I’ve been at Network Rail now for four months and my first impressions are of the scale of the business and the complexity of our Company, the level of public interest from passengers and people that live alongside our track, and the spotlight, the focus, on us - it’s very intense. There is a lot of political focus on our performance. It’s a business where you have long-term strategic issues, but what happens every single day can overwhelm visions for the future.
We’ve been through a lot in the last year: we’ve had the enquiry into safety statistics from the RSSB, the change with Iain leaving as CEO, the restructuring of our entire maintenance workforce – probably the biggest thing to happen in 20 or 30 years - and there has been commentary in the press about management bonuses. All this turmoil and yet throughout, the organisation has remained resilient.
The resilience of Network Rail is down to the people that run the railways. Despite all the change, despite the toughest winter in 40 years, this network, with all its complexity and its aging infrastructure, keeps going. It is the people that run, maintain and operate it who are the bedrock of this Company and the industry.
The recently released McNulty report has been a watershed for our industry. It challenges us, it shows international benchmarks and the efficiency that our industry can achieve, and it throws out a massive challenge for ourselves, our workforce, our partners and our customers, to be more efficient.
The organisation gives me great confidence. We can push the organisation to greater performance, and we can take further risk with it, because the organisation can deliver a complex network during tough times. How much more can we do if we free up some of the decision making, take out some of the process and bureaucracy to challenge our organisation’s performance?
My philosophy for managing for both the long and short-term is clarity of vision - where do we want to be in the future – and then unleash the potential of people in the organisation. Get the right people, give them clear accountability, set out what you want from them, and give them authority to make decisions. Take away process and bureaucracy, train and help them to lead their teams and get them closer to the customers, that’s where the real interface is, and a much closer engagement with our supply chain. We have a fantastic supply chain in the UK (designers, manufacturers, contractors) so use them, don’t duplicate them, respect them and work closer with them.
One of the really big highlights this year has been the restructuring of our maintenance workforce. We have worked closely with our colleagues in the trade unions to overhaul old agreements which were inherited from the various companies we brought back in house, and streamlined them. For example we had over 500 different job classifications which we have standardised and streamlined:,that means we can make productivity improvements across our whole workforce making us more competitive overall.We will see the benefits in the coming years in improved cost efficiency.
What you will see in this year’s Annual Report is that we have had a good year. We have outperformed our target for cost efficiency - which is absolutely crucial for achieving our objectives for the control period finishing in 2014.
On the other side, what hasn’t been good this year has been our overall performance for the network, for our customers. We had a tough winter, everyone knows that. It was the worst winter for 40 years and it started very early. That meant that while we moved a lot of people, we missed all our public performance measures for the period. We need to learn from that. We need to learn how other countries in Europe deal with that level of heavy snow and we need to work more closely with our customers to be better prepared for it - we can’t rely on it not happening again. And we need to work out how we communicate what is going on to the public as they wait on platforms or on trains.
The targets that the ORR set us for the control period that finishes in March 2014 are tough. I said that when I first joined the organisation as a Non-Executive Director and I reinforce it now. The targets on delay minutes, on public performance measure and on cost are hard to achieve. We have set ourselves the challenge of achieving them and we have to be really, really focused. The big ones on public performance and cost, we are on track to achieve those, but we have got to catch up on network availability. On cost efficiency we have made progress but we could lose all the gains made in the first two years, as we have got very big targets (particularly on renewals) to achieve in the last three years.
The ways we make our efficiencies during this five year control period are on our operations and maintenance costs (and therefore the restructuring of all our front line staff,) and investments in operational technology. One of the biggest areas is actually improvements in renewals.
One of the real challenges in renewals is identifying ‘when we need to renew’, particularly track. Life extension - are we just putting off problems to a future control period? It’s about the quality of our information on our assets, our asset condition as it is called. We are getting better and better on that. If we can save money by getting longer utilisation of our network then great, but we cannot do that at the expense of public safety.
The conclusion of the McNulty report is that our industry is fragmented and lacks leadership, and because of this we are inefficient compared to international benchmarks. It sets out a roadmap of how the industry can improve itself, taking us away from the current process of conflict and lack of alignment, and challenging the entire industry to play a leadership role in meeting international benchmarks.
At Network Rail we have to look at everything we do, we need to open up our supply chain and our activity to contest, to challenge our cost structures and we need to get much closer to our customers. Our devolution project, empowering our regions and transferring decision making into the routes, is all about getting greater efficiency to match that international benchmark.
The key to Sir Roy’s report is that we are a fragmented industry, there is a lack of leadership and no real strategic drive from the industry itself. The industry has to take control of its own destiny and then drive for efficiency. Everyone has to start to work more closely together rather than in conflict.
There have been a lot of reports before. The key to this report, in my opinion, is the way that it has been prepared. There has been extensive consultation and we understand how the report has come to these conclusions; they are ultimately all about leadership.
The challenge that McNulty has set us is to be more efficient and co-operate more closely with our customers. Devolution is all about working with our routes, putting more decision making right at our customer interface. These are decisions on how we maintain the network, how we upgrade it, how we work so that we minimize disruption for the seven day a week railway, but we also ensure there is greater integration at the actual route level.
This is all about the quality of our people in the end. It is less about technical skills and much more about commercial and leadership skills, engagement, relationships with our customers and our supply chain and our communities, and our ability to set targets – simple targets – and lead the teams.
Of course to achieve this we have to work much closer with our train and freight operating customers. What they want is closer engagement and to know that the people they are dealing with have the authority to make decisions as well as the control over the resources to implement what they decide.
All my experience in the UK and overseas is that your relationship with your suppliers (designers, contractors and manufacturers) is absolutely crucial in delivering major projects. I think here at Network Rail we are too traditional. We have involved these organisations too late in the process of delivering major projects. My experience in the Olympics is much earlier engagement, use their skills, complement our expertise with theirs, don’t duplicate it. That is all about trust, respect and the right skills within our organization, and being able to define our brief and what we want from our suppliers much more clearly.
We have an enormous number of projects underway at any one time and the really big projects like Crossrail or Thameslink get enormous focus. They get our best people, they are critical in terms of the key blockades, and we do a fantastic job. But if you look across the whole network, there are projects all over the place. We can have a much greater involvement of our supply chain to streamline those arrangements, to standardise our procurement, and to get a consistency of the work progamme.
The prize for us and our industry is efficiency. All the benchmarking tells us we are more expensive in the UK than our European counterparts to carry out work. There are lots of reasons for that; our design process is slower, our procedures, our standards, our external reviews and the various approvals we have to go through, are more complicated, but also access to our track is more limited, so therefore we need to work smarter, we need to work with our customers to get track access, and drive down the costs of major projects and renewals.
Earlier this year in February, the RSSB produced a report for us on the reporting of accidents in our organisation. It was a very blunt report, and it showed that consistently over a number of years there was under-reporting of safety incidents, particularly minor incidents, across our organisation. There are many reasons why that happened, and often programmes have unintended consequences, but we have to have a behavioural change in our organisation on safety.
Safety can no longer be something that is separate. Safety must be fundamental in everything we do; the way we make decisions, the way we review projects, everything from design to the way when I visit a project, what do I think about first? Is it always the cost, or is it site safety? What is top of mind in our organisation? In the end, it’s all about the senior leadership team sending the right signals, but it is also about skills. There are some things I have always found on previous projects when I have been faced with similar issues - you need to intervene. So front line supervisor training and safe design are crucial parts to get right in our organization.
Executive pay and bonuses are always a challenge for any organization that gets public funding, and it has been a challenge here at Network Rail. How we are going to improve that is firstly, through transparency. Successful performance must be obvious. Objectives must be clear. The public, our Members and the politicians must know what those objectives are and they must be clear that they are about performance. That being said, performance pay, for me, is absolutely crucial to get productivity in any organisation.
Our challenge to get performance is to attract the right people to our organisation. It is a very active marketplace, so if you look at our senior executive team, most people have come from the private sector. People are very mobile, they are mobile both in the UK and internationally, so you have to have competitive packages to be able to attract and retain the right executives in this organization. But because we get a lot of public money we must be clear that that is accountable and justifiable to the public.
We have just done a pay deal with our operating staff, covering thousands of people that run our network. It is quite similar to the deal we did a while ago with our maintenance staff. It offers Retail Price Index (RPI) plus half a per cent. For the year just passed, that meant that our workforce got about 0.8 of a per cent. This year they will get about 5.2 per cent. That is swings and roundabouts. What is crucial on both the deal on maintenance and operations is productivity improvements, so the overall cost of our organisation in both areas goes down each year of this control period through productivity improvements.
The Olympics is a huge challenge for our organisation and for our industry next year. What we have agreed is for a period in the lead up to the Games and after the Games that we won’t have disputes. Anything that is a concern will be deferred until after the Games so we don’t have disruptions during the Games. No-one wants that. We don’t want it, and certainly the trade union movement doesn’t want it either.
The next twelve months for both the business, Network Rail, and me personally, is an absolutely crucial year. The initiatives that have started now will be well in train; the devolution of our routes, the establishment of our projects business as more independent, more contestable, will start to really have an impact on how our organization performs. It will be tough and challenging, but our organisation is up for it.
Personally I always like a challenge, and this job is great for that - there are some big challenges and this is what I thrive on. I am looking forward to it, I am looking forward to working in an industry which has a lot of passionate people. It’s a great business to be involved in.