Are We Nearly there Yet?

The story of

East Coast Main Line Company Limited November 2009 – February 2015

e W Are e r e h t y l r Nea Yet? E A S T C O A S

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On 29 March 2011 the first of East Coast’s locomotive namings took place when electric loco 91 109 was named ‘Sir Bobby Robson’ by former England and Newcastle United legend Alan Shearer OBE and Lady Elsie Robson.

Contents

CHAPTER ONE

CHAPTER TWO

CHAPTER THREE

CHAPTER FOUR

CHAPTER FIVE

CHAPTER SIX

CHAPTER SEVEN

CHAPTER EIGHT

CHAPTER NINE

4 5 12 19 26 31 38 46 53 61

INTRODUCTION

ARRESTING THE DECLINE

EUREKA!

TRAINS, PLANES AND AUTOMOBILES

THE BRAND STORY

IT’S ALL ABOUT THE PEOPLE

PERFORMANCE

FINANCE AND INVESTMENT

LIFE IN A GOLDFISH BOWL

PREPARING FOR HANDOVER

With thanks to Jane Simms for researching and writing Are we nearly there yet?

3

Introduction

The business East Coast Main Line Company (‘East Coast’) inherited from its predecessors National Express and GNER had, in the words of one journalist at the time, “gone into vertiginous decline.” All its vital signs pointed to a crisis: employee morale was at rock bottom, trains were running late, safety performance lagged that of competitors, customer satisfaction was low, revenue was falling and the business was losing money. It was in need of some intensive care, and the government decided to nurse it back to health in the public sector with a view to returning a stabilised business to the private sector 18 months later, when the real work of innovation and growth would begin.

East Coast certainly nursed the business back to health. Or, more accurately, it took it by the bootstraps and badgered, nagged, drove and cajoled its 3,000-odd employees to believe in themselves and the company again and understand the role they would each play in driving improved performance.

But it went further. When the ownership period was extended to five years it gave the leadership team the opportunity to build on their success in stabilising the business, and they embarked on a comprehensive £50m programme of improvements and innovation that yielded good results across many areas of the company. The Public Performance Measure (PPM) dipped marginally after East Coast took over, but the position on train cancellations and ‘Right Time’ punctuality improved significantly; customer satisfaction, employee engagement and safety performance all reached record highs; and the company returned nearly £1.1bn to the government in franchise premium and profit payments.

It’s an enviable record, and one that other train operators have found hard to match – and this is despite, not because of, its public sector status. But perhaps the most telling measure of East Coast’s success is the £3.3bn franchise premium that its successor, Inter City Railways, has promised to pay to the government over its eight-year tenure, which began on 1 March 2015.

The ‘East Coast story’ is, above all, a people story. Key to the turnaround was the quality of its leadership and management, which rekindled employees’ commitment and loyalty to ‘the railway’ and restored their pride in being associated with it.

In the following pages we aim to tell that story....

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INTRODUCTION

Arresting the decline

CHAPTER

ONE

The East Coast Main Line is often described as ‘the jewel in the rail industry’s crown’. The 936-mile line runs from Aberdeen and Inverness in the far north to London King’s Cross in the south, taking in 53 stations along the way, including important business hubs such as Leeds, Newcastle, Doncaster and Peterborough.

High profile, rich in heritage and commanding some of the most stunning views in Britain, the line also boasts a long tradition of families working for it – often several generations’ worth – and their loyalty is to ‘the railway’ rather than to whatever company happens to be in charge at the time.

However, the East Coast Main Line is notoriously difficult to operate – not least because of its extreme length. ‘The wrong kind of weather’ is a running joke among delayed passengers of all rail companies, but it is a fact that the east coast of Britain suffers more extreme winds, rain and snow than the west.

What’s more, even on the core Edinburgh to King’s Cross stretch there are several major junctions, where lines cross and connect, carrying passengers and freight, affording endless opportunities for delay. The infrastructure doesn’t help either. The line was electrified up to Edinburgh in the 1980s, but, with the exception of ‘the Hertford loop’, the investment didn’t stretch to the diversionary routes, so every time an electric train is diverted it has to wait for a diesel engine to haul it.

In some ways, privatisation of the railways in the 1990s exacerbated the problems for train operators. One thing it did was to separate train operations from the management and development of the infrastructure, which was devolved into Railtrack, which subsequently became Network Rail. The relationship between Network Rail and the ‘train operating companies’ (TOCs) is governed by a complicated series of contractual and regulatory commitments, but the different aspirations of each party (Network Rail wants access to the track to repair it, the TOCs want access to the track to run trains) can create tensions at the best of times.

The majority of the delays and cancellations on the East Coast Main Line are caused by Network Rail, yet the TOC bears the financial and reputational cost.

As well as competing with TransPennine Express and CrossCountry in the north and Thameslink in the south, the East Coast Main Line route also has the UK’s highest level of ‘open-access’ competition in the form of Grand Central and First Hull Trains.

Yet despite these considerable difficulties, the bids put in by private-sector companies to run the InterCity East Coast franchise have traditionally been ‘challenging’, as Michael Holden, chief executive of Directly Operated Railways (DOR) and former chairman of East Coast Main Line Company Limited (‘East Coast’), explains.

History of the East Coast Main Line

The line dates back to 1846 and was built by three railway companies: the North British Railway, the North Eastern Railway and the Great Northern Railway. Each initially served their own areas, but the intention was always to link them up. The three companies took a collaborative approach, and in 1923 they were fully amalgamated into the London North Eastern Railway.

The line has been the backdrop for a number of famous rail journeys and locomotives. For many years it was worked by Pacific locomotives, including the famous steam engines ‘Flying Scotsman’ and ‘Mallard’.

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5

Franchise history “To win a franchise you had to be aggressive with your revenue line because in this business revenue dwarfs costs, which are relatively fixed,” says Holden. “And the longer the franchise is the harder it is to peer into the future and get that right. You’re bound to be wrong; it’s a question of how wrong. If, in any year of your seven-, eight- or nine-year project, something happens to cause a blip – a recession, a banking crisis or a terrorist attack, for example – that throws the growth off track in a way that can be very difficult to recover from.”

And this is exactly what happened to both GNER, which operated the route between 1996 and 2007, and its successor National Express East Coast (NXEC), which ran it for two years until 2009.

When it became clear that NXEC had run into trouble, the then Secretary of State for Transport, Lord Adonis, announced he was taking the line back into public ownership. The arrangement was intended as a temporary measure, designed to fulfil the Secretary of State’s obligations under Section 30 of the Railways Act 1993, which obliges him (or her) to secure continuity of passenger services where a franchise agreement has ended and no further franchise agreement has been entered into.

Lord Adonis set up DOR in July 2009 to stabilise the East Coast business, which had been starved of investment and was haemorrhaging cash, with a view to returning it to the private sector 18 months later. DOR was established and ‘mobilised’ by an expert team of 35 people, who successfully transferred the line to the wholly-owned, not-for-dividend subsidiary company East Coast Main Line Company Ltd on November 13th 2009.

The DOR team was led by Elaine Holt, former managing director of First Capital Connect, which operated the Thameslink Great Northern franchise.

She was supported by Holden, a long-time railway man, who took over her role in January 2012, and by chairman Doug Sutherland, another seasoned rail executive.

Michael Holden, chief executive of DOR and former chairman of East Coast

Holden started his career with British Rail as a traffic student in 1974, and over the next 30 years rose through the railway ranks to become regional director southern for Railtrack. In 2003 he became managing director of Connex South Eastern and immediately began to negotiate the company’s transition into public sector ownership as South Eastern Trains, which he ran until it was refranchised in 2006. He then became a railway management consultant, specialising in providing strategic advice and leading franchise bid teams. He is a member of the ATOC management board, an alternate member of the Rail Delivery Group (RDG) and a member of the DfT’s franchise advisory panel.

Doug Sutherland, chairman of DOR

A chartered management accountant, Sutherland has held senior finance roles in both private and public sector organisations, including Black and Decker, Grand Metropolitan, Dairy Crest, North of Scotland Water and the Strategic Rail Authority. He was chairman and chief executive of British Railways Board (Residuary) between 2003 and 2013, and chairman of South Eastern Trains (Holdings) during its period of public sector ownership. He is a member of the RDG.

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CHAPTER ONE – ARRESTING THE DECLINE

GNER was awarded the East Coast franchise in April 1996 to run, for a period of seven years, what had been the InterCity East Coast division of British Rail.

It was later granted a two-year extension, until 2005, and it then won a renewal to operate trains on the route until 2015.

The company presided over a period of considerable success, winning respect from customers and employees alike, but in 2006 it ran out of money. Competition had been growing from openaccess operators, and passenger numbers had plummeted after the terrorist bombings in London in July 2005, making it difficult for it to meet is ambitious revenue targets. Its US parent, Sea Containers, was in no position to help: in October 2006 it filed for Chapter 11 protection from its creditors after failing to make a crucial debt repayment.

Holden explains: “When you put in a bid, you predict a compound rate of growth – 8% a year, say – over the term of the franchise.

So if you have a big blip in year two or three, for example, which means you miss your revenue target for that year, you’ve a mountain to climb to catch up.

That’s enough to sink you if you’re on a narrow margin, which is what happened to both GNER and NXEC.” NXEC’s growth predictions were knocked off course by the recession. It achieved its revenue growth target in the first year, but growth plateaued in year two. It decided that the losses it would incur by continuing to pay its franchise premiums (£1.4bn over seven years) to the government could be big enough to bring the whole National Express Group to its knees. Paying a penalty for walking away, which is what it did, was the lesser of two evils.

The holding company structure was established in order to allow East Coast to operate at arm’s length from government. “We wanted it to look and feel like a private sector company and run on commercial lines, otherwise it wouldn’t have been able to compete,” says Holden. “For example, we needed to be able to employ people on terms and conditions akin to those of other private-sector train companies, and we wanted to free the business from public sector procurement policy, which would have slowed everything down when we didn’t have the luxury of time. We also wanted to insulate the team from the messy world of government, where there is very little black and white and infinite shades of grey.”

As it turned out, DOR had four months to come up with a business plan for East Coast, but there was uncertainty from the outset. When the DfT asked Holt and Holden to prepare to take over the franchise, it warned that it could happen in a matter of days – or even not at all. They didn’t receive a definitive date until the beginning of November, nine days before the transfer. The intervening four months had been characterised by fraught conversations with NXEC – itself in a combative relationship with the DfT – as it tried to extract information on which to base the plan and devise a strategy to implement it.

A new leadership team The biggest challenge though was to get a new leadership team in place and engaging with people on the ground. Karen Boswell, formerly customer service director and deputy managing director at First Capital Connect, joined a mere week before mobilisation and, with the support of Holt and the DOR board, she and her executive team – a mix of new and existing East Coast people – swung into action. Armed with the business plan she had inherited, Boswell set out with her team on a roadshow around the business, evangelising change.

The business plan was “a bit generic,” admits Boswell, “but it gave us something to work with. A company can take six months to come to the sort of conclusions it contained, so it was a really good start.”

Perhaps more important than the objectives detailed in the plan were the over-arching vision, guiding principles and concrete goals it contained. These, she says, gave people the length and breadth of the route something to hang on to – “which Vision, Principles and Goals essentially was what we planned to do with the business and what their Vision role in that would be.”

To provide the best possible journey experience for East Coast customers It was, as she says, a simple message, but it resonated in a complex and a great place to work. and demoralised environment – as did her insistence that it wasn’t she Guiding principles who would make the business profitable, but the 3,000 or so people Focused, Consistent, Human, working in it.

Progressive.

In truth, the medium was probably more powerful than the message.

Goals Boswell has ‘the human touch’ and her egalitarian, straightforward and 1. Get the basics right.

2. Keep East Coast staff and highly visible management style cut through in a climate that was, she customers safe. observes, “very hierarchical and status driven.” The prevailing culture 3. Improve the value of the business may have been a consequence of the rules-based nature of railway and hand over the franchise in companies, she notes, “but we needed to get over that. It’s about the good shape. job you do, not the badge you wear.”

4. Manage major projects well.

It was, she believes, “massively important” for her to get out and 5. Put the customer at the centre of everything. about in the business so that people could see who she was. In the past 6. Innovate to continually improve. leaders had been rather remote, “but it you’re asking people to work 7. Be a strong team. very hard you have to be out there talking to them. It’s also the way you find out what’s going on and get really valuable input.”

Tim Hedley-Jones, property and projects director, and one of the few executives to survive the transition from GNER to NXEC to East Coast Main Line Company, says that Boswell blew in a welcome wind of change.

The days running up to the transition were difficult, he recalls: “People felt ‘done to’, the senior leadership team felt cast adrift from the National Express Group, there was lots of uncertainty and much to-ing and fro-ing between the NX Group in Birmingham and the NXEC leadership team in York. That had a massive

CHAPTER ONE – ARRESTING THE DECLINE

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Leadership and management

According to Sutherland, Boswell immediately became ‘the face of East Coast’ – to both customers and staff. “She’s very genuine, she cared about the passengers and she was enthusiastic about the business,” he says. Holden adds: “Karen’s particular skill lies in leading, developing and motivating a group of people.”

When DOR took over the company the capability of the management team was on the risk register. It made some changes to the leadership team (“and we made one or two bad appointments which took us down a couple of blind alleys,” says Holden) and helped to coach and mentor people into roles. Otherwise it trusted in Boswell’s ability to build on a high intrinsic level of skills and capabilities and to galvanise the team to drive improvements in what was essentially a very good business, albeit one weakened by its experience over the previous five years.

“Karen developed a management team that could stand on its own two feet. Where we helped was with some of the more technical aspects of running a railway,” says Holden.

impact on people, who were already demoralised by years of cost cutting, under-investment and ownership changes. Trust and pride in the railway had declined and people felt like ‘victims’ who were unable to take charge of their destiny.”

What’s more, he continues: “Cost-cutting had led to dysfunction.”

When the franchise transferred from GNER to NXEC, the new operator centralised a number of functions and departments, including Marketing, Communications, Information Systems and Property and Projects, which meant that East Coast had to recreate functions and rebuild skills, sometimes from scratch.

Engineering was in a particularly parlous state. Holden describes it as “the single biggest weakness of the business,” and an external report commissioned in the early days of the new ownership period concluded that “East Coast Engineering barely functions.” The decimation of engineering skills under NXEC meant, says Holden, that “we struggled to turn the right number of trains out of the depots every morning.”

But things changed very quickly. “Elaine [Holt] was very clear on what we needed to do, and Karen was very good at helping us work out how to do it,” says Hedley-Jones. “Clarity of leadership, focus on governance and business processes, quick decision-making and a clear process for approving capital investment all gave me confidence that things were going to change for the better.”

The Accountability Ladder

Two slides within the business plan presentation that Boswell made to staff up and down the route resonated particularly strongly: one featured ‘the accountability ladder’ and the other ‘the think/know gap’.

The accountability ladder was aimed at moving people from a ‘powerless’ state at the bottom up to a ‘powerful’ state at the top, through the intermediate stages of ‘unaware’, ‘blame others’, ‘excuses’, ‘wait and hope’, ‘acknowledge reality’, ‘own it’, ‘find solutions’ and, finally, ‘get on with it’. The think/know gap, meanwhile, referred to an identified gap at the junior/middle management level of the business, which meant that what the executives and senior managers ‘thought’ about the business was very different from what team leaders and front-line staff ‘knew’.

“I’d inherited this business plan and a programme of mobilisation and conferences, but the bit about ‘how’ we were going to turn the business round was missing,” recalls Boswell. “That’s where the accountability ladder came in.”

The image represented an accurate distillation of where the business was in the autumn of 2009 and served as a rallying cry for leaders and managers, says Hedley-Jones. “Karen strongly supported each of us to take an active role in leading the business, rather than just managing it. I personally found that very helpful: the vision we developed in the Property and Projects team, for example, stayed relevant for the whole of the period of the franchise.”

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CHAPTER ONE – ARRESTING THE DECLINE

But even the leadership team had grown unaccustomed to taking decisions, so an early priority for Boswell was to inculcate a culture of accountability and empowerment that would allow the executives to translate the organisational vision and goals into goals and, crucially, tasks for their own departments. It wasn’t easy, and to help effect and sustain the change, she implemented a programme of ‘authentic leadership’ designed to encourage people to use their skills and knowledge and, as she puts it, “have a voice.”

Real-time due diligence Boswell’s six month ‘tour of duty’ around the business also became a period of what she calls ‘real-time due diligence’. She explains: “I take a ‘root cause’ approach. I ask a lot of questions and I keep asking until I get to the bottom of things. And I started to realise that the business was in a far worse state than any of us had realised. It wasn’t operating to the right level in any area. That was no-one’s fault; it was the consequence of years of cost-cutting and under-investment.”

Problems she identified included the following.

• A poor safety culture: East Coast was at the bottom of the industry league table on some safety measures.

• No attention to detail on train punctuality.

• An under-performing fleet: trains were not being serviced or maintained properly and there were problems with air conditioning and sticking doors.

• Inadequate financial management and controls, combined with a focus on transactional detail rather than business support.

• Poor Wi-Fi performance on trains.

• No contingency plans for major weather disruption, nor a crisis communication plan in the event of a crash.

• No performance appraisals – even for managers.

• Poorly-managed supplier contracts.

• Non-functioning automatic ticket barriers.

• Poor customer focus: NXEC had introduced a deeply unpopular charge for seat reservations and reduced catering services.

• Poor customer relations: Passenger Focus (the independent passenger watchdog) highlighted slow and inadequate responses.

• Poor train presentation and on-train environment, especially the toilets.

• Lack of leadership, knowledge and capability in Engineering and lack of clarity about responsibilities in other departments.

• Little investment in stations.

• Limited employee engagement, lack of common purpose and a demotivated workforce.

• Revenue in freefall.

• No focus on environmental issues.

Taking the lid off what was, not to put too fine a point on it, a can of worms changed the game completely. In the East Coast April 2011 Business Plan Boswell wrote: “We thought it would be business as usual. In fact there was a lot of work to be done....The extent of this did not become apparent until towards the end of June 2010.... When DOR took over the business it knew East Coast had problems that needed to be tackled, but it soon became clear that many of the issues ran deep and needed radical change. In getting to the root cause the reality became clear that we needed to take steps not merely to take control of East Coast but to undertake a thorough turnaround.”

She and the executive team drew up clear plans for every single area of the business, which became a powerful driver for improvement. They started with the low-hanging fruit. They abolished the unpopular seat reservation fee, scrapped controversial plans for ticket barriers at York station, reduced the response time to customer complaints letters, upgraded the on-board Wi-Fi, stepped up the ‘modal shift’ campaign designed to encourage passengers off planes onto trains, and pledged major infrastructure improvements.

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Future-proofing the business They also started to address some of the key sources of customer complaints – namely punctuality, value for money, train environment and the attitude of train staff. Train performance was such a big issue that Boswell instigated a daily telephone conference to review the previous day’s performance issues and made performance everyone’s responsibility.

Some things went their way. The ash cloud from the eruption of the Eyjafjallajökull volcano in Iceland closed European air space for nearly a week in April 2010, sending 36,000 additional passengers in East Coast’s direction. Other things worked against them. During the first year of operation there was an unusually high number of fatalities on the line, an unusually high incidence of cable theft, prolonged heavy snowfall, flooding and landslides. These challenges were exacerbated by a combative relationship with Network Rail – Holt and Boswell had decided to take the company on and hold it to account for the state of the line, rather than accepting poor performance as had been predecessors’ wont – and by the loss of around £20m of revenue, almost overnight, as a result of the government’s decision to cut first-class travel for public-sector staff.

However, what gave impetus to the comprehensive programme of improvements was the opportunity to introduce a major new timetable change in May 2011. The new timetable, which would expand the number of East Coast services from 136 to 155 in a day, had been ten years in the planning and represented the biggest change to the East Coast Main Line route in 20 years.

It had looked as though the new timetable might be postponed until the company was back in the private sector, not least because of opposition from both Network Rail (which saw more services on the route as a risk) and open-access competitors Grand Central and First Hull Trains (which saw their share of route traffic declining). But Holden “threw his weight around the timetabling world,” as he puts it, and drove it through.

East Coast had just 12 months to prepare itself. It added to the pressure by

Why the East Coast route is difficult to run

Boswell set in motion a strategy for ‘future-proofing’ the business early on, by feeding back intelligence and insight to the DfT about issues she had identified within the company and how those issues might be addressed in future franchise specifications and evaluations to improve the success of the franchise system and the sustainability of the railways as a whole. The fact that DOR/ East Coast would not be bidding for the new franchise meant they were able to be open, transparent and impartial about what works and what doesn’t to prevent the mistakes of the past happening again. This was consistent with one of the seven business goals – ‘Improve the value of the business and hand over the franchise in good shape’.

Hedley-Jones recalls: “We believed it was very important for the DfT to be able to use East Coast as a model for any DfT/TOC relationship, so our aim was to be as transparent as possible and provide far more information to them than we would have been able to do as a private company. It was about really helping them to understand ‘how a TOC ticks’, as we put it at the time. We made a number of presentations to DfT officials during that first year about some of the issues we had identified and what they might do to address them, including a response to a government consultation on reforming rail franchising in 2010.” (See Chapter Nine: Preparing for handover)

The East Coast line is difficult to run operationally because it is so long, it uses a small mix of relatively old trains, the infrastructure is only partly electrified and it is subject to the most extreme weather conditions in the UK. The fleet includes 30 Class 22 (electric) trains, of which 26 are needed on any given day to operate the service. They run between Glasgow and London, and end up in five different places overnight. Based in Bounds Green in north London, the electric fleet has never been reliable, says Holden, and takes “an enormous amount of ‘tlc’ to keep on the road.”

There are also 14 HST (diesel) trains, which are between 35 and 38 years old, and 13 of which are needed for service each day. Each does over 1,000 miles a day and they end up anywhere between Inverness or Aberdeen and London overnight. They are maintained at Craigentinny in Edinburgh, which is not the most natural home for them given that the diesel operation centres on the far north of Scotland and West Yorkshire.

But while this makes them very difficult to operate, they are a proven train that is worked extremely hard.

Not only are the logistics of operating the route challenging, but East Coast has only two major depots of its own – Craigentinny and Bounds Green – so it depends heavily on other companies (in Leeds, Newcastle, Glasgow and Inverness) to service its trains.

The small diesel fleet means it is difficult to provide an amended service when trains have to be diverted off the main electrified line – particularly given the diesel trains are likely to be in Scotland or West Yorkshire. “If you suddenly decide to divert a train via Cambridge, that’s a challenge,” says Holden.

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CHAPTER ONE – ARRESTING THE DECLINE

Structure of the industry

The Department for Transport – Role is to provide strategic direction and funding to the railways, and to procure and manage rail franchises and major rail projects.

The Office of Rail Regulation (ORR) – The independent safety and economic regulator.

A non-ministerial department, it is responsible for ensuring that railway operators comply with health and safety law. It also regulates Network Rail’s activities and funding requirements, regulates access to the railway network and licenses the operators of railway assets. It is also the competition authority for the railways.

Network Rail – The owner and operator of the national rail infrastructure, responsible for the safe and effective management and development of that infrastructure. Previously a private-sector company, it returned to government ownership in September 2014.

Passenger Focus – The independent passenger watchdog for the rail industry, it consults over 50,000 passengers a year to produce the National Rail Passenger Survey (of customer satisfaction, covering a wide range of different aspects).

The Association of Train Operating Companies (ATOC) – Represents the 23 TOCs that provide passenger services.

Owned by its members. Among the services it provides is National Rail Enquiries.

The Rail Delivery Group (RDG) – Set up in 2011 to bring together TOCs, freight operators and Network Rail to provide leadership to, and co-operation within, Britain’s rail industry.

Train Operating Companies (TOCs) – There are 26 in total, mainly franchised, but including seven open-access operators.

using the timetable change as an opportunity to relaunch its First Class offer, which included a completely new catering proposition that would require comprehensive training for onboard teams and significant modifications to the trains. It was a major challenge, and it galvanised the business.

Inverness Carrbridge Aviemore Kingussie Newtonmore Blair Atholl Pitlochry Dunkeld Perth Gleneagles Dunblane Stirling

Glasgow Central

Aberdeen Stonehaven Montrose Arbroath Dundee Leuchars Kirkcaldy Inverkeithing

Falkirk Grahamston Motherwell

Edinburgh Waverley Dunbar Berwick-upon-Tweed Alnmouth Morpeth

Haymarket

Newcastle

Durham

Darlington Northallerton Harrogate Skipton

Horsforth

York

Keighley Bradford Forster Square

Brough

Shipley

Selby

Leeds

Hull

Wakefield Westgate

Doncaster

Lincoln

Retford Newark North Gate Grantham

Peterborough Stevenage

St. Pancras International for Eurostar

London King’s Cross

England-Scotland services Yorkshire services Stations managed by East Coast

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CHAPTER

Eureka!

TWO

The timetable change on 22 May 2011 was the most important development in the East Coast business since the line was electrified and the rail industry privatised in the 1990s. It allowed East Coast to deliver 19 new services each weekday, equating to more than three million additional seats every year (astonishingly, with just two additional train sets). Such a major change also gave the company a platform to relaunch the business – or, at least, to relaunch First Class.

“First Class was haemorrhaging money,” recalls Holden. “We took the company over in the height of the recession, and one The new timetable of the first things the new Coalition government did when it 19 additional daily Monday to came into power in May 2010 was to stop public-sector people Friday services. travelling first class. Our route is highly dependent on the public 13 additional services on Saturdays.

Nine additional services on sector – the Department of Health is a major employer in Leeds, Sundays. for example, as are the Department of Work and Pensions and Her More than three million additional Majesty’s Revenue and Customs in Newcastle. Our third-biggest seats every year. market, Edinburgh, is highly dependent on banking, which was Improved frequency and pattern of going through its own crisis. It was a perfect storm from a train services. market perspective – at precisely the time we were committed to Two new destinations – Lincoln and Harrogate. expanding our service offer from 136 trains a day to 155.”

Faster average journey times for They decided to focus on First Class first because it was, many customers. arguably, a relatively easy nut to crack, and the service proposition had become very confusing. GNER used to have classic restaurant cars, but National Express had started cutting back on them, moving to an airline-style at-seat offer with a reduced level of service. But there was no consistency – customers didn’t know what they were going to get and staff were never clear what they were going to be offering.

“We had to either get rid of First Class catering or do something different, and we did the bold thing and did something different,” says Holden.

Research had indicated that up to 24% of Standard Class customers would upgrade if complimentary food and drink was introduced – so that’s what East Coast did. The decision was vindicated: “The catering change drove the First Class proposition,” claims Holden.

But it came at a cost. One, in focusing on First Class, the company neglected Standard Class – and, therefore, the majority of its customers. Two, the change was rushed through, which meant mistakes were made. And three, it put pressure on an Engineering department that was already struggling to function: the new catering approach required a major modification to all 44 trains in double-quick time to support the timetable change.

“These things are often best driven fast to make them happen, but I don’t think we realised at the time just how bad the Engineering business was,” says Holden.

And it wasn’t just Engineering that was under pressure. The number of meals served each year was

• • • • • • •

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CHAPTER TWO – EUREKA!

estimated to rise from 200,000 to over two million, so the new proposition also represented a huge change for the on-board teams, who needed training up in an entirely different approach. The catering offer comprised six different meals or snacks throughout the day, using local produce where practical, and the emphasis was on warm, friendly and proactive service. Some 1200 guards and onboard crew went through training and 55 customer service and guards managers also attended a four-day leadership programme. (See Chapter Five: It’s all about the people) The relaunch was hailed as a success, thanks to careful planning and attention to detail in what was dubbed ‘Project Eureka!’, which had become part of the everyday job of everyone in the business.

The new timetable and First Class offer was supported by a new advertising campaign, featuring the ‘Welcome to...’ strapline. TV commercials starred comedians Vic Reeves and Rory Bremner extolling the virtues of East Coast First Project Eureka!

Class travel, and were backed up by print, outdoor, email and online Eureka! was a cross-business executions. The new ‘Welcome to’ marketing proposition was even change project to deliver the revised timetable and new reinforced on staff name badges. on-board offer.

The campaign built on research saying customers wanted staff It comprised over 1,500 to be warm, friendly and approachable, and was intended to convey individual project tasks from the message that from the moment customers booked tickets and design to procurement to boarded the train, to the time the train arrived at its destination, delivery, and involved people they would be made to feel special, relaxed and cared for. Again, working in cross-functional teams, with suppliers, on this relied on excellent customer service, which required continuous detailed project plans. reinforcement through training and briefings for all staff.

It required substantial In addition to the new timetable, the new catering offer and the investment – around £15m new focus on customer service, the 22 May ‘relaunch’ comprised a – in on-board kitchens, number of additional benefits, including upgraded Wi-Fi throughout depots (existing sites at Leeds, the train and a new Quiet Coach in First Class. And in June East Coast Newcastle and Edinburgh were upgraded and a new site introduced a generous loyalty scheme for both First and Standard opened at London Euston), Class customers. service centres, supply chain “For us, the value of the whole was greater than the sum of its and skills training. parts, but far and away the most commercially significant thing we A new ‘fit for purpose’ did was to change the First Class proposition,” recalls East Coast’s contract was negotiated with customer and commercial director Peter Williams. food supplier Rail Gourmet, complete with robust KPIs Within nine months the number of First Class journeys had risen on availability, timeliness, to its highest point in five years. By February 2012 overall First maintenance and standards.

Class journeys were up 21%, but on the Leeds services they rose East Coast invested £1.2m in by 31% and on the flagship London to Edinburgh route by 36%, 2,700 new carts (17 per train thanks to targeted marketing and sophisticated revenue management per journey, to be maintained techniques.

by Rail Gourmet) to deliver food and clean dishes to the The new First Class proposition might have been the most trains and remove waste and commercially significant aspect of the relaunch, but the reintroduction dirty dishes for processing in of the iconic ‘Flying Scotsman’ service – not just a 240-minute dash state-of-the-art wash plants. to London, stopping only at Newcastle, but also a newly-christened The company built an extra train to deliver it – was a reputational masterstroke.

1,374 square metres of food “One of the world’s most famous services is truly back,” preparation space, employed an additional 85 East Coast wrote journalist Andrew Collier in The Scotsman. “Fast, efficient, staff, and ordered 230,000 comfortable, friendly and, above all, modern, the ‘Flying Scotsman’ is new pieces of cutlery, crockery once again worthy of its historic name. It’s wonderful to see an old and glassware. friend return – and ready to thrive and prosper.” (See Chapter Eight: It ran over 100 training course Life in a goldfish bowl) between 7 April and 22 May 2011.

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13

Standard Class Boswell and the team built on the business’s burgeoning confidence and pride by focusing on continuous improvement, including rejuvenating Standard Class (see box), and tangible benefits steadily mounted.

Continuing improvement 2011-2012

Safety In the early days performance had been deteriorating, targets weren’t being met, operational incidents were on the rise, there was a poor safety culture and East Coast was seen as the worst performer in the industry. Under East Coast the focus switched from compliance to a more proactive approach designed to identify risks before they appeared and report near misses when they happened.

New initiatives around safety culture, safety training and safety management helped make safety everyone’s responsibility. This shift was reflected in a number of improvements by April 2011, including: 21% reduction in passenger accidents (and a further 35% improvement in 2011-2012).

15% reduction in staff accidents.

45% reduction in major accidents (up 81% in 2011-2012).

50%+ reduction in major injuries.

No longer bottom of the safety league.

Progress was recognised in an Award for Excellence at the Institute of Internal Communications Awards for a campaign called ‘Safer Together’.

Operational performance A closer working relationship with Network Rail to drive a step-change in reliability of assets and reduce the impact of engineering work on performance.

Reduction in delays caused directly by East Coast.

A new Business Disruption Centre opened.

Big investment in Engineering, including systems to remotely monitor the condition of trains and a new engineering management system.

Emergency Weather Action Group (EWAG) convened after the high winds, heavy rain and snow of winter 2011/2012.

‘Project Crystal’ convened to help understand and improve the passenger experience during disruption.

East Coast started to talk about the fact that nearly 80% of delays were outside its control, to protect its reputation.

Won Golden Whistle award for operational safety two years running.

People Extensive customer service training, more visible leadership and a new reward and recognition scheme helped to: – reduce the average number of sickness days from over 14 in November 2009 to just under nine in April 2012, – grow participation in the employee engagement survey and drive a 5% increase in engagement – the highest score yet for East Coast, beating other TOCs.

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visible leadership • More was manifested in

“Lots of effort went into making staff feel that the Standard Class offer was as important as First Class,” says Holden. “One thing we did was incentivise them to run their trolleys properly, because that’s always the first thing to go when either staff or time is short.”

The buffet was rebranded as the Foodbar, with a new range of products, and new Standard Class trolleys and payment technology were introduced. Sales per head, penetration and satisfaction with the food offer all rose, despite increasing competition from the dramatically improved food and drink provision at King’s Cross, Edinburgh, Wakefield and Newcastle stations as a consequence of their redevelopment.

a ‘back to the floor’ exercise in March 2012, designed to get senior managers from the chairman down engaged with employees of every area of the business. The ‘Go Mad’ day focused mainly on on-board duties and raised £12,000 for East Coast’s chosen charity Railway Children.

Launch of new staff newspaper Coastlife in May 2012, focusing on employees’ personalities and characters.

Inaugural Business Excellence Awards, to recognise employee contribution, hosted by Olympic gold medallist Jonathan Edwards at York’s National Railway Museum.

East Coast achieved Silver Investors in People status and Top Employer status from the Top Employers Institute.

Property New cycle access routes introduced at York station, 2010.

Edinburgh Travel Centre refurbished, 2011.

Redevelopment of Peterborough station main building, completed 2011.

Redevelopment of Wakefield Westgate station begins.

The new Western Concourse at King’s Cross opened on 19 March 2012, complete with a new East Coast Travel Centre and First Class lounge (with refreshments, complimentary Wi-Fi, a meeting space, quiet areas and TV).

In the 2012 National Rail Passenger Survey from Passenger Focus East Coast gained the highest score in 11 out of 13 station categories.

Customer service London 2012 Games: 160 additional services during July and August, delivering 83,000 extra customers.

New focus from Karen Boswell on complaints as ‘gifts’ – “It’s free information you can use to fix things – and those little bits of attention to detail are really important.”

In autumn 2012 highest ever NRPS score of 92%.

The arrival of ‘Mrs Jones’.

• • • • • • • • • • • • •

Why the five-year plan was important Taking a long-term view By now the team was working to a handover date of December 2013. The original franchise term was for two years, with an expiry date of November 2011. But, given the required consultation periods, to hit that date the DfT would have needed to start the refranchising competition almost immediately after East Coast took the business over in 2009. So during the first 18 months of the East Coast tenure the handover date was pushed back.

And then, in October 2012, it seemed that handover might been postponed indefinitely after the government put its franchising programme on hold when an investigation found serious flaws in the franchising process after the award of the West Coast franchise to First Group was overturned and returned instead to the incumbent Virgin.

Boswell returned from holiday to a request from Holden to ‘add a year onto the business plan’.

“I felt the business deserved a lot better than that,” she recalls. “Quite often, with extensions, you end up treading water for a long period of time, which is very dangerous.”

East Coast’s tenure was always meant to be temporary, but, points out Hedley-Jones, planning had, for various reasons, taken place in two-to three-year chunks ever since 2000, which had, as he says, “frustrated the ability to develop the railway in a more strategic way.” But at the end of 2012 the business faced some major changes and investment decisions, not least the introduction of brand new trains and a new signalling system in 2018, which could not be postponed.

So, with the approval of both DOR and the DfT, Boswell and the team developed a five-year plan for the business that would take it through until 2018. The business press inferred from the plan that East Coast had been given the green light to continue running the line indefinitely, and some of the owning groups “got windy about it,” says Boswell. Rather, she says, the plan was “a signal of our maturity,” explaining: “We were confident of the direction we were going in and were in a great position to be able to look into the future and conceive and write a plan that would be invaluable to whoever ultimately took the business on.”

In the introduction to the plan, published in May 2013, the company wrote: “We have developed this plan on an owneragnostic basis. That is, we have developed a long-term view of the business, and of the opportunities and threats it faces, rather than focusing simply on the period through to February 2015. We believe that this plan – developed by a team of objective insiders with a deep knowledge of the ICEC franchise and with full visibility of the DfT, rather than bidders engaged in a competitive tender process – should be valuable for both the DfT in specifying the new franchise and evaluating bids, and for potential franchisees preparing their bids.”

What the plan also did, of course, was provide a clear road

planning had • Short-term constrained the business for over 12 years.

Coast had committed to • East increase the value of the franchise so could not legitimately tread water.

The suspension of the franchise process meant that new bidders would be unable to do the planning work for three critical milestone dates, namely: - May 2014 new paths would become available on the line as a result of infrastructure improvements - May 2016 the expiry of access rights for open-access operators would provide an opportunity to make these profitable for the government - 2018 the introduction of new InterCity Express trains (see Chapter Seven: Finance and investment) afforded significant business opportunities for East Coast.

These key events posed threats and opportunities for the business and starting to address them would help to maximise the value immediately and in the future.

The main arguments for planning for the longer term were: – it would allow the continued development of the East Coast brand, which represented the heart of the value of the franchise – it would allow timetables to be developed in line with the strategic economic development of the UK – it would give the company a coherent rolling stock strategy – it would protect the value of the franchise from threats from open-access operators, which directly affect the premium returned to government – it would allow the business to develop investment cases over an appropriate payback period – it would provide an opportunity to explore innovative ways of growing employee engagement and ownership.

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CHAPTER TWO – EUREKA!

15

The five-year plan

map for the existing East Coast management team to maximise the value of the East Coast franchise for the remaining two years of its tenure. By the time it was published the Secretary of State had set a date of the end of February 2015 for its return to private-sector ownership. East Coast would be the first of all the major franchises to be re-let: Great Western was timetabled for July 2016, West Coast for April 2017 and Cross Country for November 2020.

The plan also served to show the industry that East Coast meant business.

“One of the biggest challenges we’ve had is for people to take us seriously,” says Boswell. “I used to get all sorts of comments, from ‘don’t get cosy, you won’t be there for long’ to ‘you’re not a real operator, not like the private sector’.”

Boswell grew so fed up with people telling her that running East Coast was ‘a soft option’ that in February 2013 she put together ‘The Essential Short Guide’, which was distributed to key stakeholders of the company. It summarised the progress the business had made across a wide range of metrics, including customer satisfaction, train punctuality, cancellations, compensation paid to passengers, employee engagement and sickness absence, safety performance, industry awards, revenue growth, profitability, funds returned to the taxpayer and access charges paid to Network Rail.

She was able to demonstrate: • Consistently growing passenger revenue, despite the continued downturn in the UK economy.

• That East Coast had paid back more money to the government in real terms than any other previous franchisee on the line, while at the same time reinvesting over £45m in the business.

• One of the fairest and most responsible ‘delay repay’ schemes in the industry.

• Rising customer satisfaction and improved operational performance despite infrastructure problems caused by Network Rail.

• Steadily rising employee engagement and falling sickness absence.

• A dramatically improved safety record.

The results also showed East Coast’s performance against those of its two predecessors: “I went back as far as it was possible to get accurate data.”

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Building the foundation for growth Initial focus from 2009 was on reshaping the business for profitable growth through – targeted headcount reduction (10% in travel centres, for example) – strategic sourcing and retendering of contracts (for example, procurement savings were £5m).

Continue to seek efficiencies (in rolling-stock-company costs, for example) but with some 60% of costs fixed, options for savings are limited or require political will (staff terms and conditions, for example).

Focus therefore on sweating assets (for example, securing an extra set from the 225 fleet) and generating more revenue from a right-sized base.

Driving the growth strategy Forecast market growth in passengers from 19 million to 23 million by 2019/20.

In addition, maximise incremental revenue through focus on core London-Leeds/Newcastle/Edinburgh/York routes rather than route extensions.

Faster, more frequent services on core routes will grow passenger volumes by an additional two million passengers (one million by 2019/20).

Continue to assess rolling stock options in conjunction with the DfT to meet the target timetable.

To drive further demand, need to offer customers the right proposition: currently under-serve most valuable (business) customers.

Short- to mid term drive revenue through – enhanced on-board connectivity – better delivery of end-to-end travel experience – for example, better Standard Class catering, cleaner toilets, better information provision – mobile ticketing and a mobile app offering enhanced travel information – simplified fares.

Longer term, need to reconfigure trains to better meet customer needs – preliminary analysis indicates significant incremental value in a three-class model.

To underpin customer focus plan to track monthly Net Promoter Score (percentage of promoters minus percentage of detractors) to monitor how well meeting customer needs.

The business case for growth This plan delivers operating profits of £236m by 2019/20 – an increase of £23m over the 2013/14 budget – which includes: – Base case run rate improvement of £126m.

– Impact of strategic initiatives of £44m.

– A step-change in cost of £147m from introduction of IEP1 (the first phase of fleet replacement).

Overall, the five-year plan succeeds in generating more from a right-sized business: – Train miles increase by 47%.

– Cost per train mile falls by 6%.

• • • • • • • • •

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•

She ensured it was financially and legally watertight, but her aim was to be as transparent as possible: “We were getting jibes from the owning groups and some of the press, and I thought the best way to fight back was dispassionately, with hard facts. We were able to do that because we understood our business inside out.”

Driving continuous improvement It is testimony to the determination and attention to detail of the team that they were able to drive continuous improvement in every aspect of the business, despite a stagnant domestic economy and significant instability in the eurozone. Passenger revenue growth had been falling dramatically since 2006/7, but picked up when East Coast took over: it grew by 9% in the first three years. The revenue performance was sustained through having well-trained staff delivering excellent customer service, through paying assiduous attention to improving passengers’ travelling experience by addressing the issues flagged up in the regular customer surveys, through providing competitive fares, and through optimising revenue on different journeys through a combination of revenue management and targeted marketing activity.

In East Coast’s first year of operation, the business was also profitable for the first time in four years, and within three years of taking over it had returned over £400m to the government in premium payments. And it had done it without taking an axe to costs.

While there was some careful ‘right-sizing’ at the outset, the approach was to get the right performance out of people, as Sutherland explains: “We didn’t have a culture of trying to chip out 10% of the heads all the time, because that destroys morale – which was the last thing we wanted to do. One of our mantras was to utilise the resource we had, more efficiently, and by and large that drove efficiency and productivity and a different way of thinking.”

That different way of thinking was, in essence, an absolute focus on the customer, wherever in the business people worked, and that focus was encapsulated in the fictional character ‘Mrs Jones’.

The inspiration of new engineering director Jack Commandeur in 2012, Mrs Jones became a totem for exemplary customer service.

The business’s pride and self-belief was bolstered in 2013 by the international media coverage it attracted from the specially wrapped ‘Skyfall’ train to help launch the Bond movie on DVD and Blu-Ray, and by winning ‘Business Superbrand’ status from the Centre for Brand Analysis. It entered the last two years of its franchise term sure of its direction, clear about its priorities and confident in its ability to continue improving the value of the business and in being able to hand over the franchise in good shape to its successor – one of its most important founding goals.

CHAPTER TWO – EUREKA!

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Project Yikes!

Phil Dawson, regulation and track access manager at East Coast, project managed Eureka! He took it on a year before launch, by which time much of the detailed timetable work had already been done.

Nevertheless, the scale and pace of the change required (“we had to squeeze what should have been 18 months of work into 12 months”) made the period something of an ordeal by fire, as he explains.

“Being a regulated industry you have to work with the DfT and ORR to negotiate track access rights and agree the new routes. That had been done, but we needed two new trains to make the new timetable work. We’d cut the service to Glasgow, so that released one train, which allowed us to increase the service frequency between Edinburgh and London, and we procured another from what was East Midlands Trains. But the seat numbers in that train were different from our existing fleet, it had different engines and different kitchens, so we had to do a full modification to bring it in line.

“Because we were delivering the new timetable with just two extra trains, we had to work the fleet harder. That meant enhancing the depots so that we could stable the extra trains there overnight and get them washed, serviced and out again more quickly. At the Craigentinny depot in Portobello (outside Edinburgh) we built a new wash plant, upgraded the existing one and upgraded some additional service sidings. We had complaints about noise and pollution from the neighbours and spent £500,000 on a new fence. We also put in new lighting, safe walking routes and so on. We enhanced the facilities at Ferme Park, near our Bounds Green depot, too so we could do more fuelling there.

“The depots were a risk: it was always touch and go as to whether or not they would be ready, and it went to the wire. We were having daily updates, we were having to manage contractors centrally and it all got a bit hairy.

“To introduce the catering change, we needed to upgrade all the Rail Gourmet depots on stations and redesign the flow of food and equipment on and off trains. That meant new systems and methods of working, new tractors and vehicles, new wash plants – and that all went pretty much to the wire as well.

“It wasn’t helped by the decision to do a ‘soft launch’ a month ahead of the 22 May relaunch in order to give staff the opportunity to practise and get used to the new system in the real train environment. That certainly helped to iron out some glitches, but it was never in the project plan.

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Before that we’d been running four training sessions every day for around 800 front-line catering staff to get them all up to speed.

“Almost up to launch day we were having problems with Rail Gourmet at King’s Cross – the supply chain wasn’t working properly – and I moved down there for two months to try to sort it out. I arrived on the Friday night and found the ‘service centre’ we were supposed to be running was just a bare room. We had to get desks, chairs, phones and computers in for the Monday morning. It was all complicated by the fact that the King’s Cross redevelopment was taking place at the same time, so we were building temporary wash plants at Euston station – which is close to King’s Cross as the crow flies, but a lot further given the one-way system – and as a consequence stuff wasn’t getting to the trains on time. Once the redevelopment was done there would be dedicated service tunnels and lifts, but in the interim staff were having to navigate trolleys through the crowded concourse.

“At the same time I was trying to negotiate a new three-year, £60m contract with Rail Gourmet on terms that changed the whole basis of our relationship from one of closed book, closed door, not much trust – to the opposite. Normally you would spend weeks on something like that: we pushed it through very fast.

“We had to modify the fleet to deliver the new catering offer. We’d involved the unions and chefs in designing the kitchens. We modified one train per week and that worked very well – although it too was quite tight. The last train to be modified was the one we’d procured from East Midlands – and that happened a day after we launched.

“There were a few operational bits that took a long time to resolve. For example, introducing the service to Lincoln, which was the first new destination on the line for 20 years, was operationally difficult because the train didn’t fit the station, so we had to come up with a safe operational system, including extending the platforms. But we didn’t have a safe walking route for drivers until quite late on – and that was really important because without it you can’t run trains.

“There were 1500 lines in our project plan but we had a risk register of just 34 risks. One risk we hadn’t identified though manifested itself right at the end. We’d been very good at getting the front line involved and engaged, but we suddenly realised that the key people in the business who were going to manage and be accountable for the new way of working hadn’t really been involved at all. So we had to educate them quite late in the game.”

Trains, planes and automobiles

CHAPTER

THREE Peter Williams, commercial and customer service director during East Coast’s tenure, was fond of using clips from the 1987 comedy ‘Planes, Trains and Automobiles’, starring Steve Martin and John Candy, in his presentations. You can see why. The East Coast Main Line is arguably the most competitive space within the UK transport market. It certainly has more competition than any other train line. British Airways, easyJet, Ryanair and Flybe fly from Edinburgh and Newcastle to London; the M1 and A1 afford convenient direct access to the capital from cities like Leeds, York and Newcastle; and the company also competes not only with the franchised TOCs CrossCountry, Virgin West Coast, First TransPennine Express, First Capital Connect and First ScotRail on parts of its route, but also with two open-access operators, First Hull Trains and Grand Central. (See page 25) “Our customers have a choice,” says Williams. “And with around half our revenue coming from the leisure market, part of that choice might be to not travel at all. So we have a burning platform: we have to get customer service right to attract more passengers and to stop them taking their custom elsewhere.”

Getting customer service right comes down to five key things – having the right product, at the right price, delivered by the right people and promoted in the right way in the right place – five of the famous ‘7Ps’ of what’s known in marketing circles as ‘the extended marketing mix’. When East Coast took over the route in November 2009 at least some of them had been neglected and revenue, as a consequence, was under severe pressure.

Because GNER and National Express East Coast were fighting to survive, commercial momentum had stalled. So when East Coast Main Line Company came in, at the height of the worst recession in decades, there were no plans in place to deal with either short-term challenges or longer-term opportunities.

To Williams the solution was obvious. With a background in retail and fast-moving-consumer-goods, he’s a passionate advocate of driving sales through customer service and branding. “Get your customer proposition right and revenue rises; get it wrong and it falls,” he says. “It’s simple.”

It may be simple, but in the rail industry it’s far from common. “Most of the other train operators are more focused on minimising the franchise premiums they pay to the Department for Transport, or maximising the subsidies they receive from it,” he observes. “Customer service and quality come a very poor second.”

The business began to systematically tackle the service and quality issues that customers complained about – punctuality, the on-train environment and value for money being at the top of the list – but the real proof of Williams’ hypothesis came with the relaunch of First Class to coincide with the new timetable change on 22 May 2011 (see Chapter Two: Eureka!).

“It was your classic hockey-stick curve – revenue was in decline and then, bang, May 2011, it shot off,” says Williams. “The following year it slowed a bit, and then in 2013-2014 the economy picked up slightly, budgets loosened and the leisure market was more receptive to stimulus, and that resulted in further strong growth.”

CHAPTER THREE – TRAINS, PLANES AND AUTOMOBILES

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• Between 2009-2010 and 2014-2015 the number of First Class journeys rose by 53%, delivering an increase in revenue of 31%.

• Over the same period Standard Class journeys rose by 11%, delivering a revenue uplift of 21%.

• Overall, journeys were up by 15% over the period and revenue by more than 23%.

• The average long-distance growth, in volume terms, for First Class (excluding East Coast), was 13%.

• In 2014-2015 First Class accounted for 23% of East Coast revenue, compared to 20% five years earlier.

• In 2014-2015 revenue from First and Standard class journeys rose by 10.5% and 5.4% respectively, with total journey revenue up by 6.5%.

The relaunch of the business delivered tangible benefits to passengers in the form of faster and more frequent services and an enhanced on-board experience. But it was supported by sophisticated and targeted pricing and marketing activities that worked together to raise awareness of the convenience and cost-effectiveness of travelling by rail.

Indeed, says Williams, brand strategy and revenue strategy were key to the company’s commercial success.

Industry-leading revenue management Suzanne Donnelly, head of revenue at East Coast, takes up the story.

“We have a very clear strategic goal to compete with the airlines, and that underpins all our sales, marketing and commercial activity,” she says. So, for example, on the routes where the company competes head-on with the airlines it has extended its booking horizon from 12 to 24 weeks, it factors in all airline prices to its own pricing strategy and it undertakes targeted advertising in key locations to drive ‘modal shift’ from air to rail. While there has been “a concerted and sustained effort” to do this since GNER days, says Donnelly, efforts have been stepped up over the past five years as a result of greater investment in revenue management technology and Market share in marketing.

East Coast gained share in the In doing this East Coast became a victim of its own success, in rail/air market. that it now suffers from severe capacity limitations, particularly on the – On the London to Edinburgh route its share of the total London to Scotland route, which has enjoyed double-digit growth over market increased from 18% in the past five years.

2009 to 24% in 2015.

“Our average load factor on a Sunday is consistently over 90%, – On the London to Newcastle which means people often have to stand on that route,” says Donnelly. route it grew share from 56% to “If we were suddenly faced with a similar situation to the volcanic ash 67% over the same period. cloud that closed air space in 2010 and drove traffic to us from the The business has roughly 50% of the rail/road market between Leeds airlines, it would make for a very uncomfortable journey experience for and London. passengers.”

In the rail market it both gained New trains and a new timetable in 2018 will go a long way to and lost share, depending on the addressing the capacity problem, but in the meantime East Coast route. The business now has continued to invest in its industry-leading revenue management system – 74% of the York to Edinburgh that directs customers to less crowded trains through adjusting its fares. market – up 4 percentage points since 2011-2012.

“So, for example, we make the London to York or Peterborough or

– 69% share of the Newcastle Doncaster tickets on Scotland-bound trains more expensive than those to Edinburgh market – up 15 on quieter Newcastle- or Leeds-bound services in order to protect percentage points since 2011capacity on the pure long-distance route. And because the vast majority 2012.

(56%) of our customers buy their tickets in advance online, we can – 78% of the London to York influence them,” explains Donnelly. market – down 6 percentage points since 2011-2012.

Measures to ‘optimise’ the gap between Standard and First Class have

– 66% of the London to helped: when the train is getting busy, passengers can trade up, for a Doncaster market – down modest premium, if buying in advance.

9 percentage points since “Within the constraints of the capacity we’ve got, we’ve done a really 2011-2012. good job in driving up revenue while keeping crowding under control,”

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CHAPTER THREE – TRAINS, PLANES AND AUTOMOBILES

says Donnelly. “We set ourselves a target of having no more than 9% of our trains more than 90% full and we achieved that in both 2013-2014 and 2014-2015, despite increased passenger numbers.”

East Coast has always been a pioneer in revenue management and its approach, which is regarded as best practice throughout the industry, is the backbone of its commercial strategy. Automation was first introduced under GNER in 2004 and a major upgrade came in 2009 under National Express. But its efforts to spread loads, encourage more people to travel and grow revenue through optimising prices received a major shot in the arm in 2012 with the most significant upgrade yet – the Retail Price Optimiser (RPO), provided by JDA.

The Retail Price Optimiser (RPO)

The latest upgrade to East Coast’s revenue management system, the RPO, represents a step-change improvement.

The previous system was very good at forecasting demand, but decisions about the number of seats to allocate at what price points, and when to open and close those price points, was primarily a judgement call by the team of analysts in the revenue team.

The new system not only does all the forecasting, but it also incorporates competitor fares in the optimisation process. So, for example, when optimising the price of a journey from London to Scotland on the 9am train on a given day, it will consider not only historical patterns and future booking data for this trip, but will also factor in the prices on BA, Flybe, Ryanair and Virgin Trains around the same time. It does this for every journey, every day, and refreshes its recommendations every night.

The new system also incorporates price elasticities into the demand and price calculations – it knows the effect that changing a price will have on demand. It also incorporates ‘cross-class’ elasticity and ensures the gap between First and Standard class is optimised by encouraging people to trade up without ‘giving it away’.

But while the system gets it right 80% of the time, the team has to override the system for the other 20% “because we know better,” says Donnelly. They take over at weekends, for example, because engineering works and sporting

and other events can play havoc with demand. They may occasionally intervene during the week too. During the West Yorkshire advertising campaign, for example, when they deliberately wanted to push more cheaper seats to revive a flagging market (see page 23), they had to tell the system they were expecting more demand. Or there may be a peak business train where there is a policy never to sell below a particular price point, and the team will instruct the system accordingly.

Because of the significant investment involved – £1.8m – it was important to understand the ROI, and the team ran a three-month parallel trial. This allowed it to compare revenue results on trains controlled by the new system against those on the old system and to calculate a statistically significant result. The RPO parallel run proved a revenue uplift of 2%, which delivered in excess of £7m additional income in the first year of operation.

Its revenue management systems have won a number of awards, including: ‘Small Scale Project’ category for the Rail Price Manager (RPM), the precursor of the RPO, at the Modern Railways Railway Innovation Awards 2010.

‘Best Pricing and Revenue Management’ award in the JDA Pricing and Revenue Management Conference Awards 2010.

The RPM was highly commended in the ‘Information Technology Excellence of the Year’ category at the Rail Business Awards 2010.

• • •

Although iDTGV, the subsidiary of French state-owned company SNCF, and Eurostar have recently adopted the RPO, East Coast’s “strong commercial culture and desire to realise that revenue opportunity” put it in the vanguard, says Donnelly. While other TOCs tend to be more operationally than commercially focused, she adds, “our strong commercial focus is one of the building blocks of our success.”

Overall, East Coast estimates that revenue management delivers an additional 6% to the revenue line that would otherwise not be there – but this comes from a combination of systems, processes and people.

But how does the company balance its own revenue requirements with value to customers? By ensuring that the commercial and customer service strategies are aligned, by allocating the right proportion of Advance tickets and by deploying effective CRM strategies, says Donnelly. And judging by the results of the Net Promoter Score (NPS) – essentially, how likely customers are to recommend the company to others – the strategy is working.

“Price is a core driver of NPS,” says Donnelly. “Ticket prices are the most important driver of ‘would recommend’. Between 2012 and 2014 ticket prices had moved from 3.28 to 3.47 [with 5 being very good and 1 being very poor] – the second highest movement in score after ‘East Coast characteristics’.” (See page 24)

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The wrong kind of ticket

Despite a largely strong performance on fares and ticketing, East Coast doesn’t get it right all the time.

According to Nigel Harris, managing editor of Rail magazine: “East Coast has by far the worst reputation for penalty fares – there are more complaints escalated to Passenger Focus than for any other TOC.” He calls the company’s approach ‘fundamentalist’: “You get a lecture from the guard at King’s Cross about exactly what tickets you are and aren’t allowed to use – it’s horribly customer-unfriendly. Imagine going into Sainsbury’s and being told what currency you can use!”

The ultimate aim is ticketless travel, but Donnelly admits that at the moment the technology is not even sophisticated enough for train guards to check that someone who claims to have lost their ticket has genuinely bought one. The resulting tension is a source of grief to both customers and guards – though the company has sought to address it through training guards, gathering more management information on guard activity (particularly around ‘revenue collection’, as penalty fares are euphemistically termed) and improving customers’ understanding.

“Just a simple thing like changing the website so that customers have to actively select the ‘print at home’ option when buying a ticket has really helped,” says Donnelly.

Policies have been adapted over time in conjunction with the industry.

For example, someone trying to use an Advance ticket on the ‘wrong train’ is no longer charged the full Anytime fare, but a cheaper ‘walkup’ fare applicable to the particular time of day. But the industry rejected the option of making Advance fares cheaper and allowing people to ‘pay the difference’ if they end up on the wrong train because of the adverse impact on revenue.

In common with the rest of the industry, East Coast has had to respond to regulatory pressure, including the government’s Fares and Ticketing Review in 2013, to reduce the complexity of train fares to ensure customers aren’t paying more than they should be. The main industry-wide change was the move to a simplified structure with common names for core products across different train companies (Anytime, Off-Peak, Super Off-Peak and Advance) and harmonised terms and conditions. East Coast has gone beyond this to rationalise the sheer number of options and restrictions into a more meaningful and streamlined set of fares.

It has also worked hard, within legal and regulatory constraints, to reduce the level of anomalies within the pricing structure. A customer splitting their London to Newcastle ticket into a London to Peterborough ticket and Peterborough to Newcastle ticket, for example, used to be able to save around 35% of the fare. By raising long-distance fares by less than intermediate fares, the company has reduced the price gap to 14% over the past three years.

East Coast also sees the presentation of fares as a key part of simplifying them. It now displays the relevant fares to each customer for their journey and presents the terms and conditions in a clear and customer-friendly way – particularly on its website.

The site now features, for example, a live fares feed, an automatic check for a cheaper return fare if a customer has selected two singles, a tool that allows customers to check the validity of a ticket on any given train, and a tool to check how busy a particular train is.

But this is only the beginning. Plans are afoot to transform the retail strategy of the business, with improvements to both counter and self-service ticket machines already underway.

The vision is to have more open-plan travel centres, with staff spending less time selling tickets and more time supporting people who have bought their tickets online or through selfservice machines. The new Wakefield Westgate station, completed in 2013, was an opportunity to put this vision into practice, but there will be a step-change improvement to the customer experience under the new franchisee, which has committed to tendering for new IT systems from new suppliers to replace the big inflexible legacy systems that have hobbled East Coast’s best efforts to improve the customer experience.

One of the features of the pre-East Coast era was silo working, and Donnelly says that at the beginning of the franchise period too many decisions, from timetable recommendations to marketing promotions, were being taken without reference to the commercial team. That has changed, and the whole company now works more cross-functionally, with the result that all decisions take into account the impact on both revenue and customer service. A customer board was established after the five-year plan was developed at the beginning of 2013, comprising ‘heads of’ in every department, and attendance is obligatory. One manifestation of the new joined-up approach is a much closer working relationship between the marketing and revenue teams, which both reported in

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The West Yorkshire campaign to Williams. KPIs are set for the commercial team as a whole, and are reviewed monthly. The benefits were exemplified in ‘the West Yorkshire campaign’ in 2012, which transformed revenue performance on the Leeds to London route.

Insight and intelligence East Coast uses insight and intelligence to develop targeted initiatives against priority customer needs.

“We approached it from an intellectually rigorous angle and were relentless about delivering improvements that were important to our customers,” says Williams.

The twice yearly National Rail Passenger Survey (NRPS) from Passenger Focus provides a useful benchmark – and good PR for East Coast. The company scored 90% in the most recent survey (autumn 2014), in which it came joint top of the franchised longdistance TOCs with Virgin West Coast. It scored 90% or higher in the previous two surveys (spring 2014 and autumn 2013) and achieved a record 92% in autumn 2012. But Williams was always more interested in what East Coast’s own monthly customer research told him. Of particular interest were the Net Promoter Score (NPS) questions, which the company introduced in 2013. NPS was developed as a measure of customer satisfaction and advocacy by management consultancy Bain & Company in the 1990s and is a proven leading indicator of revenue growth.

“NPS allowed us to understand what elements of what we did were most important to people and how we performed against those needs,” he says. “We understood that at the customer segment level as well.”

One of the key insights from the research was that business customers were the least satisfied segment – despite being the most commercially valuable to the business (according to the five-year plan in 2013 they were worth £368 a year to the company, compared to £130 for leisure customers). East Coast started to address the challenge by targeting business travellers more closely in its marketing communications, through special fare offers (such as the West Yorkshire Executive fare and the Scottish Executive package) and travel incentives with booking companies, and though Wi-Fi upgrades. But Williams would have liked to have gone further, as he explains.

“When we were doing our research for the five-year plan, it became clear that business customers want more personal space in order to work. So we started to look at creating an intermediate class. It’s basic

“We do regular joint reviews, particularly of markets that have softened or aren’t performing well, and West Yorkshire was a particular problem for us,” says Donnelly. They launched an advertising campaign aimed at getting people out of their cars and onto the train – and the main hook was value for money. Building on the company’s new ‘Feel at home’ positioning (see Chapter Four: The brand story), the print and poster campaign featured a picture of a train, complete with front door, cat, mat, potted plant and ‘For sale’ sign, with the message ‘Leeds to London now less than you’d think’ running above it. The campaign also ran on taxi sides, tip-up seats and receipts, and the team had put Wi-Fi in taxis to bring to life the message that there was now enhanced connectivity on trains too. The marketing team worked with revenue management to ensure that there was both a plentiful supply of appropriately-priced seats and that fares became not more expensive, but more affordable, closer to departure to make the train an attractive alternative even for people travelling at short notice. They also introduced a new business product called the West Yorkshire Executive Fare, allowing people to travel in First Class for the price of a top-end Standard Class fare plus £20.

The route is now over-performing: it accounts for 22% of the company’s revenue and 15% of journeys. It is also the company’s largest business market – 61% of journeys on the route are made for business purposes and, based on sales through business travel agents, it accounts for 31% of the company’s total business market. (London to Scotland is the next biggest business market, accounting for 16% of the business market.)

The success of the West Yorkshire campaign was helped by months of road works on the M1, and Donnelly acknowledges that the falling fuel price could stall performance, at least in the short term. But the company is not complacent. In the summer of 2014 it achieved another industry first by working with mobile operator O2 to use mobile phone data to compare the numbers of people travelling by train between Leeds and London against those driving. The research showed roughly a 50/50 split. The technology, which tracks all O2 phones around the country, is new, and it gave Donnelly and her team “some amazing insights,” she says, including where the Leeds to London travellers were coming from. “We get solid statistics from the CAA on the numbers of air passengers, but there is no publicly available data on the numbers of people travelling on road routes,” she says.

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Yield versus revenue segmentation, but it didn’t go down well with the politicians who were uneasy about the idea of having a ‘third class’. I think there are real benefits for the new franchisee, if it has the imagination and the tenacity, in properly addressing the physical environment for business customers.”

Nevertheless, the commercial team has made huge strides over the past five years in developing a more focused and attractive customer proposition. It’s not so much ‘Planes, Trains and Automobiles’ any more, but ‘Trains, Planes and Automobiles’.

East Coast and NPS

East Coast has the most highly loaded trains in the UK. Its average yield, in the year to date, is £32.86, up 2% from 2013-2014. Yield growth varies over time: during 2012-2013 it was up 4% on the previous year, but in 2013-2014 it remained the same. Overall yield can be skewed by market mixes – for example, routes towards the southern end of the line are performing very well but have a lower yield than the longer journeys. The yield on the West Yorkshire to London route grew by 5% in 2014-2015.

Because the yield performance is variable, it can be above or below the long-distance average (£22.47 at the time of writing) depending on the timeframe. So while the industry focuses on yield as a measure of success, East Coast focuses instead on revenue – hence its efforts to find the optimum balance between volume and price for every market on every train on every day. Where demand is high it increases prices to help manage loadings. Where demand is low or competitors are keeping the market price down, it keeps its prices down too to stimulate sales and balance loadings.

It does this within regulatory constraints: most East Coast trains are ‘Off-Peak’ where prices are capped. While East Coast derives 85% of its revenue from uncapped fares, the restrictions are the focus of continuing debate between the industry and government, because not only do they prevent TOCs from optimising revenue as much as they might (and therefore returning more money to the government in premium payments) but they also inconvenience the passengers that they were designed to protect.

As Donnelly says: “Who wants to stand on an overcrowded train from Edinburgh to London on a Sunday, however little you paid for your ticket?”

In March 2013 East Coast carried out research to identify the drivers of advocacy among its customers – that is, how likely they would be to recommend the company to others – using the Net Promoter Score (NPS). The analysis used data from the East Coast Customer Satisfaction Survey (ECCSS) to help the company understand where to focus its efforts in order to increase advocacy. The analysis looked first at which aspects of the company’s service were most important to people (that is, the drivers of advocacy) and then it looked at customers’ satisfaction with each of those drivers. While it didn’t expect ‘importance’ to change significantly in the short term, by focusing on targeted improvements it hoped to increase its performance against those measures.

In terms of ‘importance’ the top six factors were, in order, ticket prices, onboard, schedule, East Coast characteristics, stations and First Class aspects. The performance ranking looked very different however: First Class, schedule, stations, onboard, East Coast characteristics and ticket prices.

Since March 2013 there has been a dramatic improvement in NPS. The average score in 2012 was -4, increasing to 0 in 2013 and +9 in 2014. In February 2015 it had risen to +22, up from -6 in February 2012.

The analysis breaks the scores down into sub-groups – First Business, First Leisure, Standard Business and Standard Leisure. While there have been increases NXEC East Coast 22 across all key segments, the 17 16 16 16 score for Standard Business 13 12 11 was just -7 in 2014, albeit 8 7 7 6 6 4 up from -19 in 2012.

2 1 1 1 These findings allowed -1 -5 the company to target -5 -10 improvements at a very -15 detailed level, which has driven steady improvements -27 in performance across all MayNov Feb Jun Sep Dec Mar Jun Sep Dec Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec Jan Feb six categories.

08 08 12 12 12 12 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 15 15

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Open-access competition

East Coast has two open-access competitors on its route.

Grand Central, owned since 2011 by Arriva UK trains, has run services on the East Coast Main Line between Sunderland and King’s Cross since December 2007 and between Bradford and London King’s Cross since May 2010. There are five daily services on the North East to London route, calling at Hartlepool, Eaglescliffe, Northallerton, Thirsk and York, and four daily services (in each direction) on the West Yorkshire route, calling at Halifax, Brighouse, Mirfield, Wakefield, Pontefract and Doncaster.

First Hull Trains, owned by FirstGroup and two former British Rail managers, has operated since September 2000 and now runs eight daily services in each direction between Hull and King’s Cross, calling at Brough, Howden, Selby, Doncaster, Retford, Grantham and Stevenage.

The competitive threat posed by open-access operators is compounded by a playing field that is far from level.

For example, they automatically get a share of the ‘inter-available revenue’ on the route. So the money made from tickets that are valid on any operator – for example, ‘Anytime’ or ‘Off-Peak return’ tickets – is divvied up between operators on a route according to the number of trains they run on that route and how fast, with the allocation determined by a computer model. Even if Grand Central carried not a single passenger between London and York, for instance, it would get a percentage share of the income generated by all the operators on that route.

What’s more, the open-access operators don’t pay a premium to government and pay lower track access charges than the franchised operators, which allows them to offer cheaper fares. This, combined with the fact that they have a higher proportion of leisure customers than East Coast (leisure customers tend to be more satisfied than business customers), means they typically enjoy higher Passenger Focus customer satisfaction scores. The fact that trains are usually quieter and, because there are fewer services, have a ‘more homely’ feel, adds to customer satisfaction.

In their early days they stole share from East Coast, share that the company managed to partly claw back through product improvements, pricing changes and revenue management activities.

“We know we’ll never have 100% share of the train market and they are an accepted competitor on the route,” says Suzanne Donnelly, head of revenue.

However, that competition is stepping up to potentially dangerous levels. Alliance Rail Holdings has lodged two applications with the ORR for new open-access services.

One is an hourly fast service (three hours 43 minutes) between Edinburgh and London, calling only at

•

•

Newcastle, and formed of tilting Pendolinos. The other is a two-hourly service via Leeds. The first, warns Michael Holden, former chairman of East Coast, would require the new franchisee’s trains to play second fiddle and be overtaken en route, while the second would eat into the prime West Yorkshire market.

These two applications put a significant amount of revenue under threat for the new franchisee, whose bid to run the InterCity East Coast route was predicated on the fact that it would win a sixth path out of King’s Cross every hour. It plans to take advantage of new trains and a planned £750m upgrade to the East Coast Main Line, which together will improve capacity, to run an additional 50 train services a day when the major new timetable change planned for 2019 comes into effect. At the time of writing, the East Coast team was busily making its case on behalf of the new operator, but the sixth path is by no means a foregone conclusion – particularly as the ORR is so keen on the competition that open access represents.

While competition is healthy, trying to run the franchise system side by side with the open access system doesn’t work because they operate under different rules, says regulation and track access manager Phil Dawson. Furthermore, he adds: “You agree a contract with the government to deliver something, but to deliver that you need access rights, which are determined by the independent regulator.”

However, in January [2015] the ORR rejected the proposal by open-access operator GNWR, part of Alliance Rail, to run new off-peak train services between Yorkshire, Lancashire and London via the West Coast Main Line, a decision that gives the Regulation and Track Access team some grounds for optimism.

The dog fight for paths

While still East Coast chairman, Holden highlighted the flaws in the system in an address to the RSA in October 2014. He said that ‘the dog fight’ for paths on the East Coast Main Line over the previous 15 years had not only consumed enormous energy from many industry parties, but had also made planning a timetable to make the most effective use of increasingly scarce capacity far harder than it would otherwise have been. He added that it had also compromised the collaboration between TOCs and Network Rail necessary to run a modern railway cohesively.

He said the two open-access proposals from Alliance Rail “put a metaphorical dagger through the heart of the franchise, and bring the whole question of franchising of long-distance services into question.” They represent, he said, “a really big test for the ORR, which has to weigh up its various statutory duties to make a decision on these applications,” and he concluded: “The consequences are likely to be profound and long lasting.”

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CHAPTER

The brand story

FOUR

In a highly competitive market a strong brand is a key differentiator. As National Express Group prepared to take over the InterCity East Coast franchise in December 2007, its chief executive Richard Bowker acknowledged as much. He announced that the National Express brand was so strong that he would apply it to the train company. “These two words [National Express] have incredible recognition and incredible customer support,” he said. “As a travel brand I really think there is very little to beat it.”

His words paid no heed to the very powerful brand GNER had built up over the preceding decade, a brand popular with and respected by customers and employees alike. Bowker’s rebranding fervour extended even to ripping names off the sides of trains, despite their enormous significance for stakeholders up and down the route.

Curiously, however, he decided to leave the branding of Kings Ferry, the commuter coach operation National Express had recently bought, intact. The company had been established 40 years earlier and was based near Gillingham in Kent. “I think it’s a mistake to think we know best all the time,” said Bowker. “Kings Ferry has very strong brand Brand architecture Brand Purpose awareness in Kent. We will fiddle with things like that very carefully.”

To serve the travellers of the East Fiddling with – or, more accurately, torching – the GNER brand was Coast of Britain, making every not the main reason the NXEC franchise failed, but it certainly didn’t journey a pleasure. They don’t have help. The truncated NXEC franchise period was such a disaster that to choose us but our aim is to make Directly Operated Railways (DOR) didn’t hesitate to remove all traces of it impossible for them to choose National Express’s tenure when it took the route over. Cleverly, though, anyone else.

Brand Vision the new brand name ‘did what it said on the tin’. Understanding that To have the most loyal customers of employees’ main loyalty is to the route – they call it ‘the railway’ – any travel company in the UK. rather than to the company operating it, DOR put the route itself – the Brand Promise East Coast Main Line – at the heart of the company name. It then set By being welcoming, genuine and about building the brand through product and service improvements, good value in everything we do, we sophisticated marketing and assiduous reputation management. will ensure that an East Coast journey is time well spent.

The priority for marketing in the early days was to get some emotion Brand Values back into the brand, as marketing manager Natalie Cowen explains.

Customer centric – honest, genuine, “The campaign we inherited from National Express was called proud, forward thinking. Employee ‘Miniature Prices’, featuring little plastic people, and it had a very centric – warm friendly people, pride, rational, very single-minded focus on getting the best possible deal,” smarter ways of working, different she recalls. “When we started to focus on the relaunch of the business every day.

Tone of voice in May 2011, we hired [the creative agency] Abbott Mead Vickers (AMV), Plain and simple, personal, who took us into very different territory.” warm, witty.

AMV took the original company vision – ‘To provide the best possible journey experience, and a great place to work’ – and built some brand architecture round it.

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This led to the ‘Welcome to’ positioning, which became not just the advertising strapline, but also the internal mantra of the company. The TV campaign, featuring comedians Vic Reeves and Rory Bremner savouring the pleasure of First Class train travel, was designed to support the relaunch of First Class and was intended to run for a year at most. But the core idea – the emotional experience of travelling with East Coast – had broader salience and became embedded in the business, manifesting itself in everything from name badges and letterheads to all customer-facing communication, including a powerful outdoor campaign, ‘View from the Window’, which showcased the beautiful vistas a trip with East Coast affords.

‘Welcome to’ successfully encapsulated the new customer orientation in East Coast and saw the company through for two and half years. However, the marketing team reached a point where they were, says Cowen, “struggling to keep reinventing the imagery for the messaging,” and decided to review the creative approach. They pitched for a new agency, appointed Beattie McGuinness Bungay, and launched a £7m multi-channel marketing campaign, ‘Feel at home’, across TV, outdoor, radio, digital, experiential and, for the first time, social media, in September 2013.

Feel at home The beauty of ‘Feel at home’ was that it naturally evolved the ‘Welcome to’ positioning that had become the heart of the brand, says Cowen. “We didn’t change the original architecture or brand promise massively; we just made it a bit more ‘pointy’ in some respects. For example, the brand purpose became ‘To make travelling along the East Coast brilliant for each and every individual’, and the brand vision became ‘To be Britain’s most loved travel brand’. So it was a bit more emotional, a bit more aspirational.”

The brand essence was – and remained – ‘train travel your way’, which, from a marketing and communications perspective, was about creating a more bespoke travel experience. Print executions included a picture of a carriage with armchairs, encouraging people to reserve their seat for free by booking online, and carrying the strapline ‘Don’t let anyone take your favourite chair’. Others, featuring a train with a yellow front door, complete with cat, mat and potted plant, focused on booking in advance to get cheap fares.

The ‘Feel at home’ positioning translated well into East Coast’s ongoing ‘modal shift’ campaign to drive customers from plane to train, and for the first time the company began to target the message depending on the region.

“We’d always focused on speed and frequency with the Edinburgh and Newcastle markets, but we started to add in things like First Class, enhanced connectivity and more legroom,” says Cowen. ‘Why fly when you can feel at home?’ ran the strapline across a picture of a train carriage set up as an office, with a secondary message, ‘32 trains a day, straight to the heart of London’ beneath it. Other executions bore legends such as ‘Wi-Fi. Why Fly?’ and ‘Homepage, sweet homepage’ over on-train ‘offices’.

They also got smarter at positioning the advertising. Two members of Cowen’s team drove in a taxi around the poster sites near railways stations and on the way to the airports in Edinburgh and Newcastle, handpicking the best ones. “We only use the newer sites, with technology like backlighting, because they look and feel smarter and more aspirational,” she says. “That may seem like a minor detail but from a brand image perspective things like that are very important.”

In Newcastle they ‘blitzed’ the metro, taking over the escalators and the main hubs people pass through to get to the airport.

‘Feel at home’ gave further impetus to the shift from planes to trains. On the Edinburgh to London route rail’s share moved from 18% in 2009 to 24% by the end of November 2014, while rail’s share of the Newcastle to London market moved from 56% to 67% over the same period. And these figures are distorted because they include passengers with connecting flights from London terminals: ‘point to point’ data, which East Coast was only able to start collecting from mid-2014, paints an even stronger picture for rail.

The West Yorkshire market has also been transformed, with rail now taking 50% of the London-bound market. (See Chapter Three: Planes, trains and automobiles)

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‘Feel at home’ – awareness and familiarity

The marketing team’s most recent campaign evaluation was conducted in December 2014.

Awareness The spontaneous awareness of East Coast was 35% (September 2012: 23%).

The awareness score for East Coast customers in December was 77% (September 2012: 59%).

The level of awareness of First Class benefits, including Wi-Fi, more space, complimentary food and better seats, increased between September 2012 and December 2014. The latter two increased by 16% and 14% respectively.

When it came to total awareness, prompted and unprompted, the scores were 54% (September 2012: 48%).

17% spontaneously recalled seeing or hearing an East Coast ad recently, compared to just 5% for Virgin.

This increased to 29% when prompted with the East Coast name When ads were shown, 40% recalled seeing them, and 44% in Leeds and 59% in Newcastle recalled specific modal shift ads, up from 29% two months earlier.

Among those who recalled seeing the ads, 73% agreed that they made them feel good about East Coast, 74% liked them and 60% thought they were different from other ads.

Overall, 42% said the advertising had changed their views about East Coast, and 39% said it had made them more likely to travel with it.

Familiarity Familiarity rose from 28% in August 2011 to 43% in September 2014.

Familiarity among those who saw the Sky series was 78%. (See page 30) Among Leeds and York respondents familiarity was, respectively, 45% and 53%.

Significantly, all the scores were much higher among those who were aware of the advertising. In particular, 76% would consider using East Coast when travelling by rail (compared to 58% among those who weren’t aware of the advertising).

52% preferred to use it (compared to 35% who weren’t aware of the advertising).

• • • • •

“So yes, modal shift is a success story, but we have to keep plugging away at it,” says Cowen. They are plugging away at First Class too: there is now a distinct First Class campaign, purely at stations, designed to encourage what is a captive audience to think about upgrading the next time they travel.

The marketing team has many different messages to convey, but, says Cowen, “For the first time in a long time we have had a very consistent brand look, feel and overall message, which reflects the reality of the service we deliver.

That feeds through into growing awareness, image and reputation scores.” (See box)

The value of a strong brand

Such strong brand attributes help to build long-term customer loyalty and repeat business which, in turn, create revenue and profits. East Coast’s response to the Department for Transport’s consultation on the future of franchising in autumn 2010 pointed out that a strong brand is “particularly important for longer-distance operators that compete for custom in a primarily national market against air and car, as well as other franchised and open-access rail services, and where a high proportion of travellers have practical and readily available alternative travel options.”

The response pointed out that customers from as far away as the Lake District have chosen to travel with East Coast rather than West Coast services, and large elements of the population live almost equidistant between East Coast and other long-distance services. It said: “Strong recognition and brand loyalty helps to soften (but not erase) these competitive effects and adverse macroeconomic impacts, and many practical benefits accrue from customers being able to readily differentiate their chosen service from others, particularly at stations and interchanges or when booking.”

The response recommended, therefore, that “each franchise should be allowed to develop a brand of its own that is broadly immune to franchise change, not dependent upon the vagaries of corporate branding but permitted to evolve and refresh itself over time without losing its core recognisable identity.” This would save considerable expense, it pointed out, while also reducing some of the uncertainty associated with franchise change for staff.

The DfT appeared to take the advice on board. In the InterCity East Coast Prospectus that it launched in 2013 it sought to incentivise bidders to reduce the costs associated with rebranding at the end of the franchise. It suggested that either East Coast Main Line should retain its brand and marks when sold, or, if the successful bidder identified a positive business case for rebranding they should bear the costs.

• • • • • • • • •

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CHAPTER FOUR – THE BRAND STORY

The fact that the new franchisee, Inter City Railways, a joint venture between Stagecoach and Virgin, has decided to call the company Virgin Trains East Coast affords it the opportunity to retain at least some of the values that East Coast Main Line Company has patiently built up within the brand, says Williams.

But at the time of writing there is uncertainty over how it will position the company against Virgin Trains West Coast, which it also owns, and against which it will compete on parts of the route. Will the brands remain distinct, or will there be efforts to harmonise them? The latter approach carries risk, as Richard Bowker’s experience with NXEC demonstrated.

From a cultural point of view the West Coast brand feels very different from the East Coast brand, observes Cowen. “We are quite gentle compared to them. Their latest campaign is ‘Arrive awesome!’, which is an interesting spin on our ‘Feel at home’ but tonally very different from our approach.”

The loyalty scheme An important element of the East Coast brand was the award-wining loyalty scheme, Rewards, which was introduced in 2011 and by the time of the handover had over 650,000 members. GNER used to have a scheme where people collected a given number of tickets and exchanged them for a free ticket.

It had 8,000 members and NXEC tried get rid of it. East Coast wanted to create something more robust and meaningful.

Williams says: “Our market research showed us that people didn’t want just another loyalty scheme, but something that was appropriate to their travelling experience with us – like discounts or the opportunity to get complimentary tickets from time to time. On the face of it the scheme did look quite generous in terms of how much you had to spend to get a free journey, but we think we calibrated it correctly and had a scheme that was relevant and worked well for us.”

The scheme drove both advocacy and sales, says Cowen. “When we measured customer satisfaction we compared results from our Rewards customers and our non-Rewards customers and the difference was vast. Even on factors like disruption, for example, our Rewards customers were far more forgiving. Around 30% of our revenue comes in through the website and 60-65% of that was from Rewards members, and we demonstrated we drove incremental revenue from them.”

The team was disappointed, therefore, that the new franchisee planned to scrap Rewards and replace it with Nectar.

The East Coast brand was very important from a customer point of view, but how important was it to employees?

“I think the brand was important to them, but not as important as feeling they were valued,” says Cowen. “People were very badly treated during the National Express days, and kept harking back to the ‘golden’ days of GNER, so one of [managing director Karen Boswell’s] biggest challenges was to get that cultural realignment. That’s quite tricky to pull off actually, given the fact that while people do like the company and have an affinity with the management, their loyalty is to ‘the railway’.”

Skyfall As she admits, in an industry that’s subject to frequent In 2013 marketing partnered with TV ownership and management changes, that loyalty is not network Fox to help launch the Bond movie ‘Skyfall’ on DVD and Blu-Ray. misplaced – and augurs well for the future, provided the new Leading show-business journalists joined franchisee treats employees with respect and consideration. some of the film’s stars and company Nevertheless, the business needed something to anchor employees on a specially wrapped train, people behind the brand, predicated as it was on delivering which had a huge media impact. The excellent customer service, and it came up with ‘Company train featured on all the main news Spirit’, a programme designed to get employees to distil the bulletins and in many daily newspapers.

In total the launch attracted over essence of what working at East Coast meant for them, and, £10m-worth of media coverage and the from that, creating an employee brand, ‘Further Together’. hashtag #skyfalltrain was tweeted over (See Chapter Five: It’s all about the people) 4,000 times.

CHAPTER FOUR – THE BRAND STORY

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Marketing won a raft of UK and international awards between 2009 and 2015 (over 15 at the last count), including three for the ‘All Aboard: East Coast Trains’ series and a gold award for the best TV campaign in the 2014 Roses Creative Awards for ‘Feel at home’.

But the accolade that Boswell is proudest of is East Coast’s ‘Business Superbrand’ status, which it won in 2013, 2014 and 2015 from the Centre for Brand Analysis, which has commissioned research since 1995 to identify and celebrate the UK’s strongest consumer and business brands. If anything represented the East Coast brand’s coming of age, this was surely it.

All Aboard: East Coast Trains

In January 2014 the series ‘All Aboard: East Coast Trains’ ended its ten-episode run on Sky 1 HD. The programmes took viewers on a behind-the-scenes journey at East Coast, which allowed the production company Cineflix unprecedented access to its trains, stations and depots. It was a brave thing to do, not least because Ofcom rules prevented East Coast from having any editorial control. Indeed, East Coast rejected the production company’s first approach, but 18 months later its confidence and reputation had grown to the point where it decided to let the cameras in. Boswell decided not to ask for DOR’s permission, but instead to ask for their forgiveness if it went wrong.

Fortunately it went very right.

A marketing team initiative, the key objectives of the series were to complement the ‘Feel at home’ advertising, to gain earned media value in excess of spend on the project, to protect or enhance East Coast’s reputation and to promote the show’s content in order to amplify its reach and gain additional earned media value. It was also seen as a credible way to highlight the company’s service benefits and to help instil pride in staff themselves, many of whom would become stars of the show.

A specially wrapped train promoted the series up and down the route, it featured heavily in East Coast’s social media, a PR strategy was devised based on key characters and ads aired during the breaks in the show.

Benefits included the following.

Scale and value The series reached almost 3.4 million viewers, earning more than £4.5m in equivalent media value.

The Sky 1 channel ident featuring the East Coast train reached over six million viewers, with exposure worth £152,000.

Paid search aligned with the show achieved a 48% click-through rate, generating 1,752 sales.

• • •

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CHAPTER FOUR – THE BRAND STORY

Boost to organisational profile

of viewers thought the show gave a positive • 79% impression of the organisation, with 73% feeling staff came across well.

of viewers said the show had improved their • 66% understanding of East Coast Trains, with 8% previously unaware of the brand.

Strengthening brand image and preference Across all emotional criteria viewer favourability was almost double that of non-viewers.

– 76% believed East Coast was welcoming.

– 54% thought it was environmentally responsible.

– 62% thought it understood travellers’ needs.

– 65% thought it cared about its customers.

Viewers were 63% more likely than non-viewers to agree they preferred East Coast.

Strengthening service opinions Significant improvements across all criteria among viewers versus non-viewers.

– East Coast is committed to improving service – 77% versus 39%.

– East Coast is good value – 39% versus 21%.

– East Coast is an enjoyable experience – 64% versus 32%.

Sky’s commissioning editor for factual, Chris Wilson, described the series as “a fascinating, moving and heart-warming glimpse into the lives of men and women who work both front of house and behind the scenes at one of Britain’s biggest transport networks.”

From East Coast’s point of view, the series perfectly captured the sense of family and team spirit that was at the heart of the brand. It organised a glamorous ‘All Aboard Oscars’ event at the Sage in Newcastle, to thank the 100 or so people who had featured in the series. The series also won the Drum award for ‘Branded Content Strategy of the Year’, a Thinkbox TV Planning award for ‘Bravest Use of TV’, and the top award for Content Marketing in the Marketing Week Engage Awards, all in 2014.

• • •

It’s all about the people

CHAPTER

FIVE

Customer focus is important in any business, but it is particularly so for East Coast, which relies largely on discretionary travel on what is arguably the most competitive route in the UK. Just 5% of the company’s revenue comes from season tickets, and though business travellers account for around 40% of its market, this group has choices to make and can’t be relied upon as a steady income stream. Both business and leisure travellers gave the capital a wide berth after the terrorist bombs in London on 7 July 2005, resulting in a slump in income that hastened GNER’s demise.

“Our whole business model was predicated on the idea that we had to look after our customers, because we just couldn’t take them for granted and assume they were always going to travel with us,” says Andy Meadows, who was, at the time of writing, HR director and deputy managing director of East Coast. “But to do that you have East Coast’s strategic people to invest in your own people. It’s simple service-profit-chain initiatives stuff: look after your people, they will look after your customers Company Spirit and you will make money.”

By showing their pride and passion But the workforce that East Coast inherited in 2009 hadn’t our people are our ambassadors been properly looked after for a while, and morale was so low for our customers by recognising that every day is different and always that customer service had slipped down their list of priorities. giving their best even when up against Jaded and cynical after a series of franchise changes and years of the odds. under-investment, uncertain about what the new owners would Authentic Leadership do and tainted by the stigma of being part of ‘a broken franchise’ Inspirational leaders, being (“We were front-page news, and for all the wrong reasons,” says authentic, who instil confidence, Meadows), people were less concerned about doing a good job nurture talent through rolemodelling our promises and creating than about whether they would have a job. a sense of belonging to one team.

Employee satisfaction was down to 56%, from a high of 77% Taking Ownership and Engagement under GNER, and people were taking an average of 14 days a Fostering an environment where our year off sick. But although things were at a low ebb, East Coast warm and friendly people always care had some rich heritage to build on. On their early tour round enough to make a difference. the business managing director Karen Boswell and her team Talent Development Creating opportunities to attract new were struck by employees’ underlying passion for and pride in talent and discover and develop our ‘the railway’. They realised that the turnaround would depend on people’s potential. being able to rekindle that passion and pride, and that to do that Innovation they would need to invest in changing the culture and giving To encourage and promote people the tools to do an excellent job. involvement of our people to deliver Top of the agenda were more visible leadership, greater smarter ways of working.

Being a Responsible Business accountability, a closer relationship between leaders, management Being good together today and better and staff, a faster pace of change and less reliance on the unions together tomorrow. as a primary conduit of information. Boswell was the driving

CHAPTER FIVE – IT’S ALL ABOUT THE PEOPLE

31

Introduction

force (See Chapter One: Arresting the decline), but evolving the vision into behavioural measures and embedding them in the company’s processes fell to Meadows and his HR team. Key to it all, he says, was “having managers who managed and who were clear about their role and objectives.”

The initial strategy was to build ‘authentic leadership’, to create ownership and engagement among the workforce and to develop talent. This evolved into six strategic people initiatives designed to achieve East Coast’s ‘people vision’, which was: ‘We can go ‘further together’ by engaging our people and stakeholders to shape, influence and become involved in creating our future success to make East Coast a great place to work.’ (See page 31) Change happened much faster than it might otherwise have done because of the decision to relaunch East Coast in May 2011 with a new timetable and a new First Class offer. (See Chapter 2: Eureka!)

This acted as a catalyst in more ways than one. It required a vast amount of work to be done in just 12 months, it gave the company a clear focus and goal and it helped restore a sense of purpose and pride in employees.

One of the biggest changes affecting staff was the new First Class catering offer. The onboard catering teams needed to be trained in a completely new way of working, and guards too had customer service training. HR also used the change as an opportunity to trial its new authentic leadership programme on 55 customer service and guards managers.

Why should anyone be led by you?

The authentic leadership programme was based on a model devised by organisational leadership and culture experts Rob Goffee and Gareth Jones, which has at its heart the question: ‘Why should anyone be led by you?’.

“We used that as our strapline,” says Meadows. “It really does stop people and make them think about what’s important to them, whether they are treating others as they would like to be treated, and so on.

But what we really wanted to do was build confidence in people about managing. Some managers just wanted to keep their heads down. They were working on the basis that the leaders wouldn’t be there very long before the next lot came along and had them dancing to a different tune. As well as high sickness absence there was a high number of grievances, and that was because people weren’t having the right conversations: managers Authentic leadership were saying ‘if you don’t like it put a grievance in’. That’s the The purpose of the authentic leadership initiative was threefold. way things were being managed. And because people felt they 1. To create a sense of community weren’t being managed well and not being listened to they’d and build strong teams. call in sick – they just couldn’t be bothered, let alone make the 2. To create ‘significance’ – a sense of discretionary effort required to deliver great customer service.” feeing valued and knowing where The management vacuum had been filled by the unions. people contribute.

“There was a perception that the union reps had more influence 3. To generate excitement and a sense of purpose, passion and a ‘reason than the managers and were more willing and able to resolve to bother’. issues than they were,” says Meadows. Being a publicly-owned It was designed to address the body, East Coast wanted to avoid embarrassing the government identified gap in leadership and with a showdown with the unions. Instead Meadows and his team management capability through evolved the relationship with both union and staff by making it creating awareness and a programme easier for employees to talk to managers than to their union reps of continuous development for the executive team, ‘heads of’, managers, – and here again the May 2011 relaunch was a catalyst. and team and shift leaders.

He explains: “When we set up Project Eureka! to manage the Trialled on 55 customer service relaunch we set out to find 10-15 front-line staff who wanted and guards managers it went to help us make the transition and we appointed them ‘project through several phases. Phase 3 in champions’. We used them to reinforce the training. That had 2014 focused on mindfulness and a transformational impact – it had real credibility, people felt preparation for change. involved and the whole thing just blossomed.”

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CHAPTER FIVE – IT’S ALL ABOUT THE PEOPLE

The company now uses champions for any new initiative or change programme – but people have to apply. “More and more people volunteer, so the calibre goes up. People see it as good development experience and a good stepping stone towards taking more responsibility,” he says.

The Eureka! champions were complemented by small forums all over the business where people could discuss concerns or get help resolving problems with any of the elements of the change.

“We knew Eureka! wouldn’t work perfectly, however well we planned it, and that we would have teething troubles that we would have to work through quickly,” recalls Meadows. “It was details, in the main – like ‘Can we do the tea run here rather than there because of x, y or z?’ or ‘These cups don’t fit into the storage’ or ‘The coffee maker takes too long’ – but in the past these sorts of issues would have gone to the local reps, who’d have called for a meeting and all that entails. We circumvented all that by putting things into little working groups, comprising a couple of champions, a couple of managers and a couple of front-line employees, who solved them, quickly. That allowed us to work through implementation of the new systems in a sensible way, in real time.”

Being able to transfer such “little frustrating issues” out of the union agenda and into the forums was so successful that this model too was applied across the business. Not only did this empower and encourage accountability among staff, but it also, says Meadows, “transformed relationships, in the sense of being able to manage the unions and manage our employees direct. People realised it was worth going to talk to their manager because they solved things, listened and tried to help.”

The authentic leadership programme was augmented by talent development programmes at all levels, including an undergraduate management development programme, and a Chartered Management Instituteaccredited high-potential programme, which was aimed at developing talent in existing managers in order to help retain talent and manage succession. East Coast also had plans to reinstate the graduate development scheme that National Express terminated.

Much of its most recent focus, however, was on its 12-month ‘Future Leader’ programme, which equips people with the skills they need to move into management. There is a rigorous selection process, but of the first cohort of 14 who went through the programme, 11 have been promoted into team leader or manager roles (the other three are on Engagement maternity leave).

VaLUENTiS describes employee Good quality jobs and training and development are two important engagement as follows: “Employee engagement is an drivers of the employee engagement that Boswell saw as vital to the ‘outcome-based concept’. It is the company’s turnaround. In the past the business had run employee term used to describe the degree to satisfaction surveys, but she replaced these with the more proactive which employees can be ascribed engagement surveys that identify and measure the factors that encourage as ‘aligned’ and ‘committed’ to an employees to give of their best, even in difficult circumstances. organisation such that they are at “Engagement plays to advocacy, and there is a clear link between their most productive.”

Engaged employees are: advocacy and profitability,” says Boswell. (See box) More likely to give discretionary VaLUENTiS, the leading human capital management and organisation effort/’go the extra mile’. performance specialist, runs the annual engagement survey.

More inclined to input into ideas/ East Coast learning and development manager Stephanie Oerton innovation. and her team analyse the results to a granular level of detail in order More likely to achieve goals set. to identify good practices and problems in all parts of the business More likely to produce higher grade/quality of work. and then use those insights to help leaders and managers to develop More likely to be flexible to local action plans to drive improvements. Oerton says: “I look at 80% organisation needs. engagement scores and think ‘what do I need to do about the two More inclined to share knowledge. people in my department who aren’t happy?, what’s not working?’ and Less likely to suffer stress (but all managers look at their results like that now.” more likely to burn out).

Another driver of engagement is feeling involved in the business, Less inclined to take days off.

Less likely to move employer. and in 2012 East Coast introduced an initiative called ‘Company Spirit’, which helped to foster a sense of belonging while at the same time

• • • • • • • • •

CHAPTER FIVE – IT’S ALL ABOUT THE PEOPLE

33

Bright Sparks

reinforcing the customer-centric ethos and behaviour required to improve the company’s performance.

Company Spirit derived from asking a cross-company, cross-hierarchy group of 70 staff who’d worked in the business under different owners when they thought it was great and not so great, and why, and when they felt most proud to be associated with it.

The essence of Company Spirit is three-fold: 1. What do we want people to say about us? ‘We love East Coast’.

2. What can we learn from our roots? ‘Sense of belonging’, ‘Being the best against the odds’.

3. Our passion: ‘We care enough to make a difference’.

“Company Spirit is an ‘inside-out’ approach to being a people-led brand,” says Oerton. “We were promising customers a warm welcome and that they would feel at home on East Coast, but people had to live it.

Company Spirit captured Company Spirit the essence of who we What do we want people to say about us? were, what we believed in and what we stood We love East Coast for, and helped to bring together our external Sense of We care brand positioning – ‘Feel belonging What can we enough to Our passion Being the learn from our make a at home with East Coast’ best against difference roots? the odds – with our internal brand – ‘Further Together’.”

And being a truly people-led people brand meant living the company spirit through four ‘people promises’ – ‘different every day’, ‘warm friendly people’, ‘smarter ways of working’ and ‘pride in what we do’ – each of them requiring a commitment from the company and the individual employee. The required behaviours falling out from this included the following: • Looking after Mrs Jones • Taking ownership • Positivity • Teamwork • Flexibility • Forward thinking • Full of pride • Resilience These behaviours underpinned all the company’s learning and development activities, were used for performance management and reward and recognition purposes, and informed recruitment, which East Coast brought back in-house early on in the franchise.

Rewarding customer-oriented behaviours was also important. Staff enjoy free or discounted rail travel and a final salary pension scheme, but the company also gave managers discretion to grant on-the-spot rewards – typically £25 – for great customer service or other exceptional work. Called ‘Shine’, the programme was recently broadened into a total reward strategy, including flexible benefits, initially for senior managers, and a salary sacrifice scheme that allowed an employee to buy, for example, a bike, a computer or a mobile phone. By the end of the 2013-2014 financial year the company had awarded 1079 instant Shine awards, and in the same year it won an award itself for the ‘UK’s Best Employee Reward Programme’ in the Pay and Benefits Awards.

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CHAPTER FIVE – IT’S ALL ABOUT THE PEOPLE

Engaged people not only deliver better customer service and are more productive, but they are also more innovative. In 2014 East Coast set up an innovation scheme designed to harness this new creativity and encourage people to develop new ways of working, new improvements for customers and new operational efficiencies, which, in turn, would result in enhanced customer service and even higher engagement. It’s a virtuous circle.

The company established five regional innovation panels, comprising managers and front-line staff, to evaluate ideas, and allocated an initial £55,000 of seed-corn funding to allow the best to be piloted or implemented. Examples include the following.

An airline-type labelling system for luggage to encourage passengers to leave their bags in the front of the train rather than having them cluttering the aisles.

The development of a diesel fuel recovery system at Craigentinny depot to reduce fuel waste from the HST fleet. The system works by pumping fuel back into the power car following routine maintenance work, saving around £30,000 a year and reducing the risk of pollution.

In-house health assessment kits for people to test their blood pressure and cholesterol without having to go to the GP. A ‘plug in and play’ replaceable water filtration unit. Filtration units used to be built in and when they went wrong the train had to be taken out of service.

Packs of East Coast playing cards featuring pictures of the company’s trains, to be sold for charity.

The scheme has been a victim of its own success. “We were overwhelmed by ideas,” says Meadows. “We expected about 200-250 and we had closer to 650, and the panels creaked a bit. We didn’t respond to some of the ideas as quickly as we would have liked, but they kept coming, which is a good sign. We managed to recover it and it’s now working quite well.”

• •

• • •

But perhaps an even more important recognition tool was the company’s Annual Business Awards, held for the first time in 2012, to celebrate the ‘stars’ of East Coast. Attended by around 200 people at the National Railway Museum in York, and hosted by former Olympic gold medallist Jonathan Edwards, the inaugural Awards recognised 12 winning individuals or teams, who were nominated and voted for by their colleagues, and over 30 ‘highly commended’ teams and individuals. In 2013 the Awards moved to the bigger venue of the York Barbican, which was also the location of the 2014 Awards, a glittering (and emotional) occasion, attended by 350 people, at which the outstanding contribution of 14 winners and 34 highly commended teams and individuals was recognised.

The final element of East Coast’s people strategy – ‘Being a responsible business’ – was relatively new.

It covered four key elements – workplace, environment, marketplace and community – and was designed to build engagement through initiatives fostering and promoting, for example, a healthy, diverse and inclusive workforce, ethical procurement, recycling and other environmental initiatives, and community involvement (the company raised nearly £200,000 since 2013 for the Railway Children charity).

All elements of the people strategy linked back to ‘Mrs Jones’, who, since she was ‘launched’ into the business at East Coast’s first customer conference in October 2012, became a metaphor for exemplary customer service. She featured right at the top of the company’s behaviour framework, Mrs Jones workshops were delivered to all front-line teams and she became embedded in the East Coast language.

Measures of success The story of the East Coast turnaround is essentially a ‘people story’, and that story has been recognised in a clutch of awards. Meadows is proudest of the company’s Investors in People ‘silver’ status and of the ‘Top Employer’ award that it has won for each of the past four years from the Top Employers Institute. The business ranks second out of 73 companies that have the Top Employers accreditation, and has made dramatic progress in all five criteria since 2012, earning a top score (5 out of 5) for both training and development and career development in 2014.

The success of the people strategies over East Coast’s five-year tenure was also reflected in internal measures, including falling sickness rates (down from nearly 14 days per employee per year in 2009 to just under nine in 2014-2015) and the popularity of the Bright Sparks innovation scheme (see box). But the real proof of the pudding was employee engagement scores, which rose steadily since VaLUENTiS started measuring engagement in 2010. The response rate rose from 52% in 2010 to 88% in 2014, and the score itself rose from 62% to 74% over the same period. The mean TOC score in 2014 was 70%.

“We were apprehensive about the most recent survey, which ran in September, because that was the time when we thought it would really hit people that they were going to get a new owner,” says Meadows. “We even lowered our target to take this into account. But both the response rate and the score rose from the year before – from 78% to 88% and 73% to 74% respectively.”

So how did East Coast sustain such high levels of engagement even as handover to a new franchisee loomed?

“Our role during the last 12 months of the franchise was very much about preparing people for change,” explains Meadows. “Karen drove that. She was always very keen that we didn’t rest on our laurels.

CHAPTER FIVE – IT’S ALL ABOUT THE PEOPLE

35

Engagement highlights 2014 Our leadership programme focused on how to influence change by embracing it rather than letting it happen to you, emphasising the need for people to work out what they felt was important for them in order to help shape that under the new owners – because the people coming in don’t always have the answers. And because managers’ confidence is much higher now, as the survey results show, that was easier for them to take on board than it would have been two or three years ago.”

What’s more, the business continued to invest in its people throughout 2014. It gave iPads to drivers and iPhones to guards to ensure they were at least as up-to-date with technology as their customers were (see Chapter Six: Performance), and it continued to develop people, including running two ‘Future Leader’ programmes and three high-potential programmes.

Typically a company coming up to refranchise would switch off that sort of investment, as Meadows points out. “But we didn’t put anything on hold and it was ‘business as usual’ pretty much up to early January, two months before handover.”

But then, as he says, the nature of the ‘franchise’ from day one was “to crack on with things rather than babysit.”

Investment in people

it took over in 2009 East Coast invested • Since £8.7m in training and developing its people. investment was higher in 2010-2011 than in • The subsequent years because of the training required to successfully relaunch the business in May 2011.

Despite running 19 additional services from 22 May 2011 headcount remained stable, apart from in stations and ticket offices, where it fell by about 10%.

•

FTE per Train 6.5

On Board

6.0 5.5 5.0

Stations/Ticket Office

4.5

Engineering

4.0 3.5 3.0 2.5

Driver

2.0

Admin/HQ Support Guard

1.5 1.0 0.5 0.0

36

2010/11

2011/12

2012/13

2013/14

CHAPTER FIVE – IT’S ALL ABOUT THE PEOPLE

Below are some highlights from the most recent survey.

I am proud to work for East Coast – 78% (up from 57% in 2009).

East Coast is a great place to work – 75% (up from 48% in 2009).

We deliver great customer service for Mrs Jones – 77% (up from 46% in 2009).

I am recognised when I’ve done something great – 57% (up from 29% in 2009).

The feedback I get from my line manager/team leader is fair – 71% (up from 45% in 2009).

My manager inspires me to do my job well – 65% (up from 41% in 2009).

There are opportunities to progress my career in East Coast – 63% (up from 35% in 2009).

I am provided with the tools/ equipment for me to work effectively – 65% (up from 37% in 2009).

My pay and benefits are appropriate for the job I do – 73% (up from 28% in 2009).

• • • • • • • • •

Year of the Guard

The Centre for Applied Positive Psychology conducted 45 focus groups along the East Coast route to find out how the highest performers did their job. While most of the groups were generic, particular attention was paid to train guards and station staff, these being the roles that have arguably the most direct impact on passengers.

Guards were a particular focus of training. They had emerged poorly from some of the early passenger research, largely because of the tensions involved in managing their triple role of keeping customers safe, delivering customer service, and collecting fares from customers with the ‘wrong’ tickets.

“The guards felt a bit unloved,” acknowledges Meadows. “They saw the drivers as being more important and better paid, they felt peripheral to the new working arrangements among the catering crew, they felt they got more than their fair share of criticism and their equipment didn’t work as well as it could.”

During 2012, designated ‘The Year of the Guard’, the company attempted to rectify the problem. Guards got bespoke training, their pagers were replaced with BlackBerrys and guards forums were established for guards to air their concerns, which ranged from how they were supposed to single-handedly load cycles onto trains during the Yorkshire leg of the Tour de France in 2014, to requesting help on late Saturday night trains favoured by returning club-goers.

“We helped them manage those situations,” says Meadows. “For example, we ensured that Coach C on the late Saturday night train from York to Darlington was reserved for people coming out of pubs and clubs and we put security guards on that train. That makes the guard’s life easier and stops people running up and down the train and upsetting other customers.”

The company also set up an assaults working group to determine whether guards needed more training to deal with aggressive passengers, or whether more needed to be done to deter such people from travelling.

But much of the abuse guards face centres around their revenue-collection role. East Coast gave its guards more discretion to discriminate between deliberate fare dodgers and people who have made a genuine mistake over the ticket they’ve bought but, as Meadows says, “it’s still quite a whack if you’re picked up on the wrong train.”

Social media has added to the guards’ angst: people tweet unpleasant and personal comments – and often photos too. “Sometimes, the customer doesn’t always share the full story and we had to be careful how we responded to them, particularly as we were doing it in real time,” says Meadows. “We took surnames off guards’ and some other employees’ badges, which affords them at least some degree of anonymity.”

During the second Year of the Guard programme, which ended just before the business handover, guards had talks from different teams from within the business and from outside the business (including the British Transport Police, for example), and were given and trained on smartphones. In the most recent VaLUENTiS survey, guards’ engagement scores rose to 71%, an increase of 15% since 2009.

CHAPTER FIVE – IT’S ALL ABOUT THE PEOPLE

37

CHAPTER

Performance

SIX

Shortly after Danny Williams joined East Coast in September 2010 as operations director, with a remit to get the business off the bottom of the national punctuality performance league table, someone gave him a piece of wise counsel: get close to the weather.

It was prescient advice: the winter of 2010 was one of the most severe on record, with the heaviest, most widespread and prolonged snow for 100 years. “We had trains in Aberdeen frozen in for a week, and snow was still evident in early March,” recalls Williams. But while blizzards, sub-zero temperatures and high winds along large tracts of the 936-mile route played havoc with the timetable, the weather south of Peterborough often belied the conditions further north. “So you’d get Department for Transport (DfT) people looking out of their windows in London and seeing glorious sunshine and wondering why on earth we couldn’t run a normal timetable,” he says.

That unusually severe winter aside, the East Coast Main Line route gets more than its fair share of weather at the best of times. Gales, floods and landslides affect overhead power lines, signalling and the track itself – and although these infrastructure elements are the responsibility of Network Rail, the train delays and cancellations they cause have a major impact on East Coast’s punctuality record, customer satisfaction, finances and reputation. Cable theft (an every-other-day occurrence when Williams arrived) and an unusually high level of suicides are additional ingredients in the disruption mix.

And then there are the trains themselves. They are between 26 and 38 years old, and, because there are only 44 of them, they are worked very hard – they each do an average of 300,000 miles every year.

Despite these challenges East Coast was continually being targeted on having 90% or more of its trains arriving within ten minutes of their published arrival time – a measure known in the industry as PPM MAA, which stands for Public Performance Measure Moving Annual Average – and it was continually being penalised for missing it. One of the first things Williams did when he took over was to commission a report from industry performance specialist Arup to determine what PPM MAA the route was actually capable of, given the prevailing conditions and investment plans. Arup identified the maximum possible performance as being a PPM MAA of 88%.

Resetting the bar “That reset the bar and gave the DfT, the Office of Rail Regulation (ORR) and Network Rail some real context about ‘route capability’, an expression that became embedded at the most senior level,” says Williams. “And it gave me some headroom to start concentrating on plans that would drive improvement.”

His twin focus was on galvanising his own people to help drive change and on shifting the historically combative relationship with Network Rail onto a more collaborative and co-operative footing.

“I’d inherited a team of ‘survivors’,” says Williams. “There was no team ethic or performance culture and I had to form and stabilise an operational team, engender belief that we could improve, and restore some pride.”

It was an uphill battle, but the more realistic performance target helped to get people in his tent, as did a new ‘firm handshake’ with Network Rail on performance delivery.

38

CHAPTER SIX – PERFORMANCE

Around 70% of the delays on the East Coast Main Line were caused by either infrastructure failures or engineering overruns, both the responsibility of Network Rail, but previous owners had seemed to accept its poor performance as a given. However, DOR chairman Elaine Holt and East Coast managing director Karen Boswell adopted an uncompromising stance that held the business to account for what, from both a regulatory and contractual perspective, it was obliged to deliver. Williams himself had to decouple the ‘contractual’ and ‘professional’ aspects of his own relationship with Network Rail in order to make headway.

PPM MAA hit rock bottom in June 2011 – 17% of trains were arriving at their destinations more than ten minutes late. But a move to ‘alliance working’ – essentially a joint approach to tackling projects and problems and improving performance that sought to consign the old adversarial blame-shifting culture to history – helped to drive significant improvements, and by September 2012 punctuality was better than it had been since records began. A Network Rail account manager was appointed with a dotted reporting line to Williams, which helped to cement better relations, and Boswell herself did what she does best and brought her own very human touch to the problem, visiting Network Rail depots to explain to teams the impact that even a one-hour overrun had on her employees, her customers, her mailbag and her finances.

“You could see the light bulbs going on over people’s heads,” recalls Williams. “Those sorts of messages elevate someone’s job from ‘replacing 500 yards of track’ to the vital commercial role they play within both Network Rail and East Coast. It’s a real cultural shift.”

Network Rail’s adoption of ‘Mrs Smith’, mirroring East Coast’s ‘Mrs Jones’, seemed to represent a paradigm shift in the company’s approach to customer service, and East Coast and Network Rail’s Communications teams worked together to highlight some of the successes.

“Network Rail was doing lots of great stuff that it wasn’t getting credit for,” says Williams. “For example, we had an ongoing problem with flooding in a tunnel at Potters Bar 15 miles north of King’s Cross. The water was running off the M25, across a farmer’s field, settling on the flat roof of the tunnel and dripping down. The local Network Rail team contacted the Highways Agency to tell them about the problem, and then dug out two holding reservoirs to catch the run-off.”

Shifting the relationship with Network Rail Maintaining a strong relationship with the route teams – the people who walk the lines fixing the track circuits and signalling – was critical, “because they are your day-to-day deliverers,” says Williams. But he is also quick to credit the focus, investment and good work done by Network Rail regional teams up and down the route.

“They invested in infrastructure – both track and overhead lines – as well as in more response staff, signallers, technicians and track patrollers, at a time when the business as a whole was under pressure to cut costs,” he says. “And they went over and above that, investing in things like track-side fencing and even the remote condition-monitoring equipment we introduced for our trains.”

And it was give and take. There were inevitable tensions between the two businesses, given that Network Rail needed far more access to the track to carry out repairs and maintenance than East Coast’s timetable allowed.

“I had to ensure my engineering planning team worked very closely with Network Rail to give them more time wherever possible,” says Williams. “They have windows to operate in, but there are some margins we can expand, which can make a big difference to them.”

But East Coast had to raise its own game too. While the majority of the non-Network-Rail-induced delays and cancellations were caused either by other train operating companies or were related to East Coast’s ageing fleet, Williams and his team worked hard to improve operational ‘housekeeping’ generally and to help drivers and guards in particular to sharpen Causes of delay their performance.

Network Rail 70% His approach was “to strip everything back to basics” by focusing on the Other train operators 13% detail of all aspects of the operation and how to improve them. He borrowed East Coast 17% from Toyota the concept of ‘control boards’, which list key metrics for every

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part of the Operations business, broken down into detail, and instituted weekly meetings in all areas to discuss performance against targets and how to improve it. Because people could see exactly what they were responsible for and how they could contribute, this had a dramatic effect on individual and team accountability, which, in turn, helped to improve performance.

“But performance is such a big animal that it has to be owned by everyone, not just the Operations team,” says Williams, who stepped up improvement efforts further still with the introduction of ‘Right Time’ performance at the end of 2013.

While PPM remains the government’s primary metric for measuring and regulating performance, for operational purposes the industry has moved towards measuring ‘Right Time’ performance, which is the percentage of trains arriving at their Managing disruption final destination early or within 59 seconds of schedule.

A tactical Business Disruption Williams and his team embarked on a series of roadshows around the Centre was established, fully kitted out with computers and business explaining the implications of the new target – which ranged information systems, which swings from any member of staff travelling on a train remembering to close the into action at times of disruption. window and slam the door shut when they got off, to shave precious Populated by ‘heads of’ supported seconds off the amount of time it takes to dispatch the train, through by a service disruption team, it to entirely new methods of working. A new initiative at Edinburgh focuses purely on the response to Waverley station, for example, called ‘Pit Stop’, involves every member customers, from communications to providing alternative transport, of the station and on-board teams being positioned in the right places leaving the Control office to as a train draws in. The company planned to extend Pit Stop to other concentrate on restoring the train stations, appointed Right Time champions to help embed Right Time service. working throughout the business and implemented ‘analysis of a train’ Guards were given smartphones, work streams with Network Rail to identify impediments to performance. having complained that customers “A series of these small incremental improvements – many of knew more than they did, and staff at key stations were given roving them suggested by colleagues themselves – combined to make a huge microphones. difference to our Right Time performance,” says Williams. By early 2015

Staff were trained in how to East Coast was the best-performing long-distance TOC for Right Time communicate more effectively, MAA, with a score of 64.3%. with a focus on style and tone Investment in new technology for drivers and guards also helped as well as content. “Sometimes to improve performance – but it improved safety and engagement too that involves being blunt,” says Williams. “In the past we would (see page 44). tell people things would be back to The company’s hard work on improving performance was reflected in normal again within a couple of the most recent National Rail Passenger Survey results from Passenger hours, when they clearly wouldn’t.

Focus, published in January 2015. Some 88% of passengers thought Now we’re more likely to advise East Coast’s performance on punctuality and reliability was satisfactory them to defer travel or suggest or good, a rise of five percentage points since spring 2014 and six another route.”

In 2014 managing service percentage points above the long-distance average. Virgin achieved a disruption featured for the first score of 86% and although Grand Central achieved 96% this score was time in all managers’ performance based on a very low number of services. objectives in order to further While it continued to drive punctuality and reliability, much of the reinforce the need to ‘help Mrs Operations team’s focus during 2014 was on managing service disruption.

Jones’ – whatever the day job.

The ORR was increasingly concerned that the industry’s performance was Five Experience Rooms were set up to replicate the different aspects not good enough on this score, and East Coast’s own research found of managing disruption, from the that both its customers and its employees felt ill-informed during times Control centre to the front-line, of disruption. East Coast probably had more elements out of its control to help educate managers in the than most train companies, and recognised that it could and should mechanics of managing disruption manage the resulting disruption and delay more effectively. and the role they themselves should Disruption can arise from a variety of sources, aside from suicides, play. cable theft, bad weather and infrastructure problems. When a train hit

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Fatalities a cow that had strayed onto the line in 2013 the train was out of service for nearly three weeks while the damage was repaired.

Lightning strikes can cause chaos, and people regularly wander into tunnels or climb onto overhead stanchions, requiring the power to be turned off and the lines closed.

Williams convened a cross-departmental working group, comprising ‘heads of’ within the business, to work on tactical and strategic responses to service disruption. It identified three strategic imperatives: one, to take more control through closer team-working with Network Rail to provide a joined-up response, two, to give employees the tools and technology to deliver better service, and three, to give everyone in the business the skills and knowledge to manage service disruption confidently.

“There was a real change over the last year,” says Williams.

“Managing service disruption was always seen as ‘the operators’ job’, but now people from Finance or Commercial teams will be out on the stations or in the Disruption Centre helping passengers. That represents a real shift in culture and ownership and understanding of the contribution they make.”

Again, the results were manifested in customer satisfaction scores.

• 67% of passengers surveyed in Passenger Focus’s most recent NRPS said the way East Coast dealt with delays was ‘good or satisfactory’.

• This was up nine percentage points since spring 2014.

• The average score for long-distance TOCs was 55%.

Results from the most recent employee engagement survey also demonstrated progress, although in some areas there is clearly more work to be done.

• During times of disruption I know what to do to help Mrs Jones – score for all staff 72% (up from 44% in 2013), score for guards 86% (up from 45%), score for Operations staff 69% (up from 32% ), score for Control/service delivery staff 87% (up from 72%), score for performance team 86% (up from 43%).

• East Coast is getting better at managing disruption – score for all staff 54% (up from 46% in 2013), score for guards 46% (up from 35%), score for Operations 43% (up from 32%), score for Control/service delivery 70% (up from 52%), score for performance team 86% (up from 29%).

• I receive timely information needed to keep Mrs Jones informed during disruption – score for all staff 44% (up from 36% in 2013), score for guards 36% (up from 28%), score for Operations 33% (up from 23%) score for Control/ service delivery 60% (up from 52%), score for performance team 71% (up from 43%).

Suicides are a major cause of delay on the East Coast Main Line. There are between one and two every month, and a dedicated Network Rail/East Coast team works closely with the Samaritans to try to establish why suicides are so frequent on this line and what can be done to prevent them.

While there is no seasonal, age- or gender-related pattern, there are particular hot spots on the line, and here the business has invested in thing like alarms that sound if someone starts to walks off the end of a platform, yellow hatching (a psychological barrier to someone on the cusp of stepping off) and moodenhancing low-level blue lighting.

And demand for six-foot high palisade fencing to deter people from wandering onto the line is currently outstripping demand.

In addition, a high percentage of station staff have been put through Samaritan training designed to help them spot vulnerable people and talk them down. There have been a number of success stories, and these are shared throughout the business.

East Coast seeks to influence things in other ways too: recently, for example, it helped to overturn a planning application to build a hospital for people with mentalhealth issues about 100 yards from a suicide hotspot.

The impact of a suicide on drivers in particular, and train crew in general, can be devastating. Some drivers are off work for six months or more. The company immediately enacts a ‘chain of care’ for the affected staff – and, often, their families too – and some drivers who have been through the trauma and come out on the other side help to counsel others and work with the Samaritans.

All this effort adds up: Williams estimates that in 2014 the team helped to prevent between 60 and 65 suicides. “That’s a big tick for the industry,” he says.

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• I am provided with the tools/equipment to help me work effectively – score for all staff 65% (up from 59% in 2013), score for guards 54% (up from 52%), score for Operations 64% (up from 57%), score for Control/service delivery 47% (up from 38%), score for performance team 86% (down from 100%).

Raising Engineering’s game Historic issues with the Operations team, however, “paled into insignificance” beside the performance of the fleet, says engineering director Jack Commandeur, who, when he joined East Coast in the first week of July 2012, was shocked by the extent of neglect. While the entire business had been starved of investment in the latter days of GNER and during National Express’s tenure, Engineering took the brunt of the cuts.

“The previous owners had substantially pillaged the Engineering organisation, with the result that there was a complete absence of physical and behavioural artefacts,” he says. The Engineering team was “hugely disadvantaged” by a lack of continuous leadership and investment, which meant that all the good work that Boswell and the executives were doing in the rest of the company had little traction in Engineering because the ground was insufficiently fertile.

An external report commissioned in the early days of the new Engineering’s nadir franchise concluded that “East Coast Engineering barely functions,” but Andy Cope, a chartered engineer, is an unfortunate initial appointment meant the problem was exacerbated. a non-executive director of Directly “Engineering was the biggest disappointment in the early years,” recalls Operated Railways and stepped into former East Coast chairman Michael Holden. “It was everything: people, the Engineering breach on more than process, technical, logistical, commercial and financial. Depots were one occasion in the early days when the extent of the problems in the division badly run, staff were poorly organised, people had left, skills levels began to be apparent and two people were low and there was a loss of technical expertise in understanding who had been appointed to run the how the fleet worked and its maintenance and overhaul requirements.” division proved unequal to the task.

Bounds Green depot in London had lost the capability to maintain “Skills had been run down to the the InterCity 125 fleet and Craigentinny in Edinburgh had lost the point where the organisation was so capability to maintain the InterCity 225 fleet. Concessions to keep the dysfunctional that very straightforward things didn’t happen correctly. On trains running were being issued at a local level without any agreement one occasion, for example, an HST in or review by the engineering director. This was a particular problem Edinburgh needed windows, but there given that the electric fleet is bespoke to the East Coast Main Line. weren’t any at the Craigentinny depot, But despite the trains’ unique design, not even the owners put so they had to be sent up from Bounds enough effort into ensuring they understood the technical issues, says Green, and the plan was to transfer Holden. “I eventually found out that the people who were doing the them from one train to another at York. That required a director from overhauls – Wabtec at Doncaster – were the only ones with sufficient the business to physically go to York depth of knowledge about how the trains worked. And that’s a very station to oversee that transfer. uncomfortable position to be in. If you are operating and maintaining “Another manifestation of the cost the trains you want to be the centre of excellence so that you can hold cutting was regular ‘short-form’ trains your suppliers and the owners of the fleet to account. We are now, but running, even on the busiest routes at we weren’t then.” the busiest times of day, because there weren’t enough skilled people to keep Fleet performance was dire. 460 cancellations and 52,000 minutes of up with the maintenance programme.” delay in 2011-2012 were caused by defective trains, and at the beginning What Commandeur brought when of the franchise term an average of eight services a day comprised short he joined in 2012 was a realism about train formations. Commandeur joined two weeks before the London 2012 what could be achieved and an ability Olympic games started, yet although East Coast planned to run 160 to “manage the boundaries,” says additional services during July and August, he found panels falling off Cope. “He prioritised tasks, articulated complex issues in a way that people trains, staff going on leave and no revisions to the maintenance plan. understood and restored confidence in However, like Williams, he focused largely on rebuilding morale and Engineering.” confidence among the existing team (nearly 500 people) rather than

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Investment in engineering systems

Commandeur’s efforts to fix the problems in Engineering were given a significant boost by a major investment programme aimed at improving the management and control of engineering processes, and identifying faults more quickly and accurately.

‘Project Falcon’ was the name given to a web-based on-train remote control monitoring system. It gives advance warning of train component failures ahead of actual faults occurring, improving performance and reliability.

Project Maximo’, which complemented Project Falcon, was a new management information system that replaced legacy systems dating back to preprivatisation days. Designed to make maintenance more efficient and effective, both reducing waste and improving performance, it underpins all the company’s train maintenance support functions.

It helps to ensure optimum stock levels, manage warranty claims, improve vehicle performance and drive a maintenance regime based more on prevention than reaction.

Project Maximo was particularly significant. While the investment decision had been taken before Commandeur joined, he claims that the willingness of people to adopt it when it was introduced at the beginning of 2014 was testimony to the success of the culture change. The seamless transition was important in a safetycritical environment.

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making wholesale changes. He did, however, reshape the management structure and roles, re-establish a robust materials function and quality function, and introduce a clear differentiation between planning and execution work, which involved creating eight new posts. And he embarked on an intensive re-skilling programme.

His approach was not to make the trains intrinsically more reliable – there’s only so much you can do with trains that are 26-to-38-years old – but to improve the team’s capability to manage the trains more intelligently. He explains: “It was about making sure we serviced trains more thoroughly to reduce the likelihood of them failing in service, and then, if they did fail in service, to have more robust contingency plans to respond and recover faster. So you might only lose a train for one day rather than three, which means that another train that was due for maintenance on day one can come in on day two, rather than day four.

In the past maintenance was being pushed out, which meant it was bunching up later on, which resulted in services being lost. By calming the environment and controlling it we were able to perform maintenance to a higher quality and more regularly.”

Part of that control involved switching from a reporting mentality to a ‘doing’ mentality in the early days. “Instead of doing the task we were spending an awful lot of time reporting on why the task hadn’t been done,” recalls Commandeur. “Karen gave me some breathing space, which was a leap of faith for her because when things aren’t going well you naturally want lots of information on why they’re not. We were then able to concentrate on fixing the problems one by one, and slowly and surely the benefits of fixing many small problems started to come together.”

The on-board environment

Engineering was also made responsible for the physical environment of the train. Trains were extensively refurbished, the quality and frequency of deep cleans, inside and out, improved and routine on-train cleaning was enhanced with the introduction of new standards and equipment.

Commandeur believes that by the end of the franchise East Coast had much to proud of in terms of how it delivered its service, but what remains “a single source of embarrassment” to him is the toilets, which get a regular thumbs-down in customer satisfaction surveys.

It’s about priorities, he says. “When you’re working on an interim management model, with what has effectively been a two-year planning horizon, you have to prioritise things like train panels because the train can’t run without them. And it was difficult to justify an investment of £2-3m on a project that could have taken a considerable amount of time to complete when we’ve got brand new trains being introduced in 2018.”

Repairing the air conditioning however, at a cost of £2.5m, was a priority because staff and customers were suffering in over-heating trains. But with such old trains such improvements amount to fighting a rearguard action, as Commandeur attests: “We put brand new air conditioning modules into the diesel fleet, but we were putting them into coaches where the electronics and the management controls were 35 years old.”

One of Commandeur’s most interesting contributions to the business was introducing it to Mrs Jones.

He explains: “Customer focus was sadly lacking in the Engineering team and I needed to get across to them the fact that we’re not here to polish trains because we’re train enthusiasts, but to provide a service

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for the fare-paying customer. I brought that idea to life by getting them to imagine the customer as a real person – Mrs Jones.”

So now, if someone in a depot in the middle of the night wonders whether he really needs to sterilise the water tank, he knows that if he doesn’t Mrs Jones can’t have her cup of coffee the next day. It’s a simple idea, but Boswell seized on it and it continues to resonate across the business as a rallying cry for exemplary customer service.

Within the space of two years the number of fleet-related cancellations fell from 460 to 276, and the number of fleet-related delay minutes from 52,000 to around 42,000. East Coast won a Golden Spanner award from Modern Railways magazine – twice – for the ‘Best InterCity fleet in the UK’, and Engineering’s resurgence was reflected in East Coast’s Annual Business Awards in 2013 and 2014 – in 2014 Craigentinny depot won four awards and was nominated for ten.

Embedding a new safety culture

As well as getting trains from A to B on time, Operations is also responsible for the safety of passengers and employees. At the time of the handover in November 2009 the franchise had one of the worst safety records in the industry. Targets were not being met, operational incidents were increasing and there was a poor safety culture, resulting in some serious safety incidents such as derailments. Lack of operational safety was matched by a lack of focus on passenger and staff security and safety on trains and in stations.

Under head of safety and environment Lesley Heath there was a dramatic turnaround in safety performance. The focus switched from compliance to a more proactive approach designed to identify risks before they appeared and report near misses when they happened, and this was driven by a culture and behavioural change whereby everyone saw safety as their responsibility. There is now a cross-functional safety board, and safety management is embedded in all departments.

Heath admits there are sometimes challenges in ensuring a good balance is maintained between safe operating and the need to meet punctuality targets (trains are still occasionally dispatched with doors open, for example). But where safety incidents have occurred it’s been due to neglect or error, rather than inappropriate pressure – and such incidents are addressed through more robust risk management procedures.

But while competence and compliance with technical rules has been sharpened up – how guards handle doors and emergency procedures, for example – Williams believes that some of the most effective safety initiatives have been around non-technical skills.

One of these was the introduction of ‘risk-triggered commentary’, which requires drivers to talk through

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(to themselves) their actions when in, or approaching, a potentially dangerous situation – driving the train through unfamiliar conditions, for example. It heightens their awareness, says Williams, and has also helped to reduce the incidence of trains not stopping at scheduled stations.

Managers have also been trained to spot uncharacteristic behaviour in staff – like turning up late for work, or being unusually quiet – in order to intervene before an issue, such as a problem at home, or disturbed sleep, become a risk.

The introduction last year of the ‘Drivers’ Schedule Advisory System’, a £0.5m investment, also helped to improve safety – as well as performance and engagement. A portable tablet device, which sits in a dock on the driver’s dashboard, not only displays the schedule and the train’s performance against schedule, but also vocalises it, with instructions like ‘next station Morpeth’ and the point at which the driver needs to brake to ensure the train stops at the right place on the platform.

This system was subsequently enhanced with new functionality, in the form of a ‘Rail Companion’, which comprises route maps, operating manuals and notices, the rule book and rosters, obviating the need for drivers to carry around heavy bags of books (and reducing the company’s carbon footprint). It also allows drivers to report incidents, delays and departure variances directly to Control, thus sharpening up performance intelligence. Drivers, who in the past complained about feeling remote from the rest of the business, now feel more connected.

What’s more, East Coast won two Golden Whistle awards from the Institute of Railway Operators and Modern Railways magazine for being the best performing TOC in terms of safety performance related to train driving.

On 30 January 2015 East Coast won two Golden Whistle awards from the Institute of Railway Operators and Modern Railways magazine – one for ‘Best Operational Performance InterCity – Right Time’ and one for ‘Best Operational Delivery – Delay Minutes’. They are fitting recognition of the dramatic operational improvements achieved over the past five years, despite increasing volumes of traffic on the route and much tighter timetables. As this publication went to press East Coast had just achieved the highest MAA ever – nearly 88% – and was on track to achieve the best ever period PPM. The Operations team has also had some major changes to contend with – including, in January 2015, moving its Control office into a new purpose-built Rail Operating Centre just north of York station, an important step towards a new national Railway Operating Strategy (ROS). The ROS is designed to manage the increased capacity on lines that will be needed when new higher-frequency and faster trains are introduced (East Coast will take its first delivery of InterCity Express trains in 2018), along with a new incab signalling system, the European Rail Traffic Management System (ERTMS). The team has been heavily involved in preparing for both.

And its performance is all the more impressive given continuing challenges with the infrastructure.

Despite concerted efforts to help Network Rail raise its game, including the implementation of a new performance management system with a particular focus on ‘asset reliability’, what are termed ‘major incidents’ on the line – including dewirements, possession overruns and extreme weather events – continue to be the name of the game.

In December 2013 East Coast lodged a multi-million pound claim against Network Rail for ‘sustained poor performance’, a move that could open the floodgates for other train companies to lodge similar claims. At the time of writing the claim had not been settled.

The King’s Cross debacle

Over-running engineering works just north of King’s Cross caused travel chaos on 27 December 2014. All services out of the station were cancelled, meaning thousands of passengers had to depart from the small local station Finsbury Park instead. The blame fell squarely on Network Rail’s shoulders, but East Coast had been closely involved in planning the works. What went wrong? Danny Williams explains.

“We started a process of structured ‘readiness reviews’ with Network Rail 24 weeks before the planned engineering works to replace 500 yards of track and track bed just north of King’s Cross over the Christmas break. I jointly chaired those reviews, at which the maintenance teams presented their work package, their resources and their contingency plans. We were very clear from the outset that because we had around 37,000 people booked to travel with us on 27 December, the day after Boxing Day, we had to have the track back on time. There could be no overrun because there was no viable alternative way for that volume of passengers to get to their destinations safely and comfortably. Finsbury Park station, with narrow platforms and lots of steps, was not a suitable departure point, and trains out of St Pancras and Euston were already heavily booked due to restricted services because of engineering work.

“For a variety of reasons, when they realised they wouldn’t complete the planned work in time Network Rail didn’t enact the contingency as agreed. They seemed to think they could recover the situation, but it seems that no one stood back, realised it was impossible, and did something about it.

An obvious thing would have been to do a ‘lighter’ dig than the planned full excavation to replace the track bed. That foundation might then have lasted only 15 years before it needed replacing, rather than 30, and they’d obviously got it into their heads that they wanted to give the asset as long a life as possible. But it would have saved a great deal of pain.

“It seems they actually lost control on Christmas Day but it wasn’t until 2pm on Boxing Day that they informed us that King’s Cross would have to close for another 24 hours. We enacted our own emergency response: by 15.30 we’d got a message out advising customers to defer their travel plans until 27 December, and by 21.00 we had published a revised train plan for that day.

“On the 27th itself we got everyone home safely, using taxis where necessary. We did run our normal number of trains that day, but they started from Finsbury Park.

“That episode has led to a review by the Rail Delivery Group of when and for how long Network Rail should have access to the track, in an effort to avoid these concentrated and disruptive periods of work. It’s also looking at how the operators and Network Rail could work together more effectively in the interests of the customer rather than their own commercials and reputation at times like this, and that’s about having a joint contingency plan to keep customers safe, well informed and moving, even if that means extended journey times.

“Problems arise because the industry has become increasingly fragmented; this is an attempt to join it up again. That’s a very positive development.”

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CHAPTER

Finance and investment

SEVEN

By the time East Coast handed over the franchise to Inter City Railways Ltd, a joint venture between Stagecoach and Virgin, on 28 February 2015, it had returned nearly £1.1bn to the government in franchise premium and profit payments. It’s not a bad record. National Express managed to return just over £200m in two years before it ran out of money, while it took GNER ten years to pay back £230m. East Coast’s achievement is all the more impressive given that it didn’t do it by taking a knife to the business. On the contrary, over its five-year tenure it invested a total of £50m in every area of the operation, from people and customer service, through trains, stations and safety, to marketing and technology.

The business was in dire need: the financial difficulties of both National Express and, in its latter days, GNER, meant that the organisation had been starved of investment for years. And it showed: people were demoralised, trains were falling to pieces, stations were shabby and staff lacked the tools they needed to deliver the level of service customers were demanding. No wonder revenue was plummeting.

But although the board turned on the investment tap immediately, the Finance function itself needed close attention in order to raise its capability to the point where it could evaluate investment priorities so as to deliver the short- and long-term improvements to the business that would maximise its value on handover, as well as the financial return required by the government.

The Finance function, in common with the rest of the business, had suffered from the short-termism and constantly shifting priorities associated with a decade or more of two-year planning cycles. There had been six finance directors within the space of eight years, and any sense of an overarching vision and strategy was a distant memory.

Reversing the command and control culture The culture was one of old-fashioned command and control, recalls Tim Kavanagh, who was promoted from financial controller to finance director at the beginning of the franchise: finance would set budgets for individual departments and then shout at them when they overspent. In keeping with managing director Karen Boswell’s desire to shift the culture towards one of empowerment and accountability, she and the board of Directly Operated Railways (DOR) helped Kavanagh to create a business partnering approach whereby Finance would deliver the support to the business that it dearly needed. But it took a good 18 months, he says, before people understood how to manage the responsibility they’d been given and to come up with ‘appropriate’ budgets for their proposed projects.

Another early priority was to bring back in-house some of the services that had been outsourced to a shared service centre during the National Express days. While outsourcing had been done for all the right reasons – economies of scale and process efficiencies – some of the activities, such as retail accounting (reconciling transactions from stations), had become dangerously remote from the business. Kavanagh reinsourced accounts payable and receivable, treasury and retail accounting, and invested in new systems and recruited a new team to manage them. This not only gave the company more control, but also saved it money.

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The story was similar in information systems (IS), which also fell within Kavanagh’s bailiwick. There was no vision, leadership or strategy, and IS was essentially a service department looking after people’s laptops and phones and solving day-to-day problems. But the company’s technology infrastructure was outdated and its capacity restricted, and staff needed better technology to enable them to deliver customer service, so Kavanagh set about building and delivering an IS strategy that addressed both issues. The Drivers’ Schedule Advisory System and new smart devices for guards (see Chapter Six: Performance) were two manifestations.

With very few variable costs to go at, and the fact that investment was a clear priority from the outset, East Coast’s focus was on ‘sweating the assets’. Kavanagh explains: “A franchise is a well-defined thing: you have a given number of services, a given number of trains and a given number of people, so it’s about manipulating those different variables to get the best outputs from the inputs you put in.”

The industry-leading revenue management system, the Revenue Price Optimiser, supported by targeted advertising, helped to maximise revenue (see Chapter Four: Planes, trains and automobiles), but 15% of the company’s revenue – around £90m a year – came from things other than ticket sales. A much tighter retail offering – culminating in the redesign of the Foodbar and a new menu in Standard class – helped to grow this side of the business.

The company also benefited from significant commercial settlements from Intelenet (part of Serco) and Worldline (formerly Atos) for delivering consistently unacceptable levels of service. The companies provide, respectively, outsourced customer relations services and the legacy systems behind ticket machines. While East Coast had firm commitments from both to improve service levels, the combination of history (Worldline evolved from British Rail’s old IT department) and near-monopoly status means that things are unlikely to improve until contracts are either re-tendered and/or brought back in house, believes Kavanagh.

At the time of writing, the company was still seeking to recover substantial losses from Network Rail over a Sustained Poor Performance claim lodged by East Coast in December 2013. The amount of the claim, running into tens of millions of pounds, fluctuated over the intervening months, based on DOR’s own legal advice and clarification from the Office of Rail Regulation (ORR). For DOR chief executive Michael Holden and others at East Coast the principle – holding Network Rail accountable for its legal and contractual obligation to maintain the infrastructure on the line – was as important as the money.

Balancing profit and investment But how did Kavanagh optimised the relationship between returning money to the government and investing in the future of the company?

“We never set out to be profit maximisers in the short term,” he explains. “For us it was always about maximising the value of the business to the next franchise. If you trouser the cash and don’t invest you might get a short-term boost but very quickly you will see your returns reducing. So given you need to keep your returns going, you have to choose which projects to invest in, and that’s about comparing the return you will get on any given project against the return you’re getting today. If it’s going to enhance the value of your returns tomorrow, and quickly enough, then you invest in it.”

It’s not rocket science, as he says – “You spend money to make money” – but it’s a formula that eluded the two previous franchise holders. What’s more, East Coast made investments that defied traditional investment analysis. The best example was the First Class complimentary catering offer. According to Holden, every meal served in First Class costs the company around £3.20.

“You make the investment decision based on the contribution you expect it to make to First Class revenue,” says Holden. “The restaurant car offer of the former operator was confused and very expensive – and only served 1% of passengers. East Coast’s complimentary offer, on the other hand, while it’s still expensive to provide, is an offer to all First Class passengers – and is designed to promote uptrading.”

Such investment decisions amount to a judgement call, but one that a profit maximiser and cost reducer would certainly discount. “If you’re taking a slightly longer-term view and believe that an enhanced

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customer experience will lead to enhanced returns, as we did, then you’ll do it,” says Kavanagh.

East Coast’s longer-term customer-oriented perspective was also reflected in its proactive approach to compensating customers whose trains had been delayed – the ‘delay repay’ system – even if those delays were caused by Network Rail, which they normally were. According to David Walker, DOR’s finance director at the time: “Our customers didn’t differentiate between us and Network Rail: they just saw that East Coast had let them down. So if we gave them 50% or 100% of the price of their ticket back they were more inclined to travel with us again. We took that hit.”

And it’s a hit that cost them between £6m and £7m a year.

But this longer-term view did not reflect East Coast’s public sector ownership – something that several observers (and franchised competitors) made much of.

“We thought of ourselves as a commercial business, a market-driven business, and that manifested itself in predictable cash flow, revenue and profit,” says Kavanagh.

Walker agrees: “We tried to run East Coast as an absolutely commercial organisation, and the whole point of having DOR in the background was to allow East Coast to do that. The people in the business would have been equally at home in any private sector franchise. A measure of DOR’s success, if you like, was that East Coast didn’t feel, organisationally, that they were part of government.”

However, continues Walker: “The government didn’t set us targets. They let us get on and run the business in the most effective way we felt we could. If we’d wanted to spend many hundreds of millions of pounds on investments, instead of £50m, I think we’d have had more problems. But the model doesn’t require owning groups or the franchisee to invest huge amounts of capital.”

So suggestions from some quarters that private-sector operators Virgin and Stagecoach will be spending £7bn on new trains is illKey property investments informed: “They will lease the trains and pay a rental every year for during the life of East Coast A new station building for Wakefield them during their period of ownership, as we did.”

Westgate, completed December 2013, £8.9m.

The investment programme The redevelopment of Having said that, East Coast did invest a considerable amount of its own Peterborough station main money – and great deal of others’ too – on much-needed improvements. building, completed 2011, £3m.

And even where the money came from government and other third The redevelopment of the Grade 1listed Newcastle Central station, parties, the time and effort that went into applying for funds, ensuring completed March 2014, £8.6m. the money was well spent and managing the projects, was immense.

The replacement of all Travel The most tangible manifestation of this investment was a systematic Centre counters route-wide with a programme of station improvements, including the redevelopment of new accessible design, £800,000. both Peterborough and Newcastle stations and a completely new station New waiting shelters at York station, building at Wakefield Westgate. (See box) completed 2014, £600,000.

New cycle ramps and station One of the seven goals East Coast established in 2009 was ‘Manage entrances at York station, completed major projects well’. But the company had been so starved of investment 2010, £200,000. that there were no major projects to manage. There wasn’t a clear project New and refurbished toilets at structure for the May 2011 timetable change, there had been scant Doncaster, completed 2013, investment in stations for two years, no investment had been secured £100,000. through Network Rail’s National Stations Improvement Programme During the same period Network Rail also invested in stations on the East (NSIP) and there had been no investment in staff accommodation – Coast Main Line. at Peterborough, for example, staff had to share toilet facilities with Redevelopment of King’s Cross, passengers and the drivers’ sofas were flea-ridden. completed in 2012, £500m.

“Under National Express the property team had been decimated and New platforms and lifts at it was being managed centrally out of Birmingham, which didn’t work,” Peterborough station, completed in recalls property and projects director Tim Hedley-Jones. “My priority at 2014, £40m.

Redevelopment at Edinburgh the start of the East Coast franchise was to rebuild that team with new Waverley, completed in 2014. appointments, including a new head of property who was based at York.

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We then focused on the areas we needed to tackle, starting with a programme of property maintenance, investment in proper management systems and restructuring contracts.”

Within the first two years a programme of capital investment in stations from Edinburgh to King’s Cross had yielded myriad improvements. These included new cycle facilities; wheelchair-accessible toilets; resurfacing, handrails and new signage to reduce accidents; new access routes; new CCTV cameras; the refurbishment of Edinburgh Travel Centre; automatic ticket gates at King’s Cross; new retail outlets; and refurbished staff accommodation at stations and depots. Over £2m of funding was also secured under NSIP for projects at Peterborough and Wakefield Westgate stations and to create a cycle hub at York station.

Station improvements

The new station at Wakefield Westgate was the first newly constructed station building on the East Coast Main Line for several decades. The Secretary of State for Transport, Patrick McLoughlin, officially opened it, and it was blessed by both the Bishop of Wakefield and the Railway Chaplain. New facilities included a ‘golden’ footbridge and lifts linking the platforms, a new Travel Centre, First Class lounge and Standard waiting area, free Wi-Fi across the station, new retailers (Subway, Greggs, WH Smith and Costa Coffee), increased cycle storage and improved integration with local buses and taxis. The new station is also environmentally friendly: 71% more energy efficient than its predecessor it uses natural lighting and a photovoltaic system on the roof.

And while refurbished stations benefit the travelling public, they also act as important gateways to the city, as Wakefield City Council leader Peter Box made clear when he described the new station as “an integral element of the massive regeneration programme that has transformed this area of the city.”

The redevelopment of Peterborough involved a refurbishment and extension to the existing station building to accommodate a new entrance, a larger concourse, new ticket gates and a new waiting room, toilets and customer information point. There was a smart new frontage, a lighter and brighter interior, new lifts, platform improvements and, outside, extended cycle and motorbike parking. Peterborough City Council leader Marco Cereste described the new station as “crucial to realising our ambitions to create a bigger, better Peterborough.”

The revitalised Newcastle station is also part of wider regeneration in Newcastle city centre. The refurbishment enhanced the important heritage of the Grade 1-listed original Victorian building, and the centrepiece is the newly glazed and pedestrianised front portico, now a dramatic public and retail space. Newcastle City Council leader Nick Forbes described the new station as “a 21st century transport hub worthy of one of Europe’s great cities.”

Partnership working – principally between East Coast, Network Rail and Iocal authorities – was critical to the planning and execution of these projects, as it was with the new cycle hub and access routes at York station, which won East Coast and City of York Council a top industry award – ‘Station of the Year’ – in the 2011 ATOC National Cycle-Rail Awards for the work they’d done to encourage more sustainable cycle-rail travel.

In total, third-party investment secured for station improvements was £23m, from the Department for Transport, local authorities and local developers. As far as customers were concerned, it was money well spent. In the spring 2014 National Rail Passenger Survey from Passenger Focus, East Coast had the top satisfaction scores of any train company in four key areas: facilities and services, upkeep and repair of station buildings, overall environment, and choice of shops and eating and drinking facilities. In terms of overall satisfaction with stations East Coast came second. This was across all stations on the line, including Network Rail-managed stations, so, as Hedley-Jones says, the refurbished King’s Cross would no doubt have skewed scores. But, he says, scores rose dramatically after 2009 “and the guys are really proud of what they’ve achieved.”

Measures of success By any measure, East Coast’s tenure of the InterCity East Coast franchise between 2009 and 2015 would appear to have been highly successful, with the (almost) £1.1bn returned to government setting the final seal on that success. But Walker believes the most telling measure of East Coast’s success is the £3.3bn franchise premium that Inter City Railways has committed to pay the government over the eight years of its franchise term, because this reflects the value that East Coast built up in the business.

“We deliberately set the sale price for the company very low – about £11m – because the big win was always to get as high a premium figure in the next franchise as possible,” he explains. “What counts is the

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money you can earn out of the business over the period of the franchise term. Clearly, the strength of the business, the quality of our relationship with our customers, their propensity to travel with us, our cost control, and so on, affects the sum of the sales price and the franchise premia. We could have made the sale price £1bn and reduced the premium payments accordingly, but it’s much better to do it the other way round because not only does the new franchisee not have to borrow, but they are also incentivised to use their skill to realise the value we have created.”

But while DOR and East Coast’s “total focus was on creating a strong company that is more likely to deliver future profits,” Walker believes the company’s financial success is very difficult to quantify.

“Our biggest financial challenge was getting control of the business – and we achieved that,” he says.

“Budgets are a tool that should be used to stretch people and organisations to deliver slightly more than they would have done otherwise, and I tried to set budgets for East Coast that did exactly that. People bought into their budgets, they delivered their budgets, and they considered their budgets and whether they needed to spend something much more carefully than they did before. So while we invested in major improvements, which required significant capital investment, we quantified the benefits in terms of how much stronger it would make the company than if we didn’t spend it. That culture permeated through the organisation.”

However, he continues, factors outside an organisation’s control, both good and bad, can have a major impact: “For example, if Network Rail performed very badly and we got a windfall from Schedule 8 (see box opposite), that for me was great news – though it was terrible news for everyone else in the company because it meant that service had been disrupted and passengers had been delayed. Also, the economy has an effect.”

And while the company was successful in the sense that it outperformed the stretching budgets Walker set over the latter two to three years of the franchise, he is sceptical about the results of a comprehensive review of railway financing by the ORR, published in 2014, which appeared to suggest that East Coast was more efficient financially than its privatised rivals. The review showed that private operators were subsidised to the tune of £4bn in 2012-2013, and paid out £200m to their shareholders. East Coast, however, which had no private-sector shareholders, made a net payment of £16m to the government, returning £203m in franchise payments against a £187m track access subsidy. At the time Virgin Trains said it could double East Coast’s payments to the government had it not been paying £381m more than East Coast in annual rolling stock and track charges.

Track access and rolling stock charges are based on a number of different criteria – not least the age of the trains – and Walker believes that the comparisons inferred from the ORR review were invidious.

He explains: “I don’t believe it shows at all whether we were good, bad or indifferent. It is comparing apples and pears. Running a long-distance TOC like ours, which is almost entirely based on discretionary spend, is very different from running a commuter railway, where a high degree of revenue comes from season tickets. Yes, our passengers spend on average £32/33 per journey, which is the highest of any railway, but that is determined by a whole variety of factors, including the length of journey and where fares were at privatisation.”

The ORR review also showed that fares accounted for 59.2% of industry costs, up from 55.6% in 20102011, despite falling running costs. But this too is “a sterile measure,” argues Walker. “Fares accounted for 147% of our costs. We could have reduced fares across the board by one-third and still been profitable, but we wouldn’t have been able to give any money to the government. So, effectively, you could argue that East Coast supports the commuters into Manchester, and the northern rail services, and passengers in Wales, because we pay money in and they take subsidies out.”

However, where he feels East Coast, in common with the industry as a whole, fell down was in failing to take out ‘big costs’. An influential 2011 report by Sir Roy McNulty on value for money in the rail industry suggested that the industry should be aiming to reduce unit costs (that is, costs per passenger per mile) by 30% by 2018-2019 in order to give passengers a better deal.

You could do that at a stroke, says Walker, by tackling people costs. “But you’d have two years of strikes

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Relationship between TOCs, Network Rail and the DfT

At a very simple level....

East Coast paid track access charges to Network Rail for the service Network Rail provides (essentially maintaining, repairing and upgrading the track infrastructure).

The DfT pays for enhancements to the track through the Network Grant.

In the current Control Period, CP5, which runs from April 2014 to March 2019, Network Rail has committed to spend a total of £38bn on the UK rail network.

Under the ‘Schedule 8’ agreement, when Network Rail’s performance was worse than an agreed benchmark it paid money to East Coast, and if it performed better than the benchmark East Coast paid Network Rail.

It is testimony to Network Rail’s improving performance that for most of 2014-2015 East Coast paid it money.

• • • •

•

and no trains for six months and, not surprisingly, the government has no appetite for that whatsoever. So we were only able to take costs out at the margin rather than at the core, which is what McNulty advocated.

I’m sure all TOCs have similar discussions with government to those we had – except that we were probably more forthright because of our commitment to transparency.”

Indeed, the main difficulty in precisely quantifying East Coast’s success is “the clouded finances” of the industry as a whole, says Walker – something he regards as “one of its main problems.”

For all this, he views East Coast’s five-year custodianship of the business as ‘a job well done’.

“The success for me is that I believe we managed the business well.

We set ourselves challenging budgets and we generally over-achieved on those. We created a strong company that should deliver healthy future profits, and that led to a strong premium line from the next franchisee.

And that strong premium line is the incentive for them to keep investing in people rather than turning it all off.”

And yes, he admits, being able to pay nearly £1.1bn to the government was “very satisfying.”

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The InterCity Express Programme

One of the most significant projects (in terms of its operational and financial impact on the future of the franchise) that East Coast got involved with was the ‘InterCity Express Programme’, or IEP. The decision to replace the diesel fleet on the East Coast Main Line with InterCity Express trains, built by Agility Trains, a consortium of John Laing and Hitachi, was taken before East Coast took over the business. But no decision had been taken about what to do with the electric fleet. Because the franchise period was extended, the Department for Transport had to ask DOR and East Coast for their view and their view was that the IEP didn’t look like the best value for money.

They weren’t the only ones. A report by the National Audit Office in July 2014 concluded that the DfT’s decision to replace the electric fleet with the IEP didn’t necessarily represent best value for money for the taxpayer.

It was concerned that the DfT had made assumptions about financing and the market that were ‘untested’. The Public Accounts Committee had similar concerns.

Roger Ford, industry and technical editor of Modern Railways magazine, who has been a vocal opponent of IEP from the start, is more forthright. “IEP is a bonkers idea,” he says. “It is horribly expensive: it will add over £140m a year to the new franchisee’s costs.” The design of the new train is flawed too, says Ford, and the 27.5-year contract with Hitachi, under which it will provide a given number of trains a day, maintain them and bear the costs if trains don’t run, will be difficult to manage and finance.

The consensus at the time was that the government is illequipped to make such major procurement decisions, and should have left it to the rail industry, which has to live with the consequences. But true to its form of making the best out of an imperfect situation, East Coast, once the decision was taken, worked extremely hard to help tailor the design of the train, both internal and external, and advise on the infrastructure changes that will be required when it is introduced.

For example, it provided advice on which platforms needed extending, how that work should be done, the design of the cab and the kitchens, and it involved drivers, guards, onboard staff and others in the process, taking them to visit mock-ups of train interiors and to travel on the actual trains in Spain where they have been in service for a number of years.

Two particular bones of contention have been catering and guard facilities. The unions have picked up on whether or not there will be a fixed catering point and whether or not the trains will even require guards: the train doors can be operated by drivers and there is no specific guard office built in.

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Property and projects director Tim Hedley-Jones says: “The bottom line is that come 2020 this business will be operating a vastly greater number of services than we do today and all those trains will require drivers and people to look after passengers. The franchise will grow and the number of jobs will grow accordingly.”

Operations director Danny Williams sees the introduction of the IEP as wholly positive. For example: Having a single fleet allows for consistent service provision and maintenance.

The trains are ‘bi-mode’ – they can switch between electric and diesel instantly when required.

They allow for different configurations – either one five-car set or two five-car sets joined together which, he says, allows for more creativity in timetabling.

The 140-mile-an-hour capability delivers even greater competitive edge in the fight for modal shift.

Nevertheless, the introduction of the new trains, along with the new in-cab signalling system, amounts to a significant change project. Drivers will need extensive training, and some will choose to leave, creating a skills gap. The change has important implications for the Engineering team too, given Hitachi will maintain the fleet itself.

• • • •

A piecemeal approach DOR chief executive Michael Holden believes the IEP is not the best solution for the East Coast route, and calls the whole IEP programme “an object lesson in how not to do a train procurement.” He believes the government’s agenda was at least partly influenced by its desire to get close to a big Japanese partner and to be seen to be investing in the North East of England, an area of high unemployment, where the trains are being built.

And the trains themselves represent just another example of the prevailing piecemeal approach to developing the railways. He suggests that the best solution would have been to have two different trains, one aimed at highspeed commuter flows, and one, with fewer seats and more luggage space, aimed at the long-distance market.

“With a bit of selected investment you could electrify the line from, say, Peterborough to Spalding and from Newark to Lincoln, which are fairly small branches off the main line, and then you could run long-distance commuter trains, with doors one-third and two-thirds down the coaches, from Spalding and Lincoln. Your residual long-distance business would become exactly that – long-distance inter-city – and the trains wouldn’t really need to stop south of Doncaster. That would give passengers a much more attractive service based on two different types of train suited to two different ‘products’.”

Life in a goldfish bowl

CHAPTER

EIGHT Life on the East Coast Main Line is lived in a goldfish bowl at the best of times. Linking the capital cities of Edinburgh and London with the major business and public-sector hubs of Leeds and Newcastle, it is the preferred travel option of a disproportionate number of ‘opinion formers’. Almost 20 million passenger journeys are made every year on the route, and some 200 peers and politicians use it to commute between the Scottish and English parliaments and their constituencies in Yorkshire, the North East, Scotland and Lincolnshire. What’s more, East Coast estimates that around two-thirds of the national media live, work or travel on the East Coast route, putting it squarely in the media spotlight.

However, the high-profile failure of the two previous franchises, combined with the company’s unique public sector status, means that for the five years of its tenure East Coast Main Line Company was under unprecedented scrutiny from a wide range of stakeholders – not just MPs and other parliamentarians, local government officials, national and local media, and rail user and business groups, but customers and employees too.

“We thought about stakeholders in the widest possible sense,” says communications director Paul Emberley.

The Communications team interacts with over 1000 different stakeholders on a regular and systematic basis, and the way it managed these relationships in order to protect, build and enhance East Coast’s reputation through a time of enormous change was critical to the company’s success.

And it was a bumpy ride. First the team had to manage the transition of the business into government ownership in the autumn of 2009, amid a storm of negative publicity about a ‘failed’ company and ‘a failed franchise system’. Then it had to manage the expectations of stakeholders along the route leading up to the introduction of the new timetable in May 2011. And in autumn 2012 it had to communicate through the hiatus after the so-called ‘West Coast fiasco’ brought a halt to the government’s refranchising programme.

It also had to manage negative publicity around the company’s poor operating performance – much of it caused by its strategic partner Network Rail. Sometimes it made an impact by what it didn’t say rather than what it said: it maintained a dignified silence, for example, amid the lively debate about whether or not East Coast should be re-privatised – a debate fuelled by the company’s very obvious success under public sector ownership. It also had to counter jibes from competitors and some elements of the press about managing in the public sector being ‘a soft option’ – while at the same time managing a relationship with its ultimate owner, the Department for Transport, that was occasionally so difficult that it made any notion of being ‘a soft option’ laughable.

And, last but not least, it worked hard to help rekindle the pride and passion of East Coast employees and to sustain that in the run-up to the new franchisee taking over.

Emberley’s initial role was to help Directly Operated Railways (DOR) to ‘mobilise’ the new company during the summer of 2009 and to communicate DOR’s mission to stabilise the business and prepare it for a return to the private sector within 18 to 20 months.

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The Flying Scotsman “It was a trial by fire,” he recalls. “We had to reassure stakeholders that we would reverse the considerable problems and reputational damage inflicted in the National Express era, even though at that point we didn’t anticipate being able to make the kind of structural changes and improvements that a new owner would normally do.”

Timetable consultation

The ‘Flying Scotsman’ service began in the 1920s. It comprised two trains, one from Edinburgh Waverley, one from London’s King’s Cross, and they both left at 10am. In the early days the journey took ten and a half hours, including a stop in York for lunch. By 1900 the journey time had reduced to eight and a half hours, and there were corridors between carriages, heating, dining cars and on-board toilets. By the 1930s the journey time had been cut to seven hours and 20 minutes, and the train had a cocktail bar, hairdresser and one of the best restaurants in the country.

War saw luxury sacrificed to utility, but even after nationalisation in the 1950s British Rail viewed the ‘Flying Scotsman’ as a flagship service and maintained it as a centrepiece of its marketing and advertising strategy.

The London to Edinburgh line had been fully electrified by the 1990s, making it one of the most modern and potentially fastest routes in Britain, but following rail privatisation in 1994 the ‘Flying Scotsman’ had all but disappeared from the timetable – though GNER branded its trains as operating on ‘the route of the Flying Scotsman’.

Adapted from The Scotsman, 23/5/11

At the same time, head of communications Neal Smith had started to engage with stakeholders on the new timetable. Everyone has a vested interest in new and improved services, but local authorities’ interests are arguably the most critical. Smith explains: “For some of the towns on our route the impact of the services we run is fundamental not just to their own local transport structures and policies but to their economies too.”

The engagement culminated in a three-month consultation exercise between February and April 2010, involving a ‘road show’ around key locations between London and Aberdeen. And it wasn’t a question of simply presenting and inviting feedback on the latest plans, but of managing the potentially negative media headlines. While the timetable change added new destinations and many new services, not everyone benefited. The Glasgow service was cut, for example, and the service to Newark significantly reduced.

By May 2010, Emberley had developed a ‘risk register’ of issues the team felt Operations needed to address – and, he says, “we managed to turn things round.” The company won plaudits for its approach: “East Coast has listened to concerns voiced by campaign groups when a draft version of the timetable was published – and responded by adopting the changes they proposed. This is exactly how public consultation should work and East Coast is to be applauded for listening,” wrote the Newcastle Journal.

The new timetable saw the first direct service to Harrogate in 25 years. Andrew Jones, Conservative MP for Harrogate and Knaresborough, said it “would provide a shot in the arm to business and commerce” in the town. “Our economic development relies on good transport links and it was great working with others such as the Chamber of Trade and East Coast Main Line to be able to make this new service a reality.”

The timetable change and new First Class offer were hailed as a success, but the jewel in the crown of the ‘relaunch’ of East Coast was the new ‘Flying Scotsman’ flagship service, with an Edinburgh to London (stopping only in Newcastle) journey time of three hours 59 minutes.

The service was the inspiration of Lord Adonis, then secretary of state for transport, and DOR chief executive Michael Holden, who recognised the PR value in reintroducing a four-hour Edinburgh to London service. But it was the Communications team who translated it into ‘the big idea’ that would capture national attention.

“The original ‘Flying Scotsman’ was introduced by the London and North Eastern Railway (LNER) in the 1920s, though there had been a London to Edinburgh service since the 1850s,” says Smith. “We wanted to use that history and heritage – including the historic Gill Sans font favoured by LNER – and give it a new twist.”

Stakeholders were impressed. The Lincolnshire and East Yorkshire Transport Review hailed the return of “an icon of Britain’s railways,” calling it: “An iconic name. An iconic brand. An iconic journey time.”

And, crucially, users rated it too. Ron Hewitt, then chief executive of Edinburgh Chamber of Commerce, wrote: “This service is really appreciated by business and is testament to East Coast’s determination to cut the travel time to London. The glamour and nostalgia of its famous name, the upgrading in First

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Train namings Class and a no-nonsense ticket that includes catering at your seat, makes rail a great alternative to all the queues and security of air travel. Improved Wi-Fi and real assurance of service quality in the ticket price ensures that a day will not be wasted. It’s like being in my office.”

It’s more than just a name Reintroducing the ‘Flying Scotsman’ was part of a deliberate East Coast strategy of bringing back train names and restoring some of the pride, passion and personality to the railway.

“Train names, which are part of the rich history and heritage of the railway, were a big success for GNER but National Express literally ripped them off the sides of trains, which upset a lot of people,” says Smith.

“We had people from the Dean of Durham Cathedral down asking us if we could bring them back.”

Despite believing it was only a short-term custodian of the line, East Coast grasped the opportunity, well aware of the resonance train naming had with all stakeholders, including employees. And it wasn’t a case of slapping stickers on train sides.

New train names were highly selective and chosen with great care, based on extensive consultation with stakeholders, and the specially commissioned cast nameplates were unveiled at high-profile ceremonies.

East Coast named its first train, the ‘Sir Bobby Robson’, in March 2011 at an emotional ceremony at Newcastle Central station attended by his widow and by former England and Newcastle striker Alan Shearer. The much-loved footballing legend was a frequent traveller on the line and a tireless worker for the Sir Bobby Robson Foundation cancer charity. The train naming was intended not simply to keep his memory alive but also to celebrate and sustain awareness of his legacy.

The twelfth, and most recent, train to be named, in October 2014, was ‘For the Fallen’, to mark the centenary of World War I. It was unveiled at a poignant ceremony attended by civic and military leaders, veterans and serving soldiers, at Newcastle Central Station. Three weeks later another significant event took place at King’s Cross, attended by 100 serving and retired forces personnel, in the presence of Secretary of State for Transport Patrick McLoughlin. Additional ceremonies took place in Edinburgh and Leeds. Some 20,000 rail workers were killed during the war, and East Coast enlisted the help of five regiments from bases along the route to commemorate the sacrifices

2011 Sir Bobby Robson Lincolnshire Echo Launched on 22 May, the day of the timetable change, the train was named after the city’s longestablished newspaper and helped to rebuild bridges with local stakeholders who’d seen their hoped-for 14 direct services a day to London reduced to just two – a reduction to which the newspaper had devoted many column inches.

The Flying Scotsman West Riding Limited City of York Unveiled by 89-year-old former train driver Reg Turver nearly 30 years after he took a previous ‘City of York’ on its inaugural journey. York residents had voted for the name.

2012 Battle of Britain Memorial Flight (BBMF) Featuring the Spitfire, Hurricane and Lancaster, BBMF insignia and ‘Lest we forget’ motto. The train was unveiled at the annual Railfest at York’s National Railway Museum to recognise and commemorate the bravery and sacrifice of airmen and women over the decades. The ceremony began with fly-pasts by the three planes. RAF Coningsby in Lincolnshire, home of the BBMF, is one of a large number of air bases along the East Coast route.

Blaydon Races Named in honour of the 150th anniversary of the world-famous North East anthem recalling a famous horse race held from 1861 in Blaydon, near Gateshead. The naming won East Coast a Gold Award for ‘Best Event’ at the Chartered Institute of Public Relations Pride North East Awards.

Judges described the event, which was the hook for a series of activities across Tyneside highlighting the history and culture associated with the song, as “an imaginative campaign which won the support of the community and engaged key local figures to celebrate the North East’s identity.”

2013 Durham Cathedral Named to coincide with the return of the Lindisfarne Gospels to the North East for the first time in 12 years.

Skyfall A specially wrapped train to help launch the Bond movie ‘Skyfall’ on DVD and Blu-Ray. The launch attracted over £10m-worth of media coverage. (See Chapter Four: The brand story) 2014 Highland Chieftain Craigentinny 100 For the Fallen

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Public versus private made by their forebears and to tell some of the human stories behind the conflict.

The naming of ‘For the Fallen’ and the associated events “eclipsed everything else we did in terms of recognition,” says Emberley.

Nigel Harris, managing editor of Rail magazine, summed up the contribution train namings made to East Coast’s reputation in a recent column.

“Let’s tip our caps to the one way in which East Coast has trounced all the other private sector companies – positive image building through brand extension,” he wrote. “We’ve seen the ‘Skyfall’ train, and the ‘Flying Scotsman’, ‘Battle of Britain Memorial Flight’ and ‘For the Fallen’ Class 91 namings and special livery ‘wraps’ (all designs by the excellent Paul Gentleman), and the Sky TV documentary series and its speciallyliveried train. Every one won East Coast positive news coverage and burnished its image further. It’s ironic that the one so-called ‘nationalised’ train operator has so successfully understood and developed this kind of PR, which continues more than a century of East Coast excitement and, yes, glamour.”

The ownership debate One of what Emberley calls “the most extraordinary aspects” of managing East Coast’s reputation was navigating the company through the ownership debate that emerged during the second half of its term.

“We did nothing to deliberately create the debate, which was largely politically motivated, but we contributed to it by promoting what a success we were as a business in the public sector,” he says. “We never really thought of ourselves as a public sector business, but more as a commercial business that happened to be owned by a public sector body, and most of our actions were those of any train operating company. But there were suggestions that we were somehow wrapped up in the whole ownership debate; that wasn’t the case – and we had to stand studiously back from that.”

Understandably, they didn’t stand so far back that people couldn’t hear them when they blew their own trumpet.

“We talked about things that we’d done that were fundamental to the success of the business, and if you put everything we did over those five years through a sieve it was the way the people were managed that triggered all the other successes, from operational improvements, through customer satisfaction to the significant contribution we made to the Exchequer,”

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Labour has indicated that it would leave East Coast in state hands if it won the General Election in May 2015.

In April 2014 leader Ed Miliband said his party would be looking for ‘innovative solutions’ in its manifesto to reform the railways. This would stop short of widespread renationalisation, but one option Labour was considering was allowing DOR to compete to run franchises.

Even if Labour wins the election, it comes too late for East Coast, which transferred into new ownership on 1 March. Unions mounted a legal challenge, accusing the government of ‘rushing through’ the bidding process for the franchise, despite the recommendations of the Brown Review of the Rail Franchising Programme in 2012, undertaken in the wake of the West Coast fiasco, that procurement should take at least 24 months.

Manuel Cortes, leader of the TSSA rail union, has described the refranchising as being “all about Tory dogma rather than running a social railway for the benefit of the public.” Mick Cash, general secretary of the RMT, says the move “defies all economic logic and is nothing less than an act of industrial vandalism.” And Frances O’Grady, TUC general secretary, argues that “by taking the East Coast out of public ownership the government will be passing the income the line raises into the pockets of corporate shareholders, when it should be using the cash to reduce rail fares and improve services.”

Criticism also centred around the fact that while foreign state-owned operators were allowed to bid, DOR wasn’t.

Green MP Caroline Lucas, who championed a private members’ bill that would have renationalised the entire rail network, has pointed out that Patrick McLoughlin’s ambition for a ‘revitalised’ East Coast railway under a new franchisee sounded like a strange goal given that such a revitalisation was already well underway.

Paul Salveson, author of a recent book on the future of the railways, Railpolitik, is also perplexed, arguing that rather than being ignored, the successes of the nationalised East Coast service should be held up as a model for others.

But the ownership of East Coast wasn’t simply a political football, as some hold. A YouGov poll in May 2014 found that 60% of the population believe railway companies should be run in the public sector, with 20% opposing the idea and 20% ‘don’t knows’. The view was fairly consistent across the political spectrum: 78% of Labour voters, 60% of Liberal Democrats and 70% of Ukip voters (but just 42% of Conservative voters) were in favour of public sector ownership. The idea is more popular with people over 40 - 64% of whom were in favour – and, significantly for East Coast, people in the North and Scotland – again 64%.

As Owen Jones, writing in The Guardian in November 2014, put it: “The government’s dogma could hardly be more divorced from the pragmatic common sense of the British people.”

And back in October 2013 campaigners handed over a petition to the government, signed by more than 23,000 passengers, to keep the East Coast Main Line in public hands.

The Boxing Day overrun he says. “We let all these things be known, and that helped to create a certain stature for us in the industry.”

It’s a stature that was reinforced by producing a five-year plan in 2013 (see Chapter Two: Eureka!), by refusing to take Network Rail’s poor performance lying down, and by an expanding trophy cabinet.

But what also set East Coast apart from other TOCs was its openness and transparency: all its performance data, customer service statistics and directors’ expenses were on the website for anyone to see. To an extent this was driven by the fact that it was accountable to government and viewed as a benchmark for other operators. “But openness and honesty was a core value from the outset,” says Emberley. “It was one of the things underpinning our vision – ‘To provide the best possible journey experience for East Coast customers and a great place to work’ – and we used it to our advantage.”

The relationship with Network Rail

Despite assiduous efforts at several levels of the business to work with Network Rail to address performance issues, the debacle caused by the 2014 Boxing Day engineering overrun outside King’s Cross exemplified the challenge. The root problem, says Emberley, is the controlling nature and defensiveness of people at the very top of Network Rail, which militates against bringing situations quickly under control and results in a ‘too little, too late’ approach to communications.

East Coast and Network Rail had discussed the works in detail, agreed that there was no question they could overrun and planned services carefully over the Christmas and Boxing Day period. Not only was there an overrun, meaning that King’s Cross station was closed for a day longer than planned, but Network Rail didn’t communicate it to East Coast until Boxing Day afternoon. Network Rail’s leaders were incommunicado and the East Coast Communications team had to step into the breach – three of them handled over 80 media briefings in 52 hours, starting just after 2pm on Boxing Day. Emberley was quoted in a news story on The Guardian website on Boxing Day: “Network Rail has apologised to passengers for the inevitable delays to their travel plans on Saturday as a result of the overrunning engineering works.

East Coast is particularly sorry too for the inconvenience to its customers as a result.”

As he points out, most passengers don’t differentiate between East Coast and Network Rail: as far as they were concerned ‘the railway’ let them down. The first public communication from Network Rail – albeit a full apology – didn’t come until 5pm the following day.

Independent analysis of media coverage from media agency Precise showed that sentiment towards East Coast between 26 - 29 December 2014 was 100% positive or neutral, across all channels.

East Coast’s openness and honesty served it particularly well when it needed to mount a spirited defence – something it resorted to only occasionally, preferring to let its results speak for themselves. For example, although its operating performance was compromised from the outset by infrastructure problems caused by Network Rail, it made nothing of this publicly, instead working behind the scenes with its strategic partner to address the issues. But two years ago things reached such a pass – nearly 20% of its trains were arriving at their destinations more than ten minutes late, the threshold set for long-distance services – that Emberley felt stakeholders needed to understand that 70% of those delays were attributable to Network Rail.

“The chips were really down for us in reputational terms,” he says. “We managed to get the real issue quite successfully into the public psyche and we kept reiterating it. For the first time people started to recognise the true nature of the problem – though it made life a bit difficult with Network Rail for a while.”

East Coast’s move shifted the relationship onto new ground.

“Public criticism of Network Rail was just not done from within the industry, so that was an important moment for us,” says Emberley.

Network Rail quietly dropped a monthly TOC performance league table that it used to produce for the national press. Owing to the peculiar nature of East Coast and the disproportionate amount of Network Rail-induced problems, East Coast used to bump along the bottom.

“After one particularly appalling disruptive event we even managed to extract a public apology from them to our customers, which was a first. We ensured it received plenty of media coverage,” says Emberley.

The apology, as reported in The Daily Telegraph on 20 September 2013, read: “Network Rail would like to apologise to East Coast’s customers for the disruption caused by these infrastructure failures and the

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company is redoubling its efforts to improve the reliability of this critical piece of railway infrastructure.”

It admitted it was responsible for 70% of the delays on the East Coast route in a month when more than 16% of trains were over ten minutes late.

East Coast and Network Rail couldn’t have been more different in their approach. “As a governmentowned TOC, particularly one that has openness and honesty at its heart, it wasn’t an option for us to hide away when things went wrong,” says Emberley. (Ironically, since September 2014, Network Rail too is government-owned.) “We never shirked from being a responsible business and, even when things go wrong, being upfront about the mistakes and clear about how you’re addressing them earns you reputational capital.”

Stakeholder surveys and media results bear him out. According to the most recent quarterly independent audit of its media cuttings by media company Precise, 99.6% of East Coast’s coverage was either positive or neutral between August to November 2014, which was, says Emberley, “bloody well unprecedented.”

Positive sentiment from stakeholders was 95%, up from around 70% in 2009.

Brian Greenwood, CEO of Bbgconsulting and chairman of the National Railway Museum’s board at Locomotion in Shildon, has a long association with the East Coast route. He was formerly non-executive regional director for BT and a lay member of Council for the University of York, and as a regular and frequent traveller for many years knows the route “intimately” from Inverness to King’s Cross. But he’s also sat on various East Coast advisory panels since pre-privatisation days.

He says that East Coast Main Line Company “oversaw a remarkable recovery, and turned a brand that went into decline under the previous franchise into one that was once again respected and liked by customers, not least because of a dramatic improvement in service.” He adds that the company was “exemplary” in the way it engaged with a wide range of stakeholders – in terms both of communicating business direction and getting feedback about “how things really were.”

The relationship with government Greenwood also credits East Coast with skilfully managing its relationship with the DfT. “The trials and tribulations were not evident in their public offering – and I was a member of the board of Yorkshire Forward [the regional development agency] for six years so I know what it’s like dealing with Whitehall mandarins,” he says.

Indeed, although East Coast was able to manage its business at arm’s length from the DfT because of the buffer that DOR represented, the DfT – its ultimate boss – was a critically important stakeholder.

On “a straightforward level” the relationship between the two was “excellent,” says Emberley, who describes a good working relationship at the Communications level too on events such as the London 2012 Games and initiatives such as the new InterCity Express Programme (IEP).

“Where we were perhaps a bit more at odds was where we wanted to do things that we felt were right for the business, and the special advisers, who sit between the officials and the ministers themselves, intervened and caused us to take a different approach. So yes, we managed our business and our reputation well, but we could have done even more had some of the things we wanted to do not brought us into diametric opposition to the wishes of our shareholder – or at least the special advisers to ministers, who sometimes have their own agenda. That rather tarnished the relationship at some points, but 85-90% of the time we had a good relationship with the DfT – and we were perhaps more challenging than most in our discussions with them.”

The two areas that created the most tension were the choice of the new InterCity Express trains (see Chapter Seven: Finance and investment) and the Sustained Poor Performance Claim against Network Rail.

East Coast had wanted to take Network Rail to court over its poor performance, as it would have done had it been a purely private-sector business, but the government put its foot down. With its reputation and finances at stake East Coast wasn’t going to give up easily and insisted on lodging the claim instead.

The government “would wish the claim not to be there,” in the words of a source close to East Coast, because it’s embarrassing and could open the floodgates to claims from other TOCs. The ‘franchising

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risk’ sits with the party best able to bear it, which, now that Network Rail is in the public sector, is the government itself.

You might think that government ownership of both parties could have helped to resolve the issue without recourse to the law. The source agrees: “I think the senior leadership at the DfT ducked it a bit.

They didn’t put the effort into getting people together to talk. If two parties have completely divergent opinions on a point of law, and both have been advised by highly paid QCs, then they’re not just going to suddenly cave in because some senior bod at the DfT told them to ‘go away and sort it out.”

During the pause in the refranchising programme caused by the West Coast fiasco at the end of 2012 Boswell began to think “long and hard” about how the company could be run (“I don’t think the franchising system works as well as it should,” she says), and she spent much time and effort working through all the different parameters of what would, in simple terms, be an employee-owned stakeholdermanaged business along the lines of John Lewis. At the time this ‘Alternative View’, as she called it, seemed to play to the Department for Business’s agenda, which appeared to be promoting ‘alternative’ governance models, including employee-owned firms and hybrids. Soundings from stakeholders indicated she was onto a winner, and staff would have bought into it metaphorically as well as literally. Not only did it play to the strengths of the organisation, but it neatly sidestepped the politically-charged ‘private versus public’ debate.

The time wasn’t right to advocate this ‘Alternative View’, which Boswell believed had the potential to transform not just the way East Coast was run, but also the franchising system as a whole. Yet the government’s rhetoric continued to emphasise a need for vision and innovation that, in its version, was to be found only in the private sector. Witness McLoughlin’s foreword to the government’s prospectus for the East Coast franchise, published in October 2013.

“East Coast passenger rail services have been operated by the public sector since 2009, which has stabilised a business in difficult circumstances so that it is now ready to be transformed by the private sector.

We want to see a revitalised East Coast railway, one that rekindles the spirit of competition for customers on this great route to Scotland and competes with the West Coast on speed, quality and customer service.

We need a strong partner to ensure we successfully deliver the investments that we are making on the infrastructure, through our Rail Investment Strategy, and deliver the significant improvements in rolling stock that the InterCity Express Programme will provide. We need a partner with vision, a long-term plan and the best team to deliver it. Above all, we are seeking a partner that is wholly committed to putting passengers at the heart of their business, realising the full potential in the franchise.”

It’s hard to see what more East Coast could have done to revitalise the business without the (government) investment in new trains that will come in the new franchise period. But the government was caught between a rock and a hard place – trying both to take credit for the performance of the business in the public sector and playing down its successes for fear of fuelling the arguments against reprivatisation.

“The government tried to rubbish them relentlessly,” says Roger Ford, industrial and technical editor for Modern Railways, while Rail magazine’s Harris pleads for “an end to this claptrap that the government has ‘done a good job’ running the East Coast Main Line. The good work is entirely down to Boswell’s team, from boardroom to train galley and gateline.”

The relationship with employees Internal communications were an important area of focus for Emberley and his team, who supported the work of HR, Learning and Development and Boswell herself in building engagement among staff. The intranet is the hub of all information for employees, but it is supplemented with a weekly downloadable newspaper, East Coast News, and a lively people-oriented bi-monthly newspaper Coastlife, written ‘for the staff and by the staff’ – staff act as guest editors and reporters. Coastlife won a national Excellence Award from the CIPR for ‘Best Internal Publication’ in 2014, and the company’s own research found that 90% of people rated the publication as ‘excellent’.

The Communications team also masterminded twice-yearly management conferences, all-singing, all-

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Social media

One way East Coast helped improve relations with its customers during delays and disruption was to communicate with them via social media. As Emberley says, sometimes a picture paints a thousand words, and where a delay is caused by overhead cables down, a tree across the line or a broken track, for example, getting a photograph of the obstruction into social media very quickly can take the heat out of situations.

East Coast introduced a Twitter channel, its first – and still core – social media channel, in 2011, and, at the time of writing, it has around 85,000 followers – though numbers are growing at a rate of 2,200 a month. It is manned from 6am to 11pm seven days a week by four people dealing with queries from customers at any stage of their journey.

These range from booking issues, to finding the right platform, to why the Wi-Fi isn’t working or there is no hot food, to how long they will have to wait to be compensated for a delayed train.

“We handle this in Comms because you need a bird’s eye view of the business to be able to respond in real time,” says social media manager Nick Wood. What’s more, many of the tweeters are very high profile and influential – they can have hundreds of thousands of followers, or more – “and we have to manage that carefully.”

Being able to respond instantly on Twitter helps to nip issues in the bud before they escalate into complaints, says Wood, who adds that a report due out shortly from the ORR is expected to show a decrease in customer complaints across the industry as a result of social media.

East Coast receives around 600 tweets a day (though this rose to 4,500 on 27 December 2014), but typically only 25% need a reply and sometimes many queries can be answered with a blanket response. While queries are handled by the Control team outside the 6am to 11pm ‘office hours’, “our aspiration is to be a 24/7 operator, because our customers expect to get an instant response on Twitter 24 hours a day,” says Wood.

The social media team’s KPIs include numbers of followers, new fans and tone of incoming messages. While it regularly hits those KPIs (‘tone’ needs to be 50% positive or neutral across Facebook and Twitter, but it is usually 65-70%), the focus this year has moved towards ‘engagement’, switching the emphasis on cold numbers towards the quality of responses from the Twitter team, in terms of their interest, utility and so on.

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dancing events designed to brief the top 350 managers in the business in a way that inspired them to cascade important messages down to their own teams. These were interspersed with ‘business update’ events, which were also posted on the intranet and designed to act as a forum for people to discuss areas of concern with Boswell and the executives. A series of short ‘Take 5’ reportagetype videos updated staff on everything from the latest marketing campaign or social responsibility initiative to how the business was preparing for bad weather.

The company took every opportunity to celebrate its ‘stars’. The Annual Business Excellence Awards, which recognised staff who had gone beyond the call of duty, become very special no-expense-spared occasions, highly anticipated and long remembered. Smith says: “They drove excellence through the business by showcasing what could be done, and they instilled a great deal of pride. They were a big part of the internal communications story.”

And in January 2014 it organised the ‘All Aboard Oscars’ to thank the 100 or so people who had featured in the ten-episode Sky 1 documentary ‘All Aboard: East Coast Trains’. (See Chapter Four: The brand story) East Coast’s success was reflected in 65 awards, 23 of them in 2014-2015, across every part of the business.

“We’re not ‘an awards factory’,” insists Smith, who says that industry recognition is not only important in building internal pride and external reputation, but also in creating focus. “Awards change people’s mentality,” he says. Part of Communications’ remit was to ensure the business entered and won awards: “Our KPI used to be four a year; by the end of the franchise that had become one every four weeks.”

It’s fitting that the team itself recently won five categories in the CIPR Pride Awards in the Yorkshire and Lincolnshire region – including one for ‘Outstanding InHouse Public Relations Team’.

In an address to the RSA in October 2014 DOR chief executive Michael Holden pointed out that railways are so important to the great British public that they are always in the news. “You can be sure that your company will be dragged through the mud when anything goes wrong with it, no matter if it’s your fault or not – and never more so than now, with today’s diet of rolling news and social media. So reputationally, as well as financially, it’s a high risk game.”

It is to East Coast’s credit that the reputation of the business at the end of its five-year tenure was not just higher than it was at the beginning, but had also regained much of the burnish of the railway’s illustrious past.

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Preparing for handover

CHAPTER

NINE

The Department for Transport’s announcement on 27 November 2014 that Inter City Railways Limited would be the new franchisee on the East Coast Main Line for an eight-year term meant that employees finally had a period of stability to look forward to – once they got over the 28 February ‘finishing line’.

For the executive team, however, who had been managing to a series of rolling short-term deadlines for over five years, the announcement was just another sign of ‘business as usual’. Regardless of the political debate about whether or not East Coast should remain in the public sector, the board and leadership team had always known it was a matter of ‘when’, not ‘if’, they would hand the business over to a private-sector successor, and had worked hard to keep the organisation in a state of perpetual readiness for change – whenever that change might come.

Sustaining the momentum was no mean feat. “In the space of five years we did ten years’ work,” says managing director Karen Boswell. “The challenge was to keep the business looking forward and improving in all aspects, year on year, while the timescale for change kept moving.”

That’s not the only challenge they faced, but throughout it all the executive team remained detached and professional, striving at all times to act in the best interests of the railway. “Occasionally we were a bit compromised but we were pragmatic: we just got on and made it work,” says communications director Paul Emberley.

And they made it work on a number of different levels. Within the first 18 months they fulfilled their original remit from the DfT, which was to stabilise the company. Then, despite constantly moving goalposts, they built on their early success with concrete strategies to grow the business. But from the beginning they also set out to ‘future proof’ the organisation, which meant not simply maximising its value for the government and the next franchisee, but also seeking to turn it into a sustainable model that could be replicated elsewhere, to the benefit of the rail industry as a whole.

It was a busy time. Even during the last year of the franchise East Coast continued to invest time, effort and money in leadership, training and development, engagement and innovation. “The last year was one of our busiest,” says Boswell.

The executives’ focus over the last 12 months was very much about preparing people for change. The emphasis of the leadership programme, for example, was on embracing change in order to influence it. All the good work Boswell and her team had done over the preceding years to build managers’ confidence and capability meant they embraced this message more readily than they might otherwise have done – and the fact that the last set of engagement scores under East Coast’s tenure rose to a level that surprised even the company itself, attests to the team’s success.

“If you want to keep improving performance you have to carry on sharpening the saw of the business,” says engineering director Jack Commandeur. “You can’t stop, because, as we learnt from what happened to the company under our predecessors, if you take your foot off the gas it all degenerates very rapidly.

So you have to keep that pressure on.”

Commandeur never saw 28 February as a ‘finishing line’. “Much of what we have done in Engineering

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is business development – in the sense of improving our capability, structures and processes – and we didn’t start that with the aim of saying ‘we will finish by this point in time’,” he says. “It is an ongoing process and I hope we’ll be able to sustain the same level of dedication and focus in continuing to make ourselves an even better business, knowing that in a couple of years’ time things will be very different.”

Indeed, the introduction of the new InterCity Express trains in 2018 represents a far greater change to Engineering than any change in ownership. Currently 570 East Coast staff maintain and service the East Coast fleet. The advent of the new trains will reduce those numbers to a contract team of 20, because owner Hitachi will maintain the fleet itself.

“When the new trains come in for the northern fleet, in summer 2018, the Engineering organisation will shrink, and when they come in for the southern fleet, towards the end of 2019, it will cease to exist in its current form,” says Commandeur. “There is, naturally, huge anxiety and doubt among people about how it will affect them. So to me, the ‘InterCity Express Programme’ has always been a business transition issue, not ‘a new train’.”

For the moment though, while the colour of engineers’ polo shirts might change, their job remains the same.

“What I’ve tried to focus on with them is their great track record of delivering quality work, on time, safely, and the fact that no one knows the trains better than they do,” says Commandeur. “What I say to the team is: ‘It doesn’t matter what train rolls down the track; make it yours.’ If they are really good at their job and flexible and competitive then train operators will want to carry on sending their trains to us. Over the past two years we have got more and more third-party work – we now maintain trains for CrossCountry and ScotRail, and also provide service facilities for First Hull Trains and Grand Central, for example. That has helped to restore our self-belief and inspired us to keep improving.”

Sustaining momentum The momentum that characterised East Coast’s tenure emanated from Boswell herself: her drive, determination and energy, along with her ability to galvanise teams, was key to the company’s achievements.

(See page 66) She is, as she says, “a doer, a fire starter.” But these qualities made the last few months at East Coast very difficult for her, she admits. Not one to sit around or rest on her laurels, she felt, she says, “very disassociated with the future, a sort of ‘woman without portfolio’” – because, unlike some of the other executives, she knew she would leave when the new franchisee took over.

Emberley, the diplomat, talks in terms of “easing the business, its people and customers through a seamless transition.” While Boswell was instrumental in this, she feels frustrated at the time, money and energy “wasted” on the refranchising process. She would have done all sorts of things differently over the last year had the team not been handing the business back. “I would have changed organisational structures, I would have in-sourced a lot of the things that were outsourced because some of our key supply contracts – cleaning, catering, website development, customer relationship management, for example – didn’t demonstrate they added value. And we’d have been working on a lot of the stuff from the five-year plan that we created in 2013.”

Had the government been receptive to the kind of alternative approach to running a rail company that Boswell envisaged, things could have been very different. The employee-owned stakeholder-managed model she formulated would be much more sustainable than the current system, she says. “I firmly believe the rail industry has a social responsibility to UK plc – the infrastructure is what makes this country work – and the way to keep that going is to engage your people and your stakeholders up and down the route.

Private-sector enterprises are so conscious of budgets these days that it is difficult for them to deliver what they might like to.”

It would be interesting to see how Boswell’s ‘Alternative View’ might play in a different political climate, but the fact remains that East Coast has had a significant influence on the way franchise bids are specified and evaluated.

Because of its unique government-owned status, and because of the deep due diligence it did in

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East Coast Main Line and short-term planning

2000 In the year of the Hatfield rail crash the Shadow Strategic Rail Authority (SSRA) brought forward the refranchising competition and announced that GNER, which had been granted a seven-year franchise in 1996, had been shortlisted along with Virgin Rail Group to bid for the next franchise.

2003 The Strategic Rail Authority (SRA) scrapped the refranchising process and gave GNER a two-year extension, until 2005.

2005 GNER won the franchise for another seven years.

2007 Rocked by recession and the fall-out from the July 2005 bombings, GNER ran out of money and National Express took over.

2009 National Express ran out of money and handed the company back to the government.

DOR/East Coast took it over – ostensibly for 18 months to two years.

2010 The franchise period was extended when it became clear that the DfT would not be ready to re-let the franchise by November 2011, so the date was pushed back to December 2013.

2012 The ownership period was extended indefinitely in the wake of the West Coast fiasco.

2013 East Coast was put at the front of the queue in a revised refranchising programme, with a date for a return to the private sector set for February 2015.

2015 The InterCity East Coast franchise was handed over to Inter City Railways.

the early days of its tenure, East Coast was able to be open, transparent and impartial about the strengths and weaknesses of the franchise system, and took every opportunity to communicate these to government so as to help prevent past mistakes compromising future success.

“Part of the reason GNER and National Express East Coast failed was that they overbid. But the franchising system itself also had a role to play,” says property and projects director Tim Hedley-Jones.

One of the most important representations the company made was a response to a government consultation on the future of franchising in 2010. The response suggested that the reason the two previous franchises had failed, despite a fundamentally strong business, was that the short-term planning, financiallydriven approach (to meet aggressive revenue targets), unstable leadership and constantly changing priorities (due to the fluctuating fortunes of the operators) had deflected attention from the core business of running a service for fare-paying passengers. The prevailing instability was not good for customers, employees or business performance, it pointed out.

The response detailed some of the causes of failure and proposed solutions, including the following.

• Addressing the vexed question of open access competition and capacity allocation.

• Protecting franchisees from failure in their first two years by factors outside their control.

• Structuring stronger parent company guarantees or other financial incentives to prevent an owning group running down support to a franchise once it has decided to back out.

• Desisting from holding the franchisee accountable for delays caused by Network Rail.

• Reducing the number of contractualised ‘Committed Obligations’.

• Incentivising franchisees to continue to invest wherever they are in the franchise term.

• Creating and protecting a brand that is broadly immune to franchise change (see Chapter Four: The brand story).

Working under three different business models (GNER, NXEC and East Coast Main Line) in as many years benefits no one. Nor does working to a series of short-term business plans over five years, as East Coast had to, despite being a stable owner. But short-term time planning horizons have been the name of the game for the business for the past 15 years, as Hedley-Jones points out. (See box)

Learning from the past Not only does the eight-year term of the new franchise draw a line under the constant lack of certainty that has dogged the business for the past 15 years, but the early intimations from the new franchisee are that it has taken on board the criteria listed in the prospectus (which was, in turn, informed by East Coast’s recommendations), which emphasised a service quality approach as well as a financial return. The prospectus said that bidders would be expected to focus on the following things.

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• Placing passenger interests at the centre of all aspects of business planning and operations.

• Real investment in innovation and technology.

• Service quality – particularly around operational performance, train and station presentation, passenger information and ticketing.

• Partnering and collaborating with key stakeholders, particularly Network Rail and Agility (owner of the new trains).

• Investment in the workforce, building skills and capability, improving employee engagement and demonstrating a genuine pride in developing staff over the long term.

• Social responsibility and environmental sustainability.

• A stable profitable franchise – developing the business, running the franchise for its full term and, while meeting the other objectives, also aiming to maximise returns to the government to the benefit of taxpayers.

It’s not yet clear exactly how much of DOR and East Coast’s input has fed through into the new franchisee’s plans for the business, but, says Hedley-Jones, the company couldn’t have done more to prepare its successor.

“We provided everything that any bidder could ever want – and more,” he says. “We had more visits, shared more information and were more transparent than probably any other train company has ever been – and we were held up as the gold standard in engagement.”

In a letter to Boswell and her team after the new franchisee was announced, the Secretary of State wrote: “All three bidders, our evaluators and my officials were impressed by the quality and timely delivery of information and assistance from your team throughout this process. I also know that the East Coast Executive, as well as the franchising team from the company, and DOR, have shown a remarkable amount of patience and professionalism in preparing for the share sale, which is a unique feature of this competition.”

But, says Hedley-Jones, the amount of engagement is no guarantee of future success. “The yardstick is, can they deliver what they have promised, within the time period, given all the external factors outside their control – from economic decline, to terrorism, to catastrophic incidents on the track – factors that East Coast is more vulnerable to than others because it is such a long strung-out franchise that is heavily dependent on discretionary travel?”

Only time will tell, of course. Inter City Railways has a great platform on which to build, but the stakes are high. If the third private-sector franchisee on the line goes belly-up, it will destroy the credibility of the franchising system for good.

The road (or track) ahead carries both opportunities and risks. Boswell, who knows the business better than anyone, believes Inter City Railways is in for a rocky ride. On the positive side there is substantial investment in new trains, a new timetable, new signalling and new infrastructure – not to mention the growing appetite of people to travel by train. But set against this is the increasing complexity of the industry, both operational and regulatory, the mounting threat from open-access operators, the apparently intractable difficulties with Network Rail and the need to upskill large swathes of the workforce to cope with the new trains.

But she believes the biggest risk the new franchisee faces is under-estimating the culture of East Coast and the peculiar nature of its market.

“Given the highly discretionary nature of travel on this line, you have to be extremely responsive to customers, and get your employees behind that,” she says. “The big danger is that Inter City Railways has over-egged what they can do with yield and driving the revenue line, because if they try to ‘streamline’ the business too much and try to make too many efficiencies, they will lose the essence of what makes it work.”

A more immediate and explosive threat to the revenue line would be failing to secure the sixth path out of King’s Cross. The significant improvements to service frequency, capacity and speed, along with new destinations, that have been promised by the government on behalf of Inter City Railways (see box)

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Karen Boswell

Boswell is universally praised for being the driving force behind the turnaround of East Coast.

“She is tremendously motivational and galvanised people to give their best and be proud of what they do. She created bonded teams capable of leading the organisation through difficult times and tackling difficult issues. And she was responsible for the utter professionalism with which the company was run.”

Brian Greenwood, a member of the advisory panel of East Coast

depend on winning this path. But while the team at East Coast has been working hard for some time on making the case on behalf of the new franchisee, winning the path is by no means guaranteed. This is, believes Phil Dawson, regulation and track access manager, “probably the key risk for the future of this business.”

For all these challenges faced by the new privatesector operator, those who’ve been close to the company for the past five years agree that the public sector is not a comfortable home for the East Coast business. For one “I’ve worked under lots of managing directors thing there are the conflicts of interest between the DfT and there’s never been anyone who’s provided and the train operator – “and we would have fought a lot the latitude, inspiration, drive, scope and harder on open access too if we’d had a free hand,” says empowerment to do all the things we have, or DOR chief executive Michael Holden. But, more generally, who’s stimulated thinking in the same way as the relationship between the two sides only worked, says she has.”

Steph Oerton, Holden, “because it was on a small scale, it was temporary learning and development manager, East Coast and because I worked very hard at making it work – and, “The key thing about Karen is that she really to be frank, it got progressively more difficult.” believes people make a difference. It’s not lip service.”

East Coast could have done all the things promised by John Gelson, media relations manager, East Coast the new franchisee. Indeed, many of them were underway long before the handover, and most of them are a direct “She’s pulled off a very difficult balance result of government investment in trains, signalling between being popular and respected. She’s not gobby like Richard Branson, pulling stunts and infrastructure. But the one big difference is that the like jumping out of cakes or hot air balloons. new company is ‘on the hook’ for a very large franchise She commands both affection and authority, premium. “If you were running the company in the public and she was the key to the turnaround.” sector you would never sign up to do that,” says Holden.

Nigel Harris, managing editor Rail magazine But, like Boswell, he warns that the aggressive performance this premium incentivises should not be driven by aggressive cost-cutting: “You can always cut costs, but quality goes with it.”

The bottom line is that Karen Boswell and her team left a powerful legacy. They had to contend with the oldest rolling stock, the most heavily-loaded services, the longest route and the worst weather of any train operator, as well as manage difficult relationships with key stakeholders Network Rail and the DfT. Yet they turned the failing business they inherited into what is arguably the very model of what a modern railway company should be. Every measure of performance has improved dramatically, from employee engagement and customer satisfaction, through punctuality and safety, to profitability and financial return to the government.

“I take quiet pride in the way the business performed over the last five years,” says DOR chairman Doug Sutherland, who was a guiding hand throughout. “The guys did a really fantastic job for us.”

It’s now up to Inter City Railways and the government to build on the legacy.

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Inter City Railways Limited

On 27 November 2014 Secretary of State for Transport Patrick McLoughlin announced that he intended to award the InterCity East Coast franchise to Inter City Railways Limited, a joint venture between Stagecoach Transport Holdings Limited and Virgin Holdings Limited. Stagecoach owns 90% of the company, Virgin 10%, and the new brand will be called Virgin Trains East Coast. The franchise term will run for eight years, with a further extension of one year grantable at the Secretary of State’s discretion.

The unsuccessful shortlisted bidders were FirstGroup and Keolis/Eurostar.

What the new franchisee has promised

3 new services from London to key • 2destinations, including Bradford, Edinburgh, Harrogate, Leeds, Lincoln, Newcastle, Shipley, Stirling and York.

75 more station calls a day.

New direct links to Huddersfield, Sunderland, Middlesbrough, Dewsbury and Thornaby.

By 2020, 3,100 extra seats for the morning peak time.

A 50% increase in seats.

65 state-of-the-art InterCity Express trains in service by 2020.

Journey times from London to Leeds reduced by 14 minutes and from London to Edinburgh by 13 minutes. £140m investment to improve stations and trains.

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CHAPTER NINE – PREPARING FOR HANDOVER

On 7 November 2014 a moving ceremony at King’s Cross saw the final East Coast locomotive named ‘For the Fallen’. This was East Coast’s own tribute to those who fought and died in World War 1, including the 20,000 railway workers who volunteered and never returned.

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The story of

East Coast Main Line Company Limited

BY JANE SIMMS