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By M.E. Singer

“Amtrak President Boardman Will Be Gone in September. Who’s Going to Replace
Him?” by NT Braymer (11 August 2016) provided a salient overall interpretation
of Amtrak, emphasizing the persistent frustration of those “on the outside” who
remain undaunted in their interest for Amtrak to become a success story.
However, our continuing exasperation with how Amtrak conducts its business
is best summarized by Churchill’s interpretation of Stalin-“a riddle, wrapped in
a mystery, inside an enigma.”

Given our concern, particularly over Amtrak’s management embracing of the
status quo, perhaps we should heed what President Reagan said about the
status quo: “Latin for the mess we’re in.” As this is perhaps the only heavy
industry where special interest groups, such as RailPAC, are stakeholders with
the knowledge that affords them a seat in the “wheelhouse,” we need to push
aside the Kabuki theatre reaction by Amtrak to our concerns, and “drill down”
to identify what has inhibited Amtrak gaining traction, and how to to actually
fix it. This starts by pushing back on those internal powers at Amtrak who can
only respond to our intent: “honi soit qui mal y pense.” (the motto of the Order
of the Garter: “shame on him who thinks evil of it.)

What has not been sufficiently emphasized in MBA programs, but I found in
my experience to be a key factor to successfully managing company turnarounds
is the requisite to consistently evidence credibility and integrity in the
decision process; a “hands-on” open style of management that is believable at
all levels; the personal strength of a solid leader to “park their ego” and
genuinely solicit, listen, and implement ideas from those in the field–who
actually know more about what’s happening.

Merely faking to posture and emulate this vital aspect of managerial
competence can be smelled a mile away by everybody and just dilutes the
authority of the leader. As even the best paranoid can perceive this lack of
acceptance, their sense of insecurity acutely rises to their own level of incompetence,
as identified by the “Peter Principle” of being promoted above their
talent and capacity to identify a vision to be successfully embraced and
implemented.

Realizing how transparent their superficial leadership actually is, a failed
leader reacts to their sense of inferiority by walling themselves off and holding
court with but a few trusted “Centurions” to guard and protect the anomalous
acts of the failed leader, as it is obviously in their own self-interests to preserve
his reign. Another trait of such a leader personifying the “Peter Principle” is
their instinctive projection of an imperious, arrogant stature; to conduct
management meetings as “Star Chambers” to bully anybody the leader
believes knows more than the CEO; thus, is perceived as a threat to the
leader’s survival. What the leader achieves for himself, to the detriment of the
organization, is anybody who can bail out of that sinking ship bolts, thus,
forever depleting the organization of sorely needed talent with a particular
expertise that can never be replaced.

This vivid depiction of such rank incompetence for over a decade of senior
leadership at Amtrak had to be known by its Board of Directors (“board”), who,
at a minimum of expectation, were required to provide oversight for the
management of Amtrak—approving its visions, decisions, contracts, labor
relations, congressional relations, accounting methodology, etc. Instead of
getting a board acting as a Senate with equal representation throughout the
country, we have a board mirroring a House of Representatives, with its weight
projected towards a majority appointed to protect the ephemeral interests of
only the Northeast, rather than pursuing the original vision of Amtrak as a
national system.

In dissecting this issue, one can point to the board’s inability to be stewards of
the corporation, given that other than the two appointees from California
knowledgeable in community politics and entrepreneurial business, and the
appointee from the BNSF experienced in railroading, what actually do the other
board members “bring to the table,” other than solid Northeast credentials, or,
simply just favoring the Northeast?

Instead of saluting the visage of Amtrak’s CEO and tolerating a disastrous
carte blanche relationship with that CEO due to their lack of seeking to know
the details, Amtrak’s board should reflect how successful boards are
composed. Competently run firms deliberately recruit true stewards of the firm
who lend their expertise in a particular area. In Amtrak’s case, this would
include: marketing, travel (leisure/business), food & beverage, IT, finance,
accounting, communications, community political acumen, and railroading.
Without such desperately needed stewardship this board is so paralyzed and
conflicted with an overt predisposition favoring a regional emphasis over the
national needs of the system.

However, as this board knew at least last November that their “hand-picked”
CEO was ‘riding into the sunset,’ why are we now into mid-August with no
designated CEO, when any competent transition in leadership requires a
minimum of ninety days? Given the financial duress of Amtrak, why was the
current CEO tolerated to run-up significant costs in his farewell train ride in
June, and again in July; ironically, so far west of his favored Northeast
Corridor? With the obvious financial issues that no rug is large enough to
broom them under, why does this board’s CEO continue to state how he will
pick his successor; to profess how the candidate will be one from his own
internal “Centurion” group? In light of this Kafkaesque grandstanding, when
does this board accept its own culpability for derailing Amtrak?

This necessary mea culpa of the board would be cemented by evidencing a
sense of unanimity in declaring that the only way to save Amtrak is to embrace
an outsider who will have their blessings to ‘clean out the barn.’ To merely go
with the same ol’, same ol’ insider on an initial interim basis, and then to be
permanently appointed should be a no-go. Other than the current CEO
favoring such an arrangement with his favorite board members to keep his
hand in stirring the pot, there is no justifiable rationale to take such an
incremental step.

Indeed, this goes to the crux of the Amtrak leadership malaise with the idea of
using the CEO slot as a fallback job for somebody from government looking for
a place to roost. When Amtrak really needs a reaction to its internally
contrived problems similar to how the country reacted to Sputnik, this is not
the time to stoop again to that hyper political level of providing a safety net to a
“made” man or woman who is a federal agency administrator or Northeast
commuter rail administrator. If the U.S. DOT and Congress are serious about
pumping some life into Amtrak to become a viable mode of transport, why
would the board be allowed to fail again by accepting as Yogi Berra so correctly
stated, “deja vu, all over again”?

Clearly, what Amtrak requires, if it is to survive, is not another ‘good ol’ boy
from the ‘CEO’s Centurion Privy Council.’ This penultimate opportunity can
only be filled by a person starting without pre-conceived notions and biases; to
see through the current funhouse mirrors at Amtrak; to probe and question, in
order to re-set the management culture, including:

Identify the apparent conflict between marketing, finance, and operations:

a) How can food service be cut to pieces, particularly on the long distance
routes, to the point it is not even the quality of a truck stop, without understanding
how it further erodes revenues, despite the accounting maneuver to
offset diner costs to sleeper passenger fares including meals?

b) Given the availability of restaurant software programs today applicable to
control diner costs (inventory, server time/motion, quality control, etc) why
have they never been implemented? Bar codes anybody-whatever happened to
that idea? Can this be attributed to too many manager decision levels leading
to the paralysis of decision-making?

c) Why are the liquor kits in lounge cars under-stocked; no cocktails; no
training of LSAs in mixology? (Is there anybody at HQ who knows the history of
how the New Haven made such an unbelievable profit on its bar cars between
NYC-BOS?)

d) Why are the LSAs/SAs not trained to solicit at each meal in the diner
liquor drinks at each meal, given that represents a 100% profit factor?

e) Why the incapacity to benchmark with other passenger rail services to learn
improvements in delivery, quality, and cost of food & beverage; first/business
class services? Are Canada, Australia, DB, and SNCF so far ahead of the curve
that the current management team can only shrug their shoulders?

f) Whatever happened to asset management, as Amtrak should have learned
from how the CB&Q, GM&O, and WAB could turn a consist in Minneapolis/St.
Louis/Chicago and return it on the same day? Instead, we have excessive
schedule padding that prevents optimal utilization of equipment and crews;
consists determined by union rules for staffing.

g) Why are the schedules for the eastbound Lake Shore Limited and Capitol
Limited, and the southbound City of New Orleans, not scheduled for the
market, but instead, to ensure late connections from western trains; thus,
preventing optimal scheduling between multiple market segments? Also
interesting is how these trains actually are scheduled as daylight runs to serve
the markets between Buffalo-NYC, Pittsburgh-Washington, and Memphis-New
Orleans. (The end result of one daily train per route!)

Whatever happened to marketing, market positioning, branding, and market
segmentation?

a) Why does the Northeast Regional not fully segment its market along the NEC
route by offering First Class, as well as a new Tourist Class to accommodate
the curb-side bus passengers (elderly, college) who are rapidly abandoning
the train? (Has Amtrak ever heard of-and learned-from Uber as a business
interrupter; the concept of constantly re-defining mobility; defensive
marketing?) This would also apply to the Midwest corridors serving so many
colleges en route.

b) Why was any semblance of First Class eliminated, instead of learning
from The Canadian, The Ocean, and Australia’s Indian Pacific, how market
segmentation actually works? In each case, dining/lounge/sleeping
facilities are matched to the level of service; in Australia, they actually
have three levels.

c) In respect to the obvious increased revenues derived from a true First Class
service, why did Amtrak fail to learn from its initial inability to operate the
Florida Special beyond only one season (1971-72), and the rationale for the
disengagement of support by the AT&SF for its Super Chief in 1973? How did a
proforma for MHC cars, now rusting away on some siding, take priority over a
proforma for evidencing revenue enhancement produced by re-positioning a
true First Class?

d) How does Amtrak position its brand in the marketplace, as a product or
service, given so many different versions of train types, equipment, and
services?

In view of the obvious issues, accounting requires an external audit with the
results of a transparent financial reporting system:

a) To accurately identify direct and indirect costs per business sector; fully
respectful of GAAP.

b) To prevent the cost shifting methodology of NEC overhead and
infrastructure costs, as well as corporate costs, dumped on the long distance
and state-supported corridors, to bury those sectors with a false performance
cost factor, while protecting the NEC from its higher costs that, if realized,
would bury the idea of “profitability.”

c) To follow transportation industry norm by measuring route success by
passengers per mile.

d) To eliminate the opaque cost methodology to the state supported routes;
thereby, encourage increased frequency and even route expansion, in a true
partnership with Amtrak.

Define a rational political approach by improving congressional relations and
labor relations:

a) Request from Congress explicit interpretation of PRIIA (as initially
conceptualized by Amtrak to further subsidize the NEC from payments by state
corridor routes under 750 miles); to define the potential role of private
operators, franchises, privatization; P3 (Hoosier State) potential to piggyback
on Amtrak’s insurance and trackage fee arrangement.

b) Produce requisite proformas evidencing opportunities for revenue
enhancement to Congress by requesting funding for new and rehabilitated
equipment for the western trains, Midwest regionals; to increase frequencies
and route expansions in conjunction with states/regions for tourism, business,
and leisure travel. Capacity limitation impacting frequency and incremental
revenue opportunities is not how any other firm in transportation operates,
knowing how self-defeating such a static, inflexible position would be in the
marketplace.

c) Return the NEC to U.S. DOT ownership so infrastructure costs do not
impede Amtrak’s principal requirement for maintaining and running trains.
(No different than when former CEO David Gunn closed the failed MHC
program).

d) As the NEC route segments and entire route fall under the current 750 mile
rule, as required for all other states, to generate additional financial support for
Amtrak, charge the Northeastern states for their trains as well. For how many
years did those states avoid paying Amtrak for operating on its NEC, causing
Amtrak to subsidize Northeastern commuter lines to the tune of approximately
$300-$500 Million per year?

e) Re-build labor relations and negotiate contracts based upon the 21st century
re givebacks, etc. to operate more trains; expand services more cost efficiently.
(Need to learn lessons from the IC attempting to re-negotiate labor agreements
re the Green Diamond between CHI-STL in 1968; the NYC attempting same on
its 3C Corridor (Cincinnati-Columbus-Cleveland).

Identify the level of competence in Talent Acquisition (HR):

a) To what extent is it outsourced; why; is it really cheaper vs. how
knowledgeable the recruiters are on Amtrak, the railroad industry, and its
history?

b) In respect to Robert Townsend’s terrific insight in Up the Organization,
determine if Talent Acquisition screens out the best candidates as it does not
know what management wants. In essence, the hiring manager should be more
directly involved at the beginning.

c) Identify the formal/informal “road blocks” developed for Talent Acquisition to
deter and prevent external new blood and ideas from recruitment. Yet, how did
Amtrak developed a reputation for being the biggest center of nepotism?

d) Given how no union contracts were re-negotiated over the past decade,
determine if Talent Acquisition has the skills and integrity to work with Labor
Relations and Operations to correctly identify how specific jobs and tasks can
be successfully re-negotiated.

e) This would be concomitant to a re-organization and downsizing of the
extensive corporate HQ staff.

f) Why in this day is Amtrak still structured with such a convoluted hierarchy
of “managers?” Is the plethora of manager-types a reason for insufficient
workers in the field, and cutbacks in OBS?

g) An external candidate brought in as CEO will have no preconceived biases to
implement this vision, including to flat-line the organization chart and
eliminate the current “Privy Leadership Council.” To build credibility and
encourage open discussion, the walls must come down and the staff, at all
levels, enjoy direct access to management, including the C Suite.

In summary, one has to believe that had Warren Buffet purchased Amtrak,
instead of the BNSF, our national passenger rail system would never have been
allowed to operate in such a consistent negative capacity, even to the extreme
detriment of safety when the ATC was removed around Philadelphia prior
to the wreck of #188 in May, 2015; or the MoW crew abandoned before The
Palmetto south of Philly in April, 2016.

Certainly, management would have never been given cart blanche in making
their free-wheeling decisions, until they proved their capacity to effectively lead,
and validated their depth of competent, correct decision-making. Nor would
Buffet have tolerated a hands-off board when their oversight of management
and stewardship of Amtrak was so desperately required, but apparently, not
applied.

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