The new boss of Arriva’s UK bus business wants forensic scrutiny of what drives growth, and then bold action to deliver more of it

 

kevinoconnor

 

Kevin O’Connor was unknown in the bus industry when at the beginning of this year he was named as the new managing director of Arriva’s UK bus business. The 39-year-old joined the group in March from security firm G4S, where he held a variety of senior leadership roles, but he already seems at home in his new role.

O’Connor heads a business with a fleet of some 5,900 buses and over 16,000 employees in England and Wales – the UK’s third largest bus group after Stagecoach and FirstGroup.

But despite landing such a high flying role ahead of his 40th birthday, O’Connor says that he had an unusual start to his career.

He didn’t go to university and instead worked in a number of different jobs, including a spell as a cocktail barman in London. By the time he reached 20 he realised he was “going nowhere fast, in a dodgy flat with a dodgy car”, so he joined supermarket chain Waitrose as a shelf-stacker and soon found himself rising up through the ranks and into middle management. “My dream was to be a branch manager and have a company car,” he says. “That was my life aspiration.”

But, when he found himself helping to train the company’s graduate intake, he started to get frustrated. And when he asked when he would be able to make the next step up, he was told it would be about four years.

“I don’t understand the concept of time served,” he says. “You can have four productive years or you could have four wasted years – they’re not of equal value to me.”

He pushed to get on a graduate development programme but it wasn’t possible, although he’s pleased to note that the policy has changed since then. So, in 2001 he left to join Securicor (which later became G4S), running a coin warehouse where the main job was to process coins on behalf of bus companies.

O’Connor says he earned a reputation as someone who could fix problems quickly, and his reward was a succession of promotions into the worst performing areas. One of the challenges he and his team faced was to reduce the number of attacks on security staff taking cash to security vans. These attacks had reached epidemic proportions at around 1,000 per year. Working with the Home Office, the police, unions, the British Retail Consortium and British Banking Association, O’Connor and his team examined the causal factors, along with new technologies and new ways of working.

“You couldn’t fix the problem just by looking at your own industry,” he explains.

There are now around 100 attacks a year, a level which people considered impossible.

Subsequent roles with G4S saw him in the international logistics business, moving gold and diamonds around the world, and then a big logistics business which had a lot of parallels with the bus industry. However, after 14 years with the same firm he had a seminal moment.

“Somebody said to me – ‘you’re 38, are you going to work here another 20 years?’. I thought probably not,” says O’Connor.

The roles he had held at G4S had been very diverse, but he wanted a new challenge. A headhunter approached him about the Arriva role and he saw it as a perfect fit.

His research included Christian Wolmar’s 1998 book on Stagecoach’s “rags-to-riches tale”. He was attracted by the passion that buses inspire and how much they matter to people. But the thing that really got him excited was the business-to-consumer element and the entrepreneurial freedom.

He was impressed by Arriva too. He liked the Sapphire premium bus brand, perhaps best described as the bus equivalent of Waitrose, and he’s looking forward to seeing it roll out further. He also liked the App, although he wonders whether the group has been too shy in promoting it. It has now been downloaded 800,000 times, but he was concerned to discover that the teenage children of friends in his home town of Maidstone weren’t aware of it – even though they use two buses to get to school each day and appear to be permanently glued to their smartphones.

O’Connor wants to develop a much greater understanding what is driving growth.

“We really need to be clear about what people want and value, and why. And what their drivers are, and why … Then we can move at pace and be bold,” he says.

For example, Arriva has seen exceptional growth on its Service 10/10A between Liverpool and St Helens since replacing its fleets of single deck buses with new double deckers last February. The team and O’Connor have been “obsessive” about discovering what drove this growth, urging his colleagues to dig into the data. What they found has been illuminating.

Encouragingly the growth included a significant number of journeys from people who didn’t previously use buses, and they had been lured on board as a result of recommendations from friends. The big attraction was the extra space provided by the new Enviro 400 double deckers – the first new double deckers to enter St Helens since 1989. The single deckers they replaced weren’t overflowing – but perception is important. Whether or not the extra space was needed, the passengers welcomed it, and they also liked the Wi-Fi and the frequency (interestingly, there had been no increase in the service frequency, but for some reason the new double deckers led people to believe there had been).

O’Connor believes that bus businesses like Arriva are best placed to identify, understand and act upon these market dynamics, and he warns that this expertise will be threatened if PTEs are able to introduce franchising.

“The PTE does not hold the moral ground of ‘I care about people more than Kevin’ because I care about people as well,” he says. “My angle might be slightly different in that I care about people wanting to love and use my product, but it’s the same thing. Whatever your driver is, we have to have people on the bus.

“You can quickly get quite a principled and emotional argument whereas it needs to be a pretty simple one for me – what do regular, casual and non users want out of their mobility and how can we best deliver it?

“And clearly, I want Arriva to be the best.”

He welcomes the conclusion by the Quality Contract Scheme Board earlier this month that proposals from Nexus to introduce bus franchising in Tyne & Wear (where Arriva is a major operator) failed three out of the required five public interest tests. “It was a good day,” he says.

He says that the threat of franchising has at been an unnecessary distraction and has deterred investment in the industry.

“If someone said at any time we might take your house off you, and we can rent it to anyone, are you going to spend five grand putting a new kitchen in today?” he asks.

But Arriva is comfortable with bus franchising elsewhere – in London, where it operates 1,200 buses for Transport for London, and all over Europe. What’s different here?

“Actually in Europe, it’s going from state-owned into private sector – that’s why Arriva has done so well,” he says. “People are recognising that you need private enterprise. In a number of places it will be more commercial, I’m sure. That is the aspiration. We appear to be the only ones going backwards.”

Meanwhile, he believes that London, with its rapid population growth, is a unique case. Rather than seeking London-style powers over buses, O’Connor says that cities like Manchester should address congestion with London-style car constraint, such as congestion charging and higher parking charges (it costs £4 to park all day in Manchester, compared to £20 in London).

Greater Manchester, however, was the first of a succession of areas to be promised bus franchising powers in a devolution deal with chancellor George Osborne. This development has frustrated the industry, with senior executives saying it’s difficult to get near anyone close to the devolution agenda in government in order to convey their concerns. The Department of Transport appears to have been by-passed by their Treasury colleagues.

“The way I read it is that certain people have used this opportunity to grasp some personally held beliefs that franchising is the right thing to do … I think the problem is that that message has been listened to and the Treasury have not listened to, which is really surprising, the logic of you can’t afford it. It doesn’t make any sense. You really want local authorities to take all the revenue risk in a model that simply doesn’t work. You’re chasing after this pot of gold that simply doesn’t exist.

He adds: “I guess, from a Treasury point of view, there have been significant cuts and continue to be significant cuts, and this is where people are saying ‘let me have it and I’ll be happy’ – I can see why that’s quite attractive. I do worry that the Treasury’s not looking at the logic of it. It feels like the mess will be left locally, and the people who will suffer will be the passengers.”

He adds: “I think the term franchising doesn’t help, because this isn’t franchising. This isn’t a Costa Coffee shop that you’re looking for people to buy into.”

What is it then? “It’s confiscation and then contracting, isn’t it. It’s confiscation of goodwill at the very least.”

O’Connor is adamant that aspirations like smart, integrated ticketing, covering all transport modes and with fare capping – “a fair want” – can be delivered without franchising.

He points to Merseyside as an example of a city region where partnership working is currently blossoming. “If someone wants to have a free-thinking strategic discussion around how we can do things and be really open and really collaborative we are completely open for business,” he says.

 

Management changes

Soon after taking charge of Arriva’s UK bus business earlier this year, Kevin O’Connor made changes to the management structure. He says that his aim was to strengthen the marketing and commercial functions. Meanwhile, the struggling Arriva Midlands operation has been merged with fast-growing Arriva the Shires outfit, under the leadership of Mark Bowd.

O’Connor says that he recognises that it “caused a lot of people to feel very unsettled” but he says it was a bold, one-off set of changes to ensure that the business can move forward. He says that area MDs will make sure that the industry is close to the markets it serves, while a strong central team looks closely at what works and why, and then industrialises it.

“I think there was some concern [about] are we going to go down a cost cutting route?” says O’Connor. “I think the changes I made were misinterpreted, that they were cost cutting, but they’re not. I’m sure the FD would wish they were. We’ve spent money rather than taking it away.”

 

This article appears inside the latest issue of Passenger Transport.

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