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May


On the right track at last?

Sun, 30th May 2004

IN OCTOBER 2002, when Network Rail took over management of Britain's rail estate of track, stations, bridges and tunnels the rail network was in the grip of what was memorably described as a collective nervous breakdown.

Still numb after the Hatfield crash, in the limbo of administration after Railtrack went bust, the railway definitely wasn't getting there. Blanket speed restrictions had been imposed, pushing punctuality below 80 per cent. Costs had increased sharply. 'Corporate discipline had been non-existent,' splutters chairman Ian McAllister. 'Chaos.'

It's a measure of how far the network has pulled itself together that last week it underwent the second largest structural change since privatisation in 1996 - and no one noticed. Last Monday what had been a geographically based organisation was replaced by a 'functional' structure aligned around routes and customers, cutting out layers of management and bringing train and track operators closer together than at any time since denationalisation.

The change marks a significant step in accelerating Railtrack's coming of age, shedding the disastrous legacy of Railtrack.

'It's been an incredible journey,' says Iain Coucher, deputy chief executive and driver of many of its myriad projects. 'We're pushing through a 10-year programme in three years. It's exhilarating and, for some people, a bit scary.'

Of course, blaming previous incumbents is a traditional management sport. But there's no doubt that the organisation inherited by the incoming team (basically six senior people) was dysfunctional. At its heart was a conflict of interest between shareholders and customers, both vying for the same resources. Like much of Britain's infrastructure, the network was fragile and overstretched, a monument to underinvestment and political short-termism compounded by a 30 per cent increase in traffic since 1996.

It was organisationally flawed, too. There was little commonality between the regional operating fiefdoms, each of which had its own operating procedures. Maintenance and renewal costs varied wildly and the centre had no idea what it was getting for its money. The asset register was nearly useless because there was no record of its condition - priceless knowledge lost at privatisation, says McAllister.

And because of the way the system incentives were set up, network and train operating companies (TOCs) were at each others' throats.

The first step in restoring the network's sanity was to get a grip on pro duction by stabilising the system: redefining accountabilities, standardising operating procedures and installing basic management disciplines.

Half of the top 100 managers were replaced. 'In the first six months we didn't improve, but we stopped the slide,' says Coucher. 'In the second half of the year we improved performance by 20 per cent, and it has continued at that level. Every department and project is on time and within budget.'

There were blips such as last summer, when the heat again exposed gaping holes in the maintenance record, but the system came under control and the network began a second phase of improving efficiencies. The starting point, unexpectedly, was to in-source rail and computer maintenance.

It became blindingly clear, says Coucher (who, ironically once worked for outsourcer EDS) that bringing maintenance back inside was the only way of getting a grip on costs and understanding the state of the assets. Payback has been instantaneous and spectacular. In the Thames Valley, the first area to come in-house, delays fell by 41 per cent in five months, and in Wessex 19 per cent in three months.

That has a direct and multiple effect on cost: out go the middleman's profit, management duplication and transaction costs and down goes compensation to the TOCs, which last year ran at pounds 500m. Response is quicker and coordinated.

Sophisticated maintenance is at the heart of the network's risk management, variability and asset life. 'Rail and ballast was the most important split on the railway, not rail and wheel,' says Jeremy Long, managing director of First Rail, who warmly welcomed the decision. The second big change was last week's 'functional' reorganisation, a move that is also cautiously welcomed by train operators.

The new climate of cooperation has been accompanied by the setting up of joint improvement teams - such as the one that has helped Midland Mainline improve punctuality by 20 per cent in a year - and joint control centres, where TOC and Network Rail managers sit side by side to oversee operations. In time the hope is that growing trust will lead to the establishment of truly integrated teams under one overall manager.

'We always said it would take 18 months for the public to see a difference and five years to give them a responsive modern railway,' says Coucher. But although the train is making good time, there's still a long way to go.

To get there the company must spend the staggering total of pounds 14m a day -pounds 26bn over the next five years - to renew the 100-year-old infrastructure and increase capacity while at the same time meeting the regulator's requirement to slash costs and improve performance by one third in the next five years. In the short term it is facing a Department of Transport rail review, due by July, not to mention threatened strike action by the RMT.

'Yes, we'll get there,' asserts McAllister. 'There's a huge reservoir of loyalty and pride in the rail tradition here - it's unique. What we're doing is giving them the leadership and direction to put it into the biggest rail job in the world.'

The Observer, 30 May 2004


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