Nationalising the rail

Nationalising the rail
Restored government ownership of the railway operations will present some interesting issues to the incoming board - some of which can be resolved directly by the board while others will require the intervention and direction of the shareholding Ministers. The most immediate issue is the proposed organisation of the joint enterprises and the relationship between the existing OnTrack and the proposed operating arm of the new enterprise. The new company will incorporate a number of diverse operations. Ideally, efficiencies from merging common activities should be taken, while keeping as much separation as possible between the commercial operating arm of the business and OnTrack, which could then become a track service provider to a number of commercial enterprises.

Hostile Competition
Today’s freight customer demands a door-door service coupled with supply chain management. The rail company therefore finds itself in the invidious position of relying on its road competitors to provide the overall range of freight services. Unlike most SOEs (there are some exceptions such as NZ Post) the new company will find it faces a historically hostile competitor which can, of its own accord, provide the full range of services demanded by the customer without modal interchange. Even if the government reintegrates the infrastructure and the commercial and operating businesses into one it will still face this challenge. Incoming directors will therefore need to resolve some interesting commercial and customer issues while still allowing for the possibility of competing services on rail.

Big picture view
An integrated railway consists of a number of specific activities that are businesses in their own right and with their own sets of issues. The board will therefore require a diverse set of skills and attributes not normally found in any one business. It will, within its constitution, have to address a wide range of issues particular to rail as well as the normal range of issues that any board has to resolve. The reacquisition of rail is going to demand competent and capable directors with the ability to see the wide picture. It will be a stimulating and challenging time for all.

The perfect team
Imagine the following board: Ricky Gervais, Lance Armstrong, Jamie Oliver and Germaine Greer. According to a recent issue of Director magazine (UK), it would have the following qualities: humour and creativity, relentless determination, accurate issue identification and a constant stream of new challenging ideas. A lovely idea perhaps but the reality is of course quite different. The article observes that too often boards continue to recruit in their own image and in the UK experience see more “pale, male and stale” memberships.

Outside the square
A look at the boards of some of our major companies over recent years shows an element of homogeneity as to age, gender, qualification and background. The Insitute of Directors adds that this element is not universal and clear exceptions are becoming more evident, pale and male is definitely not unknown in the New Zealand experience. No boards in the media, telecommunications, broking or distribution industries would have considered inviting Sam Morgan as a board member in 1999. Much too young and much too inexperienced would have been the entirely reasonable verdict. At the same time Mr Morgan had an insight which was invisible to all the boards. It is that spark of insight, creativity, the ability to discern things that are not trivial and not apparent which can benefit any board. A law or accountancy degree, a preponderance of grey hairs or a track record of minimising risk and avoiding mistakes do not guarantee this sort of creativity and intuition (they don’t preclude it either). There is clearly a place in an effective board for these sorts of skills to sit alongside the conformance and monitoring competencies. So let’s hear it for board diversity. We’ll always have lawyers and accountants. It’s time to add to that talent