Guidelines for NSAs for the Development of the NSA Business Plan Directorate Single Sky (DSS) Support to CAA-NSA EUROCONTROL

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1 EUROCONTROL

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3 EUROCONTROL EUROCONTROL Guidelines for the Development of the NSA Business Plan Edition: 2.0 DIRECTORATE SINGLE SKY (DSS) SUPPORT TO CAA-NSA

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6 DSS/Support to CAA-NSA ii EUROCONTROL DISCLAIMER These EUROCONTROL guidelines for business planning for a national supervisory authority (NSA) are made available to EUROCONTROL and ECAC Member States to provide guidance and support in advising their NSAs in the development, promulgation and application of business plans in compliance with the Single European Sky (SES) Commission Regulations and best practice. These EUROCONTROL guidelines are non mandatory material. It is general and procedural information developed by EUROCONTROL to support effective and harmonised development of a business plan by the aforesaid authorities. The information assembled in these guidelines reflects the SES legislation in force on the date of publication by the Commission. The compliance of the Member States, and their NSAs, with their obligations under international law, the Single European Sky (SES) regulations and national legislation remains entirely their own responsibility. Compliance with the EUROCONTROL guidelines does not guarantee a particular outcome of an oversight exercise by the NSA nor does EUROCONTROL assume any liability for claims or damages sustained as a result of the application of these guidelines.

7 DSS/Support to CAA-NSA iii TABLE OF CONTENTS EUROCONTROL DISCLAIMER... II TABLE OF CONTENTS... III FOREWORD INTRODUCTION LEGAL BASIS SCOPE OF THESE GUIDELINES VALUE OF STRATEGIC BUSINESS PLANNING OPERATIONAL CONCEPT OF THE SBP CONSULTATION PROCESS FINANCIAL DIMENSION OF STRATEGIC BUSINESS PLANNING THE STRATEGIC BUSINESS PROCESS STAGES TARGET AUDIENCE DOCUMENT STRUCTURE THE STRATEGY ANALYSIS FRAMEWORK STRATEGY ANALYSIS EXTERNAL BUSINESS ENVIRONMENT ASSESSMENT INTERNAL BUSINESS ENVIRONMENT ASSESSMENT SUMMARY OF THE EXTERNAL-INTERNAL ASSESSMENT, SWOT (OR SPOT) ANALYSIS STAKEHOLDER ANALYSIS AND SEGMENTATION STRATEGY FORMULATION GENERAL MISSION AND VISION STRATEGIC OBJECTIVES MEDIUM LEVEL OBJECTIVES (MLOS) BASIC OBJECTIVES AND LINES OF ACTION THE BUSINESS PLANNING BASELINE STRATEGY FORMULATION TEMPLATE THE METHODOLOGY OF STRATEGIC BUSINESS PLANNING STEPS OF DEVELOPING A SBP PREPARATION FOR PLANNING STRATEGY ANALYSIS STRATEGY FORMULATION DATA ENTRY AND SBP DOCUMENT DEVELOPMENT SW TOOL ADAPTATION AND FAMILIARISATION FORMAL REVIEWS PERFORMANCE FRAMEWORK THE PURPOSE OF THE PERFORMANCE FRAMEWORK PERFORMANCE ASSESSMENT BASED ON KEY PERFORMANCE INDICATORS (KPIS) APPROACH TO DEFINING THE KPIS ECONOMIC PERFORMANCE HUMAN RESOURCES AND HUMAN PERFORMANCE ORGANISATION EXCELLENCE QUALITY...24 APPENDIX 1 - LIST OF REFERENCE DOCUMENTS... 1 APPENDIX 2 - TERMINOLOGY... 1 APPENDIX 3 - ABBREVIATIONS AND ACRONYMS... 1 APPENDIX 4 - SES LEGISLATION AND ICAO MAIN DOCUMENTATION... 1 APPENDIX 5 - SW(P)OT ANALYSIS TEMPLATE... 1 APPENDIX 6 - BALANCED SCORECARD PERFORMANCE MODEL... 1 APPENDIX 7 - STAKEHOLDER ANALYSIS AND SEGMENTATION MODEL... 1

8 DSS/Support to CAA-NSA iv APPENDIX 8 - LINKS BETWEEN BSOS-MLOS... 1 APPENDIX 9 - FINANCIAL STATEMENT MODELS... 1 APPENDIX 10 - STRATEGIC BUSINESS PLAN SKELETON MODEL... 1

9 DSS/Support to CAA-NSA Unit 1 FOREWORD What mostly drives organisations and their people to strive and excel is the prospect of a better, brighter, more prosperous and safer future. In the beginning people in the organisations develop quite diverse ideas of what this future could be and how it can be achieved. This is where the strategic business plan (SBP) comes in! It organises these cloudy and diverse ideas into a solid and motivating vision and aligns people behind a mission. Then these people agree on a strategy to perform their mission and achieve their vision.. A roadmap marked by milestones, concrete actions, projects and everyday performance should be developed and agreed. Resources should be secured. Forecasting identifies opportunities and threats and the organisation need to have a good look at their own potential, strengths, and weaknesses. The SBP is now alive! It has to be nourished with high quality food to maintain its functionality and delivery to expectations. This document contains the supporting and explanatory material to assist in developing a SBP for NSAs and Regulatory bodies in general, for example civil aviation authorities (CAAs). It has been developed by EUROCONTROL in collaboration with a group of national supervisory authorities and/or regulatory bodies. Just like an actual SBP, the material in this document has to be reviewed and updated regularly with, as far as practicable the most recent information, in order to ensure its applicability and usefulness.

10 DSS/Support to CAA-NSA Unit 2 1 INTRODUCTION 1.1 Legal basis Although there is no regulatory requirement for NSAs to have business plans, it is considered highly beneficial for them to be able to plan and manage their objectives, to allocate optimally their often scarce resources and to secure budget and funding sources to address operations, future needs and strategies. In addition, having implemented their own business plan will aid NSAs to understand and better evaluate the business plans of the ANSPs as part of the supervision process. 1.2 Scope of these guidelines The business plan development and exact content (structure, description, etc.) is left to the discretion of the States and their certified NSAs. A prime purpose of these guidelines is to provide information and processes to help States and NSAs to identify their needs and to decide the objectives and associated strategies best suited to meet these needs. Also, the document provides a methodology on how to plan and write a business plan in an efficient structured manner. Thus, the guidelines aim to provide a framework to assist States and/or NSAs: 1. To fulfil best practice to have business plans in place and therefore be in a position to meet the major strategic goals: safety, cost efficiency, human resources performance and quality; 2. To construct business plans to satisfy local and national requirements. The necessity for NSAs to have an embedded planning management policy and associated culture within their organisations is also stressed. The main emphasis is put on possible processes and procedures to be followed by the interested parties when developing their plans. The document is designed as a toolbox to help NSAs that wish to conceive and develop SBPs from an immature baseline but also for NSAs that might wish only to validate their own business plans and existing processes against the advice provided. 1.3 Value of strategic business planning The world in which businesses operate is becoming increasingly uncertain, so some of the assumptions upon which a business plan is based may become invalid before the plan even has been circulated. Nonetheless, those being asked to finance or approve a project will almost always wish to see some form of business plan. They want reassurance that managers have thought through how the market may evolve and how their strategies and tactics could succeed, even in a changing environment. Additionally, a business plan gives information on the financial strength of the organisation and its direction and needs to justify measurable benefits to its stakeholders. 1.4 Operational concept of the SBP The NSA handbook explains how the business carries out its activities in relation to the organisation s mission. The business plan is linked to the organisation s vision and can include a summary or some particular parts of the organisation s handbook. The handbook normally contains a description of the organisational structure, including an organisational chart, which could be repeated in a business plan since the organisational structure itself is consistent with the vision and objectives of the business. Human resources (HR) are one of the most significant resources for business, and payroll and related costs account for a large part of operational expenditure. Associated HR responsibilities and functions are well described in a handbook, but it is not advisable to include them in the business plan. 1.5 Consultation process The best organisations implement their mission and visions by developing stakeholder focused strategies that take account of the market and sector in which they operate. Policies, plans, objectives, and processes are developed and deployed to deliver a strategy. Organisations depend on their customers and therefore should understand current and future customer needs, should meet customer requirements and strive to exceed customer expectations. Excellent organisations also comprehensively measure and achieve outstanding results with respect to their customers. The role of management here is to develop and implement strategies and policies which will balance the legitimate aspirations of the stakeholders. A formal consultation process will ensure that external and internal partnerships, finances, buildings, equipment and materials, technology and information and knowledge are properly managed within the organisation. This, in turn, will help to ensure that stakeholder expectations are met.

11 DSS/Support to CAA-NSA Unit 3 The Commission Regulation (EC) No 1035/2011, Annex I, Article 8 para. 8.1 concerns requirements on consultation processes for ANSPs. A similar approach should be applied for NSAs. A well structured and properly informative business plan could be the most efficient tool for the consultation process. For reasons of confidentiality, should an organisation need to keep some information restricted, two separate parts of the document are recommended. The first, which is the main business plan, contains non-restricted information whilst the second comprises a set of annexes for internal and restricted use only. 1.6 Financial dimension of strategic business planning The operational plan drives capital expenditure (Capex) and operational expenditure (Opex). The manner in which Opex and Capex are modelled should reflect the operational structure. This will make it easier to understand the relation between the financials and operations. The linkage between organisational structure and financials makes it possible to identify the cost of particular activities. The operational plan explains how the business is structured, what resources are required and how these resources are employed to achieve the strategic objectives. The operational plan therefore explains how investors money is used. In financial terms, it provides most operational expenditure items and all capital expenditure items as inputs into the business planning model. The business plan should consequently contain a summary of such information from the operational plan. As a minimum, the current financial situation and its forecast projection for the forthcoming years until the end of the horizon of the business plan should be presented. The current situation should be represented by formal financial statements like balance sheets, revenue and expenditure statements and out/in cash flow statements. The associated reports should be in line with the existing international accounting and reporting standards (IARS) as required for ANSPs according to the EC Regulation No 1035/2011, Annex I, Article 6 para. 6.1 which details requirements on economic and financial capacity. Also, very important financial key performance indicators (KPIs), for example, the part of the NSA cost (supervision) to the State en-route and terminal unit rate, should be properly presented in the financial projections. 1.7 The strategic business process stages Traditional practices for business planning have been based on the identification of the available resources (systems, procedures and staff) and the exploitation of these resources for operations. While this approach has its merits, it also has its shortcomings (e.g. lack of requirements, incomplete consultation of State authorities and airspace users). To address these issues, a business planning process framework is introduced that is derived from a classical public sector business planning approach. Briefly, the stages of the business planning process are: 1. Strategy analysis; 2. Strategy formulation; and 3. Business plan document development. The strategy analysis involves an investigation of the general business environment externally and internally. The formulation of a strategy, in particular for NSAs includes the following elements: mission, vision, strategic objectives (STOs), medium level objectives (MLOs), basic objectives (BSOs) and lines of action (LoA). The development of the business plan document includes populating associated databases and putting software tools in place, drafting the document itself and formally consolidating it. Related supporting material is provided to estimate and report the financial current situation and its projection for the coming years up to the business planning horizon. A business plan template/skeleton is attached to this document (see Appendix 10) which gives brief guidance on how to develop a business plan. 1.8 Target audience This document is mainly intended for the NSAs and State regulators who have delegated various State legal obligations to their NSAs in accordance with prevailing national law. The document may also be useful to other entities, for example: 1. ATM/ANS providers subject to oversight; 2. QEs as per Art 3 of EC Reg. No. 550/2004- SPR, system manufacturers, airspace users etc, who (may) interact with an NSA s activities; 3. Military authorities exercising oversight of ATM/ANS providers on the basis of national law (outside the applicability of SES legislation); 4. Other competent authorities under EU law (e.g. EASA) and those subject to various international or regional (e.g. FAB) agreements.

12 DSS/Support to CAA-NSA Unit 4 It is assumed that users of this document have sufficient knowledge and understanding of the SES legislation. This avoids detailed explanations that would only duplicate SES regulatory provisions or other existing advisory material. 1.9 Document Structure The guidelines consist of five (5) chapters covering all aspects of an NSA business plan. Amplifying guidance is provided in a series of ten (10) Appendices. Chapter 1, the introduction, assists the reader in understanding the essential legal background on the need to develop SBPs. Also it outlines the general scope and structure of this document and its general applicability with regard to ATM. Chapter 2 describes the steps of the strategy analysis, which involves a business environment assessment. Chapter 3 explains how to formulate and document an organisation s strategy. Chapter 4 deals with the methodology of business planning in order to properly meet an organisation s strategic goals. Chapter 5 concerns the performance framework aiming at monitoring the implementation of the SBP against a given performance envelope and how to estimate the progress towards the achievement of the strategic objectives and vision. Ten (10) appendices follow: Appendix 1 provides a list of the reference documents used; Appendix 2 provides formal definitions of various terms used; Appendix 3 represents a list of abbreviations and acronyms; Appendix 4 includes a list of the current SES EC legislation and links to the associated ICAO documentation; Appendix 5 provides a customised template for a S(W)POT analysis; Appendix 6 provides a balance scorecard performance assessment model customised to a particular case of an NSA; Appendix 7 presents a tool for stakeholder analysis and segmentation, also customised to NSA needs; Appendix 8 presents an example of MLO-BSO links and scoring, extracted from a special sw tool for a generic case of SBP; Appendix 9 proposes the structure of the three financial statements for NSAs. These are, profit and loss statements, balance sheets and cash flow statements, and are fully compliant with the international financial reporting standards (IFRS); Appendix 10 represents an NSA SBP skeleton together with clarifications, explanations required and makes reference to related sections of these guidelines.

13 DSS/Support to CAA-NSA 5 2 THE STRATEGY ANALYSIS FRAMEWORK 2.1 Strategy analysis The strategy analysis involves an investigation of the general business environment and competitive environment. Strategy analysis also deals with the organisation s internal environment. It allows the organisation to evaluate how well it is positioned to exploit the opportunities in its external environment. The business environment analysis is the major step prior to the definition of strategies. The following picture represents the concept of the whole analysis, which can be seen to be an assessment of both the external and internal business environments. Technology evolution Transport developments and policies EXTERNAL Institutional environment, trends & drives INTERNAL Values; Resources and capabilities; INTERNAL ENVIRONMENT ASSESSMENT Structure & processes; Objectives & services. Economy evolution, national & international, European National defence and security needs Society evolution, mobility, traveling habits, environment Figure 2.1.1: Business environment analysis 2.2 External business environment assessment The external assessment is undertaken with reference to the influences of the external world. According to the approach proposed here, the external environment assessment includes six (6) domains identified (INSETT). These are: 1. Institutional environment, trends & drives; 2. National defence and security needs; 3. Society evolution, mobility, travelling habits, environmental issues; 4. Economy evolution, national & international, European; 5. Transport developments and policies; 6. Technology evolution. An external analysis should cover the macro environment with the aim of identifying the key drivers of change, the needs and expectations of customers, partners and suppliers, and including the market targets. Some of the external analysis could potentially be extensive (for example impacts of the Single European Sky). From the external environment opportunities (O), threats and/or challenges (T/C) facing the organisation are derived. The INSETT analysis outcome should give answers to the following six (6) basic questions: 1. What factors are affecting the organisation? 2. Which of these are the most important at the present time? 3. Which factors will affect the organisation within the short-term? 4. What are the key external influences? 5. What is the current impact of these on our industry, company and customers? 6. What are the likely/potential future key issues? The following table breaks down the INSETT components: INSTITUTIONAL Local, National and international political levels; Monopolies legislation; Taxation policy; Foreign trade legislation; Employment Law; Government stability; Effect on product/market opportunities; Effect on competition; Legislation SOCIETY Population demographics; Income distribution; Social mobility; Lifestyle changes Attitudes to work and leisure; Consumerism; Levels of education; Environmental aspects. TRANSPORT Transport policies; People s travelling NATIONAL DEFENCE AND SECURITY NEEDS National security policies including the military dimension; Security threats. ECONOMY Business Cycle; Interest rates; Inflation; Unemployment; Disposable income; Exchange Rates for international operations; Effect on exchange rates; TECHNOLOGY Effect on production methods

14 DSS/Support to CAA-NSA 6 habits; Other means of transport available; Transport infrastructure; Transport cost; Transport industry developments. Effect on administrative methods; Government spending on research; Focus on technological effort; New discoveries and developments; Speed of technology transfer; Rates of obsolescence. 2.3 Internal business environment assessment The components of the internal business environment analysis are the following: 1. Values; 2. Resources and capabilities; 3. Structure and processes; 4. Objectives and services. Values Values or shared values are what prompt trust and link an organisation together. Shared values are also the identity by which an organisation is known throughout its business areas and are closely related to human resources. They are an organisation s essential and enduring beliefs which will not be compromised for financial expediency and short-term gains. An example of generic shared values for an NSA could be the following: 1. Service to the stakeholders above all else; 2. Trust and respect for each other; 3. Excellence in reputation; being part of something important; 4. Commitment to consistency and quality; 5. Continuous self-improvement, strive to do our very best; 6. Share knowledge so that it can be used; 7. Enjoy work, celebrate success, and learn from experience. Resources and capabilities Identification of an organisation s key resources and capabilities is an important step prior to selecting a strategy that exploits these relative to opportunities and threats in the external environment. Resources comprise the tangible and intangible assets of the company. Capabilities are the process through which resources are combined and co-ordinated. They can be classified as tangible, intangible and human. Tangible resources refer to physical assets that an organisation possesses and include equipment, finance and human capital. Intangible resources comprise intellectual/ technological resources and reputation, culture, knowledge and trends which have been developed over time within the organisation. Technological resources include an organisation s ability to innovate and the speed with which innovation occurs. Intellectual resources include patents and copyrights which themselves derive from the technological resources. Human resources are the productive services that people offer to the organisation in terms of their skills, knowledge, reasoning and decision-making abilities, capacity for communication and collaboration, and motivation. Key resources to achieve a sustainable competitive advantage are those rare, difficult to imitate, and non-substitutable (mostly intangible resources). It is important to identify the key resources within each category; then to make an analysis of the strategic value of key resources by evaluating their relative importance and contribution to the organisation s current strategy. This analysis concludes on the implications of the key resources with regard to the organisation s future strategy, and opportunities for better utilisation of resources. Examples of capabilities (functional, operational, technical and organisational) applicable to NSAs are as follows: 1. Optimum configuration of resources (operations, human, organisational and financial) to achieve competitive advantage; 2. SMART Team (synergistic, motivational, achievement-oriented, rapid, technologypowered); 3. Advanced human resources management, learning and innovation; 4. Excellent business record: i.e. high customer satisfaction (given the reliable planning, project coordination, good customer relations); 5. Advanced and validated documentation available (processes, management); 6. Full stakeholders support to the related activities (stakeholder management); 7. Resources used from the external market are considered as partners. An analysis of the organisation s capabilities permits consideration of which functional activities add value relative to others and/or which might therefore be considered core to the organisation. This analysis is useful since it focuses the attention on what we think the organisation does well and what it does less well.

15 DSS/Support to CAA-NSA 7 Structure and processes Organisational structure and processes in place are crucial factors in the achievement of an organisation s goals. Examples of processes applicable to NSAs are as follows: 1. Staff management (recruitment, career and skills development, salaries, etc); 2. ANSP oversight; 3. ANSP certification and designation; 4. Qualified entities management; 5. Budget development and execution; 6. Consultation with stakeholders; 7. Inspection planning. Objectives and services Finally, products and services represent what the organisation offers to its customers. For example an NSA might provide: 1. Provision of oversight and certification of air navigation service providers (ATSP, AISP, METP, CNSP); 2. Certification of training organisations; 3. Training of internal and external stakeholders; 4. Provision of consultancy. The internal assessment addresses issues mainly derived from national and local particular needs as well as from SES Legislation and the Local Single Sky ImPlementation (LSSIP). In order to assess the internal environment in a systematic way, all above-mentioned components need to cover many areas of responsibility. Therefore it is strongly recommended that all those areas of responsibilities are classified in terms of domains. The figure below indicates tasks of an NSA in line with the associated European legislation and current best practice. The following domains for assessment are proposed (see Fig ): 1. Management (MNG); 2. Oversight (OVS) and 3. Support (SUP). A breakdown into sub-domains is also shown. Related requirement check-lists should available to facilitate systematic assessment. These lists are absolutely necessary in the strategic framework process and should be recently updated prior to starting the business environment assessment. Figure 2.3.1: NSA generic organisation chart by function

16 DSS/Support to CAA-NSA Summary of the external-internal assessment, SWOT (or SPOT) analysis The summary of the external and internal business environment assessments should be properly reflected to the business plan in order to justify the need for planned projects. The best and common practice to summarise results is the SW(P)OT analysis (Strengths, Weaknesses (Possible Improvements), Opportunities and Threats). The aim of the SW(P)OT analysis is to bring together the findings from the external and internal business environment assessments. By matching the strengths with the opportunities, by addressing the weaknesses and avoiding the threats, a basis for developing future strategies is acquired. The development of the SW(P)OT will have the following inputs (see Fig.2.4.1): 1. Internal environment analysis: This analysis should be conducted via a literature review of existing material, mainly SES Legislation, ATM Master Plan and LSSIP and via the compilation of the related lists of local requirements. 2. External environment analysis: This analysis should be conducted according to the INSETT methodology. Some of the external analysis could be potentially extensive; for example impacts of the SES. Strengths and weaknesses (or possible improvements) are derived by the internal analysis while opportunities and threats by the external one. Improvement action should be taken to change weaknesses into strengths as well as to change threats into opportunities. This process creates a number of basic objectives - projects (BSOs), which comprise the business plan. As in reality the environment changes constantly, it is anticipated that a regulatory body, through its designated structure, will carry on regular formal reviews that will include the SW(P)OT analysis and its updates. A section in the business plan should summarise the results of the SW(P)OT analysis for both the internal and external assessment domains. A summary of results of a SW(P)OT analysis can be presented as per the example of Fig, Appendix 5 also represents a tool for such a presentation together with associated actions. From Figure , it can also be seen that weaknesses (possible improvements) could be transformed into strengths and threats into opportunities, if appropriate actions are taken. Also, opportunities could be upgraded to strengths. Figure 2.4.1: BSOs derived from S(W)POT analysis

17 DSS/Support to CAA-NSA 9 Figure 2.4.2: Example of a summary of SWOT (SPOT, SWOC) analysis

18 DSS/Support to CAA-NSA Stakeholder analysis and segmentation The stakeholder can be defined as follows: An individual or organisation with a legitimate interest in a given situation, action or enterprise. The stakeholder analysis involves the following four aspects: 1. Stakeholder segmentation and types (customers, owners, staff, suppliers, competitors and, overlaps); 2. Weighting importance of stakeholder consideration (% normalisation); 3. Types of stakeholder interactions (exchangesbusiness context model); 4. Analysis of each stakeholder relationship (perspectives of expectations, what do stakeholders value, impact of NSA activities and attitude?). The role of management is to develop and implement strategies and policies which will balance the legitimate aspirations of the stakeholders. The following seven principles of stakeholder management developed by Max Clarkson 1 should be taken into consideration: 1. Managers should acknowledge and actively monitor the concerns of all legitimate stakeholders, and should take their interests appropriately into account in decision-making and operations 2. Managers should listen to and openly communicate with stakeholders about their respective concerns and contributions, and about the risks that they assume because of their involvement with the corporation. 3. Managers should adopt processes and modes of behaviour that are sensitive to the concerns and capabilities of each stakeholder constituency 4. Managers should recognise the independence of efforts and rewards among stakeholders, and should attempt to achieve a fair distribution of the benefits and burdens of corporate activity among them, taking into account their respective risks and vulnerabilities 5. Managers should work cooperatively with other entities, both public and private, to insure that risks and harms arising from corporate activities are minimized and, where they cannot be avoided, appropriately compensated. 6. Managers should avoid altogether, activities that might jeopardize inalienable human rights (e.g., the right to life) or give rise to risks which, if clearly understood, would be patently unacceptable to relevant stakeholders. 7. Managers should acknowledge the potential conflicts between (a) their own role as corporate stakeholders, and (b) their legal and moral responsibilities for the interests of stakeholders, and should address such conflicts through open communication, appropriate reporting and incentive systems and, where necessary, third party review. Four (4) stakeholders groupings represent all other people and organisations that are affected in any way either directly or indirectly by a regulatory body s activities. They are as follows: 1. Contributing Stakeholders; 2. Customers; 3. Employees; 4. Society. Some of the main stakeholders per group are: 1. Contributing stakeholders a) Military ATS Units or regulatory bodies; b) Ministries of transport, foreign affairs; defence, finance, development; c) Other national supervisory authorities; d) EUROCONTROL; e) European Commission (EC); f) Other international organisations (ICAO, EASA, EUROCAE, NATO etc); g) Suppliers (equipment, training institutions); h) Lenders i) External unions. 2. Customers and partners a) Airspace users (airliners), which are the main customers, and their representatives (IATA); b) National and other ANSPs, mainly adjacent; c) Airports. 3. Employees a) Employees of the NSA; b) Professional associations. 4. Society a) Trade unions; b) Local community; c) Consumer groups (passengers); d) Social reform groups; e) Environmental groups. The main purpose of such stakeholder analysis is to properly identify all partners that have interest, power or influence in the NSA s business in order to consult or to inform them about the regulatory body s plans, actions, investments, changes and developments. 1 Max Clarkson: Professor/Toronto University, Author: The Corporation and its Stakeholders, University of Toronto press, 14 Feb

19 DSS/Support to CAA-NSA 11 A formal consultation process will help to ensure that external and internal partnerships, finances, buildings, equipment and materials, technology and information and knowledge are properly managed within the organisation and stakeholder expectations are met. The following steps should be followed for the Stakeholder analysis process: 1. Identify who your stakeholders are; 2. Work out their power, influence and interest, so you know who you should focus on; 3. Develop a good understanding of the most important stakeholders so that you know how they are likely to respond, and so that you can work out how to win their support - you can record this analysis on a properly structured stakeholder map. 4. After you have used this tool and created a stakeholder map, you can use the stakeholder planning tool to plan how you will communicate with each stakeholder. 1. High power, interested people: these are the people you must fully engage and make the greatest efforts to satisfy. 2. High power, less interested people: put enough work in with these people to keep them satisfied, but not so much that they become bored with your message. 3. Low power, interested people: keep these people adequately informed, and talk to them to ensure that no major issues are arising. These people can often be very helpful with the detail of your project. 4. Low power, less interested people: again, monitor these people, but do not bore them with excessive communication. The stakeholders analysis should be regularly repeated, at least every year, to update the associated records and list. The NSA can use a matrix approach to classify stakeholders relative importance and influence. Drawing up the stakeholder analysis table the regulatory body should: 1. identify all stakeholders; 2. identify their interests and expectations; 3. assess each stakeholder s importance; 4. assess Power/Influence 5. assess each stakeholder s potential to be supportive or threatening; 6. identify the relative priority which needs to be given to each stakeholder to help meet their expectations. The NSA should organise regular meetings, at least once a year, with all stakeholders identified individually or selectively per group depending on the agenda and interests of particular stakeholders. They should transparently follow up all decisions made and report to all stakeholders involved and to properly report to the State what has been discussed and decided during meetings as well as on follow-up actions. Figure 2.5.1: Stakeholders segmentation Each player that is positioned on the Power/Interest grid (see Fig ) has a different importance and role for the NSA:

20 DSS/Support to CAA-NSA 12 3 STRATEGY FORMULATION 3.1 General The formal structure of a strategy most relevant for regulatory bodies should include the following elements: 1. Vision, Mission; 2. Strategic objectives (STOs); 3. Medium level objectives (MLOs); 4. Basic objectives (BSOs); 5. Lines of action (LoAs). The following diagram at Fig depicts the strategy formulation concept. It represents both topdown and also bottom-up integration processes. Both cases are applicable in practice. Certainly, a systematic approach should start from the top, with vision, and mission. It should be restated that the S(W)POT analysis is a tool to create actions based on a list of requirements properly developed taking into consideration the mission, vision, stakeholder expectations, associated European and national legislation in place and external business environment. Such a list is provided in Appendix 5. Figure 3.1.1: Strategy formulation

21 DSS/Support to CAA-NSA Mission and vision Organisations sometimes summarise goals and objectives into a mission statement and/or a vision statement. A mission statement defines the customer(s), critical processes and information about the desired level of performance. A vision statement outlines what a company wants in the future; it is a source of inspiration; it provides clear decision-making criteria. Many people mistake vision statement for mission statement. Differences are summarised hereafter. 1. The vision describes a future identity and the mission describes why it will be achieved. 2. A mission statement defines the purpose or broader goal for being in existence or in the business. It serves as an ongoing guide without time frame. 3. The mission can remain the same for decades if crafted well. 4. The vision is more specific in terms of objectives for the future. 5. The vision is related to some form of achievement if successful. Which comes first? The mission statement or the vision statement? That depends. If you have a new start-up business, new programme or plan to re-engineer your current services, then the vision will guide the mission statement and the rest of the strategic plan. If you have an established business where the mission is established, then, in many cases, the mission guides the vision statement and the rest of the strategic plan. Features of an effective vision statement may include: 1. Clarity and lack of ambiguity; 2. Describing a bright future (wish); 3. Memorable and engaging expression; 4. Realistic aspirations, achievable; 5. Alignment with organisational values and culture, rational; 6. Time based if it talks of achieving any goal or objective. Some current examples applicable to.nsas are as follows: Mission: The NSA is tasked to secure and constantly audit, oversight and certify the safe, expeditious and orderly flow of air traffic with the minimum possible cost, paying due respect and protection to air passengers and to the environment Vision: The NSA will continuously adapt to new European Legislation to maintain SES compliance and achieve sound performance in a Functional Airspace Block. 3.3 Strategic objectives To achieve the vision, a number of high level STOs must be accomplished. These are related to the high-level goals of the strategy normally supported by a number of projects. The number of STOs should range between five to a maximum of eight. STOs should also be very short, clear and comprehensive. An example of a list of STOs applicable to an NSA follows: 1. STO01: Legislation- Align national with the European legislation and enforce its application as appropriate; 2. STO02: Safety and ATM security (SAF & SEC) - Ensure safety and security to the maximum possible extent complying with associated international and national standards; 3. STO03: Airspace capacity (CAP)- Optimise airspace capacity to meet the traffic demand; 4. STO04: Airspace accessibility- Ensure airspace accessibility on equal terms by the majority of airspace users; 5. STO05: Cost efficiency (FIN) - Optimise cost of services provided by ANSPs and CAA; 6. STO06: Human (HUM) - Enhance human resources performance; 7. STO07: Excellence (EXC) - Meet and exceed quality international and national standards; 8. STO08: International cooperation Facilitate and enhance cooperation among all partners involved. 3.4 Medium level objectives (MLOs) Medium level objectives are secondary objectives which are more detailed and concrete than STOs and can be considered as a breakdown of STOs. Their number is higher than the number of STOs, approximately. MLOs should be very comprehensive and measurable. MLOs are linked to STOs as well as to BSOs. Links to STOs should be classified as strong (S), medium (M) or weak (W) depending on each case. Links of BSOs to MLOs should be scored by four levels: 0, 10, 30, and 60, according to the contribution of each BSO to the corresponding MLO. These numbers do not represent percentages, but 4 numbers with a significant separation among them in order to be easily chosen. There is not a limit of the number of MLOs/ STOs to which a BSO contributes. Selection and value are based on expert judgment.

22 DSS/Support to CAA-NSA 14 An example of such a list of MLOs applicable to an NSA follows: 1. MLO01 : Achieve safety standards 2. MLO02 : Contribute to an optimum Institutional & Legal framework 3. MLO03 : Work towards the establishment of a FAB 4. MLO04 : Achieve environmental performance levels 5. MLO05 : Maintain excellence in human resources 6. MLO06 : Increase cost effectiveness 7. MLO07 : Economic transparency 8. MLO08 : Comply with SES regulations and standards 9. MLO09 : Infrastructure improvements 10. MLO10 : Contribute/optimise Airspace Management 11. MLO11 : Improve security 12. MLO12 : Achieve organisational excellence in quality 13. MLO13 : Achieve uniformity 14. MLO14 : Improve management and leadership levels 15. MLO15 : Achieve LSSIP targets The following diagram (Fig ) indicates the concept of scoring links of BSOs to MLOs. The picture represents the integration process towards the achievement of the strategic objectives. The total score of a BSO indicates its significance and its contribution to the whole business plan. This offers assistance in making decisions regarding priorities for the implementation of specific BSOs. Figure 3.4.1: The integration process towards the achievement of the strategic objectives

23 DSS/Support to CAA-NSA Basic objectives and lines of action Basic objective (BSO) is a succinct description of a complete project that is intended to deliver, in the planned timeframe, specific operational, business and organisational improvements with an estimated capital and effort cost. BSOs are the elementary building blocks of the SBP. It is through the timely and budgeted implementation of the BSOs that the SBP is implemented and its strategic objectives and vision achieved. BSOs are perceived and defined as SMART: 1. Specific: Described briefly but accurately in their scope, time-schedule and estimated budget. There is an elementary work breakdown structure (WBS); 2. Measurable: Progress and status must be as measurable as possible using different kinds of metrics; 3. Achievable: Making sure that the BSO is possible to implement within specified (estimated) time & budget limits; 4. Relevant: That the BSO is relevant to at least one strategic objective with strong or medium contribution (see below definitions of relevance/contribution); 9. Links and contribution to MLOs (Scores: 0, 10, 30, 60); 10. Links to ESSIP objectives, SESAR operational improvements (OIs) and EC Regulations; 11. Dependences among BSOs. Financial parameters of a BSO 1. Capital cost (Implementation cost, outsource assistance, etc.; 2. Additional staff cost for the implementation (total additional FTEs); 3. Financial lifecycle (capital cost depreciation period); 4. Yearly operating cost up to the end of the SBP; 5. Additional staff cost for operating the product of the BSO (yearly additional FTEs); 6. Yearly cost of capital for the loan taken or not (using their own capital); 7. Others (yearly). The breakdown of a BSO comprises a list of lines of action (LoA). The start and finish date of the implementation of a BSO are defined by the start and finish dates of lines of action, earliest and latest. The operational date of a BSO, when is put in real use can be before the finish date of the implementation as in the following picture: 5. Traceable: A BSO should contain information about the Key (result) Performance Area it belongs to, its relation with other BSOs; a code similar to ESSIP modalities should be given to each BSO for traceability. Each BSO has scope, planning and financial parameters as summarised below: Scope and planning parameters of a BSO 1. Source, rationale (from INTA and INSETT analysis); 2. Domain (e.g. OVS); 3. Code (e.g. NSA_OVS_01); 4. Title; 5. WBS (Work breakdown structure); 6. Implementation period (start and finish date); 7. Operating period (by default up to end of the SBP starting from the implementation finish date); 8. Contribution to en-route, terminal, charges State and passengers (in %); Figure 3.5.1: Implementation and operation phases of a BSO The following diagram (Fig.3.5.2) depicts all financial parameters of a BSO.

24 DSS/Support to CAA-NSA 16 Figure 3.5.2: Financial parameters of a BSO ID Domain Code Title Start Operational Priority Capital cost (ke) 1 MNG NSA_MNG_01 NSA handbook development 01/05/ /11/ MNG NSA_MNG_02 NSA strategic business plan 01/07/ /12/ development 3 MNG NSA_MNG_03 Internal quality management 01/01/ /07/ system (QMS) review 4 MNG NSA_MNG_04 Internal project management 01/01/ /01/ procedures review 5 OVS NSA_OVS_01 ANSP s certification and 01/01/ /01/ oversight processes review 6 OVS NSA_OVS_02 MET designation process 01/01/ /01/ development 7 OVS NSA_OVS_03 NSA licensing and training 01/01/ /01/ organisation certification process development 8 SUP NSA_SUP_01 Manpower plan development 01/01/ /01/ SUP NSA_SUP_02 Staff numeration alignment 01/07/ /01/ study development 10 SUP NSA_SUP_03 Stakeholder consultation 01/07/ /01/ processes review 11 SUP NSA_SUP_04 External relations process 01/01/ /01/ development 12 SUP NSA_SUP_05 Cross-border co-ordination 01/01/ /01/ with other CAAs process development 13 SUP NSA_SUP_06 Documentation configuration 01/01/ /01/ and control process development Total 600 Figure 3.5.3: An example of planning NSA BSOs

25 DSS/Support to CAA-NSA 17 The cost base or chargeable cost to users of a BSO includes five cost elements: 1. Additional staff cost for its implementation; 2. The yearly depreciation cost; 3. The yearly operating cost; 4. The yearly additional staff cost for its operation; 5. The yearly cost of capital. It should be noted that if additional staff are not required for its implementation or operation then the related parameters 1 and 4 above are zero since the existing staff cost is included in the baseline chargeable cost. The capital cost is not included in the chargeable cost, it is charged through the depreciation process. The straight-line model is used for depreciation. It means that the yearly depreciation cost is calculated by dividing the total capital cost by the financial lifecycle, the depreciation period in years. The cost of capital is calculated on the yearly rate applied in percentage of the remaining capital cost. 3.6 The business planning baseline The SBP baseline represents the financial situation of the current year, for the year before the starting year of the SBP. The baseline cost base includes: 1. Current yearly staff cost and its projection to the next years covering the SBP horizon; 2. Current yearly other operational cost and its projection to the next years covering the SBP horizon; 3. Current yearly depreciation cost and its projection to the next years covering the SBP horizon; 4. Current yearly cost of capital and its projection to the next years covering the SBP horizon; Note that planned BSOs financial figures are not included in the baseline cost base. In the case of a BSO which is in the implementation phase from the previous years but continues in the upcoming period, it should be divided into the implemented part, included in the baseline, and the remaining part as planned BSO. IMPLEMENTATION IMPLEMENTATION IMPLEMENTATION IMPLEMENTATION BASELINE IMPLEMENTATION OPERATION OPERATION OPERATION OPERATION OPERATION IMPLEMENTATION X YEAR IMPLEMENTATION Business plan horizon OPERATION OPERATION Figure 3.6.1: Baseline and planned BSOs Obviously, the total cost base is the sum of the baseline and the planned BSOs cost bases (chargeable costs). As a conclusion, the total chargeable cost base to users includes the following: 1. Yearly baseline total cost of individual projected costs as follows: a. Staff; b. Other operating costs; c. Depreciation; d. Cost of capital; e. Others, if any. 2. Yearly depreciation cost of each BSO; 3. Yearly cost of capital of each BSO; 4. Yearly operating cost of each BSO; 5. Yearly staff cost during operation of each BSO; 6. Others, if any. The yearly cash out flow includes: 1. Capital cost (investments); 2. Other operating cost; 3. Staff cost; 4. Cost of capital (interest); 5. Others, if any. 3.7 Strategy formulation template The strategy formulation template should include all written texts related to the main five (5) elements 1. Mission; 2. Vision; 3. Strategic objectives (STOs); 4. Medium level objectives (MLOs); 5. Basic objectives (BSOs) and lines of action (LoA). The main SBP document should associated detailed reports and tables, with figures in separate documents as a set of annexes for internal use only. Templates of the main SBP documents and annexes are attached to these guidelines.

26 DSS/Support to CAA-NSA 18 Associated enablers are required for reliable reporting. The strategy formulation tables and reports should be automatically extracted from a tool/database properly populated with the data described above. Reports reflecting the strategy are: 1. Mission, vision; 2. Strategic and medium level objectives and links among them; 3. List of basic objectives including timescale and costs as a summary of the SBP; 4. Detail report per BSO including all scopeplanning and financial parameters; 5. BSOs-MLOs score tables; 6. Gantt diagrammes of BSOs indicating dependencies among them; 7. Links of BSOs to ESSIP objectives, SESAR OIs and EC regulations. Annual plan reports should also be properly extracted from the SBP database.

27 DSS/Support to CAA-NSA 19 4 THE METHODOLOGY OF STRATEGIC BUSINESS PLANNING 4.1 Steps of developing a SBP The steps for the development of a SBP are as follows (and are shown in Fig, 4.7.1): 1. Preparation for planning; 2. Strategy analysis - business environment (internal and external} assessment SW(P)OT analysis; 3. Strategy formulation - development of mission and vision - derive strategic objectives (STOs) and medium level objectives (MLOs) - derive basic objectives (BSOs) and actions per domain; 4. Data entry to the available tools and other enablers and regressions and SBP documentation development 5. Adaptation of the sw tools, if used and familiarisation with their new releases; 6. Formal reviews. These steps are further analysed in the following paragraphs and also depicted in the flowchart (Figure 4.7.1). 4.2 Preparation for planning The preparation for planning and developing a documented SBP includes the following steps: 1. Set up a team consisting of experts from various domains; 2. Secure any other resources needed (budget, means and facilities); 3. Take actions for external support, if required; 4. Develop a short project management plan (PMP) defining the scope, effort required and timescales, as well as roles and responsibilities; 5. Train the team on the whole process and familiarise it with enablers and tools in place; 6. Organise meetings and brainstorming sessions, as required; 7. Report to the management on the process and steps and get formal approval to proceed. 4.3 Strategy analysis The analysis of the strategy, which in fact is the evaluation of the external and internal business environment, is the first stage immediately after the preparation for planning. The steps of such an analysis are: 1. Prepare or update tables of internal business environment requirements and check lists (INTA lists) for all the domains and derive associated actions. Take note of the LSSIP level 2 of the State concerned; 2. Prepare or update tables of external business environment requirements and check lists (INSETT lists) for all the domains and derive associated actions; 3. Implement a SW(P)OT analysis as described in the related section; 4. Define stakeholders and proceed to segmentation and expectations; 5. Develop an assessment report of the organisation s current situation including related recommendations and proposed actions. The next stage is to formulate the strategy from these analysis findings. 4.4 Strategy formulation The strategy formulation consists of the following steps five (5) steps: 1. Define mission and vision by means of a brainstorming process with the involvement of NSA management; 2. From the strategic vision, define strategic objectives (STOs) and medium level objectives (MLOs) by means of the same process. 3. From the SW(P)OT analysis, the internal and external assessment, define actions per domain required to alleviate weaknesses, to identify opportunities and to minimise threats; 4. Go through all actions derived in step 3 and group them into the basic objectives (BSOs). 5. Define the planning and financial parameters for each objective as per the example below: BSO: ANSP certification 1. Domain: OVS 2. Source: Internal assessment (INTA) 3. Code: NSA_OVS_01 4. Title: ANSP Certification 5. Priority: 1 6. WBS: Application Management, "Audit programme approval and consolidation", audit execution (first), audit execution (on site, second), certification; 7. Implementation Period: until Operating Period: SBP period, Financial Lifecycle: 3 years 10. Capital Cost: 50 ke 11. Depreciation: start for three years, until , kE per year 12. Cost of capital: 10% per year 13. Staff cost: 0 (additional staff is not required) 6. Link each BSO to ESSIP objectives, OIs and EC Regulations to which it contributes. Score all BSO-MLOs links; 7. Acquire or calculate the baseline figures and their projections until the end of this SBP;

28 DSS/Support to CAA-NSA Distribute BSO costs to Route/TAS/State/PAX users: e.g. 25% TAS, 25% Route, 25% State and 25% PAX; 9. Acquire forecast statistics data of traffic (contribution to service units and Km flown). 4.5 Data entry and SBP document development All the data acquired during the strategy formulation stage should be properly populated in the database of the associated software used for further elaboration and adequate reporting. The value of the sw, if available, guides and supports the systematic review and update of the subject SBP. This periodic review and update keeps the plan consistent with its strategic objectives, medium level objectives, vision and mission. It maintains the planning and implementation process within an envelope of predefined performance in financial efficiency and eventually in safety, capacity and environment protection when adequate respective KPIs become available. Its openness and design adaptability ensures that when more and different KPIs are adopted they may be easily built in the sw to guide planning, implementation and monitoring. Moreover the sw should fully conform to Commission Regulation (EC) No 1794/2006 of 6 December 2006, which lays down a common charging scheme for air navigation services. In conclusion, sw tools available: 1. produce and compile the first version of the plan; 2. will then be used to periodically update the plan and check its sustainability, consistency and validity and the related performance indicators; 3. guide the planning process to secure conformance with KPIs for cost efficiency, human resources performance and quality. The method of entering data into sw tools and databases should be fully described in the associated user manual. The next step is to document the SBP. This documentation should consist of two documents. The first, i.e. the main document, should be a short document of pages maximum for the internal and external stakeholders; the second document, should be for internal use only and should include the business assessment as well as the fine detail possible extracted from the sw tools and datbases. The layout of content of the main document should be as follows: 1. Foreword 2. Executive summary; 3. Introduction; 4. Terminology; 5. The current situation and trends; 6. Target model; 7. Actions to be implemented; 8. Revenues and expenditure; 9. Performance framework; 10. Conclusions. A template of the main document is attached to these guidelines at Appendix 10. By this stage, the SBP development process is complete for this cycle. The following two steps are related to the preparation of the next cycle of the SBP. The sw tools used should be upgraded and updated to meet future requirements SW tool adaptation and familiarisation SW and databases used for the business plan development should be flexible tools for changes. Regular or ad-hoc changes are required. Together with the new sw releases development, updates of the user manuals should be made as appropriate. The SBP development team should be fully familiar with the strategic planning process and the sw itself. Therefore, initial and regular refreshment training courses are needed, in particular when new EC regulation or new features of sw tools are introduced. These familiarisation sessions can be organised at local level, for particular NSAs, or at regional level, with participation more of than one State s representatives. The session programmes and syllabuses should be carefully developed well in advance and related case studies should be also prepared and tested in practice. Lists of frequently asked questions (FAQ) together with associated answers should be prepared and made available. References to the international bibliography of EC regulations and best practices should be also made available for further education on the matter. 4.7 Formal reviews The SBP should be produced on the basis of the existing situation in the organisation. It is therefore important to highlight that: 1. requirements may change over time; 2. additional actions may be needed; 3. timescales may change; 4. detailed planning for each objective is required in order to implement the recommendations. The SBP should therefore be regularly revised, preferably on annual basis. The SBP horizon should cover at least the coming five years and it is recommended that a dedicated strategic planning function undertakes this activity. Review of the SBP should include: 1. progress in implementing the SBP;

29 DSS/Support to CAA-NSA the BSOs currently being implemented and those planned one by one; 3. actions to be implemented in the following year; 4. the SBP with respect to the long-term needs of the NSA and refinement of strategic objectives and medium level objectives; 5. the parameters (e.g. implementation timescales, human resources effort, costs, and envisaged unit rate and traffic forecasts). The first formal review session should, as a minimum validate the strategy (vision and strategic objectives). In order that the development of the SBP is recorded and traceable, it is important that decisions from the review meeting are added to the SBP document. It is envisaged this will include: 1. review of forecast and external factors; 2. check of validity of assumptions; 3. check of vision/mission; 4. updated STOs, MLOs, BSOs (BSO by BSO); 5. updated plan (Gantt chart); 6. minutes of the review meeting describing major decisions (e.g. approved actions for the following year).

30 DSS/Support to CAA-NSA 22 Figure 4.7.1: SBP development methodology