Sunday, 13 February 2011

British Waterways

It’s been interesting reading the many and varied comments regarding the performance of the British Waterways executive management team.  They mostly appear to be reviled!

I’m not “close to the action” so I’d like to think I’m being objective in my assessment.  I don’t doubt their competency as executive managers and I have some sympathy for them with their efforts to develop a sustainable business model.  They appear to have tried developing a range of revenue stream ideas (eg; property, pubs, marinas).  None of this appears to have been successful.

I suspect the previous government gave them a mandate to develop a sustainable business model and were prepared to “pump money in” to get it established.  If the executive management team had succeeded and made a profit, then I suspect the government may have sold British Waterways as a commercial operation or left it as a self funded government corporation.

The board and executive team have failed to achieve this and the GFC; plus change of government; has resulted in the decision to move BW towards being a charity.  The National Trust seems to be quoted as a successful example of what can be achieved.  Unfortunately I see very few business similarities.  The National Trust appeals to a far wider audience who are prepared to pay a modest sum to visit a heritage structure.  Whereas the canals are basically a network of ditches.  Some will pay to float on them (which is expensive) but almost no one would pay to walk beside them.

The cost of an annual licence will never reach a level that could form the sole source of income.  Moreover I suspect the majority of volunteers want to “recover” derelict canals rather than maintain the existing network.  And recovering derelict canals only increases the BW maintenance task.

I suspect we will see the canal network fall into slow but steady decline with the less popular sections being the first to close.

One would expect the BW middle management and workers to be very demoralised after years of restructuring and “right-sizing” to find the business in an even poorer financial situation.  

As for the current board and executive management team; they have failed.   In the commercial world senior executives are paid large salaries for two reasons.  Either to reward success, or keep them from leaving when the business is in financial difficulty.  This is because the board doesn’t want competitors or creditors to know.  BW is a public organisation so the latter reason doesn’t apply.  Therefore the board and executive team should do the honourable thing and resign rather than wait for a “golden parachute”! 

4 comments :

Bruce in Sanity said...

Hi

Good analysis, and I'm sure that you are largely correct. There are some other positives to the NWC model, like a stable long term contract for Treasury support, and better model would be Sustrans, the charity that maintains and develops cycle routes.

Entirely agree with your comments about the Board - they are largely finance and property men, and as you say have failed to deliver, and should go.

There's also a problem with the corporate culture in the next tier down, which is happy to make policy on the hoof in ad hoc meetings, resulting in inevitable inconsistency and loss of trust.

All the best

Bruce

Tom and Jan said...

Bruce,

I would be extremely suspicious of Treasury support. Their entire ethos is based around not spending money. Bluntly, politicians spend and Treasury cut.

The executive management team must also depart (without their golden parachutes). They also failed!

You can get a good executive management team with the limited objective of maintaining the network for considerably less money!

Unfortunately a charity to me smacks of an organisation lead by enthusiasts and they have their own interest groups to support.

I can see the less popular canals gradually starting to close and the network slowly reverting to its immediate post WW2 status of half filled drains.

The rivers and Fens will be maintained because they are part of a flood control system.

Regards

Tom

Peter and Margaret said...

Hi Tom, my take on this is that currently, BW is a nationalised institution that has relied on government funding in a big way in order to sustain it, the income from its core business being insufficient to do that alone. The Department of Environment, Food and Rural Affairs, DEFRA, are resposible for allocating the required annual government funding to maintain the network in a viable condition. A couple of years ago, under the last government, DEFRA was reported to have "made an error" in its calculations of funding for BW, and they subsequently received £millions less than expected in the coming year, resulting in many cutbacks to already planned maintenance projects. There seems to have been annual reductions in funding since. The managment may have been "less than efficient", but seem to me to have "had the rug pulled from under them" in funding. The new trust however, seems to be relying, on much more volunteer activity. The volunteer network already does a great job, but it remains to be seen whether this can work in practice. Having said that, there are many successful "heritage steam railway" companies that currently work in that way, but again might be different in that they operate as companies that charge passengers to use operated trains, rather than charge users of the system annual licenses to do so and on a much smaller scale. My own feelings are that a trust is a far better option than selling up to be operated by individual competative companies, as the canals were 200 years ago. Our current rail network is a fine example of how that wouldn't work, it is a shambles!

Tom and Jan said...

Peter,
Being so far away I'm not aware of the detailed history. However it does appear that the board and exec management team have been spending taxpayers money on a range of ventures with the express purpose of providing a sustainable income stream for the canal network.
They have failed and now the recommendation is to turn it into a charity.
It reads to me like an effort to dump a venture that is costing money and which will never sustain itself.
I'm certainly not recommending it be divided up into competitive companies. Actually I doubt any one would want to purchase part of it.
My point is that the government has decided to wash it's hands of the system and I doubt the required ongoing funding will be maintained.
I'm a cynic when it comes to governments!

Regards

Tom