Ship Managers Cooperate To Set Key Performance Indicators

Wednesday, June 29, 2005
Self-Regulation of the global ship management sector has taken a step nearer reality following the announcement that a method has been developed to set an industry-wide standard for operational key performance indicators (KPI) governing the management of today’s ships. A pilot project initiated by a Sponsor Group made up of the International Ship Managers’ Association (ISMA) together with 18 of the world’s leading ship managers and owners has identified a methodology to establish common standards for measuring, calculating and reporting KPIs to the industry. The move is significant in that it is the first time since the establishment of ISMA in the late 1980s that the global ship management industry has come together to agree how to self-regulate. The pilot project decided that methodologies capable of measuring the value of different contributing factors should be used to rank the importance of such KPI attributes for safety, quality and environmental protection. The Conjoint Value Heirarchy methodology, developed by Intellectual Capital Services Ltd, is one such methodology capable of performing ‘multi-attribute/multi-stakeholder’ value measurements. The results from the pilot project indicated good correlation between the output from the CVH methodology and what representatives from the Sponsor Group considered to be prime factors for operational safety and environmental excellence in ship management. The Sponsor Group has concluded that the CVH methodology had good potential to be an instrument for establishing consensus among important stakeholders on a standard for operational KPIs in international shipping, and to resolve the differences of opinion that would inevitably emerge. The Sponsor Group will now circulate the findings of the pilot study to the shipping industry in general as part of the drive to achieve international acceptance and support for the further work required to arrive at a standard for operational KPIs in shipping. The communication will be spearheaded by ISMA, but the cooperation of other associations and organizations including the Round Table of participants comprising of INTERTANKO, INTERCARGO, BIMCO and ICS/ISF is also sought to gain support for this important initiative. A gathering of ship management ‘wise-men’ will consider feedback from the industry at a special round table meeting due to be held in the autumn. Concern has been high in the world ship management sector that an inability to embrace self-regulation could result in a lack of consistency of quality in the way ships are managed. While many responsible ship managers have developed their own in-house KPIs, there has, as yet, been no common standard to set industry-wide applicable KPIs. The use of KPIs in shipping has gathered pace as the industry focus has shifted from detailed process regulation to goal-based regulation. And while ‘stakeholders’ such as owners, charterers, oil majors, insurance companies, P&I Clubs and underwriters, port state authorities and flag state authorities require more proof of a ship manager’s operational worth, the lack of a defined set of standards has sometimes led to confusion and mistakes through the misrepresentation of facts. According to ISMA, it is essential that KPIs in the ship management sector give a representative picture of the quality of the ship’s operational performance. They must also be limited in number, uniquely defined, transparent and economic to collect. “No pan-industry agreement can be reached without a tool to measure the ‘value’ of the various contributing factors to safety and environmental protection,” ISMA said. Rajaish Bajpaee, president and group managing director of Eurasia and ISMA president, said: “ISMA knows that a compliance culture doesn’t lead to the highest standards in shipping. Quality comes from self-regulation with verification for which we need uniform measurement criteria. This initiative is founded on the very same basic principle.” Svein Sorlie, Head of the project’s Steering Committee, described the initiative as “extremely important for the enhancement of safety and quality in international shipping,” and said “the help of ISMA has been invaluable in coordinating and taking this project forward”.
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