Management control systems in public transport : study of

Karnataka State Road Transport Corporation

Abstract
Public transport systems present an interesting situation where the objective of the company is public service
as well as self sustaining profits. For the purpose of achieving both these opposite facing goals, organizations
employ various mechanisms of control systems. From the point of view of goal congruence, such
management controls are extremely delicate to balance in cases such as public transport. This paper studies
Karnataka State Road Transport Corporation as an organization from the point of view of the control systems
that have been implemented at the ground level and the effectiveness of the same. Further, the drawbacks and
tradeoffs are examined and recommendations are made for arriving at the optimal tradeoffs between the
opposing goals of public transport systems.
Background
The Karnataka Road Transport Corporation was established in August, 1961 under provisions of Road
Transport Corporation Act 1950 with the objective of providing adequate, efficient, economic and
properly coordinated road transport services.
Karnataka state has four corporations.
1) KSRTC 2) BMTC 3) NWKRTC 4) NEKRTC
KSRTC has 69 depots, 14 divisions, 124 bus stations, runs 7011 buses, operates 23.74lakh
effective kilometers per day on its total 6463 schedules. The daily average traffic revenue is
523.70 lakhs, from an average 24.57 lakh passengers who travel in KSRTC buses. KSRTC has
33843 employees and 792 officers in its three layers of organization structure. KSRTC has been
continuously a profit making organization since the year 1999 and it is second Road Transport
Corporation in India in terms of profit margin (first is BMTC) in India. In 2009 KSRTC made
250.87 crores profit. The percentage of return on capital employed in 2009 is 14.35, at par with
industry standards. KSRTC has bagged many prestigious awards like Golden Peacock Award for
services, National award for Exemplary implementation of e-Governance initiatives.
2.0 Organization structure.
The organization structure is divided into three layers, termed as Central Offices at Bangalore,
Divisional Offices at district level and Depots at Taluka level. At every level there is a clear
hierarchy as shown in following figure (Centre Office), fig (Divisional Office, also known as
district office) and (Depot Office)

KSRTC organization layer

Organisational Hierarchy(Depot Office)

The resources like buses, materials, tyres, men and money is provided to the Depots from
Divisional Office.
The bus schedules are planned by the Divisional Traffic Officer in concurrence with Divisional
Controller. In practice the routes are planned either because of the public demand, revenue
opportunity or because of local political pressures. The buses run in monopoly routes where only
KSRTC can operate and non monopoly routes that are open for competition. Apart from this, the
bus operation can be mainly divided into ordinary schedules that run mainly in the village areas
and express schedules that run between city to city. The price structure is less in ordinary routes
as compared to express routes. The pricing structure is decided by the Transport Minister and
neither the Divisional Controller nor the Depot Manager can increase the price for the
passengers. Only in case of high private competition in non-monopoly sector the Divisional
Controller can reduce the price with the permission of the General Manager Traffic department.
The purchase of buses is decided by the Central Offices. Director Mechanical Department
decides on the bus allocation to the divisions. Further at Divisional level, Divisional Controller
and divisional Mechanical Engineer decide the bus allocation depending on the requirement at
the depots based on the Depot Managers request for resources.

The types of routes, age of the vehicles, addition of the new routes, profits are the main criteria
for the bus allocation to the depots. The purchase of the materials like tyres, tubes, FIP, engine
(costly and high consumption materials) is done at Central Offices. Minor requirements (in
urgent situations)are purchased at Divisional Office level, however there is a cap on the local
purchase amount for the divisions depending on the type of the vehicles and volume of
operations.
Though Depot managers may propose routes, it is mandatory for them to run the vehicles as per
the schedules ordered by the Divisional Controller. Divisional Controller has the powers to
penalize the Depot Manager as well as officers by way of salary recovery or increment cuts.
Employees below the Depot Manager level can be dismissed by the Divisional Controller.
In the light of the above, if we examine the span of control, the Central Office has different heads
for different departments and the head of the departments directly talk to the concerned officers
of the divisions. Even though the Divisional Controller is accountable for the Division
Performance, in practice department heads at the divisional office level are questioned by the
Central Office. There is a monthly review by Managing Director for the Divisional Controller as
well as for the department heads of the divisions at Central Offices. While Depot managers are
reviewed monthly at division level, underperforming Depot Managers are reviewed by the MD.
Apart from these meetings, regularly the Directors and HODs visit the divisions and take review
meetings. There is no positive incentive system for Depot managers for better performance. But
there are penalties and transfers (commonly called punishment postings)
For underperformance. In most cases, penalties are subjective. Divisional Controllers may
consider the factors like behavior of the Depot Managers, honesty, effort put etc. Since KSRTC
is PSU there is also a lot of political interference for such decisions. The vigilance wing at the
Divisional Office level directly reports to the Director and MD who cross-checks the revenue
realizations and other procedures which in turn reinforce the processes of revenue realizations on
track.
Roles of depot employee
The Depot Manager is responsible for daily administration and is empowered to direct the depot
employees. Job assignment to the employees inside the depot is done by the Depot Manager.
There are no fixed schedules to be operated by the Depot Manager. The mix of express and
ordinary schedules is dependent on the local requirement. Every Depot is given 8% extra
buses ,and 13% extra employees to compensate the absenteeism. (This ratio may vary
slightly.)Following are the persons who work under Depot Manager.
Traffic Inspectors - Inspectors look after the duty allocation for conductors and drivers.They
maintain the attendance and allocate the leaves to the crew. They operate theschedules as per the
target given to the Depot. The Traffic Inspectors are also responsiblefor the earning target given
to the Depot.

Drivers - Are monitored for the timely arrival as per scheduled timings, driving without damage
and for diesel consumption. The target for diesel consumption is measured byKilometer per Liter
(KMPL) of diesel. Drivers are monitored for vehicle damages andaccidents.
Conductors
They are assessed by the amount of revenue they bring in. The target revenue isfixed for every
schedule based on pilot survey and experiments. The earnings perKilometer (EPKM) is the
measurement for the conductors performance. In case of lowerrevenue realization, depending on
the explanations the conductor are penalized or warnedby the traffic inspectors.
Both the conductors and drivers have to sign a register two days which conveys them
theirexpected time of reporting and their work schedule. There are clear instructions in
writingregarding duty allocation which insists that the crew and vehicles should be fixed to the
schedules.
Assistant Works Superintendent.
AWS work under the Depot Manager and are responsible for the mechanicalmaintenances of the
buses. AWS plans the docking schedules which depict which busshould be taken for repair at
how many kilometers and is accountable for break downsdue to mechanical failures. They
monitor the vehicle damages and KMPL achieved bythe drivers. An important measurement of
AWS is number of off-road vehicles at thedepot waiting for repair.

Mechanics
The mechanics who repair the bus are called Helper-A and Helper-B. Their duty is tomake the
necessary repair work and they have to make necessary preventivemaintenances called docking.
They are measured by the breakdowns due to themechanical failures and also based on bus
docking.
Accounts supervisor
.Accounts supervisor looks after the ticket issuing and cash collection works. Accountssection at
the depot has junior assistants who issue tickets and collect the cash. AccountsSupervisor
monitors proper ticket issue and cash collection. He has responsibility of cashcollection from
commercial establishments and also from pass issuances. He isresponsible for proper distribution
of salary and incentives to the employees
Administration Supervisor
Administration Supervisor monitors the absenteeism of employees and leave status andday to
day administration works like correspondence etc.
Store Keeper

Store Keeper maintains the receipt and consumption records of the store items. He hasthe
responsibility of ordering for the important items like diesel. He has to maintain theitems in
optimum level so that buses do not go off road because of shortage of items.
Statistical Assistant
Statistical Assistant looks after the data maintenance and he is the one who prepare thedata of the
depot in prescribed format.

Management Control Systems in KSRTC- In the frame work of fourlevers of control.

KSRTC is a PSU and its primary objective is defined as that of providing adequate,
efficient, economic and properly coordinated road transport services. But in practice the
objective of KSRTC is not only providing the service but also to make profit which is what
maybe able to fund the primary service objective. For the purpose of meeting these goals
theorganization may be viewed from the perspective of the framework of 4 levers of
Controlproposed by Robert Simon (Anthony and Govindarajan, 2007 ).
Simons four lever of control

Core values and belief systems

.KSRTC is highly customer centric for both internal and external customers. The bus
stationInfrastructures and facilities of KSRTC are state of the art. KSRTC has introduced online
ticketreservation which is most innovative. KSRTC floated accident relief fund which pays up to
twolakh rupees in case of accidents. KSRTC is increasing its services by establishing depots in
alltalukas of Karnataka. Public complaints are properly responded to in KSRTC. The

alternativearrangements for the bus service in case of break downs are very quick. KSRTC is the
pioneer inbringing Volvo and Mercedes Benz services among all the state run PSUs. There is
strongculture in the organization that

passenger satisfaction is most important

The conductors and drivers are provided with lot of facilities like scholarship facilities fortheir
children. In many places employees are given accommodation. KSRTC is pioneer inintroducing
electronic ticket issuing machine which has reduced the effort of the employees.KSRTC owns
two hospitals where in employees can take treatment and has tie-ups withprestigious hospitals
such as Jayadeva Hospital Banglore, Narayana Hridayalaya Banglore whereemployees can
undergo surgery at the cost of the organization. Employees are trained in thetraining institute
owned by KSRTC. Officers are absorbed in transparent manner and whole process of
examination is conducted by prestigious institute like IIM Bangalore. All the officersare trained
by Central Institute of Road Transport, Pune. Employee complaints are handled withlot of
concern and Central Office carefully observes the behavior of the officers with
theemployees.Penalization in KSRTC is also strict and dismissals on account of breach of belief
systems,especially customer satisfaction, are not rare in the organization. There is strong culture
of Customer and employee orientation in KSRTC.
Boundary system.
In KSRTC the rules and regulations are well documented and circulated among theemployees.
Invariably any deviation from the duties is punished severely. There are circulars forevery act
and all the officers and employees have to adhere to the rules and procedures. Conductand
Discipline of Employees 1971 Act is applicable to KSRTC which commands employees
tobehave in certain manner. For example employees cannot consume alcohol on duty and
hecannot be seen in public places in intoxicated condition. For Depot Manager the duties
andresponsibilities are clearly mentioned in the form of circulars and he has to adhere to them.
Anydeviation is severely penalized by salary cut.
Every employee has to submit the assets and liabilities to the corporation and has to take
thepermission from the Divisional Controller before he purchases any assets. Owning more
assetsthan the known source of income may attract investigation. This acts as control over any
rentseeking behavior of the employees.
Diagnostic Control
At the depot level as already mentioned above, the drivers and conductors are closely monitored
for KMPL and EPKM respectively. The performance of the AMS and Traffic Inspectors is also
closely monitored. There are weekly meetings at the Depot level headed by the Depot Manager.
He plans work for coming week and assigns individual responsibilities. The Duty Rota system
plans the duty allocation before a week and the driver and conductors sign the duty chart two
days before. The fixed duty acts as a formal control wherein drivers and conductors adhere to a
particular system. Kundapur Depot in South Kanara district is bestexample wherein for

continuous two years no single schedule was delayed even for a minute and no kilometer
cancelled.
Invariably conductors are not only checked for earning but also forpilferage of passenger money.
If conductor is caught pilfering, he is penalized depending onseverity of the case.
The performance of the Depot Manager is done based on more than 35 key parameters. The
Division Controller takes the review meeting once in a month. But in practice DC visits the
Depot every week. The departmental heads at Central Office collects day to day details. Control
Room established at Central Office Banglore collects each detail regarding late departures and
daily break downs and summarizes it depot wise and submits to concerned departmental heads.
Any major deviations in bus operation are informed to the Directors and Managing Director.
Every day the Depot Manager has to submit depot performance in a prescribed format to Central
Offices.
The variable pay system is not adopted in KSRTC. The incentive system is introduced for drivers
and conductors only (1% Of the revenue realized.) Some times, drivers who bring more KMPL
consistently are rewarded.
But apart from this incentive system KSRTC has no incentive system for performance. Rather
the system has more of punishment than incentive. No other employees are measured in terms of
money value. For example the work done by the mechanics or Store Keeper or Accounts
Supervisor is not measured in terms of money value. Even though the Depots are SBUs the
performance of the Depot Managers are not linked with the performance.

Interactive Control.
The employee trainings are mandatory. Drivers are trained at the Divisional level itself whenthey
are newly appointed. Employees are trained at Training Institute Banglore especially inteam
work, leadership etc. Officers are trained in Central Institute of Road Transport Pune andalso in
Industrial Academy Delhi. At the depot level the suggestions given by the employees are
considered and same are conveyed to Divisional Offices. In practice any changes required in
routes to realize higher revenue such as changing the timings are done quickly.
INFORMAL CONTROL SYSTEMS IN KSRTC
Emergent trends.
Gone are the days for KSRTC that employees were less educated. In recent days KSRTC has
been employing a lot of highly qualified people. The bottom of the pyramid is also strengthened
by educated employees. The majority of the work force can understand the needs of the
individuals and their duties and responsibilities forcing KSRTC has to tailor its attitude towards
employees. The public sector has to be aware of the needs of the employees and has to act
accordingly. If internal customers are satisfied, they are intrinsically motivated to satisfy and

delight external customers (Tam and Hui, 1996). The emergent trend in KSRTC is that even
lower level employees are aware of the competition. We can see a lot of drivers and conductors
struggling for revenue and emerging trend of active participation by the employees in
competition is also acting as a control system in aligning the employees towards achievement of
the goals.
Implicit hierarchies.
We can observe that the officials having more interactions with the employees are more
respected. For example the checkers who frequently check the employees have more contact
with employees and employees conveying the official and non official matters with them.
Another example is that even though the Depot Manager is the official reporting authority for
mechanics, the loyalty of the mechanics is always towards the DME. KSRTC should understand
these implicit hierarchies and act accordingly.

Tacit knowledge.
The Depot Manager knows exactly how many extra buses he can operate, he knows better than
anyone else that how much profit he can make. A conductor knows how much revenue he can
bring in a particular route. A mechanic can easily tell which rubber works better and which will
not. But these things are not discussed in a formal set up. Many employees discuss in the rest
room about the improvements required in route or in a depot. Their experience builds certain
knowledge within the employees that they can exactly assess the results or lacunae in the system.
(Erden et al, 2008). Many young officers can stretch beyond their boundaries. Giving an ear
towards the tacit knowledge is most important and KSRTC should create a platform where
informally these issues are discussed and discussions can be used for improvements. Leveraging
the talent among the officials benefits the corporation.
Entropy.
It is very common in the large organizations like KSRTC that employees are confused about their
roles. The clear instructions about the roles of employees should be given during the training
itself. Furthermore, there should be a clear matrix for navigating the entire organization so that
there is no confusion among new employees while seeking help for work related or
administration related issues.
Star Profile
In every depot, in every group of employees (say driver, mechanics, inspectors) we can get star
performers. The best example we can get in the system is extra operation specialists who can
manage the large bus operation, accident specialists who can manage the critical scenarios like
accidents or bandhs.
They are the ones whose skills are time tested and with the deep knowledge of the prevailing
system, they can come out as good performers. We can get the star performing depot managers

also. KSRTC has to identify these performers who are suited to that particular locality and has to
encourage getting the work done.
Gaps in Control System of KSRTC.
A Depot manager has to operate the buses on both ordinary and express routes. The ratio of
ordinary and express routes varies from depot to depot. Naturally, the buses that run on ordinary
routes have low KMPL and low EPKM since ordinary routes are in village are as with bad road
conditions, frequent halts and relatively less passenger traffic. In contrast the express routes have
more EPKM and buses ply in these routes have more KMPL for the converse reasons. We have
to note that the pricing is also more for express routes rendering depots having more express
routes more profitable. If we analyze the performance metrics of the Depot Manager, the
ordinary and express operation are not separated. At the same time, neither is the economic value
added towards the society measured nor is the opportunity cost of the ordinary routes considered.
Capability Approach (Sen-1992) can be considered here for measurement. The capability
approach measures performance according to the extent by which the public transport system is
able maintain or increase the ability of the people to employment and education. (Sen-1992).
Presently a Depot Manager has no incentives or motivation to run the ordinary vehicles since he
is measured by revenue or by profit. Hence he only runs the mandatory ordinary routes and
focuses more on express routes, which is against the primary goal of service.

The objective of the KSRTC is not only making profit but also to provide the economic service
to the rural public. Even if the Depot Manager operates the buses in most efficient manner in the
ordinary routes his depot may be in loss due to inherent characteristics of the routes. Since the
Depot Manager is evaluated based on the revenue growth, he is not incentivized to operate the
buses in efficient manner in ordinary routes which is the main stated objective of KSRTC. This
can be overcome only when the economic value added (by subsidized service, by improvement
in the rural economy etc) is considered by every kilometer of operation in ordinary kilometer and
is quantified. We can take into account the opportunity cost of the resources which Depot
Manager operates in ordinary routes.
Depot as Profit Centre.
Presently in KSRTC, Depot is working as Strategic Business Unit but not as a profit centre.
There are ambiguities in objectives and performance measurements. Some of the performance
metrics are not in congruence with the goal of the corporation. The efforts put by the Depot
Manager in efficient operation of ordinary routes takes back seat when profit is measured as
performance. Hence KSRTC can achieve its objectives by transforming Depots as Profit Centers.
Following are some possible alternatives to convert the Depot into Profit Centre.

1.The Depot Performance may be linked with incentive of the Depot Manager. The subjective
parameters like honesty, regularity, good behavior with the employees can be considered for
evaluation. 360 degree appraisal from superiors as well as subordinates is a good option to
measure the performance.
Customer satisfaction must be
given importance for while measuring performance.
2.There may be a measurement system to measure the trade off the Depot Manager has made.
The performance metrics may be crisp and easy to asses. The economic value added and
opportunity cost of the ordinary or non profitable routes must be calculated for the performance
metrics.
3.The performance parameters of other employees may also be in economic value and must be
incentive linked. The role of the every employee should be towards the objectives of the
corporation. All the supervisors in the depot must be roped in the objective of serving the public
as well as achieving the profit.
4.Depot Manager may be given with the decision rights to use his resources. Depot Manager
should have rights to cancel the unwanted kilometers and non profitable kilometers. The
customer service parameter in performance evaluation will ensure that he does not gooverboard
in cutting all ordinary routes and expanding only on express routes.
5.The interference from the divisional office in the decisions of the depot manager must be
limited. Too many officers interfering in the Depot Management spoil the decisions.
6.Under performance may be penalized by linking it to the promotions.

Conclusion and Recommendations

Ideally organizational control systems must be used to design performance parameters and
measurements so that the organizational goals and individual goals are aligned. In this paper we
have analysed KSRTCs control systems through Simons Levers of Control Framework.
While connecting this analysis to the recommendations that follow, we may say that
KSRTCscore belief is customer centric service and employees centric administration. But in
any of theparameters in the performance metrics of Depot Manager does not reflect the said
beliefs. Neither the customer satisfaction nor employees satisfaction parameters are incorporated
in theperformance metrics.
Similarly boundary system restricts the employees behavior. For example bus crew
Is supposed to behave in a cooperative, pleasant and helpful manner with the passengers,
superiors as well as with the co employees. But in practice, only the financial goals of the

corporation are measured by assessing EPKM and KMPL for conductors and drivers respectively
but behavioral aspects of the crew is not assessed.
On the same lines, with reference to diagnostic control systems, the measurements must be in
various areas such that a holistic view of the organization may be obtained. In practice Depot
Manager and below employees are assessed by different parameters which are incongruence only
with achieving the financial goals, but not with service goals of the corporation. Further,
employees like Assistant Store Keeper, Accounts Supervisor and Administrative Supervisor are
not measured at all. For example Store Keeper can be measured for cost control, Accounts
Supervisor can be assessed for timely issue ETMs, Collection of commercial revenue, and
Administration Supervisor can be assessed for leave control, cost control in terms of absenteeism
control, cost control in terms of planning the schedules based on age and experience(Depending
on salary) of the employees. The goals of the corporations should be met by defining the Key
Performance Indicators for the designations. Within informal control systems, similar measures
may be undertaken. Emergent trend can be en-cashed for the goals of the organization. For
example, nowadays the emergent trend is increase in the percentage of the educated employees.
This trend can be en-cashed by KSRTC by utilizing crew in planning the schedules, schedule
survey, monitoring the schedules, analyzing the data, brain storming sessions to improve the
depot. Since employees know the ground reality they are best people to come up with the
suggestions.
Implicit hierarchy can be used for the benefit of the organization. For example Accounts
Supervisor may be a well respected person in the depot. During the time of Jatras (Fairs)
orduring the emergency/extra operations, his involvement in the bus operation will get good
results. Any employee who has loyalty (but not basically traffic or mechanical man, say
administration man) can be utilized in revenue improvement of the depot. Organizational stories
are very important aspect of the informal control systems. Management has to give an ear to the
stories. Many of the stories reveal popular opinion. It is important to have access to such
information so that deviations from norms if any may be rectified before they get worse. The
recommendation is that vigilance wing of the corporation can collect the stories floating around
and rectify the system.
Ground level workers have a lot of tacit knowledge and can come up with many improvements
but they hardly get chance to express their views. The recommendation here is that the tacit
knowledge can be used strategically for the improvement of the system. For example a tea party
with the conductors can give us lot suggestions to improve the routes. The challenge here is how
do we systematize such process and and make use of the tacit knowledge.Another example is
that a newly recruited driver might have worked in private sector who knows about the strategies
of the private bus operators. That knowledge of this driver can be used in planning of the
routes.To capture performances through informal control systems, KSRTC may add parameters
such as innovative contribution, extra value addition and incentives linked to them.

Basic argument of the paper is that Depot Manager should be assessed by main parameters or
outcomes like
1) Depot EPKM
2) Depot KMPL.
3) Revenue increase.
4) Total cost
5) Net Profit.
Apart from these important parameters other mechanical parameters or outputs like
1) Battery performance,
2) Tyre performance
3) Vehicle utilization
4) FIP performance
5) cost on spare parts should be assessed for Assistant Works Suprtendant and below ranking
employees. In the same way, the parameters like
1) Commercial revenue,
2) Kilometers cancellation,
3) Absenteeism percentage etc
should be assessed for traffic personnel like Assistant Traffic Supervisor and Traffic Inspector.
Apart from these revenue parameters, we should add the service parameters for Depot Manager,
for example Customer satisfaction and Employees satisfaction. Depot Manager has to be
assessed not only by superiors and customers but also by subordinates. These parameters may be
assessed by a third party or by any officers of different non-related unit. Assistant Traffic
Supervisors and Traffic Inspectors can be assessed by service parameters like regularity of the
trips. AWS can be assessed by cleanliness and mechanical soundness of the buses. The ordinary
schedules operated by the Depot Managers must be taken into account by adding the opportunity
cost of those resources to the depot revenue only for assessment purpose.
This paper does not recommend in any way any structural change in public transport
organizations such as KSRTC. The effort is to make the organizational structure effective
through the implementation of appropriate measurement metrics using the intrinsic control
systems that prevail in organizations. Depot managers cannot and must not be made accountable
for things in which he does not have any control. Appropriate officers having specific powers
must be accountable for execution of those powers.
Finally, this paper makes a passing reference to responsibility centres when it talks about depot
as a profit centre. More research may be conducted in this area of responsibility centres.