Using Typical Tools of Good Management (Part 4)
A successful business makes efficient use of resources in the effective pursuit of corporate goals. David Wyndham completes this four-part series with high-level assessment tools that management can employ to examine the core issues of Flight Department safety, efficiency and effectiveness.
Benchmarking, Key Performance Indicators (KPI) and Cost Accounting are classic means for measuring a corporation’s aviation function. Benchmarking is an external measure against the performance of other peers. KPI’s are internal measures relative to corporate goals. Cost accounting uses externally approved measures to meet internal goals for the use of financial resources.
These three tools combine to give top management proven methods for assessing the effectiveness of the corporation’s Flight Department.
Benchmarking against an industry standard is helpful to see how your company compares to an external set of best practices or measures. Peer-to-peer benchmarking can be useful when the peer group is comparable (note the operative word “comparable”).
What are the organizational, cultural and strategic elements of the peer group? Does everyone in the group fit in well organizationally? When benchmarking with other Flight Departments, ask your peer to explain how his or her metrics aligned with the means you use to calculate costs. In order to be assured that you are indeed dealing with peers, you must know how standards are calculated and what assumptions are being used.
Benchmarking—the Big Four
1. Benchmarking must be relevant: The benchmark should be impactful as it relates to your corporate goals or industry practices. How your Flight Department compares to others can be insightful only if the benchmarks used align with your own organization’s goals.
2. Benchmarks should be simple to collect and measure: Your Flight Department already counts things like hours flown, passengers carried, fuel purchases, etc. Look for ways to use what is already tracked and available.
3. Benchmark measures also need to be consistent: They should be calculated and measured with the same yardstick. Consistency year-to-year is needed in order to compare performance over time. A benchmark’s definition may need to change to reflect shifts in how business is done, but be careful that the usefulness of the historical trend remains intact.
4. Benchmarking should lead to action: At least, it should lead to the contemplation of action. Being above or below the norm in a benchmark should lead to the question “why”, with a resulting effort to further improve.
Key Performance Indicators are like internal benchmarks. Instead of external comparisons, you measure against internal goals. A KPI aids in determining progress for the overall success of the company as well as establishing measures of effectiveness for business units or teams supporting the program.
KPI fulfillment should be within the control of the business unit using the indicator. When using the KPI tool, a good approach is following the SMART criteria:
For the Flight Department to be managed effectively, KPIs must be related to the Department’s goals. A safety related KPI might be simulator training frequency and quality. Training is specific to the goal of no accidents, can be measured by a safety audit, can be achieved by the Flight Department going to a third-party training center, is relevant to aviation safety, and can be done on a recurring basis.
Cost Accounting—Money is Important
As money is always a finite resource, cost accounting measures how well the investment is paying off internally to support company goals. Cost accounting should collect and organize the costs in a way that is useful to the Flight Department Manager and Maintenance Manager. The measurement system should be sufficiently flexible to allow differentiation in costs between aircraft tail numbers and, if needed, operating locations.
Your maintenance tracking software should include cost tracking. If not, hopefully the comptroller’s office can set up something specific for the Flight Department. Detailed costs at the Flight Department level then can roll up into the reporting categories needed by the CFO. Aviation and maintenance managers need to understand how costs behave and how to use the company’s cost tools to manage their use of funds.
Development and coordination of these measures for the Flight Department should be viewed from the perspective of understanding and achieving the goals of the corporation. The Flight Department, working in cooperation with top management, needs to develop the information that measures the efficient use of resources in pursuit of the corporation’s goals. The measurements will involve people, capital and time.
Used properly, business aircraft maximize the effectiveness and productivity of an executive’s or a team’s time. Develop and apply the measures that reveal how safely the Flight Department is operating, how effectively it is supporting the needs of the company, and how efficiently it is using the corporation’s resources.