In his piece is a compelling argument that our current health care system, neither the patients nor the providers are rewarded for cost-effective, high-quality health care.  He believes strongly that giving more provider choices to health insurance plan participants, particularly large, efficient multispecialty group practices, would significantly reduce health care costs.

While I may not agree with his conclusion that the employer-based health care system, combined with the current tax system, are the root causes of the health care system’s inefficiency, I think he is right about the flaws of the fee-for-service system for doctors and hospitals.  I also think that he is directionally right about the fact that most employers and insurers do not reward patients for taking better care of themselves to avoid using the health care system, and most do not provide incentives for adhering to the right disease treatment program.That is why I like the proposals made by Dr. Elliot Fisher of Dartmouth for integrated accountable care organizations in a community that are judged by both cost efficiency and population health metrics, and that realize savings for both the providers in the organization and the plan participants if health care is delivered at lower cost and high quality.
What he argues, and what I believe as well, is that we must align the system from top to bottom around healthy behaviors and high-quality care.

A great model for an integrated primary care organization is the corporate clinical offering of QuadMed, an affiliate of the Quad Graphics company, a commercial printing operation based just outside of Milwaukee founded and operated by the Quadracci family.  http://www.quadmedical.com/

QuadMed, which started as an on-site primary clinical care service to Quad Graphics employees 18 years ago, has expanded to include service to dependents, retirees, and even some third-party businesses.

Unlike a typical corporate clinic, which focuses on occupational medicine, and a little bit of urgent care, Quad Med is a full-service primary care operation which provides internal medicine, pediatrics, obstetrics and gynecology, ophthmology, and even behavioral health care.  It also has an onsite dental clinic, a pharmacy, a test laboratory, a rehabilitation center incorporated into its onsite fitness center, and an administrative services operation.

It has a combination of salaried staff health care professionals who are rewarded for patient satisfaction, adherence to evidence-based medicine standards, and optimal productivity (which targets spending a sufficient amount of time with patients to uncover the full range of issues), and separate private practice physicians who share facilities and back-office services.  It manages an electronic health record system using eClinicalWorks software http://www.eclinicalworks.com/.
Like Pitney Bowes, QuadMed has wellness incentives built into its basic employee health plan, but it goes further by having differential total out-of-pocket costs for those with chronic diseases who adhere strictly to disease treatment programs.  As a result, QuadMed performs significantly better than benchmarks in terms of lower rates of health care cost increase, and its performance approximates the savings levels to which Alain Enthoven refers.

In essence, this is a real-life example of what Enthoven hopes to put into place nationally.  There is no question that some percentage of the employers who provide health coverage for employees do so in an unenlightened manner, but the answer is not to scrap the system.  It is to point employers toward the right model, and incent them for offering it.

Today, the employer gets a tax deduction whether it has a sensible or ill-conceived model of health insurance and health care delivery.  The employer which eliminates employee choice, has a poor-quality provider network, and has the poorest-quality insurance plans gets the same deduction as a firm like QuadMed or Pitney Bowes, that works hard to deliver health and high-quality health care to employees.  That is wrong.

We have great models for what works to deliver high-quality, lower-cost care.  Let’s make them more broadly-based.

One executive remembered that I had increased the employee benefit for adoptions from $800 to $2,000, which helped him and his wife adopt two children.  Another remembered a small contribution I made to an MS fund-raising drive for multiple sclerosis.  Still another remembered help I gave her to get the company to make it easier to get support for hearing-impaired employees.  Many remembered condolence, congratulations, or recognition letters I sent, or even a conversation in which I told an individual that he or she was highly valued.

Probably one of the most heartfelt expressions of gratitude I receive year after year was from parents whose children had received college scholarships or other support from the Company. What these stories and others tell me is that, for all the attention organizations pay to compensation and major benefits, leaders underestimate the role small favors play in driving organizational loyalty, engagement, and performance.

As we move into more difficult economic times, we will not have as much money to pay as much as we used to pay.  What we need to do better is to match our total reward and remuneration system with what people value.  Very often, executive compensation committees agonize over making sure companies pay competitively, and overpay executives in the process, without really achieving the loyalty and retention they hope to get.

Having talked to many executives who have left Pitney Bowes, their initial explanation is that they received a better offer and, sometimes, they have gotten a promotion in the process.  However, after we talked for a while, I usually learned that they just did not feel adequately valued by the Company, and that their feeling of being undervalued caused them to take the call from the outside recruiter.

While there are some mercenaries out there, there are far fewer than organizations believe, and we need to figure out how to make remuneration more flexible and less standardized to meet individual needs.  In 1993, I drove the introduction of flexible benefits at Pitney Bowes, but I believe that we have more opportunity than ever to add highly-valued, but low cost, benefits for people.

If an organization does a great job delivering customized benefits valued by the largest numbers of their employees, the organization generally has lower, not higher, labor costs.

Those who oppose these programs often point out the risk of recognizing an employee that others believe is not deserving of recognition.  For example, see the Employee Recognition, Rewards, Awards, and Thank You Ideas article from the Human Resources section of About.com.

Clearly, good recognition processes cannot overcome poor performance management, particularly if the leader supports the wrong people and undervalues the right ones.  My point is that, once a leader is able to figure out who needs to be rewarded and recognized, there is a much wider range of tools available than are used today.

Some people to whom I have made this point respond that individuals still value W-2 income because they cannot pay the rent or the mortgage with the kinds of benefits I have described.  I reply to these people as follows:

• People who are living paycheck to paycheck will generally not get out of a big financial hole by getting an extra percentage point of pay increase. If they want to improve their lot in life significantly, they need to get skills development that enables them to qualify for promotions.
• There are benefits that work to reduce the cost of living for people. For example, our credit union is a wonderful tool for helping employees and their families get more affordable mortgages.
• People have varying levels of need. For someone who is a second income in a family, their reason for working at a company may be the medical plan, rather than the salary they receive. Finding a way to give the person a better medical benefit might actually be more valuable than a salary increase.

We need to be far more resourceful in thinking about rewards and recognition to stretch organizational resources further and deliver more value to people in the process.

If we look at the Fortune 500 list, 30% of the companies on the list that was published in May, 1996, the month I became CEO, are gone.  Since the list was first published in May, 1955, 1,300 companies have come and gone from the list. 

Why is this so?  I believe that there are many reasons, but the biggest one is that a business that discovers and takes advantage of a market opportunity is inherently sowing the seeds of its own destruction the more success it achieves

When a business is exceptionally successful, others want to copy it, or figure out how to capture more of the benefits of its success for themselves. Competitors find a way to take a portion of the profits for themselves. When  customers see that a business is exceptionally profitable, they are more likely to demand large discounts if they have the power to do so.  Employees demand higher wages, salaries, and benefits because they have contributed to the enterprise’s success.  Governments try to raise taxes on the successful business.  Communities try to solicit more charitable contributions.  Sometimes, antitrust and competition law proceedings are initiated, and government attempts to figure out if the business has used inappropriate or illegal tactics to be successful. In effect, a situation of large and growing profits is inherently unsustainable.

However, long before a business achieves phenomenal profit levels, the business usually hits a point at which the profitable customer market gets fully exploited.  The remainder of the market is found to be unprofitable.  At that point, the business has to explore and grow another market, and success in that task is very low probability.

Several years ago, I cam across a number of studies by organizations such as the Corporate Strategy Board, Bain, and McKinsey, which demonstrated that the odds of a well-established, mature, low-growth business successfully increasing growth in other businesses are very low.  Success in one market does not predict success in others.

Ian Morrison, formerly president of the Institute for the Future, and a brilliant futurist, wrote a book called The Second Curve,  in which he concludes that businesses which want long-term survival need to be developing the second wave of successful market development before the growth curve on the first wave declines.  At the same time, Clayton Christiansen, in his brilliant book The Innovator’s Dilemma, points out that it is extremely difficult for any business to direct investment funds away from a successful and growing business into more speculative businesses, especially in a public company environment in which quarterly profit demands by shareholders are so powerful.

What tends to happen is that a new competitor, unconstrained by prior success, can develop the new market more easily than an established competitor in another market, even though the established company typically has far more resources to deploy in the new space.

I admire and applaud companies like Pitney Bowes which have had the ability to reinvent themselves decade after decade and find new ways to keep going and growing.  I believe that one of the reasons Pitney Bowes has succeeded is that we have followed Andy Grove’s advice from his wonderful book Only the Paranoid Survive.  Because our survival has been threatened so many times by proposed legislation, Justice Department investigations and private antitrust lawsuits, postal authority decisions, and the persistent perception that mail was a dying medium, we have been in a state of high alert to look continuously for the next big market opportunity. 

While we have not always succeeded, we have not had the luxury of accumulating large profits in a single market and ignoring the threats to those profits.  We have been resilient and resourceful, as well as innovative.  Our history clearly has many examples of failed efforts to expand into new markets, some of which happened on my watch, but we have never gotten too comfortable with where we are.

I do not anticipate being in any sort of direct employment or contractual relationship with Pitney Bowes. I made this decision for two reasons.  First, there needs to be absolute clarity that I am not part of the Pitney Bowes leadership team.  Being any sort of agent, employee, consultant, or contractor to Pitney Bowes is inconsistent with that clarity. Second, I need to be free to take positions on public policy issues that are mine, and that will not be confused with Pitney Bowes’ position on these issues.  I expect that I will be aligned with Pitney Bowes, but the Company and I each need the freedom to decide how to think and act about issues independently of each other.  I will adhere strictly to my responsibilities as a former employee of the Company, but I will no longer be an insider.

I have four passions in the public policy arena:

• Health and health care
• Transportation and sustainable infrastructure development
•  Community development
• Communications

I will continue to take on project-based assignments outside Pitney Bowes that involve work with both the public and private sector on each of these issues. I also expect to stay on the two public-company boards of directors on which I serve, and to remain engaged with the Dossia personal health record initiative, the Boston University Alzheimer’s Disease Center, the National Urban League, and the RAND Health Advisors Board.  I will also continue to support my wife’s work with charter schools.

I am particularly excited today about the idea of applying the tools used by effective start-up businesses in the non-profit sector.  Too many non-profits spend too much money on non-core activities. They also fail to work together with other non-profit organizations, even when cooperation would benefit both organizations.  They also often have missions that are too fragmented and diffuse.  I am going to try to see what I can accomplish in my area.

I have become very interested in working with business start-ups because I like the passion, energy, and brainpower of many entrepreneurs I have met and with whom I have worked.  I am excited about spending more time with them.

I also plan to spend some time thinking back about my experience as a Pitney Bowes leader and employee, and will share some of my reflections on business from what I have learned from my 29 ½ year career at Pitney Bowes, my five years in private law practice, and my life experiences outside the Company.  I will create a new topic area called “Reflections on my Business Career: Lessons Learned” and, from time to time, will post blogs on specific lessons learned.

I have often been asked whether the approach I take to blogging will change since I will no longer be a Pitney Bowes employee.  The answer is that, while we have always indicated through the disclaimer that the opinions expressed are mine, rather than Pitney Bowes’, I would expect that there will be some changes that make that divergence clearer, but I am reluctant to predict what they might be.  The main message I want to reiterate is that, from December 31 forward, I will be expressing my views without any vetting process inside Pitney Bowes.

I want to thank the people at Pitney Bowes who have helped me get this blog underway and who review my blog before it is published.  They have been greatly helpful, but I cannot ask them to provide services to me as a retiree, given their other responsibilities.  I have gained great wisdom and insight from them, but I will be a free agent as of January 1.

I look forward to engaging with readers in my new role.

In Bloom’s column, the major point made is that Connecticut is the “national champion of governmental redundancy.”  We have 169 towns, with 169 separate governmental systems.  In Spiegel’s article, she talks about the fact that charities are “just starting to sort out how to deal with the as-yet uncalculated effects from potential cuts to state funds in the wake of Connecticut’s projected two-year $6 billion deficit, and the impact of the stock market’s vicissitudes on donors, corporate giving, and investment portfolios of foundations.”

I was pleased with the fact that Bloom was able to find an optimistic voice in the otherwise gloomy tone of both articles.  He presented comments from Robert N. DeCresenzo, the former mayor of East Hartford, who suggested that towns and cities need to figure out where they can pool resources.  He said that back-office functions like human resources, accounting, or tax collections could be shared, and that some direct support services like waste management and computer deployment in police cars, had already been shared in past collaborative efforts.

Non-profits, businesses, and governments need to look at today’s economic crisis as an opportunity to do things differently, not just to cut costs and services.  If all we do is lay off people and stop delivering necessary services, we will end up with a far worse economic crisis than we otherwise would have had.

I am chairing a start-up of a personal, patient-controlled, portable health record called Dossia.  In the last 10 months, we significantly stretched our scarce resources by making difficult decisions to work with partners who could help us with functions we did not need to do inside our organization.  We saved significant amounts of money.

All organizations need to think more like start-ups, rather than the big organizations they may have been. Last year, I chaired a reform commission at the request of Governor M. Jodi Rell on the Connecticut Department of Transportation.  I learned through that process that there are many ways to reduce traffic congestion that do not require government spending.

For example, as I testified before the Connecticut Transportation Strategy Board, greater mobility has typically been sought by spending significant capital to increase transportation system capacity.  However, there is a much more cost-efficient way to increase mobility: to work with private sector partners, as well as other government agencies, to implement strategies for partial or complete telecommuting to reduce peak-hour demands on the transportation system.  The private sector has many technology providers who would welcome the opportunity to help the State convene large employers and share best practices on alternative work arrangements.  In this context, the convening agency might be the state Department of Labor, not the Department of Transportation.

The DOT could focus its scarce resources on maintenance of our existing assets, rather than their construction or expansion.  It could also reduce unplanned delays by developing strategies to reduce the frequency and severity of motor vehicle accidents.  For example, a relatively low-cost deployment of traffic cameras and other devices to reduce highway speeds, as well as other moving violations, would significantly reduce accidents, which would reduce traffic congestion, improve air quality, and reduce state health care spending. To improve highway safety, the State could call upon a variety of private sector partners, such as automobile insurers, technology providers, and state and municipal police departments, to pool their resources to reduce the need for highway police patrols and rely more upon other safety-enhancement tools.

Non-profits should check the Internet for the huge number and variety of free or low-cost services available to them to increase their revenues and reduce their expenses.  They also need to define their core requirements more precisely.  For example, at Pitney Bowes, I realized over a decade ago that we had far more facilities space than we needed.  Over the last decade, we have shrunk facilities square footage far more rapidly than we have shrunk headcount, and we have gotten better usage from our space.  We realized that employees would give some excess space in their personal offices to get more conference room space, more capability in shared multi-functional printing devices, and more modern audio-visual technology.  Most non-profits I visit have great opportunity to shrink their footprint the way we have and spend less on overhead.

We can all look at the current situation with fear and anxiety, or we can see it as a great opportunity to figure out how to be creative and collaborative.  I know which alternative I prefer.

This is the second year of the campaign, and it has shown me not only the power of these handwritten letters and cards for those receiving them, but for the senders and the people who have volunteered to get them to the recipients.  Today, we desperately need to come together and connect emotionally.  The fear that the economic crisis has caused in many people has had the effect of making them suffer alone, and of making them believe that they are powerless to help themselves or others.

This campaign has the effect of enabling those who write the letters to feel that they can help someone else, and those who receive to feel that their service is appreciated by others.  Those who wrote the letters and cards last year commented that the effort to pour their hearts and souls into their messages was liberating and energizing.  Recipients felt like they had many people supporting them.

This is a value for physical mail that cannot possibly duplicated in an electronic medium. Aside from the evidence that a person sending a personal letter or card has invested money and time beyond what would be required in an e-mail, there is greater and more power from something tangible that comes to us in atoms versus bits.

One of my executive assistants Connie Telesco actually began years ago to send cookies, cakes, pies, and other items she had baked to those serving overseas.  But even those who just send letters and cards can create something very personal in the words, graphics, and choice of writing materials they use.

Recently, I read a very insightful book about communications entitled Buyology by Matthew Lindstron. Although the book was intended to be focused on the way in which different marketing approaches affect our brain and central nervous system, one of the most powerful messages in the book is that those communications that call upon our senses of touch, smell, sound, and taste are more powerful than those which rely heavily on the sense of sight.

When we communicate with cards, letters, baked goods, and small gifts, we connect far more with recipients than if we send e-mails or even present recipients with the most technologically sophisticated multi-media web site.  There is something very primal in our responses that we may not even fully understand consciously, but that has a strong effect on how we feel about what we receive and who sent it to us.

Recently, I conducted a Webinar on the Future of Mail sponsored by the Global Envelope Alliance I did not choose to make predictions on the future of mail, but rather to talk about why mail can have a bright future if we focus on its advantages.  By far its most sustainable advantage is its ability to help human beings who cannot be in each other’s presence connects and helps one another emotionally.

I hope that everyone reading this blog will choose to participate in the Holiday Mail for Heroes program, which you can learn more about by going to www.redcross.org/holidaymail.

There is a market for CEOs, just like there is a market for houses, internet stocks, or baseball players.  Just as these other markets fail from time to time, with housing bubbles, stock bubbles, or overpaid baseball players, sometimes we see market failures for executive compensation, too.

One very insightful book on this subject was actually written six years ago.  It is entitled Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs, by Rakesh Khurana.  What is unimaginable today is the degree to which shareholders, boards of directors, rating agencies, the media, and even the public believed in the notion that there were a handful of exceptionally talented CEO candidates that companies in trouble, or, for that matter, companies not in trouble, but desirous of improving their results, should spare no expense in recruiting.

General Electric provides some examples of this “Corporate Savior” phenomenon.  During the Jack Welch era, several of his top lieutenants were recruited away to become the CEOs of other companies.  Many of these executives received lavish pay packages, on the belief held at the time by directors and executive recruiters that a single highly-talented individual could create enormous economic value through executive leadership.  As events unfolded, some of the businesses led by these GE alumni did not perform well, and, in some cases, the pay packages came under heavy criticism.  These were all very talented executives, who received exceptional training and mentoring at GE under Jack Welch, as did Jeff Immelt, who is truly one of the world’s greatest business leaders.  However, what went wrong for those who were less successful was not how they performed, but the huge gap between their considerable talents and the unrealistic expectations for their performance.

Today, we understand better that CEOs, like any other people, are limited in what they can accomplish.  When they succeed, they may be catalysts for an organization’s success, but there needs to be a good business model, a critical mass of talent, and the right external environmental conditions.  Relative to the business model, that is, the value proposition of the company and its way of delivering that value profitably to customers, Warren Buffett once said something to the effect that when a highly-talented leadership team collides with a flawed business model, the business model generally wins.

Beyond the flawed belief in the “corporate savior,” the pressure on a board to recruit the best and the brightest, and the time pressure under which many boards operate when they are recruiting an external CEO, there are other subtle factors that drive up compensation in these negotiated contract arrangements.

While the executive search firms are retained by the company and are accountable to the board, they also succumb to the subtle pressure to justify their very lucrative fee by securing the “corporate savior.” They put additional pressure on the board by pointing out that the “corporate savior” is being hotly recruited by other companies and boards, and that the board needs to accommodate his or her compensation demands.

This is no different from what happened in professional sports with some of the outsized contracts over the last decade.  One difference today in professional sports negotiations is that salary caps in sports like football, basketball, and ice hockey, and the “luxury tax” in baseball act as a brake on runaway compensation.  The other difference is that professional sports teams and the agents who represent players have a better-developed methodology for valuing a superstar against other alternatives.  Baseball even has a valuation methodology called “value over replacement player” to help determine how many incremental victories a player has contributed to his team.  From that calculation, the financial value of that player for that team can be determined.  Many of these valuation methodologies were not developed by the teams, the agents, or even by the official statistician of Major League Baseball, the Elias Sports Bureau, but by outside sports statistics aficionados like Bill James, Pete Palmer, and John Thorn.

Business today lacks the kind of sophisticated tools that can truly isolate the economic contributions that a CEO uniquely creates.  Some companies have developed methods that move in the right direction, but in fact it is a very complex problem given how many factors influence company performance, including factors over which the CEO has no control.

Right now, we are in an exceptionally populist environment, so we may see excessive controls put on executive pay that will be determined through emotions and political calculations.  We must acknowledge that neither the free market nor government regulation offer a perfect solution to the perception or reality of excessive pay.  We need to draw upon tools developed for other purposes than compensation and to modify them as needed for executive compensation analysis.

Schiller, who wrote a book entitled Irrational Exuberance , warning very specifically about the risk of a meltdown in the housing and financial markets, notes that there were experts who saw what was happening, but they were in a minority, and were treated as if they were less credible and of lower quality than the experts who held the prevailing view.  He explained that, Dr. Irving Janis, a Yale psychologist, in a book entitled Groupthink, talked about the often unconscious insecurity experts feel when they are not receiving acclaim from their most renowned peers and the unconscious self-censorship that follows from it.   As Schiller cogently states:  “They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group.”  He goes on to describe how he experienced some ridicule and criticism from those who disagreed with him, and how difficult it would be for many people to buck conventional wisdom.

One explanation is that when there is well-ingrained conventional thinking, it is virtually impossible for mainstream thinkers to see the world differently.
Philosopher Thomas Kuhn wrote a great book in 1960 called The Structure of Scientific Revolutions, in which he said that the most innovative thinking in any scientific field came from people outside the field, because they were not imprisoned by conventional thinking.  However, Dr. Schiller was suggesting that there is a second motivation, the insecurity of people to depart from conventional thinking because of their belief that unconventional thinkers will be denied reward and recognition.

Academia is a particularly difficult environment in which to buck conventional wisdom.  Accomplishment is often measured by the number of peer-reviewed and peer-approved publications a professor can publish.  Getting the cooperation and subtle reinforcement required to achieve this productivity in publication requires mutual respect and active cooperation.  An individual who is right, but is not a mainstream thinker, puts himself or herself at great risk of not getting that cooperation and reinforcement if he or she takes a contrarian view on an issue in which there is generally a strong consensus.

Large organizations and leaders of any field of endeavor have to guard against “groupthink.”  At Pitney Bowes, and in my other leadership positions, I took a number of steps to reduce groupthink:

• I was a role model for unconventional thinking, and I deliberately spent a great deal of time with the innovators in our organization.  Even as a CEO I experienced passive resistance to change, but I made it clear that the people who would move up were those most resistant to groupthink.
• I specifically kept someone around in the senior leadership team who would be a check-and-balance on my thinking.  In a way, even an aggressive, innovative thinker who wants to drive for change needs to show that he or she has the self-confidence to have at least one gadfly in the group.
• In meetings, I would consistently ask whether we were missing something in reaching a consensus.
• Most importantly, I consistently visited leading-edge customers and tried to have a regular dialogue with sales professionals who were most successful in crafting innovative solutions.  I looked at leading-edge thinkers as the “canaries in the coal mine” to give us an early warning about major trends in our industry space.

I just wish more experts had listened to Dr, Schiller.  As someone privileged to have met him and spent a few minutes talking to him at the World Economic Forum, I can assure you that we would have all been far better off if we had acted on his thinking.

On the contrary, finding ways in which to conserve energy or reduce spending that actually are perceived as beneficial to individuals is far more likely to succeed and be sustainable.  Why does the “sacrifice” or “conserve” message not work?

• Telling anyone to sacrifice will inevitably create the potential for resentment and class warfare, because not everybody will choose to sacrifice equally.  Those struggling to succeed will resent such a message because they believe they are already sacrificing.
• I believe that human beings can be in a deprivation mode only during the pendancy of a crisis.  If oil prices decline and if their day-to-day situation gets better, they will stop sacrificing, and we will lose the ability to achieve energy independence.
• The wrong kinds of sacrifices will reduce the potential for economic growth and recovery.

So what is the alternative way to solve this problem?  With respect to energy conservation, let’s find ways to make less energy usage a positive for Americans.  In my testimony to the Connecticut Transportation Strategy Board, which is posted on my blog at www.mikecritelli.com, I make the following suggestions:

• Give more employees the ability to telecommute all or part of the time.  This saves them significant commuting cost and hassle, and can increase their productivity by enabling them to use effective mobility tools to get their work done at home or at satellite locations.
• Make more events or activities at work “business casual” to reduce the cost of wardrobe acquisition and maintenance.  Many workplaces are already five-day “business casual,” and Pitney Bowes made that decision 11 years ago.  However, we can make more events less dressy over time.  This may not help specific segments of the fashion industry in the short term, but they can recover over time by adapting to changed consumer demand.
• Shrink the workspaces of employees at work, but provide them with more amenities, such as more conference rooms, more access to light, more environmentally-friendly workspaces, and more common-area amenities, like kitchen areas and fitness spaces.  We did that at our headquarters, reduced costs, and increased our employees’ satisfaction with their work spaces significantly.
• Offer services through the mail that individuals today have to access by taking non-work time.  For example, give individuals the ability to vote by mail, to get permits and licenses they need by mail, to get more prescription and over-the-counter drugs by mail, and to get more purchased items delivered to them, rather than having them having to take valuable time looking for them.
• At the same time, as we increase delivery options, we should consolidate the number of delivery services that occupy our streets and consume energy and create traffic congestion.  The U.S. Postal Service has recently become the carrier for FedEx, UPS, and DHL for residential deliveries in many geographic areas.  There are many local delivery services that could consolidate their transportation capabilities and have shared services that would reduce their costs, increase convenience for consumers, and improve the environment.
• The Internet is a wonderful tool to enable individuals to learn who else is traveling somewhere or who has an item that can be borrowed or purchased at a lower cost in order to save resources and consumption.  For example, I like the idea that Amazon.com is connecting book purchasers with people wanting to sell used books, instead of having a new book printed to satisfy a consumer’s need.

None of these ideas require individuals to “sacrifice” or “conserve” anything, but, cumulatively, they can produce significant energy savings, reduced cost, and improved consumer satisfaction.  Government should be convening private sector innovators to employ some of these ideas and should let the private sector do what it can do best to make some of these ideas more widespread.  As an employer, government should also be setting an example in some of these areas.

Before I provide my views and financing and funding strategies, I want to make several preliminary observations:

• We cannot expect the public to support tax or fee increases for transportation if there is not complete transparency and logic for any movement of revenues or expenses between the General Fund and the Special Transportation Fund. The public will see such increases as general tax increases, to which they are resistant, as opposed to funding sources for transportation, which they would support.
• The public will also be reluctant to support increased transportation funding if we cannot have more discipline in making project cost estimates and approving appropriations for them.  When the General Assembly approves an expenditure based on Connecticut DOT project cost estimates, and then sees those estimates double or triple for no apparent good reason, the public and its elected representatives will be very reluctant to give ConnDOT more money to spend.
• Connecticut’s heavy dependence on federal transportation money puts it in peril if replacement funding sources are not found quickly because the Federal Highway Trust Fund is essentially insolvent.
• Reliance on motor fuel taxes as the primary funding source for covering bonded indebtedness for transportation projects is increasingly risky because of the likelihood that people will reduce fuel consumption over time.  This was emphatically pointed out by Mary Peters, the Commissioner of the U.S. Department of Transportation in her minority position statement on the Federal Surface Transportation Study released earlier this year.
• In the ConnDOT 2007 Master Transportation Plan, ConnDOT identifies a minimum of $3.27 billion funding gap between what is needed to keep the current transportation infrastructure in a state of good repair, and what is projected to be available from existing funding sources.  This gap does not take construction cost inflation into account, nor does it make any assumptions about reduced federal funding.  Whether this gap is higher or lower than it should be, nevertheless, it is indisputable that we have a significant funding gap if we do business as usual.

With this apparently grim picture, what can we do to improve mobility for people and goods to insure that we have a globally competitive economy in Connecticut and a higher quality life?  Also, what can we do to improve safety on our roads, bridges, tunnels, and public transportation systems?

The good news is that there are many cost-efficient strategies we could employ, but have not chosen to employ so far.  I will not discuss tolls or congestion pricing because those subjects are part of a study, the results of which will be released next year, and because the speakers following me will cover this in far more detail.  However, I will note that, without some form of fee based on road usage, any attractive public-private investment partnership option will be very difficult to implement.  I would hope that the toll study under way will have as broad a scope as possible in terms of technology, pricing, and process options.

Today, I will focus on other alternatives for addressing mobility and safety issues.

Strategy 1:  Use private sector sponsors to fund programs to reduce demand.

Reduce trips

The least resource-intensive way to improve mobility for those who have to travel on our roads or use our public transportation infrastructure is to reduce trip demand from those who could employ other alternatives:

• There are many private sector companies, like Cisco Systems, HP, Microsoft, ATT and the other telecom service providers, and Research in Motion who benefit from individuals working at home or at satellite locations closer to home.  Early telecommuting experiments failed in many organizations because they were too ambitious or because organizations did not understand execution imperatives.  Allowing employees to work more flexibly from a more convenient location even one day a week is a very popular benefit, and it is less risky than adopting a full telecommuting program.  Over time, as organizations learn what works best, they can expand these programs.  ConnDOT and the Department of Labor should convene a group of large employers, as well as technology providers, and workflow consultants, to identify and promote best practices in alternative work locations.  To the degree that these practices become widespread, our traffic volumes will shrink just enough to increase traffic flow significantly, as they do on certain religious holidays that are not broad work holidays.
• We have learned in the past two decades that we have mobility issues throughout the day and evening, not just at peak commuting times.  We are increasingly a just-in-time society, with retailers and manufacturers holding smaller volumes of inventory and expecting suppliers to deliver products, parts, and materials at greater frequency.  We also have many individuals making retail trips by automobile to do errands that could be avoided if a convenient home delivery infrastructure were in place.  The good news is that there are many delivery options available today that would reduce both the redundant delivery systems many retailers and manufacturers use today and the consumer travel to the retail site.  Recently, DHL announced an agreement to eliminate its residential delivery system and to use the U.S. Postal Service system.  We need to encourage other delivery services to focus on their core capabilities and to join forces to reduce traffic congestion, fuel consumption costs, and environmental emissions.
• We also might find that some of these delivery companies are better equipped to provide residential delivery services for other firms to increase convenience for consumers, such as the elderly, who would welcome more deliveries to their homes, rather than having to go to as many locations to collect items they have purchased.  Once again, state and local governments can convene meetings that enable every firm with a delivery capability to leverage that capability for more purposes.  Web-based systems could also be created to match small retailers with delivery needs to those with excess delivery capacity.
• Similarly, ConnDOT should be doing a better job promoting ride-matching services that would allow individuals to access rides in automobiles from other individuals commuting to or from nearby locations at the same times of day.  The State of Virginia has used this system effectively to reduce single-occupant vehicle demand on the highways.  Our NuRides program needs to be modified to allow payment to the ride brokerage agencies based on the number of road miles they eliminate, as opposed to a flat fee.  Houston has implemented such a system, with an annual cap that protects the government from budget overruns.

Reduce motorized travel

There are two big opportunities for reducing motorized travel demand:

• To increase bicycle access at train stations and bus terminals; and
• To make bicycle and pedestrian travel more viable options for short trips.

ConnDOT and the towns which operate rail stations have a severe rail station access issue.  There is far more demand for rail station parking than the available supply of parking spaces.  At a minimum, there needs to be a central system for identifying and allocating parking spaces.  Today, individual towns treat parking spaces like season tickets for popular sports franchises.  They issue parking permits to residents, who then keep them as long as they want, and who derive value that can be passed down to future owners or residents.  Parking access should be priced at its true value, should be continuously re-offered to those willing to pay that value, and the revenues collected should be used to improve the stations, not for the general funds in the towns.

However, beyond a more effective revenue collection system, ConnDOT and the towns need to learn from the experience of major cities like Amsterdam that make bicycle and pedestrian access to the trains and the stations very easy.

For shorter trips, bicycles are used more extensively for more of the year in many parts of North America, including Canadian cities like Montreal, than they are here in Connecticut.  One of the most absurdly inefficient uses of motorized travel is the use of motor vehicles to drive single children or to have them drive themselves to high school and middle school, when bicycle alternatives would work just fine most of the year.  We should be accessing funding from the Safe Routes to School program, but, beyond that, major bicycle or athlete clothing and equipment companies, like Nike or Adidas, could support these efforts.

Strategy 2: Use private sector solutions to get better usage of existing transportation assets.

Raise revenue and improve system-wide efficiency through better travel information.

From studies we found during the work on the Reform Commission, people who use roads and public transit will pay more for better information on whether there are travel delays, to give them an opportunity to make alternative arrangements.  Today, ConnDOT travel information is limited to interstate highway data, and, for people already in transit, is insufficiently detailed and timely to be useful.  ConnDOT also has to recognize that its transportation information infrastructure is more designed to achieve compliance with Federal Highway Administration requirements than it is to give useful information to travelers or others, like supply chain managers, who depend on accurate, precise, and timely transportation information.

Private companies are far better able to provide the level of detail needed by transportation asset users, but the ConnDOT can participate in a partnership that enables it to capture additional revenues, either in the form of higher fares or a fee-based service for which citizens would pay.

That information would include real-time data on the interstate highways and on principal arterial roads like Route 1 and Route 7.  It would also include specific information on available parking at specific rail stations.

Incent Private Sector Developers to Increase Parking At and Around Rail Stations.
I began my transportation volunteer work in 1985 to try to get funding for rail station parking in Southwestern Connecticut.  Today, we still have a shortage of parking spaces.  There are many solutions that the State could use more aggressively to increase the supply of parking.  As major development projects get approved by the State Traffic Council near major rail stations, the Council could require the dedication of parking spaces to rail station users.

Reduce unpredictable delays by reducing the number and severity of motor vehicle accidents.

By using the technological and business capabilities of the State’s licensed automobile insurers, and the trade associations that represent trucking companies, the state can take a wide range of steps to reduce the frequency and severity of motor vehicle accidents.  For example, Progressive Insurance offers an insurance plan in some states called MyRate that rewards safe, low-mileage drivers with discounts, by validating their safe driving behaviors with an on-board device.  This insurance plan is not allowed in Connecticut.  The state should allow it, but make sure it is voluntary and that appropriate privacy protections are in place for those who choose it.

Similarly, cameras are used in many states and cities around the world, including here in the United States, such as the City of Chicago, to identify vehicles committing moving violations.  Whether this technology is deployed, or others are used in its place, there is no question that technology that detects unsafe driving behavior and makes information on that behavior available to law enforcement authorities significantly reduces motor vehicle accidents.

These kinds of solutions can reduce unpredictable delays from accidents and significantly improve mobility and safety throughout the year.

Strategy 3: Increase the supply, efficiency, financial attractiveness and reliability of motorized transportation.

In a recent article in the New York Times, the Rochester, New York, Transit Authority was profiled because it actually has a budget surplus.  The reporter noted that Rochester had re-evaluated all of its bus routes, had eliminated some, changed the routing on others, but, most importantly, had identified specific large customers, such as the school districts and the major businesses, which were willing to supplement fare revenues to get more customized services and to eliminate redundant bus services they had in place.  We have a highly fragmented infrastructure for delivering bus service here in Connecticut.  That service has a lot of actual and potential innovation, but there are also opportunities for reconfiguring the networks to have those who can benefit pay more.

Expand Alternative Travel Outreach

We have many great programs here in Connecticut, such as TransitChek, which can be implemented faster and at much lower expense than building additional capacity on highways, rail systems, or even bus systems.  These programs are generally thinly-funded and poorly-marketed.  We need to look at selectively increasing funding and marketing for programs that can get the most immediate and largest paybacks in decreasing the number of people who use single-occupant vehicles.

Strategy 4: Engage Private Investment and Operational Capital for Selected State Transportation Assets

I believe that public-private partnerships for investment or operation of selected state assets would make a great deal of sense in conserving scarce state transportation capital.  Realistically, the attractiveness of selling highway assets is limited unless we have tolls with congestion pricing potential, so I would not recommend that we consider that option at this time.

On the other hand, there are asset categories which we should consider opening more fully to private investment and operation, but with appropriate state oversight:

Highway Service Areas

As noted in our Reform Commission report, one of the areas in which Connecticut is below average in transportation assets is the quality and condition of its service areas.  Many are over 50 years old.  Getting the private sector to invest significant capital in these areas could achieve several benefits, aside from making them far more attractive for travelers:

• A private sector operator could move more aggressively to increase revenue yield, the benefit of which could be shared with the state.  While these service areas are net profit contributors to the state today, they could be greater profit contributors with more focus.
• Service areas along I-95, I-91 and I-84 could be equipped more modern technology and other amenities for truckers, which would make them more attractive for truckers to get badly-needed rest and reduce fatigue-related highway accidents. A simple investment in technology that would allow truckers to keep electric power going while they eat and rest would be significant.
• Culverts and other topographical and environmental issues adjacent to the service areas could be addressed in the renovation of these service areas.

Bradley and Other Airports

It became clear to me during the work we did on the Reform Commission that our airports had great underutilized potential.  While Bradley is a net profit contributor with a strong management team and board, it is inevitably constrained by annual budgeting processes as to its ability to maximize revenue potential. For example, at a time when the New York area airports are increasingly unattractive because of air traffic congestion delays, Bradley could have a service reach much farther into Fairfield County than it does today, were it to have a more focused marketing plan.  The management team at Bradley is capable of developing and implementing such a plan, but annual and inflexible budget constraints limit Bradley’s potential.

A private operator with appropriate state oversight could do far more with Bradley, and with other airports that have potential for commercial service.  To effect this result, the state would need a more centralized management structure than it has today, and would need to consider packaging a number of airports, including Tweed-New Haven, to make them attractive to a private operator.

Strategy 5: Employ and Provide More Incentives for Smart Growth Strategies

I support Connecticut’s fledging effort to study transit oriented development, which was approved in last October’s bonding package.  However, the funding needs to be more narrowly focused on transportation and other development projects that specifically focus on creating walkable environments and on developments that occur within a walkable distance from public transportation facilities.  Transit-oriented development will relieve the funding crisis in two ways:

• It will enable developers to create more demand and, therefore, more revenue for public transportation without significant state expenditures; and
• It will cause individuals to engage in activities closer to where they live, thereby reducing the need for single-occupant vehicles and the stress they cause on scarce roadways.

The State also needs to empower the State Traffic Commission to exercise its power in issuing Major Traffic Generator Certificates of Operation to induce communities to require a master plan that takes transportation impacts more fully into account, consistent with smart growth and transit-oriented development strategies.

Concluding Observations

What I want to leave with you today are the following observations:

• While there is no “silver bullet” solution that, by itself, will have a big impact on our funding crisis, there are many smaller initiatives that cumulatively would close the funding gap.
• To take advantage of those initiatives, we need to rely far more heavily on private sector assistance and partnership than we do today.  Some of the best initiatives would require little or no public funding.
• To the extent that the State plays a major role in driving these initiatives, we need appropriate oversight, but we also need methodologies that enable us to make sensible multi-year decisions that will be investments in the future of our transportation network.

In the absence of significant changes in the way we look at transportation, we will become far less competitive in the national and global economy.

Thank you for giving me the opportunity to present my views today.