Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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Railway Reform: Toolkit for Improving Rail Sector Performance 5. Creating the Industry Structure make more sense in the context of a longer-term structural strategy to create a competitive railway that is affordable to users and taxpayers. The Case Studies contain descriptions of many railway industry structures and individual rail entities that illustrate structures described in this toolkit. Individual case studies illustrate variants of core railway structures. Collectively, the case studies illustrate the diverse solutions to organizing a national railway industry. 5.6 Dealing with Non Core Activities In much earlier times, archetypal railways needed to be highly self-sufficient. Often, they manufactured at least some of their own rolling stock and/or constructed their own infrastructure according to the specifications of their own design offices, in which they employed engineering staff who had been trained in their own educational institutes. Railways also printed their own tickets, timetables, and manuals, employed their own security force, and sometimes accrued other businesses such as hotels, ferries, ports, haulage companies, and so on. Few railways now retain such a wide range of activities. This section explains the historical reasons behind archetypal railways initiating so many non core activities, why most railways now find it necessary and desirable to reject this strategy, and business processes for dealing with these non core activities. What is ‘core’ business? ‘Core’ is generally interpreted to mean the market focus of organizational activities—a focus that differentiates a business from its competitors, or from activities of other sorts of businesses. 62 For railways the core business is delivering competitive transport services through efficient use of railway technology. Constructing railway lines, manufacturing rolling stock, or printing tickets and timetables are non core activities—not only unnecessary for a railway to do itself to be successful, but also responsible for diverting resources from the core business. Four main groups of activities associated with archetypal railways can be considered, prima facie, outside the ‘core’ railway business. These are social and recreational services for employees; materials supply and manufacturing companies; business support services; and ‘extended’ businesses that are ancillary, diversified, or involve real estate holdings. Box 5.7 gives examples of such activities. 62 An influential management text by Peters and Waterman (1982) identified poor results among companies that diversified beyond their fields of real competence, and concluded that an organization's core business consists of activities delineated by its core competencies. The World Bank Page 86
Railway Reform: Toolkit for Improving Rail Sector Performance 5. Creating the Industry Structure Box 5.7 Examples of Non Core Activities in Railways Social & recreational employee services* Railway materials & manufacturing Business support services ‘Extended’ businesses Schools Universities & institutes Clinics Hospitals Nursing homes Staff housing Social clubs Sporting clubs Staff holiday resorts Quarries (ballast) Forests (timber ties) Concrete ties Mines (steaming coal) Power stations Railway sleepers Maintenance tools Locomotives Coaches and wagons Rail motors and units Wheels & brake shoes Track circuits & relays Telephonic equipment Office furniture Occupational health Occupational training Engineering design Architectural design Construction services Heavy repairs Vehicle cleaning Printing & publishing Police & security Railway banks * Occupational health and training should be treated as a railway business support service Car parking Hotels & restaurants Train catering Road haulage Passenger road coaches ICT & logistics parks Freight & pass ferries Forwarding & logistics Travel agencies Rolling stock leasing Property development Advertising Modern, competitive railways must concentrate on sourcing and procuring those necessary but non core services in the way that will best support the core transport business. They must pose a number of questions. Is the activity necessary at all? If so, what are the alternative sources of supply? Which alternative delivers the activity at the most efficient cost? Each group of activities shown in Box 5.7 has a different origin and rationale, therefore each requires a somewhat different assessment. 5.6.1 Social and recreational services to employees During the mid-nineteenth century, large companies in industrializing economies, including private and public railways, began to extend social benefits to employees and their families to attract and retain workers and minimize absenteeism. In the railway industry, pressures to provide employee benefits such as health care, education, and employee housing emerged as railways expanded their territories into more remote locations. At that time, most central governments provided no such services or benefits for its citizens. Healthcare Early railways work was hazardous and many employees were killed or seriously injured in the line of duty, particularly at railway construction sites, marshalling and heavy repair yards, and often in remote locations. The railway industry had to make its own response and in the USA, for example, private railway companies began to employ their own medical specialists. U.S. railway medical services expanded to an array of health services including routine check-ups, vision and The World Bank Page 87
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Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

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