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Organizational Structures & Performance Evaluation of Railways ORGANIZATIONAL STRUCTURES & PERFORMANCE EVALUATION OF RAILWAYS Based on European railway reform experiences and applied to Israel Railways J. W. Wolff September 2011 Organizational Structures & Performance Evaluation of Railways Based on European railway reform experiences and applied to Israel Railways Master Thesis September 2011 Jeroen W. Wolff Thesis Committee: Prof. Dr.-Ing. I.A. Hansen (TU Delft, Faculty CiTG) dr. W.W. Veeneman (TU Delft, Faculty TPM) ir. P.B.L. Wiggenraad (TU Delft, Faculty CiTG) dr. ir. H.A. Körmeling (HTM Consultancy) PREFACE This report presents the end result of a thesis work conducted for the MsC program ‘Transport Infrastructure and Logistics’ (TIL) at Delft University of Technology. Together with close external support of HTM Consultancy, this thesis project highlights various organizational models and performances since Europe’s railway reform program started in the 1990s. Optional redesigns for the structure of Israel’s railway sector are included in the final thesis report. This thesis work could not have been conducted without extensive help of a number of experts (closely) affiliated to railways. First of all I would like to thank my thesis committee members affiliated to TU Delft for critically reviewing texts, underlying figures and outcomes of the research and design parts of this thesis work: Prof. Dr.-Ing. I.A. Hansen, dr. W. W. Veeneman and ir. P. B. L. Wiggenraad. Additionally I would like to thank my external thesis committee member dr. ir. H.A. Körmeling (HTM Consultancy) for introducing me to the state of Israel and their railways, for providing me the opportunity to research this highly interesting and relevant subject and for his extensive and comprehensive comments on all the work produced. Since I strongly believe an academic thesis should have a relation to ‘what is experienced in practice’, special gratitude is in place for drs. ir. A. Roeleveld, benchmarking expert at Dutch Railways (NS). His guiding advice, especially in the performance evaluation part of this thesis work, aided a lot in placing data and resulting figures into a more correct perspective. I would also like to thank drs. D.M. van de Velde (TU Delft) for additional information on Europe’s reform programs and the permission to make use of his framework in Part 2 of this thesis work. As external readers, I would like to thank ir. J.G. Kroon (Trans Link Systems) and ir. E.E. Wolff for critically reviewing texts and assumptions. Special thanks are furthermore in place for all Israeli representatives that decided to award me some of their (always limited) time in understanding the Israeli system and motives behind decisions better. Finally I would like to thank all colleagues of HTM Consultancy for sharing their facilities and expertise. Working at HTM for the past months has been a great pleasure and a very positive learning experience. The Hague, September 2011 J. W. Wolff TABLE OF CONTENTS MANAGEMENT SUMMARY ............................................................................................................................... I GENERAL INTRODUCTION ................................................................................................................................ 1 RESEARCH OBJECTIVES AND SUB QUESTIONS .................................................................................................. 2 PART 1: ISRAEL RAILWAYS - PAST, PRESENT AND FUTURE................................................................................ 5 CHAPTER 1.1: HISTORICAL OVERVIEW ISRAEL RAILWAYS LIMITED ..................................................................................... 6 CHAPTER 1.2: CURRENT ORGANIZATIONAL STRUCTURE AND KEY CHARACTERISTICS IRL ....................................................... 10 CHAPTER 1.3: ACTOR FIELD ISRAELI RAILWAY SECTOR .................................................................................................. 12 CHAPTER 1.4: CURRENT ISSUES IN ISRAEL’S RAILWAY SECTOR ........................................................................................ 15 CHAPTER 1.5: CONCLUSIONS ................................................................................................................................... 18 PART 2: ORGANIZATIONAL STRUCTURES EUROPEAN RAILWAYS .................................................................... 19 CHAPTER 2.1: HISTORY EUROPEAN RAILWAY REFORMS ................................................................................................. 20 CHAPTER 2.2: RAILWAY SECTOR ANALYSIS - RESEARCH METHODOLOGY ........................................................................... 22 CHAPTER 2.3: TYPICAL ORGANIZATIONAL STRUCTURES EUROPEAN RAILWAY SECTORS ....................................................... 26 CHAPTER 2.4: PUBLIC PROCUREMENT AND ORGANIZATIONAL STRUCTURES ...................................................................... 31 CHAPTER 2.5: CONCLUSIONS ................................................................................................................................... 32 PART 3: PERFORMANCE EVALUATION OF RAILWAYS ..................................................................................... 33 CHAPTER 3.1: PERFORMANCES OF RAILWAYS IN 27 EU+EFTA COUNTRIES: KPI METHOD .................................................. 34 CHAPTER 3.2: PERFORMANCES OF RAILWAY SYSTEMS IN 8 EUROPEAN COUNTRIES ............................................................. 48 CHAPTER 3.3: SERVICE QUALITY & CUSTOMER SATISFACTION ........................................................................................ 56 CHAPTER 3.4: CONCLUSIONS ................................................................................................................................... 62 PART 4: ORGANIZATIONAL STRUCTURES AND PERFORMANCES - CORRELATION ANALYSIS ........................... 65 CHAPTER 4.1: FORMULATION OF HYPOTHESES ORGANIZATIONAL STRUCTURES - PERFORMANCES ........................................ 66 CHAPTER 4.2: CORRELATION ANALYSIS ORGANIZATIONAL STRUCTURES – PERFORMANCES ................................................. 67 CHAPTER 4.3: CORRELATION ANALYSIS DEGREE OF MARKET OPENING - OVERALL PERFORMANCE .......................................... 72 CHAPTER 4.4: CONCLUSIONS ................................................................................................................................... 73 PART 5: DESIGN ORGANIZATIONAL STRUCTURES FOR ISRAEL RAILWAYS ....................................................... 75 CHAPTER 5.1: EFFICIENCY DRIVERS: QUALITATIVE DESCRIPTIONS .................................................................................... 76 CHAPTER 5.2: POSSIBILITIES AND BOUNDARIES FOR REFORM: THE VISUAL GRID TECHNIQUE ............................................... 82 CHAPTER 5.3: DESIGN OF OPTIONAL ORGANIZATIONAL STRUCTURES ................................................................................ 85 CHAPTER 5.4: CONCLUSIONS ................................................................................................................................... 94 PART 6: CHARACTERISTICS AND EVALUATION OPTIONAL MODELS FOR ISRAEL RAILWAYS ............................ 95 CHAPTER 6.1: CHARACTERISTICS OF DESIGNED MODELS ................................................................................................ 96 CHAPTER 6.2: EVALUATION OF SUITABILITY DESIGNED MODELS..................................................................................... 104 CHAPTER 6.3: OVERVIEW OF SUITABILITY – BALANCED SCORECARD .............................................................................. 109 GENERAL CONCLUSIONS AND RECOMMENDATIONS .................................................................................... 110 REFLECTIONS ................................................................................................................................................ 112 BIBLIOGRAPHY ............................................................................................................................................. 116 GLOSSARY .................................................................................................................................................... 119 MANAGEMENT SUMMARY This thesis report closely examines the relationship between organizational structures of railway sectors and corresponding performances. Following organizational issues in Israel’s current railway sector, this thesis work applies gained knowledge to the Israeli case in order to provide an answer to the main research objective: “In what way can the organizational setup of Israel’s railway sector be improved in order to increase overall performance, according to the specific environment and context in Israel by taking organizational structures, performances and experiences of European railways into account?” — Israel’s railways possess a much shorter history than its European counterparts. In the early years rapid expansion of network and services illustrated the initial significance of railways in the state of Israel. After termination of the British Mandate in 1948, years of negligence resulted in a derelict and barely used railway system in the 1980s. In 1988 Israel Railways was sold to the Ports Authority, presenting the first step in the recovery of Israel’s railways as a main mode of transport. Since 2003, the Israeli government requires Israel Railways to become a main transport facilitator in Israel. Instigated by substantial funds from the national government,
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