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Thursday, 6 January 2011

Why did they do that? A Principal of Railway Company Decision-Making

Hiding under the ins and outs of my PhD is the universal basic premise of business history, that what I am essentially studying is how and why decisions were made. For this reason, the policy decisions that the managers and directors of the London and South Western Railway (L&SWR) made take a central role in my work. But, all decisions were governed by principals that the company had adopted for various reasons at different points. Indeed, I am slowly coming to the conclusion that many of the principals that were in place in the late 19th century, had been laid down in the 1830s and 40s.

One of the most fundamental strands of thought in the minds of early railway managers and directors was that traffic will always grow year on year. This stemmed from the success of the early railway company and its business environment in which it was the only form of land transportation. However, with threats to the company’s business after the 1880s, this thinking had all but diminished by 1914. This form of thinking is evidenced by a number of explicit statements, but also by patterns of behaviour and decision making.

In 1860, a special committee of the L&SWR board met to discuss the accommodation at its Nine Elms Goods Depot. Archibald Scott, the Traffic Manager at the time, attended. Under discussion was the proposal to move the company’s Locomotive, Carriage and Wagon Works to the country and use the vacant land for the goods traffic. Scott commented that ‘should the traffic increase as may be seasonally expected,’ in 20 years the space would be insufficient for its management. [1] Here we see the underlying principal that railway management had adopted at work. The statement indicates that in the company’s managers and directors must have had in the back of their mind that traffic would continue to increase unabated. This is, however, the only explicit case that has been found where a company official makes such a statement.

Additionally, there is no indication that the traffic was ever expected to decline significantly. Indeed, if an L&SWR manager or director observed the traffic and revenue statistics, they would see that the prevailing trend was be growth almost complete year on year growth, which these would convince him of this fact. Naturally, there were years when the company’s traffic and receipts declined and the management and directors were concerned as to why this was so. In 1857 a special committee was launched to investigate the ‘falling off of traffic,’[2] and in 1881, Scott, by then General Manager, was forced to explain to the board ‘the circumstances of the present decrease ‘in the company’s receipts.’[3] However, the fact that these investigations were launched indicates that a dropping off of traffic was an exception to the norm.

Thus, it is this belief, that traffic would continue to grow and profits would continue to increase, that shaped much of the company’s decision-making in the period between 1838 and 1914. It meant that managers and directors perceived that all extra costs to accommodate traffic in trains as being covered by the extra income that would be earned from that traffic. Thus, their analysis of operational efficiencies to be made was minimal, and they simply built wagons, carriages and modified stations or yards, as the traffic levels demanded. Thus, this principal, in the late 1900s, would see their operational costs rise and their profit margins shrink.

[1] The National Archives [TNA], RAIL 411/217, Special Committee Book, Special Committee on Nine Elms Station Accommodation, 19th December 1860, p.113

[2] TNA, RAIL 411/216, Special Committees, Special Committee on the state of the company’s traffic, 3rd December 1857, p.226

[3] TNA, RAIL 411/6, Court of Directors Minute Book, Minute No.2281, 28th April 1881

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