Interviews

Number crunching

Cutting unit costs on the railway is about more than just rolling stock, infrastructure and working practices – for an organisation the size of Network Rail, savings have to be made in the back office, too. Steve Swientozielskyj, head of finance shared services, tells RTM that is just what has been happening – but that the back office is also now having a big impact on front line rail services too.

Managing the finances of Railtrack was a difficult business, with much duplication of processes, unclear chains of responsibility and work located in so many different sites.

Network Rail decided to do things differently almost from the outset, opting for a finance shared services model, where processes from across traditionally unrelated business areas are centralised and standardised, and ‘sold’ back to the company as a service.

Steve Swientozielskyj, who heads up Network Rail’s finance shared service centre in Manchester, had six years of experience at Railtrack – learning how things shouldn’t be done, he jokes – and had to start right at the beginning.

“We had no building, no people, no process – but a lot of guts and determination, that was the starting point.

“We had 42 ways of doing things, and the first driver was we had to have just one way of doing things, and put some financial and corporate discipline on the situation. Part of that was through mandating, where you just had to do things one way. We couldn’t have different terms of trade, payments, the whole plethora of different things you’d have in one organisation; we couldn’t have 42 variations of that.”

At the heart of his success in transforming Network Rail’s finance shared services into a world-class operation, with unheard of rates of invoices paid correctly and ontime for one example, was an intensive research effort in around 2006-7 to investigate, globally, what best practice in finance looked like – and to copy and integrate as much of it as possible. This was a simple concept, harder in practice, but has really borne fruit.

Swientozielskyj said: “It took us a year or two to implement all of that, but it’s meant we’ve been able to do some really clever stuff: automation, workflow management, the elimination of transactions – asking ‘why are we doing this, let’s get rid of it’ – that’s been a vital part of the transformation."

Inside or out?

Shared services units, due to the way they work, often see themselves as somewhat external and apart from the main organisation. This is not the case with Swientozielskyj’s team, he says.

“Fundamentally we’re part of Network Rail. We position ourselves to be part of the heart of the organisation. We’ve never seen ourselves as something outside it. We’re a vital cog in the engine; whatever the business wants to do, or the way it wants to achieve things, we’re part of it. It’s partly a cultural issue. If your back-room operations are recognised as world class, cheaper than India – which we are, which is a bit of a counter-intuitive statement, but it’s true – it helps the brand of Network Rail. It shows the organisation is progressive, doing positive things for the industry, and UK plc.

“Every single supplier in the industry, and there’s about 16,000 of them, and all their customers, 2,000-plus, are critically dependent on us. People don’t notice how good we are: when you hear complaints about Network Rail, you don’t hear anything about payments and backroom operations, which run smoothly. We’ve taken ourselves off the ‘problem page’.

“As a good example, they transferred project accounting to us. That’s doing accounting for an £8bn spend. We do the management accounts for a roughly £6bn spend. You’re not going to transfer that to shared services if you don’t have a degree of confidence there.”

This meant, he said, that his team has gradually moved from just “transactional shared services” to “decision-making support”, through project and management accounting, and is now going further.

He said: “It’s happening to a scale and degree I’ve not seen in other businesses. We’re moving to value-centric areas and we are now – and I’ve not seen this globally – we’re providing services for the whole of the industry.”

Train metering

A prime example of that is the recent project to move to electricity billing using on-train metering together with GPS technology, measuring acceleration and deceleration. Network Rail charges TOCs for the electricity their fleets use, on both the overhead and third-rail traction networks. These bills, totalling around £250m a year, have in the past always been worked out using modelling and estimates. But using GPS to get more accurate data is proving beneficial to all.

Swientozielskyj and his team, who developed the idea, think that by using it, costs can be brought down by anywhere from £25-40m a year. The data could also prove very useful for the operators, who can use it to alter driver behaviour and in other ways.

The project, required by the ORR, was piloted from April 2010 with 50 trains and went live in the middle of last year with 160 – a rare example of different parts of the industry working together in the interests of everyone.

The calculations involved are obviously complex (the current rules’ glossary of terms and definitions alone runs to four pages) – covering different rolling stock, with different fuel efficiency, on vastly different routes. It required a lot of IT innovation, but it is hoped that more efficient train operation following analysis of the data will also help cut track maintenance costs.

It has not yet been rolled out networkwide, but it can only be a matter of time.

He said: “We’re sure the regulator will push more TOCs down this road, because ultimately the taxpayer pays that extra, unnecessary money.”

An incentive for operators is seeing exactly how much electricity they are being charged for throughout the year, rather than standard charges based on modelled consumption followed by a potentially large ‘wash up bill’ at the end of each year, he says.

People power

Swientozielskyj and his team are not just number-men: they have backgrounds in organisational change, consulting and people management more widely. Swientozielskyj himself spent six years with what was then Price Waterhouse, for example, before getting into the rail industry in 1993.

He said: “The transformation of finance shared services involved a focus on people: talent pools and apprenticeships, for example, and more recently the Investors in People scheme. That’s been to engage our staff and for them to understand what we were doing and why.

“We thought we were pretty damn good as a management team, but when we got the feedback, it was clear that we could do a lot better – that was actually quite a painful revelation.

“There were some quite clear signals there for us to improve, and if you’re going to carry people you’ve got to listen to them.”

Risky business

The emphasis on business shared service is almost always on cutting out processes and automating everything there doesn’t need to be manually. But doesn’t the lack of human input and checks introduce an element of risk?

Just the opposite, he argues: “You could argue you’re improving risk. When we had manual systems, our rate of paying things correctly on time was 15%.

“We put in a level of automation, and got that to 80%, quite rapidly, then pushed that to 85%, which is world class level. Suppliers get paid on time, on-the-dot, if they stick to the process.

“The next level takes that technology, which is almost artificial intelligence, even further. If you scan an invoice in, if it thinks it is an ‘I’, the system will learn it is not an ‘I’, it is a ‘1’, so you don’t need that manual intervention constantly – it just learns it and does it.

“We are now yielding rates of up to 96% of our suppliers being paid on time, no problems whatsoever. The technology has actually driven that. I’d say we’re the best, and that’s us paying things in a controlled way.”

The global trend in the private sector, at the biggest companies, is now towards merging all back-office shared service units: not just finance, but also HR, IT, procurement, and so on. This could be the next step for Network Rail too.

Swientozielskyj said: “We are looking now to develop a business services model, basically pulling all those things together. That’s quite hot at the moment and we have a cross-functional team looking at that.”

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