The arrival of new private competitors can bring challenges for recruitment and training, for incumbents and new entrants alike
For the incumbents the issue is around changing their mentality whereas new entrants have to focus on finding the right talent for new services.
Starting from zero is a real big challenge: this was the case for Italo – NTV in Italy, but also for SR in South Korea, the second case of competition in high-speed rail in the world. The recruitment processes and training are key elements for new companies added to the time limitations to take into consideration when there is a process of starting a new business, especially in the railway sector where the legal constraints are quite strict.
Italo was settled between the end of 2006 and beginning of 2007 and the services started in April 2012, while in the case of SR, which was established in 2013 the services started in 2016. In this second case, the timeline was very short from the conceptualisation of the business, the startup phase and then operation of the railway company.
The recruitment process in the case of SR started on December 24 2014 and it was developed in eight stages. The process ended in October 2016, two months before the start of the operations.
As part of this recruitment process, there were professional development courses to improve knowledge and services skills as part of the on-the-job training (three times the level of Korail).
For Italo – NTV, the process started in advance: a large staff of skilled personnel at headquarters was recruited between 2008 and 2009 and at the same time there was a recruitment process for the train drivers.
Italo’s fleet size increased between April 2012 (when the operation started) and in the final period of rump up (mid-year of 2013) when the number of trains arrived to 25 AGV. During the year of the rump-up, the total number of staff arrived around a level of a thousand people. This level of job creation was very important in Italy, during a period of heavy recession around a thousand more people were recruited for externalized services (maintenance, cleaning on board, etc.).
Timing is crucial, yet other elements are no less important:
- Is the railway company going to externalize the staff on board or not?
- Is it possible to create an academy?
- Where can the new entrants find skilled human resources?
- How could they (drivers in particular) be loyal to the new company?
These questions are really important because all these key elements are important to consider when you establish a new service (it could be for example the new high-speed services in India) or a new company (SR, in South Korea, Italo – NTV in Italy or MRT in Indonesia).
The choice to externalize the staff onboard depends on the business model that the company wants to develop.
In the case of Italo – NTV, the railway company decided to have internalized staff onboard to have a direct control and more loyalty from the staff.
The total cost of the personnel is not so high in the business model of the high-speed railway, less than 15 per cent of the total cost, but for the company it was important to have its own human resources. The cost of the staff on board is lower than ten per cent of the total cost because the highest cost in the HSR business are linked to the access charge fees and maintenance of the train.
Internal or external
In the case of SR in South Korea, the decision was different because the company decided to externalize the staff on board.
The decision is subject to a possible change, but at the beginning it was chosen to follow a business model similar to the incumbent (KTX of Korail). Italo – NTV decided to also have an academy for the training of the staff on board.
The NTV academy was born before the start of the service, at the beginning of the creation of the company, and it was all managed in-house with traditional technical training balanced with innovative service training. It was supported by excellent testimonials and the staff chosen by Italo – NTV was composed of young and dynamic trainees.
At the beginning the average age of the staff working at NTV was lower than 29 years old. The staff on board of Italo didn’t arrive from the incumbent, but instead had a diverse working background.
The evaluation criteria to work in the new high-speed railway company was a meritocracy, ensuring transparency and equal opportunities.
The HR department of Italo decided to have staff onboard that came from different sectors: from cruise ships to the airlines. All those who entered the NTV academy received technical and service
training alongside an introduction to the culture of the high-speed rail sector. These lessons were very specific and focussed on the commercial side of things, for example, there was the explanation of the market and targets of NTV, the Italo train specificity, the pricing strategy and the customer loyalty strategy.
At the beginning the staff was divided between the station team and onboard team: in the first team there were 200 resources distributed across eight districts covering 16 stations, while in the second there were 430 resources distributed over three hubs covering around fifty commercial services. The staff onboard was divided into two levels with different responsibilities: the train specialists (hostess and steward) had the role focussed on the customer care and commercial services, while the train manager had the main role linked to the commercial and technical services. The train driver situation was completely different, because in that case, the process of training is by far much longer.
In South Korea, the training of driver is longer by several years, while in Italy to receive the license to be train driver of a high-speed train needs around two years. Italo – NTV decided to find their first drivers in the market and then they started to give technical courses to new applicants. At the end, just the twenty per cent of Italo – NTV train drivers arrived from other railways companies.
The timing is very important for this key position of the company, because the process of training is quite long. The training is supported by technology in many cases, a high-speed train simulator was used by Italo and SR.
There is another important element to take into consideration when the market is open to the competition. The incumbent normally has more resources and could ‘steal’ the drivers from the new entrants in order to make the development of the business more difficult. This is the reason why, where it is possible, it is important to have loyal train drivers. This loyalty could be given with high salary and also with specific contracts between the two parties.
If the training of the driver is paid by the railway company, it is important to link the driver to the company for five to seven years by a contract of exclusivity. In Spain, there was a case where the incumbent started to hire the drivers of the new entrants (in the freight market). CNMC, the regulator, had introduced conditions on Renfe, the incumbent, to improve the pool of availability of loco drivers, as a result of Renfe hiring thirty per cent of the competitors’ loco drivers, creating a shortage of drivers and big disadvantages to private rail freight companies operating in the Spanish market.
In conclusion, human resources are a key element in the railway sector and the training is really crucial especially when there are new operators in the market.
Competition makes the panorama different, but it is an opportunity to give more value to the railway human resources as the Italo and SR cases showed.
Andrea Giuricin is the CEO of TRA Consulting and Senior Rail Sector Advisor to the World Bank Group. He gives speeches on the rail sector at the world level from Bangkok to Lisbon