The Discussion of Institutional Transformation – far from being BORING

There are people who are of the opinion that discussing “Institutional Transformation” is boring or even antiquated. My colleagues in the BT Workgroup and I can’t quite share that view – given that one area of institutional transformation, the co-called “Separation of Functions”, forms the basis for independent regulation, customer oriented service provision and independent oversight.

And it becomes even less boring if we develop a mature understanding of how effective separation can lead to adding value to the Aviation Value Chain and to create regional efficiencies. But in order to get the best results – decision taken at the very beginning of this process should be well thought through. Sometimes it helps to visualize complex structures and look at principles.

We speak often of “Air Navigation Services” needing to add value to the Aviation Value Chain. Another concept very often used is that of creating regional efficiencies. Looking at above graph it becomes quite obvious that being able to concentrate on a “core function” increases the possibility to achieve those important targets.

By the way, we use the term ‘organisation’ in a neutral way: it can either be an ‘independent unit” or a “separate or independent entity’. In this first step, the BTWG did not concentrate on assessing organizational models, but focused on discussing the principles of separation and the benefits of separation.

So let’s start with the Principles:

We all agreed that the methods for separation and the final design of the new organization may vary, but that many principles should be consistent for all methods. I just want to list the ones we thought are most important without going into further detail:

Defined separation between Regulation and Service Provision

• Separate lines of accountability
• Different lines of management and operational authority
• Individual control and reporting mechanisms in each function / body
• Separate funding mechanisms
• Divided resource allocation
• Removal of service provision budget from public funds

 

Clearly defined objectives for the Service Provider

• Needed for defining success in the new organization
• Framework and pre-requisite for Performance Based Management (Performance Scheme)

Clear Governance structures 

Clearly defined Coordination Process between the Regulator and the Service Provider

Separation of Budgets and budgetary freedom for Service Provider

• Investments should be operationally driven and based on economic reasoning (Business Cases)

Empowerment of Service Provider Management
The level of empowerment must be synchronized with the objectives defined at the beginning of the process (in line with the model selected for separation). These can include e.g.

• Right to sign contracts
• Set salaries and compensation packages
• Join alliances
• Conduct union negotiations
• Provide core services in other regions
• Compete for non-core services
• Capitalize infrastructure improvements

Accountability of Management

• Empowerment and accountability go hand in hand
• Incentive based Management

Any kind of transformation has to lead to a “better situation” – so it is always a means to an end and never an end in itself.

Institutional Transformation is a long and costly process – my next blog will discuss that this journey is worth every effort as I will share the “Benefits of Separation” with you that have been discussed by the BTWG.