Cost efficiency of NSW rail passenger services 1951/52-1991/92 : a case study in corporate strategic modelling

Abstract

During the 1990s, governments, managements and unions have been focused upon improving the cost efficiency of firms. This focus has been strongest for firms in the public sector where improved outcomes can be expected to significantly improve the Gross Domestic Products of whole economies. This case study looks at the cost efficiency of NSW rail passenger services over a 41 year period to 1991/92, long suspected (but hitherto only tentatively demonstrated) as a paradigm of cost inefficiency. The case study focuses upon the use of the total factor productivity (TFP) index, as a datum point for measuring change in productivity in four markets: suburban, internrban, country and interstate passenger services since 1951/52. From this datum, changes over the years in management, technology and other external factors can be identified and assessed. The thesis identifies management quality (the organising element in the firm) as the preeminent factor in determining productivity change, and the role that new technology plays in its impact on failures in management. We establish the linkages between management and innovation, with TFP, pricing efficiency and economic resource use efficiency, to present a rich paradigm for assessing the economic performance of any business firm. Borrowing from systems theory and other management practices such as total quality management, we disaggregated the case firm into its component systems, sub-systems and processes, for separate study in relation to impact on TFP. The database for 41 years of rail behaviour is the richest ever compiled for any railway in Australia, and with enhanced modelling, enables a systematic treatment of the performance through time of State Rail's passenger services.