CSPCAR MODULE 3 by Ceddet

STRATEGIC CUSTOMS PLANNING AND MANAGEMENT

MODULE 3

TOOLS FOR STRATEGIC PLANNING IN CUSTOMS ADMINISTRATIONS

COURSE AUTHOR Interamerican Development Bank (IDB) (www.iadb.org), through its Integration and Trade Sector (INT). COURSE COORDINATOR Interamerican Development Bank (IDB) (www.iadb.org), through its Integration and Trade Sector (INT), the Institute for the Integration of Latin America and the Caribbean (INTAL) (www.iadb.org/es/intal), the Inter-American Institute for Economic and Social Development (INDES) (www.indes.org), the World Customs Organization (WCO) (www.wcoomd.org) and the General Secretariat of Central American Integration (SG-SICA) (http://www.sica.int/). MODULE AUTHOR Claudia Delgado, Manager of the AEAT (Spanish Tax Agency) in Seville, Spain. EDUCATIONAL COORDINATION AND EDITING The Inter-American Institute for Economic and Social Development (INDES) (www. indes.org), in collaboration with the Economic and Technological Development Distance Learning Center Foundation (CEDDET) (www.ceddet.org) and Caribbean Customs Law Enforcement Council (CCLEC) (www.cclec.net).

Copyright ©2016 Inter-American Development Bank. This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives (CC-IGO 3.0 BY-NC-ND) (http://creativecommons. org/licenses/by-nc-nd/3.0/igo/legalcode). This document is the intellectual property of the Inter-American Development Bank (IDB). Any partial or total reproduction of this document should be reported to: BIDINDES@iadb.org Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB’s name for any purpose other than for attribution, and the use of IDB’s logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license. Note that the link provided above includes additional terms and conditions of the license. The opinions expressed in this publication necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. These materials have been revised in light of the ministerial decisions taken in the framework of the 9th World Trade Organization Ministerial Conference held in Bali, Indonesia, in December 2013. The adjustments were made in order to reflect a higher alignment between the course topics and the priorities identified in Bali’s Ministerial Declaration and decisions, where all IDB members participated. Bali Ministerial Declaration and Decisions

Strategic Customs Planning and Management

MODULE 3

Table of contents List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 General Module Aims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Questions to Guide Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 UNIT I. SWOT ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.1. SWOT matrix description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 UNIT II. STAKEHOLDER ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 II.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 II.2. Identification and characterization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 II.3. Production of reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 II.3.1. Analysis of interests and expectations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 II.3.2. Analysis of importance and influence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 II.3.3. SWOT analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 II.4. Analysis of information for designing the project . . . . . . . . . . . . . . . . . . . . . . . . 21 II.5. The target group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Strategic Customs Planning and Management

MODULE 3

UNIT III. THE LOGICAL FRAMEWORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 III.1. Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 III.2. Producing a logical framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 III.2.1. Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 III.2.2. Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 III.3. Levels of implementation: logical frameworks for programs, logical frameworks for projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 III.4. The logical framework used to create the activity schedule and the resource schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 UNIT IV. THE BALANCED SCORECARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

IV.1. Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 IV.2. Practical application of a balanced scorecard . . . . . . . . . . . . . . . . . . . . . . . . . . 43 IV.3. Advice for producing a scorecard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 IV.4. Application in customs administrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 UNIT V. MANAGING INTANGIBLE ELEMENTS THROUGH ORGANIZATIONAL CHANGE PROCESSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 V.1. Managing intangible elements in public projects . . . . . . . . . . . . . . . . . . . . . . . . 49 V.2. People management in change processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 V.3. Cost-benefit analysis of a strategic plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Strategic Customs Planning and Management

MODULE 3

List of Figures Figure 1.1 Example SWOT Analysis - Private Sector Organisation Figure 1.2 Example SWOT Analysis - A Customs Organisation Figure 2.1 Stakeholder Identification for a Natural Resource Management (NRM) Organisation Figure 2.2 Diagram of stakeholder importance and influence Figure 2.3 Stakeholder SWOT report Figure 2.4 Stakeholder SWOT report â&#x20AC;&#x201C; the Media Figure 3.1 Logical framework Figure 3.2 Problem tree: Child Health Issue Figure 3.3 Objective tree: Clearance Processing Figure 3.4 Child Health objective tree Figure 3.5: Clearance Processing objective tree Figure 3.6 Logical framework basic matrix Figure 3.7 Intervention logic Figure 3.8 Example of vertical logic links Figure 3.9 Levels of intervention: from program to component Figure 3.10 Example of the development of accompanying reports Figure 3.11 Example of a resource schedule

List of Tables Table 1.1 SWOT matrix template Table 2.1 Stakeholder analysis matrix Table 2.2 Guiding questions to determine the target group Table 3.1 Model Logical Framework for a Customs Project Table 4.1 Evolution of tax collection targets for customs in region X

Strategic Customs Planning and Management

MODULE 3

Table 4.2 Chilean Customs May 2014 report on revenue from foreign trade Table 5.1 Diagram of a simple benefit structure

Glossary BSC: Balanced Scorecard ICT: Information and Communication Technology NRM: Natural Resource Management OVIs: Objectively Verifiable Indicators SWOT: Method used to evaluate the competitive position of a business within its market (external position) and its internal characteristics (internal state) in order to determine its Strengths, Weaknesses, Opportunities and Threats WCO: World Customs Organization

Introduction Strategic planning can be defined as the process of creating an organizational strategy to help us build the ideal organizational structure needed for an organization to develop to its fullest potential. A strategic plan involves a profound structural transformation, provoking big changes in an organization. It is, therefore, a tool which supports processes of change. In the customs environment, this process involves the development of a plan in which targets are set and resources are assessed and applied in the most efficient way possible to make sure these targets are met. As such, a strategic plan always answers the following two questions: a) Where are we and where are we heading? b) Where are we and where do we want to be? To answer these questions, the first obvious step is to define the “where do we want to be”. This is related to the “mission-vision-values” concepts analyzed in the first module of this course. Once we know where we want to end up, the planning process can be logically divided into a number of stages:

Strategic Customs Planning and Management

MODULE 3

0. Collection of information from both internal and external sources that will shed light on the internal state of the organization and the field in which it operates. 1. Definition of specific objectives that together make up the overall goal (the mission). 2. Prioritization of objectives and timeframe for implementation 3. Production of the strategic plan at various levels: overall plan, partial plans for every specific target and project of each plan 4. Implementation 5. Control, supervision and modification 6. Level-by-level evaluation Each step in this process is equipped with the appropriate tools to organize information and guide us through the change process. 1. In the preparation phase, the necessary tools for processing information are: SWOT analysis, stakeholder analysis, cost-benefit analysis and risk analysis. 2. In the strategic plan design phase, the tool to use is the logical framework, which begins with producing a problem tree and an objective tree. 3. In the plan or partial project implementation phase, a balanced scorecard will be used to ensure appropriate tracking and then evaluation of the results achieved. The module is divided into six learning units. The first four offer an individual analysis of the essential reports; the SWOT report, the stakeholder analysis, the logical framework and the balanced scorecard. As there is a whole module dedicated to risk analysis, it will not be covered in this module. The last two units offer a brief introduction to two equally important aspects in strategic planning: people management in an organizational change process and the problem with cost-benefit analysis in strategic plans for public agencies.

General Module Aims To understand the purpose of each planning tool and be able to apply them in the daily management of customs responsibilities. To understand the potential benefit of applying these tools to strategic planning in organizational change processes.

Strategic Customs Planning and Management

Questions to Guide Learning What are the phases of a strategic plan? Which tools will be used in each phase of the plan? What information will be obtained from each tool? Can these tools be used outside of a strategic plan?

MODULE 3

Strategic Customs Planning and Management

MODULE 3

UNIT I

SWOT ANALYSIS

Learning Objectives To understand that “SWOT analysis” is an essential tool for developing strategic customs management. To be able to effectively use this tool by correctly categorizing and analyzing the information obtained.

I.1. SWOT matrix description SWOT analysis can be defined as: “A method used to evaluate the competitive position of a business within its market (external position) and its internal characteristics (internal state) in order to determine its Strengths, Weaknesses, Opportunities and Threats.” The internal state is composed of two controllable factors: strengths and weaknesses, while the external position is composed of two uncontrollable factors: opportunities and threats. Honest and correct use of this tool reveals the actual state of the organization and answers the following basic questions: How can we make the best use of all strengths? How can we make the most every opportunity? How can we combat our weaknesses? How can we minimize threats?

Strategic Customs Planning and Management

MODULE 3

As you will see, this tool aims to determine the competitive advantages of a business or organization, which is essential for making long-term strategic decisions and creating operational plans. The analysis has four different phases: 1 External analysis 2 Internal analysis 3 Preparation of the matrix report 4 Strategic decision-making To produce a SWOT matrix, internal and external factors must first be identified and then grouped together under the appropriate categories. The same factor could fall under one category for one business/organization and under another for a different business/organization, or be positive at one point and negative at another.

Text box 1.1 Examples of factors that can be categorized Examples of factors that should be analyzed:

Economic: national economic conditions and budget Social: workplace location, characteristics of service users and characteristics of businesses Technological: useable applications, obsolescence and possibility of new technological resources Legal: tax system, taxation trends, the administrationâ&#x20AC;&#x2122;s employment structure, recruitment capacity, position compared to other administrations involved, and legal powers Environmental: an organisation affects the environment in which it operates, hence the need to analyse in depth the implications of the impact on the environment. Similarly, the environment also influences the business directly or indirectly, hence likewise the need for such analysis. Once we have identified all factors that can influence the organization, in terms of facilitating or limiting the achievement of targets, they must then be categorized. There are four possible categories: Opportunities: positive factors that arise within our environment and can work in our favor. For example, proposing that new IT equipment is purchased just as a new management application for similar processes comes onto the market. This will allow us to evolve from technical obsolescence to having the latest data-management

Strategic Customs Planning and Management

MODULE 3

tools, putting us in an advantageous position for achieving clearance targets. Another example could be to suggest the creation of a team of in-house IT technicians, to avoid dependence on external companies and updating costs, just as the organization is planning to hire new staff. Threats: these also come from outside the organization. They can take so many different forms that here we will mention just a few of the most common. For example, what is our competition doing? Letâ&#x20AC;&#x2122;s take a classic customs example: the customs organizations of two neighboring countries. We should be asking ourselves: What is the average clearance time in the neighboring customs? What is the unloading cost? What is the demurrage cost? Strengths: these must be sought out from within the organization. They represent characteristics that produce added value and a competitive advantage. As such, they should answer the following questions: What do we do better than our competitors? What do our customers/users value most about us? What resources do we have? Do other organizations have access to the same resources? Weaknesses: situations or attitudes that lead to obstacles or halt activity. What can be improved or prevented are questions that respond to this situation. Plans must be drawn up for eradicating these weaknesses. Here are just a few examples of potential weaknesses: high average age of staff, resistance to new technology, inability to fill vacant positions due to budget restrictions, insufficient staff training, lack of adequate data-processing applications and post-control difficulties. Once the most significant external and internal factors have been identified and categorized, giving us a clear picture of the current state of the organization, the SWOT matrix can then be created based on the following template: Table 1.1 SWOT matrix template SWOT MATRIX

STRENGTHS (List)

WEAKNESSES (List)

OPPORTUNITIES

STRATEGIES

(List)

Use strengths to make the most of opportunities

Overcome weaknesses by making the most of opportunities

THREATS

STRATEGIES

Use strategies to avoid threats

Minimize weaknesses and avoid threats

Source: Compiled by the author

The combination of strengths and opportunities represents the potential of the organization. Weaknesses and threats are what limit this potential.

Strategic Customs Planning and Management

MODULE 3

Analysis of strengths and threats highlights risks and the connection between weaknesses and opportunities indicates the challenges the organization must face. It is precisely these challenges that should set the course of strategic planning. Figure 1.1 below provides an example of a SWOT Analysis undertaken by a private sector entity. Â

Figure 1.1: Example SWOT Analysis - Private Sector Organisation

Strategic Customs Planning and Management

MODULE 3

Figure 1.2 Example SWOT Analysis - A Customs Organisation

Strategic Customs Planning and Management

MODULE 3

SUMMARY SWOT analysis is a very simple tool used to determine the competitive advantages of an organization, as a key step before decision-making. It can be used as a stand-alone tool or in combination with other tools; for example, stakeholder analysis uses the SWOT matrix as another approach to information analysis. The matrix has 4 variables: Strengths, Weaknesses, Opportunities and Threats. To produce a SWOT matrix, we must first identify internal and external factors and then group them under the appropriate categories. Once the matrix has been created, it provides the following information: Strengths + Opportunities: the organizationâ&#x20AC;&#x2122;s potential Strengths + Threats: limitations to the potential of the organization

Strengths + Threats: risks Weaknesses + Opportunities: challenges

Strategic Customs Planning and Management

MODULE 3

UNIT II

STAKEHOLDER ANALYSIS

Learning Objectives To understand that stakeholder analysis is an essential tool for developing strategic planning in customs. To identify the various groups that could have an interest in the project. To predict potential reactions and to design a strategy to minimize the negative impact or maximize the positive, all carried out through effective analysis of internal and external information.

II.1. Introduction Text box 2.1 Step-by-step guide to producing a stakeholder report Stakeholder analysis has three critical steps: Identification and characterization of the affected groups. Production of reports based on the following tools: “analysis of expectations and interests”, “analysis of importance and influence”, SWOT analysis. Analysis: identifying key questions that should be taken into account when designing the project.

II.2. Identification and characterization Stakeholders are groups or individuals who benefit from or are disadvantaged by a specific problem and, therefore, have something to gain or lose if the project can solve this problem or improve the initial conditions.

Strategic Customs Planning and Management

MODULE 3

Projects tend to have a diverse range of stakeholders and the level of influence each stakeholder has over the project will vary. Therefore, the analysis should cover groups that will benefit from achievement of the expected results and those who will not, those who are involved in the decision-making process and those who are not, potential participants and non-participants, and possible supporters and opponents of the project. Stakeholder analysis is particularly useful to gain a solid understanding of these different groups and to build consensus between stakeholders with different points of view, motivation and expectations. The analysis begins by making a preliminary list of stakeholders. If there are any subgroups, it is a good idea to include them under each main group. Once the stakeholders have been identified, we then need to describe the characteristics of each group that could be relevant in the project, such as: Economic, social or cultural characteristics Status of the group (formal or informal) Role played in the existence of the problem and that could be played in the solution

Organizational structure of the group Likely attitude toward the project Based on this information, the projectâ&#x20AC;&#x2122;s design team will then decide on the role each stakeholder should play in the design process. For some groups, the opportunity to be heard and to participate is limited or nonexistent due to unequal power relations. Consequently, there is a risk of their interests and perspectives being ignored and not being included in the design of the project. In these cases, the design team is faced with a dilemma: often, the degree to which the most important groups are able to participate in the project does not allow for their priorities and needs to be properly addressed. However, it is precisely these priorities and needs that are most important for the project. Some solutions to this dilemma include targeted diagnostics on these groups or working individually with them. Below is an example of stakeholder identification undertaken by a Natural Resources Management (NRM) organisation. The diagram is just a model of one possible type of segmentation of the stakeholders for the regional body, based on the nature of relationships.

Strategic Customs Planning and Management

MODULE 3

Figure 2.1: Stakeholder identification for a Natural Resource Management Organisation

II.3. Production of reports The main tools that are used for this stakeholder analysis are: Analysis of interests and expectations Analysis of importance and influence Analysis of Strengths, Weaknesses, Opportunities and Threats Letâ&#x20AC;&#x2122;s take a brief look at each of these tools.

Strategic Customs Planning and Management

MODULE 3

II.3.1. Analysis of interests and expectations Every stakeholder will have certain expectations about what they hope to gain from the project or certain interests that can coincide or be in conflict with the project. These expectations and interests can lead to supporting or opposing attitudes toward the project, depending on what the groups feel they stand to gain or lose. As such, it is essential that these are identified in advance. We should bear in mind that expectations and interests can be based on subjective reasoning. For example, in a training project some people may refuse the training because they think it will be of no benefit to them, they struggle to adapt to new things or because they do not think it is worth putting in the required effort. The following questions may help us with this analysis: Who will benefit from the problem and who will lose out? What are the possible benefits (real or perceived) that the project can offer to stakeholder? Which interests of which groups could clash with the project? What support can stakeholders rally in favor and against the project?

II.3.2. Analysis of importance and influence In every project, each stakeholder will receive a different amount of attention. Certain groups will be more important to the project than others; for example, those whose problems the project aims to resolve or those with the right influence in the right places to ensure long-term sustainability of the achievements made. The importance of each stakeholder depends on various factors, including: The mandate and the priorities of the organization promoting the project. The mandate of each organization will focus on the support of certain groups. In the case of customs, their services are designed to directly benefit foreign trade operators. The type of project. In each specific project there will be other groups (public agencies, consumers, citizens) that will play an important role in solving the problem. This type of stakeholder will also be highly important for the project. On the other hand, not all stakeholders are able to participate in and influence the success of the project to the same degree. The ability of each group to help or hinder the project and its degree of success will shape the nature of their involvement. A stakeholderâ&#x20AC;&#x2122;s influence derives from a range of factors such as legal attributes, leadership, economic, social or political power, control of strategic resources, etc.

Strategic Customs Planning and Management

MODULE 3

The combined analysis of the importance and influence of stakeholders helps to clarify how each of the parties involved will interact with the project, which, in turn, facilitates the design of suitable response strategies. One method of performing the importance-influence analysis is to create an “importance-influence diagram”. This diagram is a quadrant whose horizontal axis represents influence and whose vertical axis represents importance.

A: stakeholders in A require special initiatives if their interests are to be protected B: your project needs to construct good working relationships with these stakeholders, to ensure effective coalition of support C: these stakeholders may be a source of significant risk, and they will need careful monitoring and management D: these stakeholders are unlikely to be the subject of project activities or management

Figure 2.2 Diagram of stakeholder importance and influence This figure allows us to divide stakeholders into four main categories according to their importance and influence: Groups with little importance and little influence. These are located in the lower left quadrant labeled ‘D’. A group with little importance is not a priority stakeholder for the project. If it also has little influence, it is not likely to be able to affect the course of the project. Therefore, this type of group will not be focused on by the project and, as a result, will be only subject to light monitoring. Influential groups with little importance. These are located in the lower left quadrant labeled ‘C’. These groups are critical. They are made up of stakeholders for whom the project is not directly designed, but who are capable of obstructing

Strategic Customs Planning and Management

MODULE 3

its progress in the event of conflict. These groups represent a potential risk and must be carefully considered when planning the project in order to try to win their support from the outset or, at least, to ensure they will not oppose the project. Sometimes it is even advisable to involve them in the project in order to gain their support. Important groups with little influence. These are located in the upper left quadrant labeled ‘A’. These groups are very important to the project but do not have the power to fully participate. In this case, the strategy should be to help these groups to develop their capacity and to promote a more balanced power relation with other groups. Important and influential groups. These are located in the upper right quadrant labeled ‘B’. This is the most favorable case as it represents groups for whom the project is directly designed and who are also in a good position to defend its interests. These groups must be included in the planning phase as soon as possible and we must strive to maximize their support and participation. The directors of receptor organizations are an example of this type of stakeholder.

II.3.3. SWOT analysis

The analysis of Strengths, Weaknesses, Opportunities and Threats is a powerful tool for participation analysis. It focuses on assessing a group from two different perspectives: internal factors (strengths and weaknesses) and external factors (threats and opportunities). Cross analysis of these factors (as explained in the section specifically dedicated to this tool) provides us with some invaluable guidelines for project planning and it is particularly recommended for projects that seek to change the relationships between different stakeholders. It should be carried out for each individual stakeholder, although in practice organizations that are very similar they can be grouped together into the same analysis. A matrix like the one in Figure 2.3 below is usually used to conduct this analysis. Stakeholder

Strengths Internal factors that enable the stakeholder to resolve the problem or participate in the project

Weaknesses

Threats

Internal facLimiting extertors that make nal factors it difficult for the stakeholder to resolve the problem or participate in the project

Opportunities

Effects

External factors that can be taken advantage of to resolve the project or to boost participation

Strategic recommendations

Source: Compiled by the author

Figure 2.3 Stakeholder SWOT report

Strategic Customs Planning and Management

MODULE 3

Each row contains the analysis for one stakeholder. The strengths, weaknesses, threats and opportunities are presented in the respective columns. The last column shows the results of the analysis in the form of questions that should be considered during the design stage. These questions should include recommendations for: using strengths overcoming weaknesses neutralizing threats or reducing their impact making the most of opportunities Figure 2.4 illustrates a SWOT Report for a single stakeholder group â&#x20AC;&#x201C; the media. The results of the analysis are presented in the four different quadrants. Â

21 Figure 2.4. Stakeholder SWOT Report â&#x20AC;&#x201C; the Media

II.4. Analysis of information for designing the project The design team should decide which areas of analysis are most important depending on the project in question and, on this basis, select the most appropriate tools for stakeholder analysis. The methods used, stakeholder analysis, should produce criteria for guiding the project strategy in areas such as: Measures to reduce risks and conflicts arising from opposing attitudes, conflicts of interest, environmental threats, etc. Strategies for encouraging partnerships with stakeholders who can strengthen the project. Recommendations for developing the capacity of important stakeholders who have little influence or significant weaknesses.

Strategic Customs Planning and Management

MODULE 3

Guidelines for encouraging participation and commitment, above all, from key stakeholders who are able to ensure sustainable results. Identification of conditions for success, such as support from certain groups, threats that must be neutralized or opportunities to be seized. The following matrix presents a summary of key questions for participation analysis and can be used to identify design guidelines. Table 2.1 Stakeholder analysis matrix Stakeholder analysis matrix Stakeholder

Interests and Expectations

Importance

Influence

Strengths

Weaknesses

Threats

Opportunities

Impact on the design

One row per stakeholder

Who is disadvantaged by the problem?

Priority groups

Type of influence

Target groups

How influence is exerted

Internal aspects that can help project progress

Internal aspects that can hinder project progress

External factors that can hinder success of the project

External factors that can be of benefit the project

Strategic recommendations for:

Similar stakeholders can be analyzed together

Who benefits from the problem?

Key players

What are the potential benefits if the problem is resolved?

Support or oppose the project?

Support and conflicts of interest

using strengthens overcoming weaknesses neutralizing threats making the most of opportunities

Source: Compiled by the author

II.5. The target group The target group is the group of people that the project is designed to benefit. The target group will be at the center of the project strategy. In the participation analysis, special attention should be paid to the target group and its analysis should be especially thorough. There can be more than one target group in a project. The following terminology is usually used to identify them:

Strategic Customs Planning and Management

MODULE 3

Beneficiaries The people or group of people whose problems the project aims to help resolve. They can be divided into two groups: Direct beneficiaries: people who receive direct support in the form of goods or services delivered by the project. Indirect beneficiaries: people who receive goods or services from organizations that have been directly supported by the project in order to facilitate or improve delivery of these goods or services. Recipients This term is often used to refer to institutions or organizations that are responsible for providing services to beneficiaries or acting as intermediaries in this process. Recipients receive services directly from the project in order to offer better services to beneficiaries.

Source: Compiled by the author

Figure 2.4 Target groups

Strategic Customs Planning and Management

MODULE 3

If we take, for example, a strategic plan to reduce clearance times in Customs X; with planned actions including new clearance software, replacing computer equipment and staff training. The direct recipients will be customs staff who need to update their skills and learn to use the new software. The indirect beneficiaries will be customs support entities that manage clearance documentation for their clients. They will be able to significantly speed up their processes. The direct beneficiaries will be the clients of customs agencies, who will see their imports and exports being processed faster than before and, as such, will also see a reduction in their administrative costs. Target-group selection criteria To identify the target group, we need to carefully consider which groups should be the beneficiaries of the project. In some cases, when the nature of the project makes this relatively clear from the outset and the key players are well known, the target group can be established almost immediately. In other cases, when the project has a wider scope and the participation analysis paints a more complex picture, more in-depth analysis will be required to identify the target group.

The following table shows some of the criteria that can be used and the guiding questions to ask. Table 2.2 Guiding questions to determine the target group Criterion

Guiding questions

Need

Which group is most affected by the problem and is the most vulnerable and excluded?

Effectiveness

Which group stands to gain the most from the benefits of the project?

Efficiency

Which group would benefit most per unit of resource?

Sustainability

Which group is most likely to be able to sustain the project results?

Importance

Which group is most important in terms of the mandate and objectives of the organization promoting the project?

Source: Compiled by the author

Strategic Customs Planning and Management

MODULE 3

SUMMARY Stakeholder analysis aims to identify the groups affected by the project, determine their reaction and plan the involvement of each group in the project design and implementation. This tool will also reveal the risks associated with the potential attitudes of the affected groups in relation to their importance to the project and level of influence over decision-making. The key steps for carrying out the analysis are: 1. Identify each group. 2. Obtain information about group characteristics using the following tools: “analysis of expectations and interests”, “analysis of importance and influence”, SWOT matrix. 3. Based on analysis of the information in the foregoing matrices, we are able to identify the key elements to be considered in a project: target groups, risks, necessary partnerships, strategies for engaging key players, recommendations for training and support of key players and actions to minimize threats. Identification of the “target group” is the most important part of stakeholder analysis. The target group is the group of people who will benefit from the project and, therefore, who will be at the center of the project strategy.

Strategic Customs Planning and Management

MODULE 3

UNIT III

THE LOGICAL FRAMEWORK

Learning Objectives To understand that the â&#x20AC;&#x153;logical frameworkâ&#x20AC;? is an essential tool for developing strategic planning in customs. To learn how to make a project strategy map including causal relationships between the various objectives and essential indicators to assess the extent to which the desired goals are achieved.

III.1. Description The logical framework approach is a method of analysis that presents, thanks to the way results are structured, the objectives of a project or program in a systematic and logical manner.

Source: Google. CEPAL documents

Figure 3.1 Logical framework

Strategic Customs Planning and Management

MODULE 3

A logical framework should show the causal relationships between the different levels of goals. It should indicate how the achievement of goals can be verified and define the assumptions that are beyond the control of the project/program but that could have an impact on its success. The main results of this process can be summarized in a matrix that describes all important aspects of a program/project. This matrix is used in all phases of the project cycle, its design should begin during the preparation stage and it should be added to in later phases. This is why it can be used as a management tool for each phase of the project cycle. However, it is also an important master tool as other management tools are produced based on the logical framework: the implementation schedule and the project evaluation and monitoring plan. The logical framework is a support tool designed to assist project managers. It helps them to think more effectively and to clearly express the fundamental ideas of a project. However, it neither guarantees a project will be logical (despite its name) nor successful. If the policies are poorly constructed, the logical framework cannot be of any help.

III.2. Producing a logical framework There are two steps to producing a logical framework: analysis and planning.

III.2.1. Analysis In this first step, the current situation is analyzed to create an idea of the â&#x20AC;&#x153;desired situationâ&#x20AC;? and to choose the strategies that will be applied to achieve it. The central idea is that the projects/programs are designed to resolve a specific problem that affects the target groups. There are four types of analysis: Stakeholder analysis Problem analysis Objective analysis Strategy analysis Since stakeholder analysis was studied in Unit I, we will now focus on the other three types.

Strategic Customs Planning and Management

MODULE 3

Problem analysis Problem analysis identifies the negative aspects of a current situation. It establishes cause-and-effect relationships between the existing problems. The analysis is divided into three stages: 1. Precise definition of the framework and focus of the analysis 2. Identification of the biggest problems affecting the target groups and the beneficiaries 3. Presentation of problems in a “problem tree” or “problem hierarchy” diagram to determine the cause-and-effect relationships The analysis is presented in a diagram in which the effects of a problem appear at the top and the causes at the bottom. Figure 3.2 illustrates a problem tree for a health related problem.

Figure 3.2: Problem Tree: Child Health Issue The above problem tree reflects an accurate, but simplified model of reality. Figure 3.3 illustrates a tree showing the cause-and-effect relationship for a problem related to delays in clearance processing times.

Strategic Customs Planning and Management

MODULE 3

29 Source: Compiled by the author

Figure 3.3. Problem Tree: Clearance Processing Objective analysis Objective analysis is a methodological tool that enables us: 1. To describe the future situation that will emerge when the problems have been resolved with the help of stakeholders 2. To verify the hierarchy of objectives 3. To present the relationship between means and ends in diagram form Also based on a tree diagram, it can be laid over the problem tree so that each branch of problems ends in the desired solution or state. This can help us to see that certain objectives cannot be met under the project as planned and that some problems cannot be resolved, at least not at that time. The following Objective tree, Figure 3.4, is derived from the Problem tree illustrated in Figure 3.2. The original problem is reformulated as positive and desirable future situations.

Strategic Customs Planning and Management

MODULE 3

Figure 3.4: Child Health Objective Tree The original clearance problem illustrated in Figure 3.3 is reformulated in Figure 3.5 below as positive and desirable future situations.

Source: Compiled by the author

Figure 3.5: Clearance Processing Objective Tree

Strategic Customs Planning and Management

MODULE 3

Strategy analysis Strategy analysis consists of selecting one or more strategies that will be applied to achieve the desired objectives. During this analysis, we should decide which objectives will remain part of the project and which will be left out. In addition, if there is more than one objective, they will need to be ranked. The chosen strategies will translate into different types of intervention according to the scope and quantity of the work to be carried out. When various projects are involved, this is referred to as a program.

III.2.2. Planning In this stage, the idea of the project is converted into a practical operational plan for its implementation. The logical framework and other documents supporting project implementation are produced in this stage. As we just said, the logical framework and other supporting documents are produced in the planning stage. Letâ&#x20AC;&#x2122;s take a close look at these toolsâ&#x20AC;Ś The Logical Framework The logical framework is presented as a matrix. This matrix allows us to structure the content of a project/program in a thorough and easy-to-understand format. It has 4 columns and 4 rows: The vertical logic sets out what the project aims to achieve, clarifies causal relationships and specifies the key assumptions and uncertainties that are beyond project management control. The horizontal logic refers to measuring the effects of the project and of the allocated resources by specifying the key indicators to be used and how they can be verified.

Source: Compiled by the author

Figure 3.6 logical framework basic matrix

Strategic Customs Planning and Management

MODULE 3

1. First column: the intervention logic

The title of the first column of the logical framework is “Intervention logic”. It shows the underlying basic strategy of the project:

Activities and required resources

Outcomes of the activities

Specific goal achieved based on these outcomes Overall goal fulfilled by achieving the specific goal

It is important to remember that the outcomes, specific goals and overall goals are all defined by the same word in this tool: goal. Therefore, to distinguish between them we refer to “levels of goals”.

As such, we have four levels of goals referring to different content: Overall goal: benefit to society, in terms of the more long-term benefits for final beneficiaries and other groups. The overall goal must be in line with government policy. The project cannot fully achieve the overall goal by itself, but must contribute toward this goal.

Take, for example, a project to reduce clearance times. Faster customs clearance will improve the flow of goods, reduce costs and enhance the efficiency and competitiveness of this public service. All this will contribute to the overall goal of economic growth in a specific region. Specific goal: the goal to be achieved during implementation of the project and that may continue on after the project. The specific goal should be to respond to the central problem and must be defined in terms of sustainable benefits for target groups. There should only be one specific goal per project. The outcomes are the “products” of the activities carried out. In theory, if all outcomes are achieved, the specific goal will be fulfilled. The activities are actions that must be carried out during the project for the outcomes to be obtained.

Strategic Customs Planning and Management

MODULE 3

33 Source: Compiled by the author

Figure 3.7 Intervention logic 2. Second column: objectively verifiable indicators

This column contains operational descriptions of the overall goals, the specific goal and the outcomes.

The operational descriptions describe the project goals in terms of quantity, quality, target group(s), time and location.

A good indicator must be: Specific: measuring what needs to be measured Measurable Available at a reasonable cost Relevant to a specific goal Able to indicate time

Strategic Customs Planning and Management

MODULE 3

The material and non-material means required to carry out the planned activities should be listed in the bottom row of the second column.

Text box 3.1 Examples of verifiable indicators for a customs project logical framework For the goal “reduce clearance times”: Indicators: average clearance time, number of clearances per day and per month, for imports, at Customs X, how long after the program was launched.

3. Third column: sources/means of verification This column indicates where and in what format information can be found about achieving the overall goals, the specific goal and the outcomes. The costs and sources of funding should appear on the bottom line of the third column. 4. Forth column: assumptions

Once the strategy has been chosen, we then need to identify the goals not included in the intervention logic and other external factors that can potentially or definitely affect the project’s implementation and long-term sustainability, and which are beyond our control. To identify the assumptions, we must ask ourselves what external factors cannot be controlled by the project but have the potential to negatively affect implementation and long-term sustainability. The vertical logic of the logical framework; or rather the link between column 1 and column 4 functions according to the following “if-then” logic: If the preconditions are fulfilled then the activities will be launched. If the activities are carried out and the assumptions hold true at this level then the outcomes will be achieved. If the outcomes are achieved and the assumptions hold true at this level then the specific goal will be fulfilled. If the specific goal is fulfilled and the assumptions hold true at this level then the project will contribute toward achieving the overall goals.

Strategic Customs Planning and Management

MODULE 3

Figure 3.8. Example of vertical logic links

III.3. Levels of implementation: logical frameworks for programs, logical frameworks for projects When dealing with an extensive change process, a single logical framework is unable to include all the information required for it to be put into practice. In these cases, the end goal is achieved by launching various action plans, each with its own logical framework. The logical framework that encompasses the key aspects of the change process is known in this case as the “master logical framework” and the set of actions required to achieve the desired result is known as the “program”. This logical framework for the program will be used at the highest level of management (General Director) to oversee the process as a whole. Each individual action included in the master logical framework or the logical framework for the program will be known as a “project”. This program/project structure is recommended as it offers an overview of the order of goal priority. In turn, projects can be carried out at lower levels within the organization, in which case they are known as “components”. For each component, a “sub-logical framework” should be produced.

Strategic Customs Planning and Management

MODULE 3

This will give us various levels of interconnected logical frameworks which would be represented as follows:

Source: Compiled by the author

Figure 3.9 Levels of intervention: from program to component

III.4. The logical framework used to create the activity schedule and the resource schedule The activities that will be carried out as part of a project are usually outlined in the logical framework. Once the logical framework is complete, the operational details will be added. The activity schedule is a methodological tool that presents the project activities and identifies both their logical sequence and interdependency. This schedule serves as the basis for deciding who will be responsible for carrying out each activity. Once the activity schedule has been prepared, the resources and means can be defined in more detail. Figure 3.10 illustrates movement from high level data in the framework to the production of the activity schedule to final resource scheduling. Figure 3.11 provides an example of a resource schedule.

Strategic Customs Planning and Management

MODULE 3

Source: Compiled by the author

Figure 3.10 Example of the development of accompanying reports Activity/Inputs

Unit

Quantity per period

Unit cost

Cost per period

Total project cost

Source: Compiled by the author

Figure 3.11 Example of a resource schedule The WCO compendium for phase II of the Columbus Program provides an example logical framework for a customs improvement project, giving an at-a-glance overview of what should be expected from the development program. This document usually accompanies the executive summary of the program proposal. Table 3.1 illustrates. Project logic GOAL To protect and develop the Country X economy with regard to trade, security and social protection

PURPOSE (specific goal) To develop Customs as an effective revenue collection and border management service

Objectively verifiable indicators

Means of measurement

Assumptions

Others involved

Current statistics with regard to international trade and inward investment are maintained or improved.

Comparison of statistics year on year

The goal reflects the strategic policy of the Country X Government.

Survey of trade and public opinion

There is no significant change in government policy.

Member departments of the governmentâ&#x20AC;&#x2122;s economic and security departments

Current statistics on border related crime show an improvement. Revenue collection is maintained or improved in line with inflation. Reduction in the availability of controlled/prohibited goods. Public opinion recognizes an improvement in performance.

Current trends in trade development continue. Regular monitoring of Revenue statistics Monitoring of price and availability Public opinion surveys

Economic operators Public

Tariff policy remains consistent

Tax Department of Revenue Authority

Changes in rates for VAT and Excise remain

Importers/exporters

fundamentally unchanged. Prohibitions and restriction on import/export remain fundamentally unchanged and are a Customs responsibility.

Brokers, logistics, transporters, banks etc. Travelling public International Organizations WCO Members

Strategic Customs Planning and Management

Objectively verifiable indicators

Project logic OUTCOME

Measurement against the Standards of the Kyoto Convention and the SAFE Framework of Standards

A Customs Service which complies with the Kyoto convention and SAFE Framework of Standards

Means of measurement Regular monitoring and review by Revenue Authority Program management

MODULE 3

Assumptions Recommendations of the WCO Diagnostic Mission are accepted and agreed.

Economic operators

WCO and other International Organizations

ACTIVITIES

Costs

Resources

Preconditions

Maintain the operations of Customs

To be estimated during the scoping phase

Government wide acceptance of the strategic purpose and outcomes of this program

Maintain current plan Re-establish approvals Develop business intelligence Develop middle management Develop and implement: An effective strategic management policy and process including risk management

Others involved

A supporting structure A development budget and expenditure plan A communications and promotion strategy Review and implement: New structure New procedures

A realistic development budget is allocated. Realistic timescales are set A program management mechanism is put in place within Customs. Basic data by which long term monitoring and evaluation of the program can be completed.

Supporting legislation New computer systems New equipment A supporting HR Program Form practical partnerships with Tax department of revenue authority Other Government Departments Economic operators Regional and International Partnerships

Source: The WCO Compendium for phase II of the Columbus program

Table 3.1 model logical framework for a customs project

Strategic Customs Planning and Management

MODULE 3

SUMMARY The logical framework is a very comprehensive and powerful tool for strategic plan design and implementation. It is a â&#x20AC;&#x153;masterâ&#x20AC;? tool, representing the entire project. As a master document, it is used to produce the implementation schedule and the projectâ&#x20AC;&#x2122;s evaluation or monitoring plan As such, the logical framework matrix will contain all the essential elements of a plan or project: goals, prioritized and with a definition of the causal relationship between them, and indicators to measure results and risks. There are various stages to producing a logical framework: a) Collection of information and analysis using various tools and matrices: stakeholder analysis, problem analysis, objective analysis and analysis of alternatives and possible actions b) Definition of the analytical structure of the logical framework c) Creation of the logical framework matrix d) Evaluation The basic matrix for a logical framework has vertical and horizontal entries. The vertical entries are: overall goals, specific goal, outcomes and activities (actions to be implemented). The horizontal entries are: the intervention logic, the project logic, the sources of verification and the assumptions. In addition, the activities have various associated indicators: expected costs, means to employ in the activities and preconditions to starting an activity. Just like a BSC, the logical framework is designed to be used at all levels involved in organizational change; from the unit or service through to the highest possible level, even up to the general director, ministry or government. The body of reports, which is added from the lowest to the highest levels, is known as the program and corresponds to the general strategic plan. As such, logical frameworks cover everything from the program (highest decision-making level) to the component (smallest administrative unit with responsibilities in the project or strategic plan).

Strategic Customs Planning and Management

MODULE 3

UNIT IV

THE BALANCED SCORECARD

Learning Objectives To understand the “Balanced Scorecard” tool To develop the skills to produce a balanced scorecard to facilitate tracking of strategic project implementation

For each student to be able to use this tool to improve their performance at work, by adapting it to each and every working environment

IV.1. Description The strategic plan IMPLEMENTATION TOOL known as a “Balanced Scorecard” (BSC) was presented in 1992 in the Harvard Business Review by Robert Kaplan and David Norton. As a completely new idea at the time, it offered an administrative management tool that went beyond the financial perspective that many managers relied on to assess company performance. It allowed for the adoption of a much broader perspective of a business. This tool represents a way of thinking and reasoning that helps us to express the objectives and initiatives required to implement the strategy defined by an organization. To do this, we first need to specify the vision and strategy for achieving this ideal image of the organization. This is then transformed into operational plans and finally provides information in return about activities and results, which will allow us to assess how to permanently improve implementation.

Strategic Customs Planning and Management

MODULE 3

Text box 4.1 BSC perspectives The BSC suggests observing the organization from four different perspectives, each of which must answer a specific question: Learning and growth. Can we continue to develop and create value? Internal business processes. What must we excel in? What added value do we offer? Customer. What do our customers think of us? Financial. Are we attractive to shareholders? What do shareholders think of us?

Letâ&#x20AC;&#x2122;s take a closer look at each of these areas... Financial perspective The financial indicators of any company are based on its accounting records and, as such, they speak to us of the past. BSC analysis aims to look at the financial future of the company, analyzing what is required to create value for shareholders. To do this, various indicators are used such as Economic Value Added, Return on Capital Employed, Asset Rotation, Liquidity Ratio, Debt Ratio or Return on Investment. Customer perspective This measures customer relations and customer expectations of the company. It requires analysis of the main elements that generate value for users of the service, focusing on the processes that are most important or satisfactory for them. As such, it analyses prices, quality of service, time, function, image and relations. Some other indicators used for this analysis are: user satisfaction, deviation in service agreements, claims resolved versus total number of claims, estimated claims versus total, incorporation or increase of users and increase of commercial flows. To help companies understand the customer perspective, basic customer care protocols are often used, as well as the mystery shopper technique, to assess the customer care offered by staff responsible for providing this service. Business process perspective This perspective analyses the suitability of the companyâ&#x20AC;&#x2122;s internal processes for ensuring user satisfaction and for improving financial performance. In the case of customs, this translates as higher levels of economic efficiency (more services at less cost). There are four types of process:

Strategic Customs Planning and Management

MODULE 3

Operational processes: developed through quality and re-engineering analyses. The indicators are those related to cost, quality and time. Customer management processes: the indicators used here are those related to customer selection, customer attraction, customer loyalty and expanding the customer base. Innovation processes: these are sometimes difficult to measure. Indicators such as the following can be used: % of new products launched; or number of products patented by the company. Good corporate management processes: these are related to new corporate values and generate intangible assets such as reputation. The corresponding indicators include those related to health and safety processes, environmental management and corporate social responsibility. People and learning perspective This perspective analyses the tangible and intangible assets that give a company the capacity to learn and grow. It is important to stress that BSC, in agreement with new business management theories, does not see training as an expense, as in traditional accounting, but rather as an investment.

This area of analysis is, however, rather under developed as the traditional production model for human capital is based on a period of specific initial training followed by a number of years of work with hardly any ongoing training. Today, it seems obvious that training should continue throughout our entire working lives and, as such, exact indicators need to be developed to assess the return on investment from this training. The boom of the Web 2.0 environment, e-learning and bâ&#x20AC;&#x201C;learning, and collaborative tools such as wikis allows companies to design fully comprehensive training systems in order to continually update staff skills. Another aspect that has changed our approach to training is the greater rotation of company employees. Today, the idea of a job for life has practically disappeared, making the generational transfer of information more complicated. The collective knowledge built up over time must remain within the company and means of offering this experience to new staff are required. This calls for the use of modern information management systems, such as electronic files. The indicators used to obtain reliable analysis from this perspective are divided into three blocks: Staff capacity and capability: employee satisfaction, average service time, training at the start and end of time spent in the company, no. of hours of training per person and year.

Strategic Customs Planning and Management

MODULE 3

Information management systems used by the company: development of in-house or commercially available software, computerized processes versus total number of processes, internal and external communication structure. Motivation: this is one of the most difficult things to measure. However, we would suggest using the following indicators: Are there channels in place to “listen” to employees who have come up with an initiative? Does the company actively encourage employee initiatives (for example by holding project competitions or offering prizes for ideas, etc.)? Do employees identify with the vision and identity of the company (related to employee satisfaction and average length of time spent at the company)? When all this information has been collected and categorized, we will have a type of “scoreboard” that can be used to track variation in key areas that are truly important for company management.

Text box 4.2 BSC purpose BSC is not a strategic planning tool. It is a tool that allows for implementation to be properly tracked. The company’s corporate purpose will influence which variables are most important. As such, different indicators will be chosen by different companies to assess the evolution of key variables. Far from being the only tool used to analyze the current situation of a company, the BSC is supported by one or more of the tools that we will study at a later stage. Interestingly, not all BSCs are currently based on the original model created by Kaplan and Norton, and there are many different versions of this model in use. When we use various management tools at the same time, the term “Dashboard” is often applied. A dashboard integrates all the reports obtained from the different tools used to analyze a company from a strategic point of view. BSCs can be used to analyze a small part of the overall situation of a company: a certain operational area (raw material storage management), a specific service (after-sales) or an individual aspect (risk to reputation). In this case, its application will be more straightforward since the variables and corresponding indicators will be easier to identify. In these cases, when it is applied to a specific area of management, it is known as an operational scorecard.

IV.2. Practical application of a balanced scorecard Experts propose six stages for implementing this tool:

Strategic Customs Planning and Management

MODULE 3

Analysis of the situation and gathering information Analysis of the company and determining general functions Study of needs according to priorities and technological level Flagging up critical variables in each operational area Establishing connections between critical variables and control measures Configuration of the operational scorecard, according to identified needs and information The operational scorecard must be configured in each operational area and at each level of responsibility so it always has the minimum level of information required to offer conclusions and ensure the most informed decisions can be made.

IV.3. Advice for producing a scorecard Simple: It should only include essential information presented in a simple, synoptic and summarized manner.

Pyramid structure: Indicators should be added level-by-level until reaching the simplest levels. Each manager should only receive information about the indicators related to their objectives and area of responsibility. Relevant: Indicators should only highlight what is genuinely important. It is advisable to support information with figures, tables and summaries. It is vital to establish how the information will be presented. This will ensure standardized reports and make comparing results much easier, both between different departments and from different periods in time.

Text box 4.3 BSC structure The structure of any scorecard will be: VARIABLES – INDICATORS – PLANNED REALIZATION – ACTUAL REALIZATION – DEVIATIONS

Since BSC is a diagnosis tool, the information it presents should shed light on what is not working in the company. Indicators that stray beyond the absolute limits fixed by the company will be clearly highlighted, in addition to those that are at risk but are not currently critical.

Strategic Customs Planning and Management

MODULE 3

Once fully designed, the BSC is a useful tool for decision-making at meetings between the heads of each department. They will be able to see deviations in their own areas and in others, and the interconnections between them, creating an opportunity for dialog and to establish responsibilities, analyze circumstances and propose action. What are the advantages of the BSC compared to other accounting and management tools? The nature of the information used: Instead of only focusing on accounting information, this tool usually includes information from management processes and protocols used in each area of the company and can cover any variable that is seen as important. Each BSC report is adapted to a certain area of management, cross-area unit or specific problem. The reports are simple: One-page reports are ideal, allowing the situation of a certain activity to be assessed at a glance. The format allows for rapid identification of problem areas.

IV.4. Application in customs administrations 45 For practical application of this tool, customs could focus on the following areas of strategic results: From the learning and growth perspective: Development and implementation of new applications Career development among members of the organization Building position-specific capacities Making it easier for staff to change areas through inter-area training programs From a process control perspective: Cost control Efficiency: procedure times Data management Quality (e.g. reducing causes for legal disputes) Quantity of services provided Satisfaction of economic operators:

Strategic Customs Planning and Management

MODULE 3

Progress in the fight against fraud Reduction of control times Reduction of indirect costs by improving the selection of goods to control and time needed to execute controls Cooperation with other control agencies to reduce the overall level of intervention of all agencies involved Uniform application of protocols Easier tax payment (e.g. introducing online payment or payment over the phone) Reduction of the time it takes to resolve appeals From the perspective of law enforcement: Increase in voluntary compliance with tax collection Reduction of causes for legal disputes Increase in tax collection through direct control activities Increase of seizures due to breach of the law

Improved coordination with other control agencies Some examples of reports based on the BSC tool are presented below. Table 4.1 Evolution of tax collection targets for customs in region X

Customs

Target

Performed 2013

% target met 2013

% target met 2012

R13/12

NATIONAL

7,176

10,020

139.6%

134.23%

104%

REGION X

1,094

1,205

110.1%

107.85%

102%Â

REGIONAL OFFICE

294

350

119

128

CUSTOMS 1

142.85

115

124

CUSTOMS 2

187

150

CUSTOMS 3

145

165

113.79

115

CUSTOMS 4

93.3

103

CUSTOMS 5

100

106.38

101

105

CUSTOMS 6

243

290

119.34

109

This table 4.1 shows the targets fulfilled in 2013 compared to those in 2012.

Strategic Customs Planning and Management

MODULE 3

It also shows the degree of fulfillment achieved by the region compared to the national total. The data in orange are minor failings or at-risk data. The data in red are targets that were not met and with data very far from 100%, leading to compulsory revision of all targets and procedures. The Chilean Customs website offers a set of very comprehensive reports about the evolution of main indicators. As such, we have included below one of the tables from the MONTHLY FOREIGN TRADE REPORT for MAY 2014. This report presents the net tax revenue per account in pesos and dollars. Variations are expressed in real and nominal terms based on the â&#x20AC;&#x153;Tax Revenue Reportâ&#x20AC;? from the National Treasury. Table 4.2 Chilean Customs May 2014 report on revenue from foreign trade

Strategic Customs Planning and Management

MODULE 3

SUMMARY

The “Balanced Scorecard” emerged from the need go beyond the traditional financial perspective of a company, introducing the analysis of other aspects that allow for a much broader vision of the company, its internal state and external position. As such, BSC analysis includes three additional perspectives together with the financial one: Internal business processes: What is the added value of our product compared to similar ones on the market? Here the internal processes of the company are analyzed. Customer perspective: What do our customers think of us? How can we attract new customers and ensure they remain loyal? How satisfied are our customers? Learning and growth perspective: How can we build individual capacities to contribute to the overall growth of the organization? BSC analysis does not consider training as an expense but rather as an investment. Therefore, the aspects that are analyzed from this perspective are the capacity and capability of staff, the information management systems used by the organization, horizontal and vertical communication, and motivation. All this data, when properly organized, will give us a “scoreboard” which will allow for better implementation of plans and projects. Since its initial creation, BSC has evolved into a very versatile tool. It is used in conjunction with other analysis tools (stakeholder analysis and SWOT matrix) and at all levels of the organization and the strategic plan; from the general plan to the smaller operational plans of individual units. When used in conjunction with other tools, the set of reports is known as a “dashboard”. The structure of any BSC will be: Variables – Indicators – Planned realization – Actual realization – Deviations BSCs must be kept simple. The indicators must be relevant, created at the various different levels and brought together in a pyramid structure. Deviations must be color coded so that at a quick glance, we can see which targets have and have not been met. This, combined with regular meetings between the heads of each area or service, will facilitate decision-making related to correcting deviations and implementing satisfactory strategic plans. Designed to produce a series of reports that are grouped together over time for each decision level, and to isolate units or services that are struggling to meet the targets set out in the strategic plan, it has a big impact on increasing the likelihood of fulfilling the overall plan and applying the best measures to each problem. The use of BSC reports in intermediary stages of implementation, with information on trends according to partially completed reports, helps us to make decisions “on time”.

Strategic Customs Planning and Management

MODULE 3

UNIT V

MANAGING INTANGIBLE ELEMENTS THROUGH ORGANIZATIONAL CHANGE PROCESSES

Learning Objectives To understand the problems associated with managing people through change processes in organizations. To understand the difficulty of assessing costs and benefits in public projects, and the need to find specific indicators for this task.

V.1. Managing intangible elements in public projects Our global reality has changed and these changes mean, among other things, new demands on customs administrations. To respond to these new demands, customs must look to implement modernization processes to strengthen their capacities. Such processes will require considerable investment and their efficiency and final results will depend on solid strategic planning. The set of tools that we studied in the previous chapter is what will guide these change processes. It is important to stress that the changes will be structural since, given the interconnection between global economies and the influence of customs procedures on world trade, any modification of the service conditions at one customs administration will affect the business activities of economic operators and other customs administrations with which it is connected.

Strategic Customs Planning and Management

MODULE 3

This change process also requires a comprehensive approach, offering a complete image of the plan under which the change will be implemented. In light of this, it is advisable to use a combination of the tools analyzed in this module, as well as the information from the WCO Diagnosis Report. However, use of the strategic planning tools analyzed above is not, by itself, enough to implement a successful change process. There are two tangential yet essential elements required to ensure a successful change process: a) Involvement of all people at the organization b) An appropriate cost assessment

V.2. People management in change processes There are two aspects to change processes in an organization: a) The external aspect: modification of structures, processes, products and services.

b) The internal aspect: modification of values, principles, image and identity. External changes can be organized and structured through strategic planning and implemented through various operational plans or projects. However, the internal changes that need to be carried out and that affect how members of the organization feel are just as important as their external counterparts. The degree to which members internalize the change to the identity, principles, values and vision of the organization at which they work has a direct effect on the success of the change process and, as such, this area requires some analysis. The internal process relating to members of the organization has a number of unique characteristics. One of these is the time required to complete the process: there is no fixed time or even one standard timeframe. Each member of the team will undergo this process at their own pace and each person will respond in a different way. This is why people management through the change process requires specially trained managers. This people focus is a new concept in the field of managerial skills and it is still not addressed in sufficient depth. Until now, business studies, whether at undergraduate or postgraduate level, focused on the external aspect of development strategies, without considering the thoughts and feelings of employees. Today, we are paving the way toward a more sensitive and empathetic type of production process management, which if not properly implemented can lead to serious problems for managers.

Strategic Customs Planning and Management

MODULE 3

When a change process is launched, people tend to react in three different ways: Enthusiasm Indifference Resistance Usually, the most negative of these categories would be resistance. However, the real danger here is actually indifference. People who resist change take action and communicate their feelings. They explain the reasons behind their reaction and it is important to listen to these reasons, without upsetting the dynamics set up to combat this resistance. Resistant people can be invaluable to the change process as they can draw our attention to faults in the project that may have been overlooked. In addition, by voicing their discontent, they show that the organization “affects them”. If they can be motivated in the right way and come to accept the project, they can be transformed into staunch “enthusiasts”. However, people who react with indifference put up mental barriers to avoid being “contaminated” by the process. This makes it very difficult to involve them in the project while this attitude persists and it is also harder to motivate them. Any change in an organization will generate feelings of loss among the people affected by the process. Identity is lost and, as such, must be replaced by the new identity that the process aims to create. A sense of security is also lost as we move away from familiar ground, from the expected to the unexpected. Past efforts appear to be wasted as people see the hard work put into the old organization project as being undone. All this can lead to frustration, accepting that the former model did not work, despite all the effort put into it. Logically, the intensity of these feelings will differ from one person to the next, depending on their individual character. Those who are most sure of themselves will accept these changes with greater conviction and spirit. However, we are able to identify a set of similar stages that all people go through in a change process. a) Recognition of the end of a situation: the feelings associated with this stage are anguish, confusion, uncertainty, resentment, sadness and fear. In terms of our own personal identity, we have to set aside our old professional selves and construct a new professional identity. b) Neutral zone: in this stage, the associated feelings are anger, insecurity, fear, frustration, vulnerability, skepticism, apathy, isolation and disruption. In terms of our own personal identity, we have shed our old professional identity but have not fully adopted the new one. c) New start: here we start to experience feelings of involvement, enthusiasm, confidence, relief, hope and acceptance of loss.

Strategic Customs Planning and Management

MODULE 3

One of the most important aspects of people management is to give people time to move through the first two stages and to guide them toward entering the final stage as soon as possible. To do this, managers involved in a change process may wish to adopt the following recommendations: Provide channels for people to externalize their feelings throughout the process. When we externalize and share our feelings, this helps us to take the drama out of the change and to accept it. Always use positive motivation. The change is necessary and people need to know the reasons behind it. Communicate with each member of the team. Everyone wants to know how the change will affect them personally. Encourage participation. People who actively participate in the change process will feel a greater sense of identification with the change. Increasing a sense of ownership over the project and control over the change will help people to reach the third emotional stage much sooner. So, the more people who are directly involved in the process and the greater the degree of participation, the easier it becomes to implement internal change and to change the organization’s identity.

Text box 5.1 Learning organizations The best, most useful and effective changes can only be successfully introduced in organizations that are able to learn. This idea was popularized by one of the leading experts on people and institution management, Peter Senge, who coined the term “learning organizations”. This type of organization is defined by Senge as places where “people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free and where people are continually learning how to learn together”. (Change Management, Master’s in Public Management IEF-EOI, Lecturer: José Aguilar)

Strategic Customs Planning and Management

MODULE 3

V.3. Cost-benefit analysis of a strategic plan In this section, we will take a look at an analysis method that can be applied in conjunction with those presented above and which is especially recommended for larger programs/projects in customs administrations: COST-BENEFIT ANALYSIS Of all the analyses that should be carried out before or at the start of development or change projects, cost-benefit analysis is logically one of the most important for finding out if it is worth moving forward or if it is best to abandon the project or investment before getting too far ahead with its implementation. It also allows for priority to be given to other projects before having spent too much on less beneficial projects.

Text box 5.2 The purpose of cost-benefit analysis The basic idea is to calculate the total value of all expected benefits and compare this with the total expected costs.

There are a range of different models that can be used to carry out this analysis. Yet they all share one fatal flaw when applied in the field of public services: they only measure assessable and tangible elements. The analysis does not consider areas such as: increased motivation, better working environment, improved citizen services, promotion of regional trade and economic development, enhancing the possibility of the best decisions being made due to a greater appreciation of other aspects once the change process is complete, and many others. These are just some of the intangible benefits that are associated with the provision of purely public goods or services. As such, the need arises to use a model under which these variables that are so inherent to public services can be assessed.

Text box 5.3 The advantages of cost-benefit analysis Most comprehensive estimate Most solid basis for defining the required criteria and conditions Most visible presentation of change targets Focus on the most important factors The intangible benefits become clear Greater understanding of the connection between benefits and investment

Strategic Customs Planning and Management

MODULE 3

Cost-benefit analysis should be performed during the initial phases of a project. That is, at the same time as the preliminary study and planning. Over the course of the project, this analysis will be subject to checks and changes as circumstances develop. The key challenge in cost-benefit analysis is how to assess the intangible benefits created by a project to improve public services. This can be done in two ways: through absolute values or through the relationship these intangibles benefits will have with their quantifiable counterparts. In light of the complicated nature of this task, and its vital importance for using this tool, the following recommendations should be considered: At the start of the preparation phase, the main objectives should be defined. These could be: To increase tax revenue To increase the volume of operations To reduce costs To reduce clearance times To improve the quality of services, reducing the possibility of legal disputes

Timing is essential. It is important to decide at which moment in time the costs and benefits will be assessed. We should bear in mind that while the costs will appear at the start of the project, the benefits may not appear until some time later. Histograms can be used to represent the time lapses between costs and benefits. In relation to the previous point, three different moments in time should be considered: Current time: when the cost assessment is carried out. Time zero: when the project is launched and the investment begins. The costs should refer to this moment in time. End time (corresponding to the desired situation). This is when the benefits should be assessed. It is advisable for the analysis team to be made up of 6-9 people from different professional backgrounds, so all the different benefits can be properly assessed. Define the effects of the benefits brought about by the investment. When referring to public services, benefits should be divided into the following categories: Benefits that have a direct impact on the results obtained Benefits that increase efficiency and quality in normal production procedures Benefits that allow for internal staff to be valued

Strategic Customs Planning and Management

MODULE 3

Benefits that provided added value for users Benefits that provided added value for society Benefits can be associated with revenue (increasing it) or with costs (reducing them). As we said before, the method of assessing intangible benefits can be indirect. Continuing with the example of a project to reduce clearance times, and knowing the desired reduction time, we can assess how many extra clearances can be performed per day by the same staff, the reduction in waiting times and the corresponding average cost. We can then apply a % of this value to the improved competitiveness that all this will generate compared to the same service in neighboring customs. It is not just the benefits that can be intangible... but also the costs. For example, a poorly trained staff with a low level of rotation through different positions or without professional career paths may begin to lack motivation, which will reduce their productivity. This can also manifest in more intrusive ways, such as a high level of absenteeism. The cost of an unmotivated member of staff can be assessed by calculating the days they do not turn up for work and also by mapping an inefficiency curve: if we have a model employee with satisfactory production figures (e.g. number of clearances per day), these figures can be used to establish the â&#x20AC;&#x153;desired levelâ&#x20AC;?. We can then calculate the difference between this level and the clearances performed per day by the rest of the staff. The resulting difference can be expressed as a cost measured in terms of the cost of waiting times for operators. Table 5.1 Diagram of a simple benefit structure Facilitation of appropriate information Internal benefits

Less claims

Less errors More productive visits to users

Lower costs Better service Less storage expenses User benefits

Lower costs

Lower staff costs

Less staff on sick leave Less staff rotation

Benefits for society Source: Compiled by the author

More tax revenue Lower costs

Strategic Customs Planning and Management

MODULE 3

SUMMARY SWOT analysis is a very simple tool used to determine the competitive advantages of an organization, as a key step before decision-making. It can be used as a stand-alone tool or in combination with other tools; for example, stakeholder analysis uses the SWOT matrix as another approach to information analysis. For an organizational change process to be successful, two essential elements must be incorporated into the project: Management of all members of the organization undergoing the change process Assessment of the costs and benefits of the project People management within the organization is vital to ensure all members internalize the new values, principles, image and identity developed under the strategic plan.

In terms of potential indifference or resistance to change, staff management must be geared toward fostering involvement, confidence and believe in the change as a chance for a better future. This can be achieved through motivation, communication, encouraging participation and opening channels for staff to express how they feel about these processes. On the other hand, the strategic plan must cover two fundamental concepts: the cost of the investment and the benefit to be gained or expected return from the strategic plan. These two aspects are vital for determining if a project is financially viable, if it can be of benefit and for indentifying the most suitable actions. Cost-benefit analysis is very difficult for public projects due to the nature of public goods and services; many of them have no substitutes as the private sector would be unwilling to produce or provide them. This analysis is also difficult when the nature of the service (in the case of customs, national security and public resources) means it cannot be handed over to the open market economy. Therefore, private-sector business models need to be adapted to public agencies, establishing prudent mechanisms for analyzing intangible elements that can contribute to improving service provision.

Strategic Customs Planning and Management

MODULE 3

References European Commission. Eurostat. (2014): “Information society statistics”. European Union. WORLD CUSTOMS ORGANIZATION. Columbus Program for capacity building. Phase II. Implementation tool. EUROPEAN UNION COOPERATION OFFICE. Project Cycle Management Guidelines. AGUILAR, J. (coord.) (2003): La gestión del cambio, Ariel. JEAN PAUL SALLENAVE. 2004. Gerencia y Planeación Estratégica. Editorial Norma. 2004. UNIVERSITY INSTITUTION FOR DEVELOPMENT AND COOPERATION. 2012. El enfoque del Marco Lógico. Manual para la planificación de proyectos orientada mediante objetivos. AECID.