Target organisational model of the Russian Railways Group

The advantages of the Group’s organisational model include:

• a clear division of powers and responsibility for the Company’s results as a whole and the results of specific types of activities and businesses and the ability to evaluate the performance of leaders in terms of key indicators related to strategic goals and operational objectives;
• optimising the management level and the location of regional management bodies of business divisions being created;
• improving the quality of strategic decisions adopted by having the Corporate Centre specialise in the solution of the relevant problems;
• improving the efficiency of decision-making by delegating responsibility and powers to the heads of business divisions.

The Board of Directors handles the overall management of the Group’s activities within its purview and pursues a policy that aims for the dynamic development as well as the improved sustainability and profitability of its work.

The Russian Railways Management Board, which consists of Russian Railways executives acting in the interests of the Russian Federation and takes into account the positions of shareholders from S&A, studies proposals that aim to identify the priority areas of the Group’s activities and prospective plans for its development, determines unified corporate policies, provisions, rules and standards developed by the Corporate Centre and monitors their compliance and the achievement of the strategic goals of business units.

Advisory bodies comprised of executives from Russian Railways and key S&A ensure the compilation of proposals on the main areas of the Group’s activities in order to represent the Russian Railways Management Board.

The Corporate Centre studies strategic decisions and prepares unified corporate policies, provisions, rules and standards on the basis of and in order to achieve strategic decisions, ensures the monitoring and analysis of the implementation of strategic decisions and the achievement of goals, organizes the current allocation of the most important and limited resources and also ensures the coordination of interaction of branches, S&A amongst one another and with the ‘outside world’ at all management levels and the operating efficiency of the monitoring system. In addition, the Corporate Centre organises corporate governance and the monitoring of S&A.

In order to maintain control at all levels, railways that are branches of Russian Railways are part of the Corporate Centre and perform their functions at the regional level.

Business divisions — branches, structural divisions, S&A of Russian Railways — are responsible for the results and effectiveness of business activities. Given their unconditional compliance with corporate policies, rules, standards and regulations, business divisions are granted broad powers in adopting operational decisions and determining ways to achieve strategic goals as well as financial and non-financial indicators.

Key achievements in the organisational development of the Russian Railways Group and a description of its development plans

In 2014, updates were made to the Russian Railways Group’s Organisational Development Programme until 2015 to establish a system of ongoing improvements to management technologies and processes and ensure the unidirectional development of all components of the management system.

Work was continued to expand the use of the process approach in the Company’s management with the approval of the relevant Action Programme. The introduction of process management with the establishment of all the key tools creates additional opportunities for improving the operating efficiency of the Russian Railways Group.

Role of the process approach in ensuring operating efficiency and customer satisfaction

Key objectives for the management system

• Focus on the priority solution of business objectives
• Improve quality of services ensure growth in sales and customer satisfaction
• Achieve coordinated work within the functional vertical hierarchy and different branches of russian railways and its subsidiaries and affiliates

Benefits from the introduction of the process approach

• Strengthens the link between production plans and planned expenses and income
• Creates the organisational and methodological framework for work with non-production operations
• Helps to improve the coherence of production activities

The Company continued work in 2014 to enhance internal efficiency, optimise costs and increase the income of Russian Railways by preparing organisational, technical and technological measures. The Russian Railways Efficiency Improvement Commission operates on a permanent basis to coordinate and monitor the implementation of optimisation measures by the directorates and regional corporate governance centres. In order to enhance the development of the management system and improve operating efficiency, Russian Railways has established permanent project offices within the core production directorates for matters involving the development of the management system and improved operating efficiency. As part of the transition to the target business model of the Russian Railways Group in 2014, changes were made to the managerial organisation of the Railway Transportation and Infrastructure Business Unit.

The Management Department of the Railway Transportation and Infrastructure Business Unit was established in late 2014 for the coordinated and efficient operation and mutually agreed strategic development of the business divisions within the business unit. Its main objectives and functions are: the technological coordination of the activities of business divisions, organising work to improve the efficiency of the transportation process, determining parameters for the strategic development of the branches, S&A of the business unit, the integrated planning of their production activities, managing key strategic projects and monitoring the quality of technological processes and internal services.

In order to meet the required organisational framework for improving the focus on the customer, the Business

Development and Customer Focus Department was established under the direct supervision of the Russian Railways first vice president.

The Department will perform the following functional tasks:

• achieving the strategic goals set for the Russian Railways Group’s production and economic activities;
• establishing and implementing a customer focus strategy in order to meet maximum customer demand for the Russian Railways Group’s services;
• achieving maximum production and economic efficiency parameters in the activities of the Russian Railways Group.