The Business of Government Hour

 

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The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. The executives discuss their careers and the management challenges facing their organizations. Past government executives include Administrators, Chief Financial Officers, Chief Information Officers, Chief Operating Officers, Commissioners, Controllers, Directors, and Undersecretaries.

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Join the IBM Center for a weekly conversation about management with a government executive who is changing the way government does business.

Roger Nober interview

Friday, April 16th, 2004 - 20:00
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Roger Nober
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Sat, 04/17/2004
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Roger Nober
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Wednesday, October 29, 2003

Arlington, Virginia

Mr. Lawrence: Good morning and welcome to The Business of Government Hour. I�m Paul Lawrence, partner-in-charge of The IBM Center for The Business of Government. We created the Center in 1998 to encourage discussion and research into new approaches to improving government effectiveness. You can find out more by visiting us on the web at www.businessofgovernment.org.

The Business of Government Hour features a conversation about management with a government executive who is changing the way government does business. Our conversation this morning is with Roger Nober, chairman of the Surface Transportation Board.

Good morning, Roger.

Mr. Nober: Good morning, Dave. Good morning, Paul. Thank you for having me here.

Mr. Lawrence: And joining us in our conversation is Dave Abel.

Good morning, Dave.

Mr. Abel: Good morning. Thanks for having me.

Mr. Lawrence: Could you tell us more about the Surface Transportation Board.

Mr. Nober: The Surface Transportation Board, which we affectionately refer to as the STB or the Surf Board, is an economic regulatory agency that oversees primarily rail and a small amount of trucking and water shipments. It is the successor agency to the Interstate Commerce Commission, which is the nation�s oldest federal regulatory agency.

We have about 140 employees, down from maybe 2500, which we had 25 years ago. Most of the industries which we oversee have been deregulated, so primarily motor carrier and water rates, which had been very heavily regulated from the 1930s through the 1980s, are now market-based, and we have just a very few people who deal with that, and the bulk of our staff works on rail-related matters.

Railroads are an interesting industry in that they�re both partly a regulated utility that serves customers that solely rely on rail and have no competitive options on the one hand, and we have oversight to ensure that their rates are reasonable and their service is fair; and on the other hand, they�re competitive with trucks and they operate in a competitive marketplace, and we have no role in that part of it.

So we do have a great deal of influence with the rail industry and we try to use that to help iron out problems informally as they come on. We review rates; complaints that rates are unreasonable, that service problems arise, and perhaps very importantly also, we review and approve mergers between railroads.

Mr. Lawrence: What are the skills of the 140 people?

Mr. Nober: We have a variety of people who work for us. We have many lawyers who process the cases that the rail industry needs to continue forward. Being 150 years old, it has a lot of statutory regulations on it to get rid of track, to lay new track; you know, any number of things that most private companies wouldn�t need government approval for, railroads do. So we process those, and that�s probably about a third of our staff. Then we are also an economic regulatory agency.

We have to review whether rates are reasonable, so we have a team of economists, engineers, and industry analysts who are able to look at and apply sophisticated models to complaints about rates and evaluate whether they�re reasonable or not.

And finally, we have a team of environmental specialists. Any time anybody wants to lay a new rail line, we have to approve that and conduct the environmental review. So we have an environmental section, and that�s become a busier and more controversial area in the last few years. And finally, we have folks who are industry specialists who help informally work out service issues.

So, you know, a shipper will call up with an issue here or there, and they will try to help mediate it or bring about a resolution, but people who have to really understand what it means to operate a railroad, to do that effectively, and enjoy that railroads are operating smoothly.

Mr. Lawrence: You talk so much about transportation in your description. What�s the relationship between the Board and the Department of Transportation?

Mr. Nober: Well, it�s an interesting and somewhat unique one. We are decisionally independent. So the substantive matters we decide, the cases that come through us and our policies that we implement, we are, by statute, independent from DOT and from the Secretary. So we function like an independent agency.

On the other hand, we are administratively affiliated with the Department of Transportation. We all are technically DOT employees. They do our payroll. We use their copy machines. I�ve got a DOT I.D., as does everybody else. So we�re kind of neither fish nor fowl, and I think only the Federal Energy Regulatory Commission is kind of in a similar hybrid situation. But I work with DOT and have very good relations with the folks there and we informally cooperate with them on any number of matters.

Mr. Abel: Can you tell us a little bit about your responsibilities and duties as the chairman?

Mr. Nober: Sure. We�re a three-member, bipartisan agency. Right now, I�m the only member, and for the first time in the 125-year history of the ICC and STB, we only have one member, and I think I�m the only multi-member agency in the government that�s ever been alone for this long. So I kind of joke with people that I�ve finally reached the point in life where everybody has to listen to me.

Mr. Abel: Because you�re the chairman and the board?

Mr. Nober: I�m the chairman and the full board. Now, the President has announced that he�s going to nominate two new folks, and hopefully they�ll be in place before the end of the year and we�ll be back to our full complement.

My duties as chairman are, first of all, to set the agenda and policies, and as chairman, you know, that�s really -- having spent eight years on Capitol Hill, working for one of the most powerful chairmen there -- that�s really the main power that a chairman has, is to set the agenda and decide what goes forward and what doesn�t.

I believe in running a cooperative agency, so I work very carefully with the other board members, when I have them, to try to come up with consensus on the agenda, but my job is to really map out and drive the agenda of the agency and what kinds of policy issues we want to take.

Secondly, when it comes to the decisions that we render, we both set new policies and we decide disputes. When it comes to disputes, I am the administrative head of the agency, so the staff report to me. So I first review and ensure that the decisions that go forward are ones that I�m comfortable with, and then sit down and work with the other board members to try to bring them along, but I kind of make a decision in the first instance on matters.

Finally, as I said, I�m the administrative head of the agency as well, so I approve all hiring, firing, transfers, budget; prepare the budget, decide on disbursements. Some of that has to be collectively approved, but preparing and setting priorities in the first instance is my responsibility.

Mr. Abel: You mentioned a number of years that you spent on the Hill. You�ve had an interesting career leading up to your current role. Can you tell us about your previous experiences before being chairman of the STB and how they have impacted the decisions that you make and the background that you brought to the position?

Mr. Nober: Well, sure. You know, I got involved in transportation because it�s an area that I just like and always have since I was a kid. When I was in college, I wrote my thesis on a beltway, and when I was in law school, I wrote my note on environmental litigation and transportation project. So while I spent four years in New York, after I graduated from law school, working on a variety of securities-related matters, I really was very fortunate to be able to come to Washington and be involved in transportation. It was kind of a fluke that I wound up going from what had been the country�s largest law firm to Capitol Hill, and it�s hard to explain how I quite got there, but I was very pleased to be able to -- I was offered a job on, at the time, the minority staff, in the House of Representatives, and this was in the 38th and 39th year of the Democratic majorities, and the idea that I would ever be anything but a minority staffer was incomprehensible. I mean, it was just laughable. But proving that it�s sometimes better to be lucky than to be smart, I took the job and I was the junior-most staffer on the minority side of the largest committee in Congress.

Ironically, the chairman at the time was a Democrat named Norm Mineta from California, who will factor into this a little bit later, and the ranking Republican was someone from Pennsylvania named Bud Shuster, who is, you know a well-known figure in the transportation world. And, you know, in 1994, you know, the country voted a Republican Congress. It was quite a shock. And then I went from being, you know, instead of a junior staffer on the minority side, to being the head of the largest subcommittee in the Congress, the Surface Transportation Subcommittee.

One of my first duties, when I was in the majority, was to be the principal staffer for a bill eliminating the Interstate Commerce Commission and creating the Surface Transportation Board, and a lot of the policies and philosophies that I bring to the job were borne of that exercise. The ICC was the only federal agency to be eliminated, and we can talk in a little bit why that was.

You know, to my mind, when I manage the agency now, it�s really keeping in mind why was this agency in the past eliminated and, you know, what are our core missions and how are we going to focus our energies and resources on those.

I was promoted to the chief counsel of the committee and was the principal staff person responsible for drafting TEA-21, and spent many years on that, and that was a terrific experience as well, and when Bud Shuster left, he was term-limited out of staying on as chairman which, again, was incomprehensible when term limits were adopted that Republicans would ever be chairman, no less be chairman for long enough to have term limits kick in. It was an unthinkable outcome.

I started working for Don Young and spent six years with him as the new chairman as chief counsel of the committee, and Michael Jackson, who was then just the recently-named Deputy Secretary of Transportation, and Norm Mineta asked me to come over to DOT to serve in a sort of senior capacity there as counsel to Michael Jackson at the time. And that was an interesting transition, going from the Legislative Branch to the Executive Branch and, you know, learning different skills and understanding how to manage an administrative agency rather than politically how to legislate.

Bud Shuster was considered to be the best legislator in a generation, and was responsible for much of the major transportation legislation that is pending now, and learned a great deal about, you know, how to get bills to the President�s desk that reflected what the members wanted to see, and I was I think a fairly experienced and successful legislative aide there.

At DOT, there were a different set of challenges, and Michael was a tremendous manager and the Secretary was a tremendous leader. I learned a great from them about how to manage an agency, and after about a year or so with them, they were -- you know, DOT was a factor in selecting a new STB chairman, and they asked me if I�d be interested in taking on that role and I was. And this was after September 11th, and it seemed like it�d be an interesting challenge. And so after a somewhat extensive process, I was nominated by the President in July of 2002 and confirmed in November of 2002, and here I am.

And, you know, one irony is that in 1995, the night that the House of Representatives passed the conference report eliminating the ICC and establishing the STB, the subcommittee chairman at the time, who didn�t really think we were eliminating the agency, so he didn�t love the bill, said, well, you know, there�s a good job for you when you leave Capitol Hill. You can go to the board, and I said, oh, don�t worry, Mr. Chairman, I�ll never go to the STB. So shows you what I know.

Mr. Lawrence: That�s an interesting point, especially how the dots all connected with the people.

What is reauthorization and why is it important? We�ll ask Roger Nober of the Surface Transportation Board when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I�m Paul Lawrence, and this morning�s conversation is with Roger Nober. He�s the chairman of the Surface Transportation Board.

And joining us in our conversation is Dave Abel.

Well, Roger, at the end of the last segment, you were talking about your career. You�ve been in both the Legislative and Executive Branches, and I�m curious, how would you contrast or compare the management styles?

Mr. Nober: Well, from a management standpoint, it�s interesting. They�re both about process, but different kinds of process. On Capitol Hill, it�s a legislative process, where you both have to try to reach consensus within your own party and members on the one hand, and then with the minority on the other hand, and then bring that through one body, then sit down with the Senate, you know, with the other body, work out something with them, and then ultimately bring something to the President. And it�s about reaching consensus, but in a broader way, where a lot of people have different inputs into the process with a very small staff, and the goal was to really try to synthesize what are the key important things that the members who you represent are trying to see accomplished and what�s the best way to see that accomplished in a way that gets to the President�s desk. On Capitol Hill, there are many fewer people handling matters. It�s a small group of folks who you�re constantly having to work with, and you need to manage both the views of the members, the views of the external groups, and the views of the Administration and try to synthesize them all in a way that you think the members will understand, and from my standpoint, you know, the members trusted me when I was the chief counsel of the committee to know what I needed to know, but the judgment, the art of it, was to be able to tell them what they needed to know and to try to synthesize it in a way that they could make decisions. And that�s a much more difficult thing than just telling people everything that you know.

When I went to the Administration, I found that there were many more people who were involved in various policy matters. Rather than having one or two, you might have, you know, departments of a hundred. Part of what they were doing was implementing programs on a day-to-day basis, and that�s a different set of skills, and part of it is in implementing the general directives that are set out by the Congress.

One of the interesting things I found in the Executive Branch was the importance -- and some of the things are very similar. For example, dealing with the interest groups, dealing with Capitol Hill the same way and understanding what the world at large thinks of the kinds of decisions that you�re making, and those are similar kinds of judgments.

On the other hand, within the Administration, there are many more layers that one needs to go through. There�s the operating administrations at DOT. Then there�s the full DOT and what the Secretary wants. Then there�s the OMB-White House end of things, for anything that has major policy or financial implications, and all of those are factors that go into a final decision.

In some ways, it�s not terribly unlike Capitol Hill, where the various interest groups and interested parties would all have their influence at some point, but in the end, the legislative process is a very personality-driven, almost an idiosyncratic process, if you will, and the Administration process is very set, informal, and it goes up through a chain of command and has certain steps that have to be followed, and managing that in an effective way is different. It requires a different set of skills than managing legislation. And getting an appreciation for what those are has been, you know -- it was very valuable time that I spent at DOT.

Finally, I will say that one of the interesting differences between the Administration and Capitol Hill is the difference to which folks in the Administration can set the agenda in a way that you can�t on Capitol Hill. Even if ultimately, when it comes to the ability to effect statutes and policy from a macro level, in some ways you have a lot more ability on Capitol Hill to do that because you affect the laws that get passed.

In the Administration, the general perception in the world at large is that they really set the agenda and implement it and are responsible for managing programs, and by and large, that�s true. So what I found when I went to the agency is that simply, you know, taking action generated a good deal of interest and culture change, and so I learned that at DOT. Michael Jackson, whom I spent time with, was a master, if there ever was one, at understanding the ability to set the agenda and how to use that to accomplish your aims, and I hope I�ve been able to set forth just a little bit of what he taught me.

Mr. Abel: Roger, let�s change gears a bit and talk specifically about the Surface Transportation Board. The reauthorization for the board passed earlier this year. Can you give us some highlights and tell us a bit about what was in the reauthorization?

Mr. Nober: Sure. It didn�t get through the full process. It was reported out by the Senate. It mainly reauthorized our agency for several years, which had been a point of contention with the ICC, that Congress didn�t go in and periodically review it and make changes to the laws to calibrate its regulatory regime to the marketplace.

That led to some very odd and unfortunate results by the ICC, and led it to -- ultimately that people threw up their hands and say we don�t need the agency at all and, you know, one of the things that�s -- and I�ll get to the question in a minute, but the ICC -- sometimes in Congress, you legislate by anecdote, and anecdotes seem to capture a mood., and the ICC was criticized for two kinds of cases. One was -- back then, it had 11 members -- and there was a dispute on the trucking side as to whether the rates you charge for carrying candy canes with straight tips ought to be the same as candy canes with bent tips.

Now, this went through a five-year proceeding, where the board ultimately voted and decided this, and people said, you know, for God�s sake, why in the world are we having a government agency deciding whether candy canes with straight tips or bent tips ought to be charged the same? And if you looked at the doctrine, just from a micro level, it fit and it was an important decision to make, but if you stepped back from a macro level and said why in God�s name is the government deciding this, how much does a box weigh and pay it. You would eliminate the agency, and by never being reauthorized, the ICC�s doctrines and regulatory regime never caught up to the marketplace. So so much pressure built up, people just said get rid of it.

So I think reauthorization bills are important because they give the people a chance to say here�s what the agency�s mission is. Here�s what its statutory oversight is. If we think there ought to be changes, we�ll make them and let the agency�s mission and charges conform to the current realities.

The reauthorization bill was relatively sparse. It gave us a few more resources because we�re going to try to take on some new missions going forward. It made some administrative changes to the way commissioners are appointed, which again were relatively minor things and within the Senate�s prerogative, and it directed us to do one new major policy initiative, which was to look at ways that smaller shippers would be able to challenge rates before our agency.

And again, that kind of a bill reflects general consensus with what our agency ought to do. And the oversight process is helpful because, you know, all the folks who are stakeholders in the agency have been put into the legislative process, and if it gives us significant changes, then that shows we ought to be changing, and if there are very modest changes, it shows that we�re basically on target.

So having been a Congressional veteran, I think those reauthorizations are very important. I worked with the Senate on putting that together and I hope that it gets through the Congress.

Mr. Abel: With a number of the guests that we�ve had on the program, we�ve talked about the Surface Transportation Act reauthorization and the DOT. What�s the relationship between that reauthorization and its impact on the reauthorization for the board?

Mr. Nober: Substantively, very little. From a practical, political standpoint, the reauthorization of the highway and transit programs are something that have to pass because tens of billions of dollars a year are tied to Congress, deciding how that money�s going to be spent. So that�s a lot of legislative pressure to reauthorize surface transportation programs, and they have a tendency to kind of drag along all the other minor things with it.

Our bill hasn�t passed for several years because there are a core of Senators and Congressmen who feel very strongly that far more significant changes ought to be made in the legislative process, unless there�s a reason why you have to do something, it gives people who have that kind of ability -- they can�t affirmatively accomplish, you know, those kinds of changes, but they can stop a bill that doesn�t do them. And that�s the situation we�ve been in since 1998 with our agency.

A large Surface Transportation bill, which, you know, I have a little bit of experience in, having been the principal staff person for the one that�s expiring, that kind of bill can drag -- you know, you can just add all kind of things to it, and so it�s conceivable our reauthorization could get added to it.

It also occupies a lot of the attention of the transportation world, and as we talked about earlier, it�s not that big a world. So most of the folks who are focusing on things are focusing on that because, you know, that�s where probably almost close to $300 billion will get spent over the next six years. That�s a lot of money.

Mr. Abel: A couple of weeks ago, we had Emil Frankel, who, as you know, is the Assistant Secretary for Transportation Policy, and he talked to us about the state of the passenger rail industry.

The other side of the coin, can you tell us a little bit about the state of freight rail transportation in the United States?

Mr. Nober: Sure, and I think it�s both good news and some bad news. I think the good news is that our freight rail system has in many ways not been better for several generations. We have four reasonably strong and healthy companies that do the predominant amount of freight rail in the United States that are not national companies, but regional companies.

We then have several smaller but still significant major railroads; two Canadian and one American, and then we have a very vibrant and healthy short line industry, which are railroads that run really spurs or small segments of lines that connect with the major railroads and provide a feeder network. And from an operational standpoint, for the first time in many years, the amount of freight that railroads are carrying is growing. They�re able to attract business off of trucks. You know, containers that come in from ports are now primarily carried by railroads, and railroads have been able to focus their business rather than on shrinking their networks and avoiding losses, and instead on growing their businesses and improving their financial health. So in many ways, the rail system is in the best shape it�s been in. It still faces challenges though. It�s a very expensive, capital-intensive business.

About 18 percent of railroads� revenues need to go back into capital expenditures, which is by far the highest of any major industry in the United States. And as I said before, railroads are kind of a split personality. On the one hand, they have traffic, which has to go on them. Coal, for example, that�s mined and goes to power plants; grain, some kinds of chemicals.

It�s what we call captive traffic, where the manufacturing process or the mining process or the milling process demands the weight and volume and efficiencies of rail be used, but really, there�s not enough of a market for two rail lines to serve individual plants. So the shippers feel that they�re captive, if you will, is the term of art, to one carrier, and that that carrier has a lot of ability to charge them at, you know, high prices, and that traffic is pretty much a defined universe. I mean, we have all the chemical plants, you know, that we have. All the power plants. And if new ones get built, it�s relatively rare.

On the other hand, for railroads to grow their market, it has to come from freight that could otherwise be carried on trucks, and there are probably 75,000 over-the-road trucking companies, and it�s a very brutally competitive market. And for railroads to attract that freight, they have to provide good service and better prices and take advantage of their efficiencies of carrying a lot of goods a long way very cheaply, and it�s a challenge for them to be able to continue to grow their business and charge enough to generate enough revenue to invest back in their system.

And it�s in some ways a conundrum. You know, railroads, to grow their markets, have to be able to provide better service and in order to provide better service, they have to be able to invest in their networks and have their tracks in good shape and not have delays and slow orders and things when they have to slow down, but in order to be able to have enough money to invest in their system, they have to generate enough revenues to invest in them, and to generate enough revenues to invest in them, they have to be able to provide better service.

So it�s a conundrum that they�re in. They can�t grow unless they give better service, and they can�t give better service unless they grow. And so part of our job is to help railroads navigate through that very difficult thing. The market has demanded that freight railroads succeed, because they need them to.

Mr. Lawrence: How is performance measured and what�s done with this information? We�ll ask Roger Nober of the Surface Transportation Board when The Business of Government Hour continues.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I�m Paul Lawrence, and this morning�s conversation is with Roger Nober, Chairman of the Surface Transportation Board.

And joining us in our conversation is Dave Abel.

Well, Roger, in the last segment, you described the industry, and I�m curious: I understand there�s a moratorium on mergers after extensive merger activity. Could you give us the state of this?

Mr. Nober: By way of background, in the mid-to-late �90s, there were several large rail mergers. Union Pacific merged with Southern Pacific. Burlington Northern merged with The Santa Fe. Conrail merged with Norfolk Southern and CSX, and ceased to exist. And so we had a period of industry consolidation where we basically had two large railroads west of the Mississippi and two large railroads east of the Mississippi, and all of those mergers produced some difficulty in integrating the two railroads into one unit.

In the late 1990s, in 1999, one of the big Western railroads, Burlington Northern, proposed to merge with Canadian National, which had an extensive U.S. network, and form an intercontinental network. That created a great deal of consternation in the industry that we would then have consolidation down to just two. My predecessor, as a result of that, announced a moratorium on mergers to give the companies a chance to consolidate what they had. And that moratorium ended, and produced instead new guidelines to govern how our agency looks at mergers.

On the one hand, I support the merger guidelines and think that they require companies that want to merge to come in and show the kinds of changes they would want to make in putting a safety integration plan in, but, you know, I don�t have a predisposition on mergers. Our agency was set up as an independent agency, primarily to look at mergers on their merits and not let political influences govern how we look at them. So if there�s going to be a merger, we�ll look at it fairly. We�ll look at it on the transaction, and we�ll apply the merger guidelines, but what weight and value we�ll give to them, I�m not sure.

I do, however, think that my view of -- an administrative body view of mergers -- is really less important than the view of the railroads, the view of their shareholders, and their customers. If they feel that to really be valuable and productive entities in the long run, they need to be transcontinental, they�ll merge, and there isn�t that much as an administrative body that we can do to stop that.

On the other hand, if they think that their best way of succeeding in the long run is staying the way they are, then that�s what they�ll do. But I think it�s investors and customers that are going to drive that and not a glorified bureaucrat like myself.

Mr. Abel: Roger, the current Administration has a strong desire to accurately measure and record the performance of government agencies across the board. Can you tell us a little bit about how the board is measuring its performance and what type of measures you�re using?

Mr. Nober: We�re not a grant-making agency, and so we�re not able to set performance measures the way that other agencies are. In the same kind of way, we can�t say are we, you know, having this level of fraud or this level of grant; you know, tailoring our programs to meet our current priorities. However, I believe very strongly in performance-based management, and what I�ve tried to do is manage our resources in a way that maximize what I think our core missions are. So we are there to review rate and service complaints, and I�ve taken staff who have similar skills from different departments and put them on rate cases to help us process them on time.

One way I measure performance are statutory deadlines. We have statutory deadlines for resolving disputes. Have we done that? Our agency doesn�t miss its statutory deadlines and it�s very important to me that we continue not to.

By way of example, though, we face a significant management challenge on that. Our large rate cases are big, expensive, time-consuming matters with records of 700,000 pages, with complicated algorithms that help us decide whether rates are reasonable or not, and we normally have two to three pending at any given time, and right now, we have 13. So we�re basically trying to process, with the same amount of staff, four times as many cases.

I�ve tried to take resources away from places where we may not be as busy and put them on those cases to ensure that we meet our statutory deadlines. That, to me, is a clear performance measure.

We have environmental review responsibility, and trying to ensure that our reviews are done as quickly as possible in a way that addressed them and are legally sustainable is another top priority. I�ve again moved staff away from other resources and put them on there. Part of my job is to step back and look at what do people expect of us. What are our responsibilities, and that�s to resolve cases fairly, quickly, professionally, and within the deadline set by Congress, and I measure performance that way, and I�ve had to try to move resources and allocate them to ensure that we�re continually able to do that.

Sometimes it�s little things, like, for example, I�ve reinstituted hearings and oral arguments on cases and decisions; you know, public meetings to decide matters, when in the past, we used to just vote them on paper, and a lot of folks would like to come to that but they can�t always make it. So I�ve taken some money aside and we�re redesigning our website to have streaming audio which, you know, for those of you in the radio business might seem like yesterday�s news, but to our agency, is pretty forward-thinking. And so, that again will help us perform in a way that helps our stakeholders understand what we�re doing and why we�re doing it.

Mr. Lawrence: You make a good point about the uniqueness of the kind of information that you deal with, and that it�s not rote administrative tasks, but you did talk about the timeliness of the processes being completed. How do you look at the quality of the decisions that come out?

Mr. Nober: Well, as with any kind of matter, it�s somewhat arbitrary and somewhat affective, and to my mind, are they persuasive? Are they decisions that don�t require a lot of rewriting or revising by me? Are they consistent with what kinds of decisions I think ought to be made and with the parameters of the case? And many of our cases are appealed to court, and are cases being upheld in court, and our agency has an excellent record in having its decisions upheld by reviewing courts.

They�re not always. You know, we had a very controversial matter in South Dakota that was recently sent back -- an environmental review -- that was sent back to us by the Eighth Circuit. I think our agency�s analysis was excellent, and the court struck some new ground in finding a way to send it back to us and, you know, those things will happen. People are people, and judges are people, too, and they have their own individual perspectives on things and you can�t predict everything, but, you know, with matters like that, there is a certain amount of art to deciding what high quality is and what high quality isn�t.

You know, 90-some-odd percent -- about 92 percent -- of our budget is salaries and expenses and rent. So we don�t have a lot of, say, grant-making. You know, I say that because at DOT, about 80 percent of our budget was for grants, and so performance could be measured on our grants going out on time. Are they meeting the purposes? Are we overseeing the money and how it�s spent to ensure that we�re getting the return on the investments that we want? How are our grantees being selected? I mean, there were any number of performance measures you would put on at a grant-making agency.

Our agency is an adjudicatory one, and so it�s harder to measure it, but it�s still important that we do, and when matters don�t meet my satisfaction, or my predecessor�s satisfaction, they get sent back and staff understands it. When they do, you know, I tell them good job.

Mr. Abel: During our conversation, you talked a little bit about your stakeholders. You talked about the industry that you�re regulating. Can you tell me a little bit about the relationship that you have, your organization has with the organizations that you are regulating?

Mr. Nober: Well, it�s a very interesting question, because on the one hand, we are almost like a court, and on that, we have to maintain an arm�s length relationship with the people who are litigating before us. On the other hand, we�re a regulatory body and we need to work with the stakeholders to try to forge consensus and advance our regulatory doctrines. So we both have to work very closely with them, and on the other hand, keep at arm�s length from them, and it�s sometimes very difficult to meet that balance.

Because railroads and shippers occupy kind of the same relationship with one another, they, on the one hand, need each other and have to work together, and on the other hand, have disputes which they litigate before us. And sometimes our stakeholders call upon us to try to help resolve things, and because of our agency�s role in the regulatory process, we carry a great deal of weight with both parties. And my predecessor and I have both tried to use our agency�s reputation and persuasiveness with the parties to try to work through and come up with, you know, negotiated or mediated solutions and try to help the parties work together.

I�ve had a great deal of personal success in that. My predecessor, for example, was able to get the parties, all the railroads and the City of Chicago to work together on rail issues out there to come up with a plan to revise the rail system in Chicago, to help smooth it, make it more efficient, and improve the flow of goods.

Now, a third of all rail traffic flows through Chicago and of the sort of anecdotes that I don�t like to use, but I use all the time anyway is it takes two days to get to Chicago and two days to get through Chicago. So improving the flow and the handoff between railroads in Chicago really has national repercussions, but because Chicago�s the end of everybody�s line, they would all focus on other places. And the city is filled with rail lines and they had an interest in seeing issues worked out as well. We were able to get the parties together, sit down, begin to talk about ways to improve things, and operationally, improvements have been made in Chicago, and now we have a capital plan to work on things that just operations can�t help with. And so again, a lot of the parts of the job are art, not science, and you try to use your influence where you can to improve the operations of the freight system, and I�m a big believer in that.

Mr. Lawrence: That�s an interesting point about Chicago. I�ll think about it the next time I�m there.

What does the future hold for the Surface Transportation Board? We�ll ask Roger Nober, when The Business of Government Hour returns.

(Intermission)

Mr. Lawrence: Welcome back to The Business of Government Hour. I�m Paul Lawrence, and this morning�s conversation is with Roger Nober, chairman of the Surface Transportation Board.

And joining us in our conversation is Dave Abel.

Roger, in the last segment, you were talking about working with the various stakeholders through different situations, and I�m curious, what are the lessons learned you�ve had from that experience?

Mr. Nober: Well, I�ve found in my time on Capitol Hill and at DOT and now at the agency, it�s most important when dealing with stakeholders to be fair and give them confidence that you�re treating them with respect, listening to what they have to say, and giving consideration to the perspectives that people bring. You don�t have to agree with people all the time, but you have to be respectful of their positions and why they�re doing it.

I think in Washington, 99 percent of the people who are here and who are involved in policy, either from the private sector side or the lobbying side or from the government side, are here because they want to do the right thing and they believe in what they�re doing or representing a perspective. I�ve not agreed with a lot of people, but I�ve found that if you�re straight and you explain to them what you�re doing and why you�re doing it and why you agree or disagree with their position, people respect that and feel you have personal integrity, and if you give people respect in what they do and what they say, then they�ll repay that.

Even people for whom, when I was on Capitol Hill, I disagreed with and whose policy ideas and initiatives we worked hard to see stopped were very supportive of my nomination, because I think they always felt that I treated them with respect and listened to what they had to say, didn�t always agree with it, but nobody expects you to agree with them. What they expect you to do is treat them fairly and I�m a big believer in that.

In our process now, it�s very important to me that we give the sides and the different parties and perspectives full care and respect and not to be snide or in any way disrespect the folks who are bringing a perspective. That�s not to say we�re going to agree with them and that their arguments are going to always be persuasive, but we�re going to be fair and we�re going to listen and we�ll do the right thing. And I�ve never met anybody who begrudged any decisionmaker doing what they thought was right.

Mr. Abel: Roger, we live in a different world then we lived in a couple of years ago. Our world has become increasingly security conscious. It�s affected every mode of transportation. We�ve had a number of conversations on this program about the impact of security on a number of different modes of transportation. Can you help us understand a little bit what the impact of our new security consciousness has had on freight rail transportation?

Mr. Nober: Well, sure. Security is very important to me. I was actually sitting in breakfast with Secretary Mineta and Administrator Garvey of the FAA when the World Trade Center attack occurred, and spent much of the next year at DOT working on security matters. So I have a personal interest in ensuring security.

At the STB we both try to work with the railroads to ensure that security is a function of what they do, and I think that as an industry, they have really taken proactive steps to impose security measures on their far-flung networks. And so I applaud them for the efforts that they do.

I�ve spent a lot of time with the American Association of Railroads and their security folks to understand what they�re doing. And then on a personal level, I�ve taken a great number of steps to ensure our agency�s safety, to look at the threats that are faced to us, where we�re located, and to try to evaluate them and to take steps to impose security measures for our employees.

It�s difficult, because many of our employees have spouses who work for other agencies and not everybody does things the same way, but to me, ensuring that we have, you know, space to operate. If we can�t be in our offices in downtown Washington, we have a business continuity plan for continuing on with regulatory approvals and if there�s a security emergency.

You know, I�ve gotten a secure telephone unit to be able to coordinate with the Federal Railroad Administration, the DOT, and the railroads, on security measures. It�s hard to predict what kinds of things might happen in the future, but to me, being mindful that extraordinary security events might require us to take extraordinary steps in the future is important.

Mr. Abel: Now, security�s just one part of the change in the industry and one component of what we�ll see in the future. Two questions for you: I want to talk a little about the future of the freight rail industry and I want to talk a little bit about what you see for the future of the board. Let�s start with the industry at first. Over the course of the next five years, what type of changes do you see and how does the future look for freight rail transportation?

Mr. Nober: Well, I think the future is bright for freight rail transportation in general, but I think that there are changes from what our agency has traditionally done. Over the past 15 or 20 years, we�ve been looking at first deregulating and then consolidation, and I think consolidation is either near an end or coming to an end. There are four railroads now. We could really only have to get down to two. So there is a limited amount of consolidation that can occur.

And in the future, when we have fewer larger railroads, the challenges will be, as we�ve talked a lot about today, rates and services. People don�t like the way the railroad�s treating them. They�re captive to the railroad. They need to have a place to try to get their concerns addressed. So we need to have our resources going to addressing rate and service concerns, rather than mergers and consolidations and oversight.

I think you see that by the fact that we have, you know, 12 or 13 rate cases as opposed to two or three. It�s rates and service that are the future, and that�s where I�m trying to put resources into and the kinds of matters that our board has to focus on more in the future. Consumer protection will be a big issue, and we�re going to try to put more resources into that. Again, all these are informal matters, if you will.

And finally, environmental review is a place where increasingly, companies want to cut their transportation costs by building new and competitive rail lines. We approved those and they�re getting more and more controversial and difficult. So we need to have more resources there.

So, you know, I look at the future very carefully and try to make sure that our agency adapts to it.

Mr. Abel: One of the things that we�ve seen through the Department of Transportation is the importance of intermodalism moving forward. What�s the impact of intermodalism on freight rail transportation? Is it a positive? Is it a negative? And how will that impact the industry as we move forward as well?

Mr. Nober: Oh, it�s beyond a positive. It�s an imperative.

As I said, I just heard yesterday that the single-largest commodity group that freight rail carries is intermodal traffic. So, like it or not, the market is pushing railroads to be, you know, intermodal partners.

Traditionally, railroads and trucking companies have competed with one another, but right now, truck companies are the single-largest customer of the railroads. So they�re both competitors and customers at the same time, and that�s because customers don�t care how things get to them. They want things to move as smoothly and as efficiently as possible, and if it�s on a truck, if it�s on a railroad, if it�s on an ocean liner, they by and large don�t care, and it�s up to the transportation marketplace to provide the best service to the customer and freight rails are an integral part of that.

So I think that they�ll grow and they�ll prosper and they�ll compete and they�ll have all the fits and starts that have gone along with it, but I see them as being a growing and more important part of our network.

Mr. Lawrence: Roger, you�ve had some interesting challenges in your career and you�ve moved in some very interesting circles. What advise would you have for a person interested in a career in public service?

Mr. Nober: Well, first of all, I would encourage people to pursue it. Since I graduated from school 14 years ago, I�ve been in the public sector for all but 18 months of that. I�ve had some I think unique experiences in the public sector, on Capitol Hill, and at DOT and now at the agency, and I wouldn�t trade them for anything, and part of that was because I put what I thought was interesting and what I liked first, and I worried about money second. And at some point, you know, we�ll all have to worry about that, but to me, I think that the rewards of a public sector career have been just beyond anything that can be quantified. So I would encourage anyone who�s interested in government to pursue it. I�ve never met a person whose career was worse off for spending some time in the government than if they hadn�t, because it gives you a perspective and an understanding that if you deal with anything, anything that�s regulated, is absolutely imperative and I think most people are there for good.

I would encourage people to think about what kinds of things they want to do and to do what they like. I mean, I�ve always pursued what I enjoy doing, and that has led to, as we talked about today, a series of events that could never have been predicted, but I think I�ve been very fortunate to have been able to do.

You know, our agency, as I said before, has an older profile because when we were eliminated, many of the existing younger people who had less service had to go, and I�ve made hiring new people a priority, and we�ve been able to get some excellent people to join us and I feel very fortunate that we�ve been able to get them. And I�ve made that a top priority for myself, of bringing on new folks to the agency.

You know, I love transportation, I love the government, and I hope to be able to share that a little bit with other people. There are a lot of benefits to it and you can do good and you can have a lot of responsibility early, and if you have a young family, like I do, you can even spend a little time with them.

So I strongly encourage people who are interested in government to figure out what it is that they would want to do and let the money take care of itself. It always seems to.

Mr. Lawrence: That�ll have to be our last question, Roger.

David and I want to thank you very much for joining us and fitting us into your busy schedule.

Mr. Nober: Well, thank you for having me and I appreciate the opportunity to come here.

Mr. Lawrence: This has been The Business of Government Hour, featuring a conversation with Roger Nober, chairman of the Surface Transportation Board.

Be sure and visit us on the web at businessofgovernment.org. There, you can learn more about our programs and research and you can get a transcript of today�s fascinating conversation. Once again, that�s businessofgovernment.org.

This is Paul Lawrence. Thank you for listening.

Roger Nober interview
04/17/2004
Roger Nober

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