Railway Age, March 1993

Change or Die

Pennsylvania Railroad, Standard Railroad of the World-gone. Northern Pacific, Main Street of the Northwest-gone. Atlantic Coast Line, Route of the Champions- gone.

Instead we have Conrail, CSX, Burlington Northern. And about 300 feeder railroads. The railroad map of the 1990s reflects considerable organizational change. Of course, technology hasn't changed much- we still have diesels pulling cars on four-wheel trucks, air brakes and knuckle couplers. What has changed is attitude.

Beginning with the Staggers Act more than ten years ago, successful rail managers have been changing what Peter Drucker calls "the business theory" of their railroads. Those that could change, did-and evolved their companies into what we see on the map today. Others didn't and are gone.

How does a railroad change its business theory? It starts with an idea that spreads through internal marketing. Internal marketing is a crucial step in the process of change. Otherwise, rail staffers- who feel threatened by a change in the status quo-will fight you tooth and toenail. The only way to market change internally is to make it nonthreatening and to show employees how it meets their needs for increased productivity, more job satisfaction, or perhaps more tangible rewards.

Identifying Internal Needs
Some times internal marketing means responding to employee needs you'd never even considered. Parvesh Swani of the Long Island Railroad offers a case in point. Back when he was with the Seaboard in the mid-80s, they planned to use internal marketing to improve accuracy and timeliness in a number of clerical areas.

To management's surprise, the clerical groups had another agenda entirely: a cluster of environmental needs hampering their ability to do their jobs. Noise levels in the work area. Secondhand smoke. Strict group break times and limited washroom facilities. Inflexible working hours. Once these issues were addressed, employees felt empowered to make real changes in the work process. They overhauled their billing process to reduce errors and increase timeliness. Morale went up, mistakes went down, and so did the cost of failure.

Eventually Seaboard merged with Chessie to form CSX. Many of those people who ran Seaboard-or Chessie, the C & O, the B & O and the L & N-now manage shortlines. And manage successfully because they are good at internal marketing.

A Changing Vision
The Class II and Class III railroad environment has no room for busy- work, and the cash flow doesn't allow the luxury of doing work twice. The connection between every worker's work and the customer is quite evident. And the validity of the business theory-the entrepreneurial vision-is measured daily.

Assumptions regarding the outside (customers, connections, car supply) and assumptions about the inside (skills, train size and scheduling, track maintenance) are what drive the business theory. But assumptions must be ever-changing-otherwise they become cast in stone and ossify the company in the process. That's what happened at the Fallen Flag & Eastern. And IS happening to industrial giants such as GM, IBM and Sears today.

Keeping the shortline vibrant and flexible means constantly re-thinking the assumptions. Managers can no longer say "We know;" they must now say, "Let's ask." And there's no better place to begin asking than your own employees. As Gus Welty pointed out in these pages not long ago, "Railroad people are among the most dedicated and the most knowledgeable about what they do and about what their companies do -- or should be doing."

Sharing the Vision
Railroads traditionally operate a batch process. Customers want customization. What do we mean by this? Well, the ultimate batch is a unit train; the ultimate customization is a private fleet of trucks. The railroad trade-off becomes, how far can I customize my batch without hurting economies of scale? Shipper trade-off is, how far can I batch my custom movements without hurting flexibility? Making these trade-offs work depends on the ability of workers in each organization to make changes in their assumptions about the work.

Some years ago the Milwaukee-and before that the New York Central-tried short, fast, frequent freight trains over short distances. They weren't howling successes, and part of the reason was that they were running a custom process with a batch mentali- ty. The folks who thought up the idea had not done their internal marketing. Now, on the other hand, we routinely see short custom trains, and they're mostly on short lines. The technology is not different. The attitude is.

Change from the ground up To be effective at internal marketing, start with marketing a willingness to embrace change -- across levels of management. Change is nowhere nearly so threatening when it's understood; and when it's a change you've had a hand in yourself.

I've spent enough time around the short line coffeepot, in the yard, or in the cab of a locomotive to know that most train crews intuitively embrace changes in the way they do business when they can see tangible benefits for their shippers -- or in the efficiency of their operations. And, insofar as management (or their unions) will let them, they'll initiate change to achieve those ends.

Change is a survival issue. And it's vitally important-especially when you consider the alternative.

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Created July 31, 1995. Send comments to lblanchard@aol.com