Peckford: On Marine Atlantic

Larry Peckford

Last week on July 15, CBC News published a story about Marine Atlantic. The focus of that report was regarding a study undertaken by consultants, employed by the corporation, that looked at whether there should be a relocation of company employees from the Head Office in St. John’s to Port aux Basques or North Sydney. In other words, the corporation was looking at the feasibility of centralizing administrative employees to one of the year-round port hubs, essentially shutting down the St. John’s office. This matter has been talked about for some time and advocated for at various intervals by the Government of NL, the Town of Channel-Port aux Basques and some industry groups.

For the record, my view is that relocation of the head office to North Sydney is a non-starter. That part of the corporation only exists because Newfoundland needs a transportation link to Canada. Nova Scotia is conveniently just the point of departure and arrival. Important as North Sydney is, it is Port aux Basques where the real action is and Newfoundland is the reason for the service. So in my mind we are only talking about Port aux Basques as a location for the Marine Atlantic headquarters.

Who is Marine Atlantic?

Marine Atlantic is a crown corporation – not a privately owned company. It gets approximately 50 per cent of its operating revenue from the federal government. The remainder of its revenue comes from its customers who pay to travel the ferry system, passengers, vehicles, trucks etc. Marine Atlantic’s mandate includes a 65 per cent cost recovery of its operating budget from user fees.

The Board of Directors is appointed by the federal government. The corporation is overseen by the federal Minister of Transport as the ferry link to Newfoundland is a federal and constitutional responsibility. The operation has a virtual monopoly on sea-based passenger transportation to Newfoundland via the Gulf ferry crossings. Its ferries carry a large quantity of freight to the province through Port aux Basques and, during the summer season, Argentia.

What did the consultant report say?

The CBC News story included an interview with Marine Atlantic President and CEO Murray Hupman, who spoke about results offered by the consultants that conducted the feasibility study. Although I understand from the reporting the study was initiated by the Board of Directors, curiously, in the news story the CEO seemed to think the consultant’s conclusions now are final. I think we should hear from the Board since it commissioned the study.

The main points made by the consulting group is that it will be a challenge retaining talent at the executive level and other specialty positions in the event of relocation of these jobs out of St. John’s. The consultants believe senior executives would not be inclined to live in a smaller port community such as Port aux Basques. This, they feel, would be a risk that would see a loss of talent that would adversely affect the corporation’s operations. Previous experiences cited by the consultants suggests that in some instances where senior positions are located in smaller locations, the retention of these people is not good. Another example demonstrated that when personnel are told they have to transfer to retain their jobs, many will decline a move.

Another point of view

Marine Atlantic is a creature of government that provides an essential service to the province. I believe it is being judged on principles that may well fit independent organizations of larger size and operating in a different environment. I just don’t know if the arguments put forward by this consulting group fit the circumstances here.

Thus, the provincial organization that is cited – where many staff chose not relocate to Corner Brook – may not be a good example. As far as I know, the department of government that moved there is still doing fine in Corner Brook. If Marine Atlantic employees in St. John’s don’t want to relocate, so be it. Many of their specialties are not so special that others could not be found elsewhere.

How big a factor is marketing and communications to the operations of a Crown corporation that other people would not live in Port aux Basques to do that work? Furthermore, a large percentage of Marine Atlantic employees are sea-based on the ferry boats and come from all parts of Newfoundland and Labrador.

According to the report, the rental costs for housing 20 employees in St. John’s is $460,000. That seems pretty expensive to me. The corporation lease expires this year, so thankfully it is on the lookout for alternative space. If I were Marine Atlantic, I would not be looking for a long-term lease because this conversation is likely far from over.

Over the years there have been many jobs transferred to Port aux Basques and North Sydney and those communities have benefited from this. Is there particularly strong evidence that the corporation has been negatively affected by that? A new building that will house all Port aux Basques employees under one roof is already underway.

The consultants

I checked out the consulting group that Marine Atlantic contracted to delve into this issue. I was able to read the contents of the report completed by HDR Inc. The company is not a household name but, by the looks of it, they are big and sophisticated and offer quite a range of services. I have no doubt they do good work, but they bring a big corporate perspective to the issue that Marine Atlantic asked them to work on and that affects a smaller region. I do not question the consulting group’s expertise, but this issue of office consolidation and relocation may be not be quite the problem for which they are best suited to examine.

Marine Atlantic is not a major corporate entity, as may be the case for many of the clients of this consulting group. Marine Atlantic is a small and unique operation that does not reach beyond Atlantic Canada. Again, to its credit Marine Atlantic has located many jobs to both Port aux Basques and North Sydney. For the remaining 20 employees left in St. John’s let’s finish the job by locating the headquarters in Port aux Basques.

If you need a current example, Fortis Inc., which is listed on the New York stock exchange and owns Newfoundland Power, is a multi-national energy corporation that has its corporate headquarters in St. John’s. A similar argument could be made that its headquarters be located in a much larger city – maybe Toronto or Montreal. I can hear the howls from our capital city if that were to change.

What’s new?

The consulting report was delivered to Marine Atlantic in February 2020. With the COVID-19 pandemic, a lot has changed in how corporate workplaces function. So to be fair to everyone, this singular event has changed a lot on where and how workplaces and their employees operate. National and independent newspapers and business experts continue to explore how the pandemic has changed the corporate landscape. Although still evolving, many working arrangements are undeniably changed forever.

A report that was largely done in 2019 could hardly be expected to take these recent events in to account. Even so, I am not sure if the conclusions about the risk to executive retention because of a change in location apply anyway.

There are clear financial advantages of relocating the headquarters outside St. John’s in a centralized administrative arrangement. The downsides appear not to be substantial. There is a degree of symbolism in the argument that the headquarters be located in a community that is its primary operational centre and has a history of being a transportation gateway for the province. What is wrong with that?

Port aux Basques is a modern town that is well managed and with modern amenities. In this connected world, it can be reasonably argued that it is the logical choice for the Marine Atlantic headquarters. I suspect with not too much effort, the new building being constructed in Port aux Basques can be made to accommodate those employees.

So let’s get on with it.

Larry Peckford and his wife, Dianne (née LeRiche), have lived in Ottawa for the past 10 years, but keep a seasonal residence in the Codroy Valley. He has worked as a NL public servant and community volunteer. An occasional blogger, he also writes other pieces of personal interest. E-mail him at: larrypeckford@outlook.com.

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