By M.E. Singer
In respect to the signal system of America’s railroads, a “yellow over red” caveat is issued here to the incoming CEO of Amtrak, Mr. Richard Anderson, in respect to the persistence of the passenger train grunts who have not given up over the years, despite their competent input being ignored, including the well versed associations, such as RailPAC, and knowledgeable pundits, as myself.
For Amtrak to have a glimmer of hope, the CEO position requires a full-time officer, providing long-term stability and leadership to avoid merely keeping the seat warm for the next “Friend of the Potomac seeking temporary shelter; which by default, allows subordinate “lifer” levels of management to make, or avoid, decisions, based upon whose patronage appointee or protege they represent.
As CEO, you must tamp down and take with a grain of salt the internal political and institutional biases that have only achieved the potential dismemberment of Amtrak. When in doubt, refer to Plato who stated, “a good decision is based on knowledge and not on numbers.” From your own experience, you come prepared with the knowledge of how the ‘bread and butter’ of Northwest, and later Delta, were the flights between Minneapolis-Spokane, almost exclusively serving North Dakota and Montana (e.g., Fargo, Missoula, Bozeman, Butte, Billings, and Great Falls). You did not tolerate the politicalization of business decisions by your Board to forgo such contributions to revenue merely to focus on the Delta Shuttle in the Northeast. With this background, you have a greater appreciation for the opportunities of the long distance routes that have been deliberately dis-invested and laid fallow at the orchestration of Amtrak’s leadership marching in tune to the Northeastern-focused Board of Directors. Important to appreciate Amtrak’s perpetual history of how it was a Board with such a slant to the Northeast that not only accepted the Northeast Corridor (NEC) in 1976 with no consistent funding to alleviate the deferred maintenance, but also, re-negotiated a sweetheart lease at NYC’s Penn Station in 1988 with the MTA/NJT without building in any profit or ROI.
In view of this reference to such overt tilting against business opportunities across the national system in order to subsidize the Northeast Corridor, as CEO, you would be wise to remember the admonition of Lord Salisbury (UK PM, 1895-1902): “The commonest error in politics is sticking to the carcass of dead policies.” As a former CEO of public airline companies, you know how strict the SEC views dis-information to falsely inflate or smoke screen financials. Ideally, to know what you are actually walking into, it behooves you to view the different set of accounting books proclaiming the Northeast Corridor to be “profitable,” despite the GAAP requirement to include capital infrastructure costs before determining profitability. On that scale, you will want to determine how corporate and NEC overhead costs, as well as NEC infrastructure costs, are overly allocated against the long distance and state-supported sectors; ensuring a more positive financial image of the NEC. To spark your motivation to uncover and repair this legacy of false accounting, I would refer you to The Wall Street Journal of 26 June 2017, “SEC Tells American Airlines to Rein in Praise of its Non-GAAP Metrics.” In essence, the SEC demanded the reining in of “the use of accounting figures that deviate from U.S. Generally Accepted Accounting Principles, as companies often use non-GAAP figures to give a rosier account of performance, and the regulator has been concerned the practice could mislead investors.” As stakeholders in Amtrak, the taxpayers and Congress are entitled to have GAAP respected when presenting the financial condition of the NEC. Following such a true course of transparency may actually level the track for the long distance and state-supported routes.
As you dig into the organization to learn how it has stymied over the years, beyond being saddled with political appointments as CEO between 2005-2016, including two commuter administrators back-to-back, followed by an FRA administrator, you will find Amtrak’s structure is stilted with the legacy of long-term, unproductive corporate sectors apparently continuing to exist with a sense of protection from change, or, performance requirements. The following sectors stand-out as requiring intervention to achieve purposeful change:
PASSENGER EXPERIENCE/SERVICE (What airlines refer to as “Customer Experience;” the lack of in Amtrak):
Despite Wick Moorman’s decree to run Amtrak as a business, their is a need to frankly acknowledge what hinders evidencing such a desired business mindset. The obvious is that the only consistency in customer service delivery is the inconsistency of performance; barely offering a bland, sterile, standardized service concept. Amtrak simply does not understand it is in the travel+hospitality business; therefore, without that acknowledgement, it does not even bother to ‘own the brand.’ Amtrak is oblivious to how its customers desire a consistent, positive experience; particularly the new millennial traveler; consequently, Amtrak succeeds in producing the self-destructive end result of being a comfortable monopoly mindset vs. competing with other franchises or open access. Frankly, changing this comfort zone to the detriment of Amtrak’s financial performance and public image should be accomplished by opening the NEC to franchises, or, just an open access concept.
MARKETING (Indefinitely undefined; non-existent. If the Queen Mary as a troop ship in WWII was known as the “Grey Ghost,” Amtrak marketing is known as the “Silver Ghost”):
How does Amtrak approach branding? Cruises offer branding as an experience served up, or, as a brand customers can belong to (e.g., Viking). Amtrak brand remains undefined, unsupported; injured by failed customer experience; dysfunctional as aligned towards so many divergent sub-brands (e.g., Acela, NE Regional, Silver Service, Auto Train, Wolverines, Lincolns, long distance western/southern routes, Pacific Surfliners, Corridor Capitols, San Joaquins).
Lack of route operational marketing expertise to connect corridors into regional service; failure to identify revenue opportunities by fulfilling traffic demand surges; inability to create head-on competition to prevent traffic depreciation; no persistent special train efforts (e.g., Saturday college football, Sunday pro football, baseball, hockey, play-offs, seasonal, e.g., Holland, MI Tulip Festival). Their is a continuing unmet need to fulfill market demand and achieve increased revenues by providing additional First Class space on Acelas, particularly between WAS-NYC, during weekday rush hours. (Need to revamp rigid consist preventing some Acelas from offering more than just one First Class car.)
Unresolved perpetual marketing myopia refusing to acknowledge and compete against the curbside buses on the NEC and Midwest Corridors. This could be achieved by developing a stripped down T Class (Tourist) to attract college students and the elderly. NEC marketing myopia also includes lack of First Class on NE Regionals despite given the numerous en route multi-market segments only served conveniently by this train for business travelers. Also, to what extent are fixed consists and inability to expand to meet market demand shunning co-marketing opportunities, e.g., cruise lines/cruise ports reached by train, etc?
How is the new demand for “mobility” served throughout the entire national system, as SNCF’s new TGV line between Paris-Bordeaux now allows for people to live in Bordeaux and commute to Paris? In the Midwest, increased frequencies between Galesburg, IL-Chicago facilitated commuters from Mendota and Princeton to work in Chicago. Where else has the new mobility been identified, defined, and researched by Amtrak? Their is a profound need to provide the requisite leadership to push to identify new opportunities; produce proformas for seasonal, weekend, special, and expanded route train services so Congress can gain an appreciation for what can be done with appropriate investment, instead of just a status quo mentality.
HUMAN RESOURCES/TALENT ACQUISITION (An unfathomable Quasar-like “black hole” lacking oversight and direction; inability to “think out of the box”):
Despite being the front portal to the world for Amtrak, HR is dis-connected and evidences antiquated attitudes contrary to proven 21st century concepts. HR discourages external management candidates below C-Suite level, contrary to position advertising in Linkedin, Indeed, etc. Never mind that the CEO of Florida’s Brightline was hired from New York as a sports event operator skilled in customer experience. Like a horse with blinders cantering only in one direction, HR does not possess the intellectual capacity to appreciate the relevance of transferable experience. Instead, by not appreciating the skills acquired in today’s world, HR conveniently dismisses such translatable experience, falling into the old trap of how Amtrak is so “unique.” Thus, HR condemns the organization to continue following a course of repetition compulsion to internally reenforce limited, narrow vision; preventing new blood, fresh ideas, open eyes. It is incredible for a company of Amtrak’s size and revenues to see the plethora of confusing, complex job titles (non-agreement); how many floors of HR does that require to administer?
Ironically, this is in direct contrast to the position of Tom Pendergast, recently retired CEO of the NY MTA, voted Railway Age “Railroader of the Year-2016,” who directly expressed his appreciation for the value of a fresh pair of eyes and bold ideas: “because if you see the same thing from a different perspective, you may have a fuller picture of it. That’s good because they will ask the question, why? If you matriculate up in the organization, sometimes you don’t ask that question.” By overtly favoring only internal promotions, Amtrak perpetually fails to understand what leaders in this industry have already learned and professed. When you view the perpetual inability of HR to learn how the world now works, I strongly recommend to Mr. Anderson to embrace author Robert Townsend who wrote Up the Organization in 1970, based on his turnaround experience of Avis, where he succinctly explained to close HR (nee Personnel), because “Personnel screens out the best candidates, as it does not know what management wants in a candidate.”
In essence, their is nothing unique to Amtrak’s management requirements, as we have obviously experienced year-after-year as the organization has struggled to gain traction (particularly with the loss of key people after Mr. David Gunn received his Potomac kiss good-bye from the Board at that time.) Mr. Anderson should critically determine that the only way to drive transformation of Amtrak’s culture will be from the outside in. Accordingly, Amtrak under Mr. Anderson should be actively recruiting seasoned, external management with the background and proven competency to correctly evaluate and fix a broken situation, by cutting costs and maximizing revenues concomitantly to building a better product and a consistent, meaningful, and acceptable brand.
In parallel to the stifling closed culture to external management candidates, Mr. Anderson will find how the inconsistency in customer experience starts at the recruitment level. To what extent is the perpetuation of the problem of inconsistency in OBS due to HR (nee TA) itself by excessively hanging onto the candidate before releasing to the hiring manager? As such, how does Amtrak hold the manager responsible for the appropriate recruitment, successful orientation, and correct training, as well as discipline and turnover, if not immediately bringing the manager into the hiring process. To the same extent, over the past 10+ years, when was the last time any union work agreement was re-opened and negotiated, let alone to require appreciation for the brand, evidence all encompassing concept of customer experience; acknowledgement that promotion, and the job itself, are most certainly not based just upon seniority, but predicated upon embracing a company designated culture to achieve consistently acceptable customer experience? As part of that, to shorten the length of disciplinary process to achieve termination?
With these unacceptable stodgy concepts inhibiting Amtrak, Mr. Anderson should also be quite interested to learn the details of what, if any, explicit, successful role has HR achieved in the work environment to “tune-up” the culture and ensure relevant communication to re-build morale? What role has HR endeavored to play, and how successfully to prevent timecard fraud, company credit card theft, and vendor abuse? Where has HR been to prevent a Wells Fargo syndrome encouraging management to manipulate financials and other metrics to set their bonus? What has HR achieved to clearly identify the process preventing retaliation by managers against employees identifying problems, e.g., safety, theft, vendor payoffs, etc?
FINANCE (Although siloed from Operations and Marketing; but who leads?):
Revenue Enhancement and Maximization (opportunities denied in food/beverage services)
Why does Amtrak continue to not focus on resolving the perpetual lost revenues by creating opportunities to capture in catering//food & beverage services? Why does it take forever to select and implement a Point-of-Service computer program (remember bar codes?) to operate diners and cafes as separate restaurants to control inventory pars, prevent stock-outs that stab service acceptability, and cut waste? Why is their such a lethargic approach to increasing bar sales by actually training LSAs in mixology as bartenders to create cocktails; adequately stock lounges and diners with liquor, mixes, garnishments, and tools of the trade? What has prevented serving regionally crafted beers in kegs and sampling/selling regional wines? Why are the cafes tolerated as a step-up from a Penn Central food service car, and diners barely at a truck stop level, when product quality and selection could be vastly improved by charging sleeper class for their meals, instead of just using sleeper fares to bury diner costs? Why has the ability to benchmark been lost to learn how European airlines established ability for coach passengers to pre-order/pre-pay upgraded meals thru their website; limited to only cities with end point commissaries? On that topic, where is the impetus to achieve cash controls aboard trains by enabling passengers to purchase pre-paid card for all food/beverage items aboard trains? (How much does Amtrak spend, i.e., waste, on LSA and accounting salaries counting change and reconciling receipts at end of trip?) What will spark the motivation to determine opportunity of increased revenues by improving utilization of diner and galley as a partial coffee shop/grill?
Asset Utilization (seasonal services, schedules)
What has been the inability of Finance to appreciate and push to maximize asset utilization to cut costs and increase revenues? What is the rationalization that tolerates consists sitting in yards vs. in operation; how is this allowed to defy the economic principle of incremental costs vs. Amtrak’s full cost methodology? Why has their been no effort to improve utilization of dedicated “Auto Train” equipment, instead setting off winter seasonal equipment in the Sanford, FL yard? Is their not a department in Amtrak with multiple levels that works with states/regions to prospect, identify, and proforma route expansions or new services, e.g., working with growing rail enthusiastic Colorado to establish a summer season “Auto Train” service from Chicago-Denver/Colorado Springs, the gateway to the western national parks? Up through the early 1960s, The Pullman Company had no problems fully utilizing dedicated consists between winter and summer seasonal routes. Is it feasible to determine if VIA Rail Canada has excess equipment/power to sell to operate as extra sections or seasonally, as recently experienced during a prior Thanksgiving? What about the consumption of additional consists, crews, and their related costs due to the extensive schedule padding and being artificially constrained by scheduling Chicago-New York/Boston, Chicago-Washington, and Chicago-New Orleans late in the evening to facilitate late arriving western long distance trains? Is their no market research to evidence scheduling specifically for these markets with afternoon departure and a morning arrival? How many consists could be freed up for other routes, or, even additional frequencies?
Forensic Audits (Long overdue to verify protection of taxpayers)
What has Finance done to assure the competitiveness, indeed, negotiation of “most favored nation” status of vendor contracts? What is the continuous check and balance on how suppliers are sourced, and contracts negotiated? Can Finance define what is their effort and frequency to re-negotiate and push down pricing; identify new sources to bid?
GOVERNMENT RELATIONS (What happened to such a very competent component that served Claytor/Gunn?):
As CEO, Anderson should early on establish his authority and vision. Ideally, he will waste no time to visit Congress to legislate an Amtrak ticket tax of 1¢ per gallon of gasoline for a dedicated fund. Amtrak also needs to counter the ability of airports to use their funds generated by taxes and fees to pay for the entrance of new airline services.
In respect to the above delineated issues, it is incumbent upon the new CEO Anderson to revamp the organizational structure and energize it with the outside blood, unblinded eyes, unbiased opinions of new management that does not know, is not recruited by, and will not kowtow to the Potomac establishment, as exemplified by the current Amtrak Board of Directors. I seek to disambiguate these facts for Mr. Anderson to avoid what has consumed so many prior Amtrak CEOs; disappointing us for lack of action and interest; merely taking us on another ride ‘future back to the future.’