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A TURNAROUND ARTIST?

Here it is the middle of May, and here comes Book Review No. 1.  Howard Green's Railroader: The Unfiltered Genius and Controversy of Four-Time CEO Hunter Harrison is an approved biography, mostly finished at the time of Mr Harrison's death.

Several phrases in the subtitle are salient.  "Unfiltered Genius" refers to Mr Harrison's path to the business car.  He was the son of a baseball player, but didn't have the temperament to play that game at the highest level, where razzing from the opposing dugout (or slagging from team-mates) is customary.  Thus he left college and hired out on the railroad, showing ability for greater responsibility, and worked his way up the ranks, something that today's credential-worshippers would likely frown upon.  His first employment was with St. Louis - San Francisco, the Frisco, which later became part of Burlington Northern; and apparently Frisco valued the kind of up-from-the-ranks officers the Navy refers to as "mustangs," sometimes (read the book to find out how frequently, actually) without the prep-school manners.  That's what led to Precision Scheduled Railroading, starting with a remark by a mentor, also a mustang, about how a plugged yard was not "a lot of good business;" rather it was a waste of capital.  After Burlington acquired Frisco, Mr Harrison worked in the traffic department in the Cities, where an analyst developed the algorithms for tracking shipments.  The book skimps on the details.  Perhaps that analyst, Sue Rathe, one of the pioneer female yardmasters, will write her memoir and say more about the service performance reports that led inter alia to the discovery that eighty percent of the freight moved among twenty percent of the termini, and from there a plan for the timely movement of cars in trains followed directly.

"Four-Time CEO" refers to Mr Harrison's role at Illinois Central (at the time essentially in its original Omaha to Chicago and Chicago to New Orleans configuration, after merging with Gulf Mobile and Ohio, disposing most of that, then selling the Omaha line and buying it back), then Canadian National (a promotion in due course after CNR acquired IC; that is why the railroad with the most track-miles in Mississippi is CNR); Canadian Pacific subsequently induced him away from CNR, and a shareholder group seeking greater return on investment persuaded him, despite some rancor, to leave CPR for CSX ( the latter day incarnation of Chesapeake and Ohio, Baltimore and Ohio, Atlantic Coast Line, Seaboard, Louisville and Nashville, pieces of New York Central, and a partridge in a pear tree.)  It's rare these days for anyone to serve as CEO of four companies in the same industry, let alone to screen for corporate multiple times without the usual credentials.  We'll see whether the MBA is over-rated in due course, one example is not dispositive.

Along the way, we learn a bit about the man's family life (if you make a movie about an up-and-coming executive whose wife divorces him and then asks him to marry her again, the critics will have none of it) and his affection for show horses.

As far as precision scheduled railroading, the jury is still out.  There's a part of the story that Mr Green didn't tell.  It began in Peoria, and an Indiana short line offered the proof of concept.

[Gilbert] Lamphere and [Ed] Moyers put the plan into action on MidSouth Railroad, a regional created from four lines the IC cast off. Within a year under Moyers’ operating plan, the MidSouth’s operating ratio plunged to 59%.

“Most importantly, he created a railroad that was the precursor for today. And he showed us what short lines could accomplish,” says Lamphere, who considers himself the original financier of Precision Scheduled Railroading.

A couple years later, Moyers wanted to try the operating plan on a larger railroad, the IC. Lamphere led an investor group that bought IC, which at the time had an industry-worst operating ratio of 93%.

“It was the worst-run railroad in the United States,” Lamphere says.

Moyers put his operating model in place, scheduling cars and trains, tripling train length to 120 cars, and replacing IC’s double-track main with single track and long sidings. With disciplined operations, IC’s operating ratio improved to 68% within a year and to 59% within two years, Lamphere says.

“At the Illinois Central … Ed and I hired a gentleman by the name of Hunter Harrison,” Lamphere says. “Now Hunter, Hunter was at the BN. And he had been marginalized because he had these crazy ideas about how to run a railroad. Hunter was data-driven, and there really wasn’t a place for him at the Burlington.”

Harrison had similar ideas about running an efficient railroad.
The time may come when Illinois Central, er, CNR, regrets removing that second track through Illinois, but I digress.

The challenge for the industry now, Lamphere says, is to regain market share lost to trucks over the years.

One way to do that, he says, is for the Class I railroad systems to forge closer ties with short line railroads.

Another way is by making the capital investments necessary to grow with existing and new customers, as CN is doing now under CEO Jean-Jacques Ruest, Lamphere says.
Or perhaps precision scheduled railroading is hype.  I fear that it's dressing up the false economy that downsizing or right-sizing or re-engineering or whatever you call it these days with a more positive sounding name.

(Cross-posted to Cold Spring Shops.)

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