Turnaround: How the Business Services Center Has Transformed the New York Metropolitan Transit Authority

An Insight from the 2015 Public Sector for the Future Summit

Part of a Series

This Insight is a part of the 2015 Public Sector for the Future Summit Report.

To see the complete report, click here.

In 2013, when Wael Hibri became the Senior Director of the New York Metropolitan Transportation Authority’s (MTA) Business Services Center (BSC), and Hilary Ring became Hibri’s deputy, the leaders had a problem. Established in 2009, BSC was supposed to save funds by consolidating the agency’s human resources (HR) and financial services. However, MTA’s employees believed that BSC had caused recent layoffs. They also faulted BSC for failing at basic tasks, like paying invoices. The organization’s problems were so great that many of Hibri’s and Ring’s colleagues expressed shock that they were taking the posts. Ring recalled, “People were like, ‘you’re going there!?’”

But the two leaders saw an opportunity. From their perspective, the frustration with BSC reflected a broader problem: with seven separate operating companies, MTA itself was fragmented and lacked “a common culture.” They felt that if they could change BSC’s culture and calm the critics, their unit could fulfill its mission, they could help the behemoth transportation agency achieve savings, and they could move its large back-office operation one big step closer to being an “optimized enterprise.” The question was how to convince 70,000 employees that BSC could help them achieve a common mission. As Ring said, this would take “every creative bit of energy they [the leaders] had.”

Established in 1965, MTA had over the course of 50 years evolved into a conglomeration of transportation providers. Consequently, the agency had seven operating companies, each with separate payroll, HR, information technology (IT), and procurement systems. For most of the organization’s history, stakeholders had been content to stay fragmented. This was in part because the divisions allowed people to lead in their silos. Operating company leaders also feared reforming the massive organization, whose $14 billion budget made it the largest transportation provider in the Western Hemisphere. “No one,” Ring explained, “wanted to rock the boat.”

We needed to own the problem to fix it. We never said the BSC was perfect, we always said, ‘Show me where it’s broken so I can fix it. Help me prioritize what the problems are so that we can get to the next stage.’
Wael Hibri
Senior Director, Business Services Center, New York Metropolitan Transit Authority

That sentiment shifted in the 1990s when state officials began pressuring MTA to decrease spending. HR as well as finance and operations were prime candidates for cutbacks. This was in part because other alternatives, such as reducing transit services, cutting back capital projects, and slowing compensation growth, would upset customers and unions; it also stemmed from a belief that with seven operating companies, MTA could manage finance and HR more efficiently. To figure out how to do this, MTA sought input from Booz Allen Hamilton, which recommended that the agency establish a shared services operation and consolidate the agency’s HR, procurement, and finance operations. Staff expressed concern that the consultants had not created a compelling “business case” for the move. MTA therefore sought a second opinion from Accenture, which concluded that with a shared services center, MTA could eliminate 40 percent of its HR and finance staff and provide the same level of service.

With the start of the Great Recession in fall 2009, MTA saw an almost immediate $1 billion hole in its budget due to shortfalls in dedicated tax revenues. For most organizations, this would create a crisis, but for MTA, it was fortuitous and after more than a decade of planning and discussion, created a powerful impetus for change. In addition to allowing cuts to be made across the board in staffing and services, the upheaval enabled MTA’s leadership to push for the BSC to become a reality.

That sentiment shifted in the 1990s when state officials began pressuring MTA to decrease spending. HR as well as finance and operations were prime candidates for cutbacks. This was in part because other alternatives, such as reducing transit services, cutting back capital projects, and slowing compensation growth, would upset customers and unions; it also stemmed from a belief that with seven operating companies, MTA could manage finance and HR more efficiently. To figure out how to do this, MTA sought input from Booz Allen Hamilton, which recommended that the agency establish a shared services operation and consolidate the agency’s HR, procurement, and finance operations. Staff expressed concern that the consultants had not created a compelling “business case” for the move. MTA therefore sought a second opinion from Accenture, which concluded that with a shared services center, MTA could eliminate 40 percent of its HR and finance staff and provide the same level of service.

With the start of the Great Recession in fall 2009, MTA saw an almost immediate $1 billion hole in its budget due to shortfalls in dedicated tax revenues. For most organizations, this would create a crisis, but for MTA, it was fortuitous and after more than a decade of planning and discussion, created a powerful impetus for change. In addition to allowing cuts to be made across the board in staffing and services, the upheaval enabled MTA’s leadership to push for the BSC to become a reality.

From its beginning in 2009, the BSC group faced challenges. One was that before the organization was established, many operating agencies, knowing that the administrative functions that they now performed would soon be transferred to BSC, had stopped carrying out crucial tasks; as a result, as soon as BSC opened its doors, it was immediately struggling with backlogs. Also, because the agencies themselves determined which employees would move to BSC, the highest performers often remained at their home operating agencies but in different positions. This meant that the most knowledgeable and effective operators were not part of the new system. Making matters worse, 40 percent of MTA employees who performed the tasks that BSC would now undertake were laid off. This further diminished BSC’s popularity.

In an effort to mollify opposition, BSC attempted to adapt to MTA’s operating companies, but this created more problems and calcified the opposition. For instance, rather than establishing one payroll system for all MTA companies, BSC altered its approach for each operating company. “The result,” Ring recalled, “was cumbersome [and] expensive” and very difficult for BSC to manage. BSC also did not create a common procurement system because the operating companies’ leaders felt that any procurement consolidation would interfere with their ability to provide transportation services. The result was a disconnect between invoice processing (which BSC managed) and purchasing (which was not centralized), and many bills were sent to the operating companies and went unpaid. BSC became deeply unpopular with MTA’s managers and rank and file, and soon “BSC” stood for dysfunction.

When Hibri and Ring became the BSC’s new leaders in 2013, they realized that they would need to do more than pay invoices to solve MTA’s problems: they needed to create a “common culture.” To accomplish this, the leaders organized cross-agency discussion forums where staff could constructively air grievances and raise concerns, with the hope that these dialogues also would help bring together people from different parts of MTA. (Hibri noted that his predecessors dealt with each agency individually “to prevent agencies from bouncing off each other’s negative energy.”) The forums also provided an opportunity to distill fact from fiction when it came to staff concerns. Hibri explained, “You cannot complain about any problem unless you can demonstrate the problem…. So we went from narrative and anger into a facts-based discussion.”

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The discussions constituted one of many approaches BSC employed to counter the negative impression that BSC’s early performance had created. Another was focusing on transparency by releasing as much information as possible about peoples’ concerns and how BSC was addressing them. The organization also sent monthly performance metrics to MTA leadership and created a steering committee with the executive vice presidents from the different operating companies. This provided another forum in which people could voice qualms; it also helped BSC to address those issues and manage customers’ expectations. Finally, BSC asked people to prioritize concerns and developed an “escalation process” to address the biggest problems first.

The dialogue helped BSC to focus its mission and get a series of “quick wins” that bolstered its credibility. For example, while accounts payable had been a huge problem for BSC when it began, the organization reported to MTA’s board that by 2014, BSC was late on just 44 of 500,000 invoices (a 99.99 percent success rate) and that only 20 invoices had been double paid. Benefits open enrollment had occurred smoothly as well, and payroll, probably the most vital of BSC’s functions, was, as Hibri said, operating “cleanly.” Within 12 months, Hibri and Ring had made substantial progress; BSC was now seen as a boon, not a bane, to MTA.

When MTA’s COO, to whom Hibri reported, resigned, a new reporting structure was needed and BSC was moved into the CFO’s organization. As Hibri explained, this was like walking into the “lion’s den.” MTA (which was in perpetual deficit) and its leadership, particularly the CFO, were always looking to generate savings—including potentially making budget cuts at BSC. Instead, BSC’s leaders argued that in a $14 billion agency, the greatest savings opportunities had to come from outside their 400-person operation. In fact, BSC even boldly requested $49 million to update the PeopleSoft enterprise resource planning system that they had been using, arguing that it could be used as a platform for long-term MTA-wide standardization and efficiency. After less than an hour of discussion, the CFO backed the effort. Based on BSC’s success at delivering shared services, MTA soon consolidated IT and non-operational procurements under Hibri as well.

When Wael and I took the job…people looked at us like we were crazy. We had good jobs, we’d both [been] at the MTA for a long time. People were like, ‘You’re going there.’
Hilary Ring
Deputy Senior Director, Business Services Center, New York Metropolitan Transit Authority

Hibri and Ring have already delivered on part of the goal of generating recurring efficiencies. In 2015, BSC will save MTA $18 million in operating costs and another $45.5 million in cost avoidance from not having to replace old legacy systems across MTA’s operating companies. The IT consolidation will deliver savings of six percent on a $300 million IT budget, and next year they expect that figure to increase to seven percent. Procurement consolidation is on the hook to generate over $10 million in annual savings. And with PeopleSoft, MTA now has a common platform with cross-MTA data visibility. This creates the opportunity for further savings down the road.

Looking ahead, Hibri and Ring still have a long way to go to transform MTA’s BSC into a fully “optimized enterprise.” Nonetheless, they have already taken a critical step: by fostering an approach centered on facts, transparency, and “collaborative ownership,” they have reshaped the organization’s culture. As Hibri explained, they “needed to own the problem to fix it.” Now they have to continue to seize that momentum and help move MTA to the “edge” of the “optimized enterprise” spectrum.

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