After years of European promotion of separation between infrastructure managers (IM) and train service operators (TO), in The Netherlands the discussion is heating up over the re-integration of ProRail (the IM) and Nederlandse Spoorwegen (the main TO). It has become clear from the Dutch experience (and elsewhere, see Van de Velde et al., 2012) that vertical separation can be problematic. This has become an even more relevant issue, as the Fourth Railway Package of the European Union is further pushing separation of IM and TO to strengthen the possibilities for market development, separation like the one currently in the Netherlands.
In the Netherlands we have seen problems mostly in two fields. First of all, we have seen problems on those moments of acute need of coordination. An example is een in those times of harsh weather, mostly snow, in which the normal planned train operations fall apart. On these moments the IM and the TO have to work together closely to make sure the trains keep running. The separation has led to formalization of the cooperation and coordination between the Dutch IM and TO. Rather than quickly come up with solutions, the solution space in conditioned dramatically by the rules and regulations that govern the separation. A simple example, train drivers are not allowed to climb out of their cabin and on the tracks to deal with a snow jammed switch. It is seen as unsafe for the driver, and the track are the IM’s, not of the driver’s employer, the TO. As a result, train drivers are waiting in sight of jammed switches for a contractor of the IM to show up by car and unjam the point, which takes a lot of time.
Two additional points have to be made with this example. Because not just the organizational boundary between the IM and the TO is hampering swift integral solutions. First, it is good to remember that other aspects than the separation between IM and TO play a role here, including the securing of safety in procedures. To keep the tracks safe, procedures formalize decision-making and limit options. The train driver walking on the tracks to fix a switch is deemed unsafe. In addition, the tracks are to be fully closed off as the contractor works on de-icing the points. Safety is the main reason (and a fair one) for the set limitations. Second, the organizational boundary between the IM and TO is not the only one relevant. Also such a boundaries exist between the IM and its contractor, between the TO and its maintenance company, etc. Also these relations are highly formalized.
A second example is the decision-making on the amount of switches in the infrastructure. For the sake of reducing complexity and to limit the vulnerability during harsh weather, the Dutch IM started a program to reduce the amount of switches in the infrastructure. The simple and correct line of reasoning was: plain rails are less vulnerable than switches in the winter. The main TO did oppose to this course of action. It recognized the value of fewer switches during harsh weather, but fewer switches also reduced the possibilities to handle disturbances in other situations. Fewer switches would provide fewer possibilities to deal with blocked tracks, in case of broken down trains or accidents. Less switches would result in less alternative routes through the network. Consequently, the cascading effect of a blockage would be stronger, leading to longer delays. This also was a simple and correct line of reasoning: fewer switches lead to longer delays during a blockage.
These two examples show how the separation between IM and TO in operational management and strategic investment (or in this case divestment) has hindered a swift and integrated resolve of the issue due to distinct problem analysis and value priorities in at the IM and the TO. The separation led to a non-integrated problem solving process.
So, what are the hopes when we think about re-integration of the IM and TO? How would that re-integration solve the problems illustrated above? Let’s discuss operational management first. Reintegration, in the current European context, would mean a shared board of directors for an IM and a TO. That board obviously would not decide on operational solutions when we have had some snow. The board will not tell us which snow to clear first or what train to cancel. What the situation asks for is integrated operational improvisation on unexpected problems, something, which is not typically a board of directors cup of tea.
What they could do is reducing the formalized conditions, the rules and regulation, for train operation during those uncommon situations. This would provide a wider set of possible solutions available for those dealing with the surprises the winter has thrown at us. “Deformalize” should have to be their adagio.
However, that will be a tough task to deliver upon for that integrated board of directors. Separation does not just rule the relation between the IM and the TO, but specialization and market forces have fragmented our world much further than only on that divide. And the formalization that comes with the fragmentation is also widespread. In our example, the IM still uses an outside contractor, carrying out the works at the tracks. And safety has, rightly so, become secured in procedures to protect the staff of the contractor. The unions are quite adamant about that, as in the inspectorate for safety. In that sense, it is nostalgia to think about integration as going back to a single railway company where the financial department would start shoveling snow when the winter shows its more dark, white side. Or where brave men and women risk their lives for the sake of the nations railways. Fragmentation is here to stay for a long time. For a reason.
This means the role that such a board of directors can play in securing integral solutions on an operational has to be seen as limited.
So, how about the strategic investments, can integration through a shared board of directors provide some solace there? This seems to make more sense. The decision to reduce the number of switches could actually make it to the agenda of the board. And they could cut the issue short. And they could demand a more integrated analysis, with the costs and benefits of both the IM and the TO included. Or even better, the understanding of the both the IM and the TO side of the company that the board would demand an integrated perspective would drive the two sides towards an integrated analysis in a earlier stage, without the need of escalation.
Interestingly enough, this is something that would be possible in the current situation as well. The ministry could take a stronger role in building a culture of cooperation by wisely waving Solomon’s sword every now and again. The ministry could develop the role as a board, gathering understanding and decision making power and using it wisely and limitedly to foster a culture of cooperation. There has been a demand for more direction from the ministry over the last 5 years in the Netherlands. This to my view would be that direction, possible even without a new board of directors.
As a side note, in another industry there has been a battle between what is better: integration or fragmentation. Apple is known as the company that has been integrating everything under the visionary leadership of the late Steve Jobs. Apple builds computers, tablets and phones, operating systems, applications and app-stores, software to make music, play music and buy music. They build mice, wifi routers, cloud storage, and seemingly soon watches and TV’s. And integrating it all has made them hugely successful. Microsoft, on the other hand, has built an operating system and an office suite. And also Microsoft jumped on the integration bandwagon, jumping into search, communication software, tablets, phones, game consoles, and also mice. They were not nearly as successful as Apple in integration, but are still hugely successful with support of the fragmented and competitive market of Microsoft Windows related hardware and services. Google is just doing search, advertising and operating systems, and has been hugely successful with others building the other stuff needed to use their services. Integration here is not the uniform key to success.
So, how should we value the idea to re-integrate the Dutch IM and TO. My belief, I use this word deliberately, is that on an operational management the effect will be limited. There are other factors that fragment and formalize, and limit the possible solutions when the winter has come. The re-integration provides a better possibility to strengthen the culture of cooperation, of shared values, and of integrated solutions when it comes to longer-term decision-making like in the field strategic investments. Here, the current structure could facilitate that as well, with the minister using the concessions to the IM and the TO as instruments of governance and by wisely waving a Solomon’s swords when needed to make the IM and the TO work together more closely. That would ask a change in position of the ministry, which up to know has taken a rather hands-off approach.
So, change is needed to have a more integrated decision-making processes, operational and strategic, in the railway sector in the Netherlands. I hope we do not get hung up too much on re-integration through a shared board of directors of the IM and the TO. Simply, because that will not provide the answer, maybe it can be part of a broader answer. Integrated decision-making is also problematic in companies that have a single board of directors. In addition, many other factors influence the potential to deal with harsh weather or different views on investments in the sector. Tackling these provide other courses of action that can help and reintegration will have a limited effect to get to a more integrated perspective.
That integrated perspective is actually quite simple, but still difficult to achieve. Eventually, only two stakeholders matter: the taxpayer and the traveller. Obviously, the train professionals are also important. Every solution that serves the first two best is the best solution, under the premise that the third can make it work. All the rest consists of internal turf wars in an industry that is in need of direction through these wars. Within the current structure or in a fresh one.
Van de Velde, D., Nash, C., Smith, A., Fumitoshi, M., Uranishi, S., Leijsen, M., & Zschoche, F. (2012). EVES-Rail Economic effects of Vertical Separation in the railway sector. … of European Railways and …. Amsterdam.
