An accident waiting to happen? - railroad safety impacted by corporate mergers - Brief Article

Railway Age, June, 2001 by Nicholas J. Bahr

In the summer of 1997, the Federal Railroad Administration set its goal of "zero tolerance" for railroad accidents. This followed on the heels of five Union Pacific train collisions between June 22 and August 31. The FRA felt divergent cultures within the merged UP and Southern Pacific played a key role.

The official inquiry into the 1999 London Paddington Station crash that killed 31 people is almost at a close. And a few months ago, Railtrack Chief Executive Officer Gerald Corbett resigned after a broken rail derailed a train, killing four people.

These high profile accidents have raised questions about how corporate cultures can impact safety. CEOs and boards of directors increasingly find themselves in the spotlight after an accident. Railroad safety culture has taken such a visible position that the Surface Transportation Board closely monitored the Conrail split between CSX Transportation and Norfolk Southern. To mitigate the risks associated with integrating the two operations, the FRA went so far as to insist on the development of a "Conrail Merger Safety Assessment and Surveillance Plan."

Clearly, society has become much less tolerant of rail accidents. That intolerance has translated into greater regulatory pressure, even as the industry's safety record improves. Despite this progress, U.S. rail companies have had to address a raft of new federal and state safety oversight issues in recent years. And foreign owners of national infrastructures receive even greater scrutiny. Indeed, the chief question to answer for joint U.S. -Mexico rail operations seems to be: Can the involved parties create a uniform, consistently-enforced safety culture within a vast network of cross-border operations?

As a rule, mergers create a large amount of management turnover. Also as a matter of course, safety operations are often overlooked or aggressively streamlined during the consolidation process. And therein lies the principal risk any merger presents to maintaining a vibrant, active safety culture. In going through any major organizational change--be it a merger of Class I railroads, privatization of Russian State Railways, merging of U.S. and Mexican rail operations, acquisition of rail operations in another country, or reorganization within your own company--it pays to be mindful of the following:

* During merger due diligence or reorganizations, look beyond accident rates and insurance payouts. Quickly identify the safety management team and who reports to whom. This is especially important if the safety organization is buried deep in the organizational structure. It is key that the safety manager have easy and direct access to the executive staff. Otherwise, safety problems are not elevated for action at the appropriate time. Make sure that the safety manager is a doer and proactive. Too often, safety problems that were known were not elevated to the right decision-maker in time because the safety manager didn't feel empowered to force the issue.

* Be sure the newly merged safety organization can adequately assess risks. Accidents can result from safety processes that are too informal and "spotty" in their approach. The safety risk assessment process should be rigorous and formal. It should utilize systematic analytical tools that methodically identify and control hazards. Also, prioritize the risks to be managed. Not all safety risks are equal, so rank them and manage the most important ones first. This also keeps your safety program cost-effective. Communicate the risks. It's critical that internal processes exist for regularly communicating safety information across an organization. Front-line staff must be able to report hazards without fear of retribution. Likewise, safety managers must have power to cross division lines to assure safety programs are appropriately implemented. Finally, promote the safety culture top-down. If the company's leadership doesn't live safety and promote it daily, it won't be taken seriously by the rest of the organiza tion.

Hidden safety problems can tarnish a merger's brief honeymoon. Because most safety hazards are controlled by operational procedures, a strong safety culture is imperative for a successful and safe rail operation. Increased shared right-of-way and smaller temporal separations make it critical that companies truly enhance and re-enforce their safety cultures. As merged rail operations become larger and more complex, the need for a strong, actively-managed safety culture will loom larger than ever.

Nicholas Bahr is a Senior Associate with Booz-Allen & Hamilton, and the author of "System Safety Engineering and Risk Assessment," a graduate-level textbook used at various universities, including Massachusetts Institute of Technology.