crs1026
Superstar
My experience (35 years in certain Ontario Crown Corporations) has been that when a management team hears the words "standalone business unit" they tend to interpret these as "exempt from all the usual scrutiny". They also hear "we can have our own separate staff and processes for everything because we're special". In my experience, while these standalone units may claim to be more productive by virtue of a narrow bottom line focus, this extra overhead (inevitably the startup generates elaborate rationales why they are "different" and how the generic service doesn't meet their needs) turns out to be more expensive than if the entity is operated as one division of the main organization, drawing on all the economies of scale in corporate services and processes.
The danger of the "we are focussed on our specific bottom line" argument is - if there is insufficient true market pressure, costs get passed on to the customer instead of being seen as something that ought to be aggressively curtailed. The bottom line looks compelling but the customer is gouged. (I could cite some Ontario Energy Board rulings that reached this conclusion in the electricity sector, but I won't)
At some later date, housecleaning or hard-nosed budget cutting discovers the room for economies, and the standalone is told to suck it up and rejoin the base organization. The UPX/GO situation is might be fertile ground for a provincial Auditor General audit - the Ontario AG is pretty good at finding this stuff.
The uniform thing may seem trivial....but why would UPX maintain its own uniform stockkeeping instead of just having the GO stockkeepers perform the uniform supply for them - at little or no added labour cost?
The "branding" thing is a bit of a red herring. If you want different branding, have a single uniform procurement and design process. Hand out black polo shirts to GO and hand out red polo shirts to UPX staff. But why the need for an expensive fashion designer and a whole different style of uniform with its own sourcing? That's the "standalone" mentality run amok. No matter how the service is priced, it's money (ours, the taxpayer) that doesn't need to be spent.
Compensation is especially harmful to the "we are special" mentality. I pored over the Sunshine list today, trying to compare UPX executives from GO executives. Job titles make this difficult. But it would be interesting to see how much UPX senior people are paid for their 28-unit operation versus what the GO Rail people are paid for the same function in a 600+ railcar and 70+ locomotive operation.
Back when they did the EA for the proposed layover facility at Islington, the consultant produced a sample organization chart to estimate the size of the offices and employee accommodations needed for the UPX facility. It was egregiously overstaffed - in the order of 190 people to maintain a 28-car fleet. It had its own security force, and enough maintenance planners to stage a pretty good sized nuclear reactor outage. I will try to find the url to the document.
The mentality is incredibly hard to corrall....I have seen that done, but it's a brutal process. I would have hoped Metrolinx would be managed tightly to avoid getting there in the first place.
End of rant.
One tangential comment for those analysing costs - the labour costs cited are wage costs, I presume. Don't forget to mark these up to include pension and benefits costs. These can be as high as 50% on top of wages, for a union workforce that has good bargained provisions.
- Paul
