Linking Brazilian strategy with performance

A recent study published in the International Journal of Transport Economics analysed the relationship between management practices and the performance of Brazilian port authorities. The study’s interesting findings can be extrapolated to other ports.

To undertake the study, a survey-based evaluation tool of the quality of management practices was developed and applied in the country’s port authorities. The results indicated that better managerial practices have a positive impact on port authorities’ financial performance (the company itself) but have no significant impact on ports’ operational performance. As most Brazilian ports operate under the landlord model — in which operations are the responsibility of private terminals — this finding makes sense.

The study also observed that Brazilian port authorities use more management practices that are control-orientated, such as “information management”, “inspection of contracts” and “port safety”.

These practices received higher scores in the research when compared with management practices aimed at planning and leadership, such as “foster autonomy, innovation and entrepreneurship of employees”, “reward and recognition of employees”, “total quality management” and “strategic planning”.

Behind the curve

These results demonstrate that, in general, Brazilian port authorities are not following the practices adopted by their peers in developed economies where they act increasingly beyond the landlord model, with an entrepreneurial attitude beyond the port, and using management practices focused to create value through innovation, new business and internationalisation, among other strategies.

Breaking down the management practice scores from the study, port authorities controlled by local governments scored better in “port marketing”, “innovation and entrepreneurship of employees” and “total quality management”. On the other hand, port authorities controlled by federal government obtained higher scores on “traffic control in land access to the port”.

Also, the EBITDA margin, net margin and operational margin were statistically higher for port authorities controlled by States and Municipalities. This corroborates the general port management and governance understanding, which associates greater management autonomy and decentralisation with a better performance of port authorities.

From the results, it can be observed that management practices scores have a positive relationship with several financial indicators, in particular profitability, confirming the hypothesis that adoption of good management practices leads port authorities to achieve greater financial performance.

One of the current pillars of Brazil’s National Port Logistics Plan is the financial self-sustainability of port authorities. The results of this study contribute to the advancement of programs aimed at improving the management of Brazilian ports since they confirm the positive relationship between the use of management practices and financial performance for Brazilian port authorities, reinforcing the importance of providing these organisations with better processes and management tools.

Jonas Constante is a management and innovation consultant at Valenciaport Foundation.