Strategic Transformation at Prague Public Transport Co. Inc .

1. Strategic Transformationat Prague PublicTransport Co.Inc. Jan Barchánek Brussels, July 3rd 2009

2. Basic data of Prague Public Transit Inc. (PPT) Prague: City area 496 sq. km Population about 1,200,000 Job opportunities about 780,000 Road network3.520 km PPT: Public ownership100% by City Market share 100% metro, tram 71% bus (92% in city) Personnel 11.553 employee PPT network: Metro (underground)59 km 3 day lines 720 coaches Tram 142 km 25 day + 9 night lines 991 trams Bus (PPT - within the city) 690 km 163 day + 13 night lines 1158 buses PPT performance: 167 millions vehicle km per year 1262 millions passengers per year

3. Reasons for Transformation • Pressure on owner (Prague Municipality) to decrease costs. • Overstaffing • Large and complicated company structure • Low flexibility of staff • Fear of competition on PT market

4. Transformation of PPT Inc. 2002 – 2004 Concept 2004 – 2006 Realization – 1st phase 2007 – ... Realization – 2nd phase • Main objectives: • Hold high quality level of public transport service • Be competitive on free market of public transport in European Union • Reach European standard of company economical efficiency(better utilization of company resources) • Increase efficiency of company management

5. Before Transformation – hierarchical structure General directory BUDGET BUDGET BUDGET Metro division Tram division Bus division Operation Vehicles Infrastructure Financial mgmt HR mgmt Internal services Operation Vehicles Infrastructure Financial mgmt HR mgmt Internal services Operation Vehicles Financial mgmt HR mgmt Internal services Economic responsibility = DIVISION

6. After Transformation – process structure General director BUDGET BUDGET BUDGET BUDGET Operational section Technical section Internal Services Financial mgmt. Metro vehicles Metro infrastructure BUDGET Metro operation Information technologies HR mgmt. Tram operation Tram vehicles Tram infrastructure Internal Transport BUDGET Bus operation Bus vehicles Supply Safety and security mgmt. TECHNICAL SERVICE processes MAIN processes Assets mgmt. CENTRAL SERVICE processes service level agreements ... Economic responsibility = each UNIT

7. New strategy 2008 - 2015 • Evaluation of results of transformation (2004-2007) • SWOT analyses of actual situation • Direction statement – mission, vision, values • Strategic Objectives(Balanced scorecard method) • Priority issues • Action plans for implementation

8. Strategy brochure – for each PPT employee

9. PPT Vision • high-quality, progressive and flexible operator • the biggest PT operator in frame of Prague integrated transport system • provide wide and high-quality metro and tram network • provide high-quality and environmental friendly bus transport • operate modern and environmental friendly vehicles • provide barrier-less network • provide complex and quality services for proper price

10. Strategic objectives – Balanced scorecard Financial stability Customer management • Cost management • Revenues increasing • Assets management • Increasing of covering costs by internal revenues • Decreasing of capital frozen in supplies and outstanding • Increasing of capital assets covering by internal sources • Offering PT services according to customer demands • Systematic working with customers to attract them • Increasing of customer satisfaction PPT Inc. Top European PT operator HR management Effectiveness and quality of internal processes • Increasing of productivity • Decreasing of administrative staff • Consolidation of staff competences and optimise age structure • Consolidation of ethic standards • Internal communication and staff satisfaction • Decreasing of illnesses, incidents, fluctuation of staff • Fulfilment of contracted traffic obligations • Keeping of reliability and safety • Increasing of internal process effectiveness • Using of new technologies

11. Priority issues • 1. Quality of service • Renewal and modernisation of rolling stock • Electronic ticketing • Development of technologies • 2. Scope of service • Metro and tram extension • Close cooperation to Czech railways • Increasing transport output • 3. Responsibility • Environment friendly vehicles • Barrier-less transport • Staff satisfaction • 4. Economic efficiency • Increasing cost coverage by revenues • Effective HR management • Increasing bus market share

12. Increasing cost coverage by revenues Cost coverage and subsidies expectation 2007  2015 subsidies -16%

13. Decreasing costs, increasing revenues Outsourcing of supportive processes 150 mil. Kč Increasing productivity 100 mil. Kč HR Audit - 770 employee 430 mil. Kč Centralisation of Purchasing410 mil. Kč Property management, leasing 100 mil. Kč Tariff policy 550 mil. Kč Planned annual cost savings – 1090million CZK (more than 42 million Euro)

14. Planned network extension

15. Action plans – example for bus units

16. Barriers and actions Main problems: • lack of motivation and resistance to change Using actions: • Involvement of (middle) management with new targets and processes • Communication on changes (both in- and external) • Promotion and support of teamwork • Setting up of measurable targets and data evaluation – using BSC (Balanced Scorecard method) and KPI’s (Key Performance Indicators) • Increase flexibility of some staff members • Introduction of new technologies • Implementing new control and safety systems

17. Thank you for your attention and see you in Prague !