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in the January/February 2011 print issue of PA TIMES. Contact Editor
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With No Bailouts or Fare Hikes, CEO Turns System Around
When Mark Aesch became CEO of the public transit system in Rochester, NY, in 2004, he faced a daunting challenge. The Rochester Genesee Regional Transportation Authority (RGRTA) was facing a more than $27.7 million operating deficit, about 40 percent of its annual budget.
Aesch knew there’d be no bailout from higher levels of government. In fact he went out of his way to say he didn’t want one.
“The typical playbook in these situations is to raise fares, lay off workers and to retrench in the face of economic realities. But we threw out that playbook. We changed the game itself,” said Aesch, a 44-year-old career administrator who grew up on a farm in upstate New York.
This year, the RGRTA marked its fifth straight year of surpluses–all while avoiding layoffs, lowering fares, increasing customer satisfaction and reducing reliance on taxpayer dollars.
The RGRTA turnaround is now the talk of transit circles nationwide. Aesch has been called to Washington to advise Congressional panels, he’s been consulting the transition team of New York’s new Governor Andrew Cuomo and he’s a sought after speaker on public agency turnarounds.
But how did they do it?
The goal from the start was to run RGRTA as a successful private-sector business, but doing so meant the business had to be transformed from the bottom up. RGRTA stopped picking up passengers and started picking up customers. They stopped offering a service and instead sold a product. Rather than serving the public employee unions, RGRTA began serving the customers and taxpayers. Aesch and his management team dealt with chronic bureaucratic inefficiency by implementing performance standards, measuring productivity and linking pay to results.
One of these performance-based measurements created by RGRTA is the Trip Scoring Index (TSI). “We asked ourselves the threshold question–was our mission to provide a service to the community or to provide return to the taxpayer for their investment” says Aesch. “And we determined the answer was yes!”
“TSI allows us to spend money to achieve a strategy, rather than just spend more money next year doing the same thing we did the year before,” says Aesch. RGRTA employees throughout the organization contributed to this dramatic shift in thinking. That RGRTA would begin to sell a product that the marketplace wanted to buy, rather than provide a service that people could “take it or leave it.”
The TSI measures two components: cost recovery–how much money the customers pay toward the trip’s actual cost–and ridership levels. Each bus was assigned a score for each component and then the scores were combined to reveal the best way to schedule bus routes. The TSI provided quantitative reasoning in RGRTA’s analysis of services. As a result, no service was discontinued that either had enough riders or significant cost recovery. Conversely, RGRTA made adjustments to routes where no one was riding and where taxpayers’ dollars were being wasted.
“This dramatic mind shift for our organization, to have a market driven philosophy, has been huge for us. I laugh today listening to so many governments talk about how they have large deficits. A deficit only exists if you insist on doing the same thing next year, which by the very fact that there is inadequate revenue to continue last year’s program demonstrates the need for change,” says Aesch.
One example where RGRTA implemented a market driven change came about through the analysis of TSI. The team discovered that its Route 95 service was grossly underutilized and therefore inefficient and unproductive. The service carried only eight people per day and was costing RGRTA $18,500 per year per person. The money saved could be funneled to services and programs the overwhelming majority of RGRTA customers utilize.
Due to heavy public resistance, which was furthered by media coverage, the decision to change the Route 95 service was tougher than the TSI originally presented. A local TV station ran a live story from a bus stop on the route. Local elected officials also pleaded with Aesch to keep the Route 95 service, telling him they received complaints from their constituents. One prominent local official berated Aesch, calling his position ridiculous.
“I can’t tell you how many conversations I had that began with me saying: “With all due respect… and then I’d explain that the truly ridiculous thing was for a public entity to operate so inefficiently. We were running bus routes that were so unprofitable that we could have bought everyone using it a new car and saved money.”
In the end, RGRTA’s board, who bought into the hard, measurable results of the TSI, voted unanimously to discontinue the Route 95 service. They were sad to see those eight customers lose their ride. Ultimately, though, their decision brought RGRTA closer to its goal of running an efficient and productive public transportation system. Changing the Route 95 service is saving RGRTA $200,000 a year, and TSI, in total, has produced more than $25 million in savings.
“People say all the time that when you take “service” away customers will be mad and ridership will go down. We’ve made million of dollars of changes to respond to market demands and sell a “product” to our community, and we’ve seen ridership go up three times the national average, and increased customer satisfaction,” Aesch says.
RGRTA does not only measure productivity of their bus schedules. Every possible aspect of the business that can be analyzed and then put into quantitative terms to measure effectiveness is done so. Whether it’s bus cleanliness, telephone on-hold time for customers or efficiency of routes, RGRTA has numerical data on each. This allows for constant assessment of services and for improvements to be made continuously.
“Our whole management approach is geared towards having quality information to drive our decisions. We focus like a laser on the data that will help us to achieve our strategies, rather than the numbers that some bureaucrat requires us to report” says Aesch.
That $27.7 million in losses that RGRTA was facing in 2004 has instead become more than $32 million in surpluses–a $60 million change in its bottom line. While most transit systems have raised fares multiple times, RGRTA has been able to actually cut fares. And while once proud companies like General Motors and Citibank have become reliant on taxpayer funded bailouts, RGRTA has reduced its reliance on taxpayer subsidies by 26 percent.
“Our commitment to providing a public sector service with a private sector mindset is what led us to this place. There’s nothing that we’ve done that’s unique. We just made the time to build a strategy, spend money to achieve it, and had the courage to listen to the data in order to be successful,” said Aesch.
“I firmly believe that our experience in Rochester can be a model far beyond the transit world. What we’ve done is applicable to nearly all public sector agencies. The key is developing the will to make performance-based changes,” said Aesch.
Mark Aesch is the newly published author of Driving Excellence: Transform Your Organization’s Culture–And Achieve Revolutionary Results. Email: [email protected]
Alan Defame is a freelance writer based in New York.