But when I looked into the small print of the costs there appeared to be something which - at first - struck me as strange, but than raised a red flag.
As a bit of background: when using a plane there is always a cost involved. This cost varies depending on whether you own a piece of the plane or are borrowing it without an equity involvement. But regardless of whether you are, or are not, there is always the cost of fuel that needs to be factored in. In many cases you take the plane, use it for however long you want and then fill it up when finished, at your own cost. In some instances you can fill it up on a company account and it gets charged to your costs or - and this was the case with the plane I was looking at - you were charged a fixed amount per hour for fuel, regardless of what you used.
The problem with this was the behaviours it promoted. Imagine the situation: regardless of how fast or how far you fly, you are going to be charged a set amount of money for fuel. This was not an insignificant amount either. It equated to 55 litres of fuel per hour for a single engine Cessna. (That's pretty much the same amount of fuel as my road car uses in about 8 days - and aviation fuel is more expensive). So in that situation, would you take it easy with the plane? Would you lean the fuel mixture to be as conservative as possible? Or would you just slam those throttles open and scream across the sky as fast as you could and as inefficiently as you could? Human nature would expect us to do the latter rather than the former. After all if there are ten people renting this plane in a week and they are all paying the same amount per hour, why should you be the one who only uses 75% as much fuel as them but still gets charged for 100%?
There was a knock on effect of this, too. The amount per hour was calculated on the average fuel usage that the owners of the plane were being charged. (They paid for all the fuel themselves and offset it against the hourly fuel rate). But the rate they set was based on current behaviour rather than future expected behaviour. Which means that after a few months of running at the new fuel amount (55 litres per hour), they discovered that they were actually paying for 70 litres per hour of usage (for example). Therefore the owners were losing out on this deal. So what did they do? That's right, the increased the hourly fuel charge to 75 litres regardless of actual usage.
Can you see how this would then become a bit of a problem? The upshot was that a lot of the guys who were renting the plane found that the fuel cost became prohibitive (even though they were using that much fuel per hour), and stopped flying. The owners then started to lose out on the rental charges for the plane. When it came to doing routine maintenance such as replacing the engine or the propellor, they found they had to stump up the money from their own pockets.
As I thought about this today I realised that there is a lesson in there from a process point of view. The process that was being initiated had measures or metrics that were - effectively - Key Performance Indicators for the whole process. They determined the efficacy of the process (after all, if the plane was using more than 55 litres of fuel per hour then the ROI on the process was reduced). But what had happened to this process was that it had become driven by the KPI rather than measured by the KPI. This was an occasion when the adage "What gets measured gets rewarded" did not apply. Quite the opposite intact.
The process had been designed with a flaw in it. The measure was inappropriate for the process. A more correct measure would have been to remove the fixed cost per hour and replace it with a variable cost based on actual usage. This added a small administrative burden to the billing process, but resulted in more flexible (and better run) flights, where the fuel usage wasn't excessive.
It might be worth having a look around your current process and seeing if there is anything in there which is working in a counterintuitive way. Do you have any process steps that are time dependent and allow a larger amount of time than is needed? Could you cut down that time to enforce the right behaviours of efficiency and speed? Could you organise your workflow in such a way that you are not encouraging unwanted behaviours from the participants.
You might be surprised at what you can change.
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