Public transit authorities, and the essential services they provide, are indispensable to communities across the U.S. It takes a combination of ticket sales, advertisements, and federal and state funding to keep these institutions operational. So, when the COVID-19 pandemic struck—destabilizing traditional funding sources like ridership and fare revenue—it instigated an era of financial crisis for many transit providers.
The U.S. government did provide temporary relief through the American Rescue Plan Act and the CARES Act, totaling $55.5 billion. However, these funds are expected to run out by 2024 or 2025, and ridership has not yet returned to pre-pandemic levels. According to the American Public Transportation Association (APTA) 2023 survey,
“...although ridership levels have recovered to more than 70% of pre-pandemic levels nationwide, those levels vary by agency, and there is some evidence that fare evasion and operating costs have increased in the last three years.”
This situation has created a significant budget deficit for transit agencies, known as the Transit Fiscal Cliff—a challenge that 71 percent of major transit agencies are predicted to encounter within the next five years. Without additional funding, this financial cliff may force transit authorities to decrease services and increase fares, further reducing ridership and accessibility, especially for low-income and vulnerable populations.
To put it simply: Transit authorities need to pivot if they wish to remain viable. They must seek alternative funding sources, such as public-private partnerships, local tax initiatives, or specific transit funding measures to mitigate these impacts. Securing this support means demonstrating a compelling business case for public transportation with improved cost management, operational efficiency, and attentiveness to local needs and customer feedback.
Prioritizing these areas can help transit agencies secure sustainable funding and deliver the reliable and accessible transportation their communities desperately need. But they will need both speed and accuracy to pull it off. Enter: Strategic Portfolio Management.
Read on to find out how transit authorities facing financial challenges, like the Transit Fiscal Cliff, can benefit from this innovative framework for balancing resources against strategic initiatives.
Strategic Portfolio Management: A solution for transit fiscal challenges
Gartner® predicts that “By 2026, 30% of organizations will embrace effective strategic portfolio management (SPM), and invest in talent and enabling technology to become industry leaders.”
SPM is a comprehensive methodology that aligns projects, programs, and investments with strategic objectives and is widely utilized in finance, IT, healthcare, and the public sector. It helps optimize resource allocation, minimize risks, and maximize return on investment across the portfolio—a combination that enables transit authorities to make data-driven, strategic decisions more efficiently.
Beyond enhanced decision-making, there are five key benefits for transit authorities that adopt SPM:
1. Strategic Alignment and Prioritization: SPM can help ensure investments support long-term financial sustainability and community needs by aligning projects with strategic goals. SPM also uses a prioritization framework based on available resources, ROI (depending on an organization’s maturity), risk assessment, and community impact. This approach builds public trust and support for funding initiatives by clearly illustrating the benefits to the community.
Gartner® estimates that “By 2027, 75% of organizations will enrich business architecture by connecting financial benefits to digital investment decisions.”
2. Resource Optimization: It allows strategic allocation of funding, talent, and other assets. By providing a holistic view of all projects and initiatives, SPM enables transit authorities to identify resource conflicts and opportunities. This approach ensures limited resources are effectively utilized to maintain service quality and reliability and meet urgent community transportation needs, even during financial instability.
3. Comprehensive Portfolio Visibility: According to a GetApp Lab report, 95 percent of organizations use two or more team tools, underscoring the need for SPM to provide a unified view across diverse teams and methodologies. SPM establishes a centralized project repository, consolidating all transit engagement data into a unified view. This clarity allows decision-makers to quickly reallocate resources to critical initiatives, minimizing service disruption and maintaining public trust. For example, a large state transportation enterprise engaged North Highland to mature its IT Department’s Portfolio Planning & Governance. Using SPM techniques, our experts transformed a siloed team of developers, managers, and directors into a cohesive group. This collaborative shift delivered visibility into the full array of ongoing projects, enabling better resource planning and a higher probability of projects finishing on schedule.
4. Enhanced Transparency and Risk Management: It promotes transparency in project goals, risks, and outcomes across stakeholders. This proactive approach minimizes delays and cost overruns, promotes greater accountability, and helps keep initiatives on track and aligned with organizational objectives.
5. Understanding of Dependencies and Risks: SPM enhances an organization’s ability to analyze relationships and dependencies between projects and anticipate challenges and conflicts. This reduces disruptions, maintains service reliability, and ultimately improves the passenger experience.
Expert Insights: Tad Haas on North Highland's NH360 SPM tool
Tad Haas, Director of Business Services at North Highland, shares how our proprietary SPM tool, NH360, helps transit authorities optimize resources, minimize risks, and align investments with strategic objectives. The graphic below summarizes the SPM fundamentals and represents the core capabilities supported by NH360.
We sat down with Tad to hear about his SPM and NH360 experience. Here’s what we learned:
Question 1: How do you define "success" when implementing SPM at a public sector transit organization?
Success in SPM varies based on organizational goals and challenges. Some transit agencies focus on cost reduction, while others prioritize safe operations and risk management. For example, one rail organization may strive to improve on-time arrivals whereas another wants to implement proactive risk management strategies. There is seldom a one-size-fits-all approach, since each organization has its unique culture, processes, and paths to strategy realization.
Question 2: What are the key elements clients need for a successful SPM implementation and how does NH360 provide these tools?
There are several keys to successful SPM that transit authorities can leverage. These include:
- A flexible model that meets specific customer needs while complying with industry standards.
- Business process modeling for clearer visibility into how changes impact processes.
- Value stream and business capability modeling to streamline the mapping and optimization of organizational capabilities.
- API integration to support data consistency and connectivity with tools like Power BI and ServiceNow.
- Survey functionality that unlocks crowd-sourced data collection for more informed decision-making.
- Portfolio analysis, specifically NH360’s deep portfolio analysis that assures value creation, reduces value erosion, increases cost recovery, and strengthens investment governance.
- Scenario planning for robust ‘what-if’ planning and scenario comparison capabilities that combine data and analytics for more informed decisions. For additional details on this capability, and real-world examples of its impact on enhancing decision-making, please visit our website.
Question 3: How does SPM translate to efficiencies, cost savings, and optimization for an organization facing financial challenges?
SPM offers pathways to optimization and cost reduction in three ways:
1. It aligns spending with strategic priorities to maximize ROI and value creation. This additionally helps generate more value for the riders.
2. SPM also identifies duplicative spend by utilizing heat maps to pinpoint and eliminate redundant expenditures.
3. It streamlines operations and improves processes by clarifying current and target states of resource allocation—as well as the steps needed to bridge the gap.
Question 4: What is the change management process for implementing SPM, and how do you ensure the change is sustainable?
The change management process starts with collaborative whiteboarding sessions in which team members identify challenges and ongoing activities that no longer align with strategic goals. Once these have been pinpointed, the next two actions are taken simultaneously:
1) Developing a clear vision of the Target State for future operations, and
2) Linking newly identified pain points to Key Performance Indicators (KPIs) to assess potential improvements.
These KPIs help create a detailed roadmap for transitioning from Current State to Target State—addressing gaps, operational impacts, process maturity, and monitoring KPIs. Meanwhile, leaders should implement ongoing maintenance to keep things running smoothly. This involves keeping leaders engaged, socializing new processes, and regularly reviewing KPIs. Because every organization is different, these measures are tailored to fit unique organizational needs and change maturity.
Question 5: Beyond the NH360 tool, what learned experience does North Highland offer to new clients tackling SPM challenges?
Putting it all together: North Highland is the only consulting provider with industry analyst-recognized SPM software. But we offer a comprehensive strategy realization capability that goes far beyond just software implementation. Our approach is backed by:
Industry Experience: We leverage deep sector-specific knowledge to deliver tailored solutions that address the unique challenges faced by transit authorities.
Standards and Models: We apply proven frameworks and best-in-class transformation services, ensuring that SPM isn't just a tool, but a catalyst for real organizational change.
Enterprise Transparency: While NH360's Enterprise Connect feature provides comprehensive organizational insights, we focus on translating these insights into actionable strategies that drive tangible outcomes.
Change Management Expertise: We guide organizations through the cultural and operational shifts necessary to fully realize the benefits of SPM, ensuring that the changes are sustainable and aligned with strategic goals.
Sustainable Transit: Making your strategy real with SPM
SPM ultimately emerges as a critical tool for transit authorities navigating financial challenges. By aligning investments with strategic goals, optimizing resources, and enhancing transparency, it helps ensure sustainable and accessible transportation services. And as transit agencies face evolving challenges, adopting an SPM approach becomes imperative to maintaining operational resilience and effectively meet community needs.
We're committed to partnering with you to not just implement SPM, but to use it as a springboard for transformative change—turning your transit authority's strategic vision into a living, breathing reality that serves your community effectively and sustainably. To learn more about how North Highland brings the optimal combination of expertise, tooling, and methods to make your strategy real, visit our website.
Gartner, Magic Quadrant™ for Strategic Portfolio Management, By John Spaeth, Shailesh Muvera, Zahid Kisa, Daniel Stang, 28 May 2024.
GARTNER and Magic Quadrant are a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein with permission. All rights reserved.
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