIVES
1. DEVELOPING STRATEGIES TO
IMPROVE QUANTITY OF SERVICES
PROVIDED
CAUSE INDICATORS
1.1 New services provided to the users
2. DEVELOPMENT SYSTEMS OF
INTERNAL
AND
EXTERNALCOMMUNICATION WITH
USERS
3.TECHNOLOGICAL
INNOVATION
DEVELOPMENT
2.1 Construction of Database
internal and external Reports
□No. USERS USING NEW SERVICES
No. TOTAL USERS
and
3.1
Investment
in
advanced
technologies to enhance performance
of vehicles and improve quality of life
4. DEVELOPING NETWORKS AND
RELATIONSHIPS
WITH
STAKEHOLDERS
4.1 Projects in collaboration with other
organizations
5.
DEVELOPING
SKILLS
PROFESSIONAL TRAINING
5.1 Number of training courses and
work groups carried out
AND
6.
PROMOTING
INCENTIVE
SCHEMES FOR THE STAFF
EFFECT INDICATORS
1.1 Rate of usage of new services and satisfaction
2.1 Rate of circulation of information
□INFORMATION REQUESTED
INFORMATION PROVIDED
3.1 Investment Rate in R&S
□ INVESTMENTS IN R&S
TOTAL INVESTMENTS
4.1 Growth rate of these collaborations
□NoORGANIZATIONS WITH COLLABORATION
No OF ORGANIZATION. CONTACT
6.1 Number of oriented management
policies to improve the business
climate and the motivation of staff
□ No IMPLEMENTED PROJECTS
5.1 Degree of professional improvement and promotion of
work groups
□ EVALUATION TEST RESULTS
□No ACTIVE STAFF IN WORK GROUPS
TOTAL No STAFF MEMBERS
6.1 Employee satisfaction
□ EVALUATION USING ANONYMOUS QUESTIONNAIRES
TO EMPLOYEES
□ No PARTICIPATING TO INITIATIVE
TOTAL No STAFF MEMBERS
Proceedings of European Business Research Conference
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INTERNAL PROCESSES PERSPECTIVE
OBJECTIVES
1.IMPROVING
MAINTENANCE PROCESS
CAUSE INDICATORS
1.1 Number of revisions of the
planned vehicle fleet
EFFECT INDICATORS
1.1 Intensity Rate of scheduled maintenance(a.v.
and %)
□SCHEDULED MAINTENANCE INTERVENTIONS
MAINTENANCE INTERVENTIONS ACHIEVED
1.2 Number
failures
2.
IMPROVING
RELIABILITY
FLEET
of
subsequent
2.1 Staff Rate employed in
maintenance
1.2 Intensity rate fall maintenance(a.v. and %)
□MAINTENANCE INTERVENTION ACHIEVED
MAINT. INTER. INCLUDED IN DATA SHEET
2.1 Number of faults
□NoMAINTENANCE WORKERS
VEHICLE FLEET
3. IMPROVING PROCESS OF
BUILDING
THE
OPERATIONAL
PROGRAMME
3.1 Service reliability rate
4. OPTIMIZING THE NUMBER
OF FLEET VEHICLES
4.1 Average vehicles used per
day
3.1 Number of runs not carried out for lack of
drivers
□ DELIVERED VEHICLE SHIFTS
DELIVERED VEHICLE SHIFTS
4.1 Fleet usage rate
□
5.
MONITORING
TRAVELLED
KM
6.
EFFICIENCY OF THE
PROCESS, IN THE STRICT
SENSE
MONTHLY PEAK OF VEHICLE DEMAND
No. FLEET AT THE END OF THE MONTH
5.1 Number of "extra" runs due
to breakdowns
5.1 Programming Rate km
□ KM PLANNED
ACTUAL KM
5.2 Km variation
□ ACTUAL KM - - PLANNED KM
6.1 Effective Standards with
private and public benchmarks
5.2 Reducing lost km
6.1 Cost coverage rate
□TOTAL
COSTS
OR
COSTS
INFRASTRUCTURE
TRAVELLER SEATS OR KM
□TOTAL COSTS
No TRAVELLERS
OF
Proceedings of European Business Research Conference
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USER’S PERSPECTIVE
OBJECTIVES
1.
INCREASING
USER
SATISFACTION to promote
opportunities for dialogue
with users to meet unmet
needs:
-quality of service (comfort,
staff, cleanliness, level of
information
for
users,
timeliness of information);
-frequency of the transport
service
CAUSE INDICATORS
1.1 Number of complaints by type
(or frequency of service quality
transport service)
EFFECT INDICATORS
1.1 – Satisfaction of end-users
Quality SERVICE SATISFACTION SURVEYS
THROUGH
QUESTIONNAIRES
AND
ONLINE SERVICES
Example (complaints):
□No COMPLAINTS
No TOTAL USERS:
□No COMPLAINTS REPORTED
No COMPLAINTS RECEIVED
□No COMPLAINTS RESOLVED
No COMPLAINTS RECEIVED
2.
INCREASING
LOYALTY LEVEL
USER
1.1.1 Number and frequency of
information on services provided
Analysis on the period number (e.g.
summer, Christmas time, strikes of the service
staff, etc.) and typology
2.1 Customer retention rate (a.v.
and %)
2.1 Level of customization services
□PERIOD-END
USERS–NEW
USERS
USERS START PERIOD
OBJECTIVES
CAUSE INDICATORS
EFFECT INDICATORS
Proceedings of European Business Research Conference
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1. MANAGEMENT OF PUBLIC
BODY
FINANCIAL
DEPENDENCY
AND
INCREASE
IN
PROFITABILITY
1.1
Increased
accessories
sponsorships)
revenue
(e.g.:
1.2 Increased revenue from
users
1.1 Dependency on Public Body( %)
□GOVERNMENT GRANTS INTO
EXERCISE
TOTAL OPERATING REVENUE
ACCOUNT
1.2 Increase revenues (a.v. and %)
□ VARIATION BETWEEN REVENUE PER YEAR
(N) and (N-1)
1.3 ROI – ROE – ROS – EVA
2.
ACHIEVEMENT
BUDGET RESULTS
OF
1.3Impact costs/revenues
2.1 Degree of
budget
feasibility:
□BUDGET COSTS
ACTUAL COSTS
2.1 Empowerment of managers
□ ANALYSIS OF DIFFERENCES BETWEEN
BUDGET AND OBJECTIVE ACHIEVED
□BUDGET REVENUE
ACTUAL REVENUE
FINANCIALPERSPECTIVE
COMMUNITY PERSPECTIVE
1. CONTAINMENT OF COST OF
SERVICE TO PROMOTE A
FARE POLICY THAT MANAGES
TO
COMBINE
COSTEFFECTIVENESS
AND
SOCIALIZATION
1.1 Reduction of cost of
service
1.1 Cost of Service Coverage (%)
□ SERVICE REVENUE (FARE)
TOTAL COST OF SERVICE
1.2 Service cost reduction in
critical areas:
1.2 Cost of Service Coverage (%)
- Maintenance, repair and
operations
□ SERVICE REVENUE (PRICE)
COST OF MAINTENANCE
- Operation
□ SERVICE REVENUE (PRICE)
OPERATING COST
- Human resources
□ SERVICE REVENUE (PRICE)
COST OF HUMAN RESOURCES
1.3 Reduction of evasion
1.3 Coverage of direct costs Legislative Decree No
422/1997 (%)
□ REVENUES FROM TRANSPORT TICKETS SOLD
DIRECT COSTS – INFRASTRUCTURE COSTS
1.3.1 Cover variable costs (a.v. and %)
□ REVENUES FROM TRANSPORT TICKETS SOLD –
VARIABLE COSTS
Proceedings of European Business Research Conference
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2. INCREASING THE SUPPLY
OF LPT SERVICE IN SOME
LAND AREAS
2.1 Percentage of land areas
not served by LPT
2.1 Variation of the degree of coverage of the user area
(%)
3. IMPROVING QUALITY
LIFE
3.1 □ NUMBER OF ECOFRIENDLY VEHICLES
3.1 Level of polluting emissions (atmospheric and
acoustic) in service delivery
TOTAL
NUMBER
□ TERRITORIAL AREA COVERED BY THE SERVICE
TOTAL AREA
OF
4. INCREASING THE NUMBER
OF USERS
5.
IMPROVING
THE
REGULARITY OF SERVICE
VEHICLE
4.1 Number of new transport
lines
4.1 Activated lines (a.v. and %)
□ No NEW LINES ACTIVATED
No TOTAL LINES
4.2 Number of transmission
lines
with
increased
journeys
4.2 Increase of the frequency of journeys made
□ NO LINES WITH INCREASED CORSE
NO TOTAL LINES
5.1. Temporal regularity of
transportation service
5.1 Implementation rate of scheduled service
□ ACTUAL SERVICE LEVEL
SCHEDULED SERVICE LEVEL
7. Conclusions
In the past, the public utilities sector was not particularly discussed by management control
scholars, being rather more frequently topic of interest of economists and lawyers, involved in
analyzing the best forms of industry management and the related regulatory issues.
However, several elements, including one fundamental- the progressive reduction of public
funds available to the industry - lead to a greater focus on the typical problems of
management control.
For example, in light of the envisaged reforms in fiscal federalism, the standard cost
seems conceived to have an increasingly important role for the measurement of efficiency,
i.e. a cost considered adequate, as it is linked to the performance of an averagely efficient
operator, operating in a standard competitive environment. Asides from future laws and
without neglecting the many operating difficulties encountered in determining the level of
standard costs, it must be remembered that the standard costs help assess the economic
gap between expected and actual outcome in the conduct of business activities and
especially to guide subsequent improvements. Therefore, it would be advisable to bring the
analyzed companies closer to the "culture" of the standard costs, regardless of future legal
provisions34.
Another aspect that has been highlighted is the opportunity to create a strategy map, i.e. a
system of key elements for development, suitably summarized in a causal model, each of
which shall be measured by one or more indicators which in turn form a system (the so-called
34
On technical problems in determining standard costs for LPTs, see: Liberatore 2001: p. 161 et seq.
Proceedings of European Business Research Conference
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Balanced Scorecard). Such strategy map should act as a connecting element between
strategy on the one hand, and budget/reporting on the other (Brusa 2007). Obviously, it is
important to focus the analysis on a limited number of key elements for the success of the
reference business (those truly relevant for the implementation of the strategy) and that is
actually possible to identify the causalities between them.
This is not, of course, a radically innovative approach but the adoption of a strategy map
and of a BSC, especially in enterprises/public administration, has the advantage of forcing a
reflection on the strategy pursued and on the actions to achieve it in practice.
Both the adoption of standard costs technique, and more importantly, the construction of a
strategy map and the Balanced Scorecard require adequate investments in Information
Technology enabling the management to have required data in a timely and reliable manner.
Clearly, the necessary investment in the upgrading of information systems must follow a prior
and careful analysis of business strategy, critical success factors and indicators by
management; in other words, it should be clear (and this is not always the case in
companies) that the management should request to the information system to make the
deemed necessary data available and that the management should not base its choices on
information made available by information systems proposed by external IT consultants.
The design and implementation of an integrated information system must fulfil the choices
of targets and indicators determined by company management at different levels of the
organization.
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Anselmi L., Il percorso di trasformazione della pubblica amministrazione, Giappichelli, Torino,
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