Can Reorganization Tame the MTA Beast?

CAMBRIDGE, Mass. â€”  L.A.’s Metropolitan Transit Authority management has come up with a potentially revolutionary proposal to transform the agency’s poorly performing bus services. According to the plan, bus-service operations would be divided into five geographic semiautonomous “sectors.â€� Small-scale sector operations could lead to local control, better bus service and lower costs.

That was the promise of transportation zones, too, a previous MTA idea that languished for reasons of politics and indecision. Under the zone concept, service would have been entirely removed from the MTA and transferred to local zone operations, typically privately run, under the aegis of local operating authorities. With sectors, service is transferred from central to local management, but is operated by organizations that still are part of the MTA. Both scenarios provide for a degree of local political control. In the case of the zones, however, local officials have complete control of operations; with sectors, the nature of local input will be determined by the MTA board.

But the MTA management’s initial presentation of its sector idea is, unfortunately, inadequate. The MTA’s board only recently received an outline of the plan and was not involved in its conceptualization. That should be a warning. The bureaucratic confusion and political strife that followed previous attempts to rebuild L.A.’s transportation institutions could continue to haunt the MTA unless it accepts disciplined analysis, planning and consultation, as well as the establishment of systems to measure performance.

The now faltering zone idea was based on the perceived success of Foothill Transit. Privately managed Foothill Transit--operations are contracted out on a competitive basis--has undeniably revitalized bus service in the San Gabriel Valley. Ridership has increased and costs have dropped. But low costs have come at the price of substandard wages and poor benefits, as unions feared, and organized labor has proved a formidable opponent to the establishment of new or expanded zones.

The fight over whether to keep bus operations in the MTA’s public hands or transfer them to private management has overshadowed the many achievements of small independent municipal operators in Los Angeles County. It turns out, however, that efficiency depends not on privatization but on the quality of management--whether public or private--and on the scale and structure of operations. Across the United States, large transit organizations tend to perform less efficiently than their smaller counterparts, at least partly because their size distances them from both their workers and customers. The MTA’s bureaucracy is particularly dysfunctional. For example, divisional managers who oversee bus maintenance and delivery of service have been hampered in improving productivity because the MTA bureaucracy downtown doesn’t supply them with information on how much their operations cost.

Small public operators, such as Santa Monica’s Big Blue Bus, perform much better than the MTA, with costs comparable to those at Foothill. Santa Monica shares Foothill’s reputation for high quality service and community responsiveness, but its wages and benefits are similar to those at the MTA, and much higher than those offered by Foothill. Add a management that regards labor as a valued resource and the personal scale possible at a small operation like Santa Monica’s--and it is not surprising that labor relations there are good, while the unions are bitter about every aspect of Foothill’s existence.

Breaking up the MTA’s bus service into five sectors thus offers great promise. But to be effective, the new units should be autonomous, accountable and locally responsive. Unfortunately, MTA management may have violated that standard already, by hiring three sector general managers, without soliciting local input. The boards governing the sectors could be either advisory or have real power, according to options that management has presented to the MTA board. But unless the agency forms wholly owned MTA operating companies, each with a separate and locally accountable board empowered to direct management and monitor performance, the concept is unlikely to work.

It is disturbing that MTA management has already drafted budgets for each of the sectors based on current costs for serving their respective territories. Not only should regional disparities and goals be considered in setting new budgets, but budgeting should be flexible enough to reflect changing local needs. As important, budgets should encourage creativity and efficiency by incorporating rewards and penalties. Cost reductions could be rewarded by using the savings to pay for new and improved local services. Penalties could be assessed, a common and effective practice in the private sector, for poor on-time performance or the presence of graffiti. Sector managers should themselves be on performance-based contracts.

Sector managers should be free to innovate to improve service and reduce costs, but this would require union cooperation. The United Transportation Union has, however, stated it will enforce all aspects of its contract with the MTA. Goldy Norton, a consultant to the union, says the MTA “can hire any way it wants to but where [the workers] will work will depend on seniority in the contract.� The union contract means that someone living in the San Fernando Valley could be hired there but assigned to the South Bay, defeating the advantages of local identity and community made possible when management hires locally.

The transit unions have been instrumental in retaining outdated and inefficient practices. On the other hand, MTA management has provided little reason for the unions to trust it. To undo this history, it should make implementation of the sector proposal a win-win situation, demanding concessions on productivity in return for avoiding the imposition of low wages for new local services. Management should also show its willingness to develop friendly and supportive local work units if the unions agree to cooperate. Regrettably, this key element, which in itself requires substantial organizational change, is not even mentioned in the sector proposal.

Of greater concern is that MTA management would apparently transfer some managerial staff and duties to the five sectors but not as part of an overall restructuring effort to streamline the MTA central bureaucracy. The whole point of small transit organizations is that they typically perform their entire work with lean and tightly integrated staffs. But management’s proposed organizational chart indicates that many central-support functions would be retained, which promise unnecessary bureaucratic complexity and duplication of management services. It is unlikely any money would be saved this way.

Instead, the central MTA should morph into a relatively small umbrella organization, restricting itself to coordination, oversight and performance review of the subsidiary operating companies operations, as well as non-transit and regional responsibilities that cannot be delegated locally.

As part of previous discussions on transportation-zone formation, MTA management leaders said they could shed relatively little staffing even though it was abandoning transit services to the zone. It is unlikely they will be any more prepared to give up their own empires in the development of sectors. The MTA board should consider hiring a management consulting firm experienced in corporate restructuring to assess the redesign of the entire MTA as the only way to reform the current bureaucratic mentality and bring focus and efficiency to the new organizational elements.

Make no mistake about it. The sector idea has much to offer, and MTA management is to be commended for putting it on the table. But at this stage of development, MTA management’s plans do not form an adequate blueprint for effective organizational development. If the MTA board is to make this sector concept work, it must force itself, along with MTA management, to confront wholesale organizational reform in order to streamline overall efficiency and provide control at the new local units. It must build in structural elements that provide incentives to develop high-quality, low-cost local services. And it must open itself to a new start with labor, one capable of overcoming the old adversities and building on the positive labor relations often achieved in smaller transit operations. Perhaps hardest of all, the MTA board must show it has the discipline to divest itself of direct operational powers and let the new local boards do their jobs effectively.