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Gerald Corbett came into an industry in transition, and took over a high profile unique railway company already in trouble. If that was not enough, he lacked the railway experience that would have at least enabled him to see things going wrong before it blew up into major issues.
On the plus side, here was a professional manager who knew what a ‘proper' company should look like in terms of management controls and information – the features the newly privatised Railtrack lacked.
So while all through 1999 one big unexpected problem after another came through the door of Gerald Corbett's 13 th floor office in Railtrack House at Euston, one by one the professional manager started working out solutions.
Which is not to say that there are easy solutions, particularly when you are dealing with fiercely articulate, media-smart people like Chris Green, Tom Winsor and, until his departure, Ed Burkhardt, who know more about the nuts and bolts of your business than you do.
So things were pretty tough even before the collision at Ladbroke Grove. Then while everyone else ran for cover Gerald Corbett came of age in the railway.
Spun against by Tony Blair's personal spin doctor, used as a scapegoat by Her Majesty's Railway Inspectorate, excoriated by the media as a fat cat putting profits before safety, warned by the Rail Regulator that if Railtrack had been responsible it could lose its licence, Gerald Corbett fought the railways' corner almost single handedly. Often his inexperience showed but as Sir Alastair Morton commented at the time ‘I think Railtrack employees MUST be pleased to observe the leadership qualities displayed by Gerald Corbett after Paddington. He did not evade the issue'
But now it 4 January 2000 and Gerald Gerald Corbett has just shooed away his PR minder. ‘So', I ask, ‘what are the top three challenges for Railtrack in the coming year? Presumably settling the new financial regime is top of the list?'
‘No, the first challenge is all the safety improvements post Ladbroke Grove. That's got to be number one and implementing Train Protection & Warning System fast is the most important action'.
With the Government trying to forget its threat to ‘strip' Railtrack of its safety responsibilities and the HSE putting responsibility for compliance with safety cases firmly with the Railway industry, it is going to be up to the owner of the infrastructure to manage the risk on the infrastructure more effectively.
In addition to its own safety concerns, such as train protection, Gerald Corbett believes that Railtrack now has to become ‘more proactive and intrusive' when it comes to the Train Operating Companies. In particular, the Safety & Standards Directorate (S&SD) has to be given teeth because the currently available audit powers are not enough.
As aspects of the Southall Inquiry have revealed, observation of the train operator's safety case can be pretty tenuous. Deciding how S&SD can be given the necessary powers to enforce compliance is a ‘big issue', says Corbett.
Having wrong footed me once, Gerald Corbett does it again with the second big challenge, again, not long term finance but Train Performance.
Here the good news is that the various processes (see ‘Raiders of the lost minutes' Modern Railways) put in place have been ‘pretty successful' and are delivering improvements. ‘Now we just have to keep working hard at it with more of the same', claims Corbett. ‘The Area Delivery Groups are coming up with even more actions, even more intelligent ways of spending money to reduce delays and working closer with the maintenance and renewal contractors than ever before'.
But the bad news is that despite all this effort, the Regulator's demand for a 12.7% increase in 1999-2000 isn't going to happen. Up to Period 8 of the year things were looking good with a 12% improvement. But mediocre results in Periods 9 and 10 have dragged down the reduction in minutes lost.
Before the Regulator's intervention, the Area Delivery Groups had budgeted for a 7.5% year on year reduction in 1999/2000. Subject to the vagaries of climate, this will be beaten, perhaps by a couple of percentage points, but the 12.7% aim has gone.
But it will still be a better result than last year ‘and we just have to keep hard at it'. ‘There are no silver bullets, no magic formulae, no lever under my desk that I can suddenly pull to make things better, its about getting thousands and thousands of little things right every day, which is about management process and attention to detail'.
Warming to this theme Gerald Corbett continues 'We can all say what we'd like, we can all make speeches about how it should be better and we all want it to get better, but the only way to get it better is on the ground with better process, better attention to detail, faster response, better plans, better targeting of resources. We just have to keep bashing away'.
Hope is not a great management tool Gerald Corbett |
With the Area Delivery Groups, who are responsible for improving performance, coming to the end of their first full year, Gerald Corbett reckons about half have ‘picked up the ball and are working well'. Lest this seem critical he adds, ‘It is new to them, because they now have to manage and not just react, they have to learn to manage a budget, acquire planning skills and they are suddenly accountable for delays in their areas and accountable for investment to improve performance'.
Acquiring such skills were, of course, part of career development in the old railway, with its staff colleges which were declared redundant with the imminent inflow of private sector expertise. Now Railtrack has revived management training and Gerald Corbett claims that one of the ‘hidden triumphs' of the past year has been the training programmes which have been put in place for the ADGs by what he terms ‘Human Remains' alias Railtrack's Human Resources (HR) teams. Each of the ADGs has its own HR person, responsible for developing training programmes for individuals.
As the skills develop, so the performance of the ADGs is improving. Corbett reckons that by the end of the coming financial year three quarters of the ADGs will be up to speed on the ‘plan-do-review' cycle. And as he points out, in 1998-99, the passenger delay minutes were reduced by only 2% against the targeted 7.5%. This year the planned 7.5% should be bettered, even if last year's short fall is not recouped as well, as the Regulator has demanded.
So far, so good, and with more experience next year's performance should be better. But Corbett is cautious. This year's performance went from triumph to disaster largely because of three days this autumn which he quotes from memory – ‘the day summertime ended, 30 November and the Monday before Christmas'. Each day saw around 110,000 minutes delay attributable to Railtrack compared to the 18,000min of a ‘typical' day. ‘Those three days represent 5% of our minutes lost this year' says Gerald Corbett ruefully.
But what I suspect will really rankle when Tom Winsor sends the boys round to collect the fine is that Railtrack is being penalised for not getting better fast enough. This contrasts with the TOCs which, on present trends, could all be worse year on year when the final results are in for 1999-2000. Yet no one is threatening the TOCs with massive fines on top of the existing access regime penalties.
So after all this grass roots railway stuff, we finally get to the money. While the City saw the Regulator's pronouncement on the proposed parameters for new control period as better than expected, Corbett still thinks it is ‘not right'.
In particular he highlights the Regulator's efficiency targets which are ‘way too demanding given what we have to achieve'. He reckons that the 5% a year savings equate to taking 40% out of the company's cost base over the five year control period.
‘If you think you can take 5% a year out of this place at the same time as improving train performance, plus doubling the investment programme, plus all the safety improvements we've got to make, it's not on'.
Indeed, to a long time railway observer, the Regulator's 5% a year efficiency gain is pure John Welsby under the Department of Transport cosh rather than SSRA Chairman Sir Alastair Morton's vision of the new railway.
‘Of course there are efficiency savings to be made and will be made', Corbett avers, ‘but you can't have a better railway without it costing more. We have to come back to the ORR on that'.
What about the enlargement of the Regulatory asset Base, including adding in higher-than-forecast levels of renewals? Gerald Corbett's view is that Winsor has not gone far enough.
‘But you would say that, wouldn't you', I counter. ‘Yes, but we still don't know what the Regulator is going to allow on the renewals on the WCML since privatisation'. I resist the temptation to ask ‘what renewals on the WCML'?
And on the rate of return on the asset base, Railtrack thinks it should be 7.5% pre tax rather than the 7% proposed by the Regulator. ‘But the Stock Market liked what it heard', I point out. Gerald Corbett believes that because of the Regulator's aggressive first six months, the City was expecting ‘something far worse'.
Anyway, with a capitalisation of £5.5billion, Railtrack is going to have to deliver investment now estimated at £30-40million – some say more. How much of this, can Railtrack fund out of its own and the city's resources?
Based on the Regulator's preliminary conclusions, Railtrack will not be able to fund the investment programme, to be revealed in the 2000 Network Management Statement, without more support from the tax payer. And before Christmas Gerald Corbett called down yet more media flak on himself when he suggested that up to £1bn a year of public money a year could be needed to close this funding gap.
When I mention the ‘S' word Corbett echoes that wily old fox, former BR Chairman Sir Peter Parker. ‘Subsidy is the wrong word, what is actually happening is that the Government is buying a whole bunch of outputs which they are willing to pay for because those outputs have high social value. You could cut the subsidy and set the railway back, but that is not what anyone wants, because at the end of the day, there's a public service'.
All these funding issues should come together in the next six months, when Railtrack publishes the new NMS, the SSRA is due to publish its strategy for the railways, the Government fleshes out its 10 year plan and the Regulator finalises the new financial regime for the control period starting in 2001.
Gerald Corbett hopes that out of all this will come a ‘joined up plan for the industry'. This will set out what all the players have to do, how it's going to be financed and achieve a consensus on what the priorities are. Phew!.
Clearly the 2000 NMS, due in March, will be a crucial document. Projections are likely to be based on two growth rates over the next 10 years – 30% and 50% - with outline details of what each will mean in terms of maintenance, renewal and enhancement.
A criticism of last year's NMS was that it was an amorphous wish list, with no prioritisation. This year we should see the major projects identified in order of priority. This should make it easier to ‘sell' to Government since the customer benefits, hard to determine in the 1999 NMS, should be more readily identifiable.
A related challenge is how to determine from the SRA and the TOCs, the enhancement they need and, more significantly, will pay for, before Railtrack makes investment decisions. This may seem a statement of the blindingly obvious, but railway investment is so long term and the projects highly complex (the WCML refers) and Railtrack has to commit years in advance.
But if the timescale forces Railtrack to make a commitment before the TOCs are fully signed up, this introduces ‘colossal risk'. This isn't to say that such a project can't go ahead, but the risk would be reflected in the cost of the necessary funding.
Gerald Corbett sees the WCML as an awful warning of what happens if you make up a project as you go along. ‘We cannot allow that to happen again' he declares with feeling'.
Another lesson from the past is freight forecasting. English Welsh & Scottish Railway made ambitious proposals in 1996 to double tonne kilometres in five years and treble them in 10. Last year, the tonnage lifted by rail in the UK actually fell and no one talks of doubling by next year now.
‘Freight has caused us huge problems' agrees Corbett, ‘because these aspirations were put forward as reasonable requirements and under Licence condition 7 the company is duty bound to meet its customers' reasonable requirements'.
Corbett believes that the operators have yet come up with a coherent freight strategy. Railtrack will try to remedy this in the 2000 NMS, draw on studies it has commissioned into how fast freight is likely to grow based on current economics and service requirements. The studies also estimated the subsidies needed to attract new freight traffic.
From this work, Railtrack hopes to produce a matrix of costs and social benefits for the various freight traffics. This matrix would enable the SRA to prioritise investment both by commodity and by route. Gerald Corbett sees future freight growth largely determined by subsidy. Hence Railtrack's capacity provision could depend as much on the SSRA as on market forces.
Given the uncritical euphoria surrounding the much hyped ‘freight resurgence' since privatisation, the NMS is likely to come as a cold douche and will no doubt add to the flak being directed at Corbett. But with the hard nosed Julia Clarke now in charge of freight at the SSRA, the Railtrack should have some strong support.
Fourth in the immediate concerns is the WCML. You can read about the latest developments in this month's informed sources, and grim reading they make.
Corbett sees the management task in two parts. ‘We have to keep pressing on with Phase 1 (125mile/hr operation from June 2002) and we have to make sure we've got the right project for the industry in Phase 2 (140mile/hr operation from May 2005).
The new costing for Phase 2, including further capacity upgrades, reflects the commitments made under the Passenger Upgrade 2 agreement with Virgin Trains. Now, says Corbett, the rest of the industry now has a ‘final chance' to decide if that is indeed what it really wants.
Once again we see the Chief Executive trying to get control of an ill thought out policy he inherited. The PUG2 contract with Virgin was agreed at his first board meeting as Managing Director.
With the Regulator in punishment mode again, Corbett wants to change the approach from ‘how can we force Railtrack to meet its undertakings under PUG2', to ‘is this the right Phase 2 we want given the finite limits on finance
Corbett, wants industry to ask this question before the money gets spent and thinks that there is ‘quite a lot of talking' to be done on Phase 2, in particular the £1billion of capacity upgrades.
Well yes, but the debate should have taken place two years ago. Virgin has hundreds of millions in revenue riding on PUG1 and PUG2 being delivered on time (see Chris Green's paper in this issue).
It might be ‘good to talk', but it can't be allowed to hold up PUG2. If Virgin is still running at 125mile/h through a possession riddled building site in May 2005, the penalties on Railtrack for not delivering PUG2 are massive enough to wipe out all career prospects on the 13 th floor board room. Even worse, those hundreds of millions of premia in Virgin's subsidy profile won't be there to be recycled into the industry.
Of course, the WCML is only one of several major projects. How is Railtrack going to manage all of them, given that it has thrown all of its in house talent at the West Coast? Gerald Corbett is putting his faith in the three programme management companies brought in from outside.
‘Our in house engineering and projects teams can manage £50-100million contracts but £1-2billion projects are not their job', he says. Hence Fluor/Mott MacDonald have been pencilled in for the East Coast Main Line upgrade, Parsons Brinkerhoff are getting to grips with the WCML and Bechtel are already at work on the Channel Tunnel Rail Link, with some success.
On top of all this, there is the daily railway to be managed through the Zones. Initially, the view was that the Zones should be allowed considerable autonomy compared with the command and control structure under BR.
This resulted in considerable variation in performance and once again, the business has had to be taken in hand. Best practice processes are being established across the Zones, ranging from the ADGs already mentioned to the new contractual relationships with contractors such as IMC2000.
According to Gerald Corbett, the key is in moving away from ‘didactic central management' to something more systematic. ‘When I joined, the performance “plan2 was a 15% reduction in minutes, but there wasn't actually a plan'. Readers will recall similar arbitrary 5% cost reductions handed down to the businesses when John Welsby was under the Treasury cosh in BR days.
Under Railtrack the zones were given the desired outputs to achieve and what Gerald Corbett calls the ‘bemused troops' sat down and tried to work out how to respond. Depending on their corporate history and attitudes, and don't forget that the pre 1948 railway begat the BR Regions which begat the Zones, Zone management then came up with various unique approaches, some of which worked and some didn't.
Gerald Corbett's doctrine is that plans have to be built from the bottom up so that they are based on reality. But their preparation is greatly aided if management can draw on the collective experience of the industry.
Hence the ‘best practice tool-kits' for the ADGs. Throughout Zone management the aim is to introduce process which ‘drive everyone towards doing things one way, the right way, the best way'. After Performance, the focus in now on maintenance as the new contracts are negotiated.
Three longer term initiatives in particular should improve business performance. These are the new IMC2000 maintenance contracts, the computerised Asset Management System and improved Supply Chain Management and a ‘huge lot of human Resources stuff'.
Clearly Railtrack faces massive management challenges, with the pressure likely to increase through the year. And yet Gerald Corbett was remarkably cheerful throughout the interview.
This growing confidence is reflected in current legal challenges against those monstres sacres the HSE and the Rail Regulator. I really think that he believes he can win the political and regulatory battles and improve Railtrack's commercial and operational performance at the same time.
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