Hunter Harrison was a railroad whisperer.
Without formal training or degrees, he worked his way up from the yards to lead and turn around the fortunes of four major railroads: Illinois Central, Canadian National Railway (CNI), Canadian Pacific Railway (CP) and CSX (CSX). He came out of retirement while ill and ran the last company while on supplemental oxygen.
He was successful wherever he went. When Harrison joined Illinois Central in 1989 — he started as chief transportation officer and was named CEO four years later — the company’s operating ratio was 98%. The O.R. represents the amount of money a company has to spend to earn a dollar in revenue. In this case, it cost Illinois Central 98 cents to make a buck. In essence, it was running at just a little better than breaking even.
When CN acquired the line in 1998, Illinois Central’s operating ratio was 62.3%.
It was an amazing turnaround and a portent of things to come. Harrison produced even better results at Canadian Pacific Rail. He joined CP in 2012. A year earlier, its O.R. was in the high 80s. By the end of 2016 it was an unheard of 58.6%.
He’d improved the railroad’s performance by every other measurable metric: Trains were longer and they traveled faster. And they spent less time in terminals loading and unloading and more time on the road.
An Unlikely Success
Growing up in Memphis, Hunter Harrison (1944-2017) seemed an unlikely candidate for business success. The son of a bullying police officer and part-time preacher, he barely scraped through high school. In fact, the athletically gifted student was banned from sports his senior year because, as a junior, he’d failed every course but P.E.
But in 1963, after a long hiatus to accommodate returning World War II veterans, the St. Louis-San Francisco Railway began hiring. Harrison took a job as oil man — lubricating railcar axles — and safety inspector. His sister Mary told Harrison’s biographer, Howard Green, that in taking that job “he found himself. Up to then, he really didn’t have purpose.”
His bosses soon noticed his talent and enthusiasm and started him on the track to success. In a little over a decade, he moved 18 times. During one 11-month period, the Harrison family lived in three different cities — and one of them twice.
In a phone interview with IBD, Green, author of “Railroader: The Unfiltered Genius and Controversy of Four-Time CEO Hunter Harrison,” said: “He was willing to do anything to move up and that was the way to move up. He was also a guy who wanted to excel at whatever he did. One way to excel was to move (to different cities) and see what was going on at other terminals and other locations.”
Brave, Brilliant Innovations
Harrison learned that financial performance could relatively easily be improved by adding cars, driving trains faster and eliminating unnecessary stops. He seemed to see opportunities to grow business that even experienced railroaders overlooked.
Once, Harrison was approached by a third-generation railroader who managed a key terminal that was operating full-bore. The manager wanted to expand. Harrison looked at the terminal and quickly saw more than enough capacity there, but containers weren’t being loaded quickly enough. He showed the manager how to do that and as a result extra capacity opened up immediately.
It all seems like simple common sense. But according to Keith Creel, current CEO of Canadian Pacific Rail, it was an act of bravery.
In a phone interview, Creel, who first went to work for him at the Illinois Central in 1996, said Harrison’s concepts were “so simple and so common sense based they were brilliant. He understood the nuts and bolts of the business well enough to go against the status quo. He was swimming against the stream. Everyone said what he was doing was wrong and to go forward required a whole lot of risks.”
Harrison ran into opposition from customers, unions and seemingly everyone in between. Throughout this period, railroads were losing business to the trucking industry. As a result, their customers ruled the roost. Rail companies kept rates low to keep customers from abandoning the tracks in favor of roads. Not Harrison.
At the time, freight trains essentially had no schedules. They left when a customer’s loads showed up, and arrived when they got to the destination. Not with Harrison, who developed the philosophy that he’s most famous for: precision scheduled railroading.
His trains left when they were supposed to, whether a customer’s freight was there or not. He believed customers would pay more for assurances that their merchandise would arrive where needed and when needed. It created quite a stir, and he briefly lost some business to trucking or other rail lines.
One thing that Harrison never lacked, however, was confidence in his decisions. While still at Illinois Central, he met with an important customer who did about $100 million a year in business with the line — or about 17% of its total revenue. The customer wanted a steep cut in prices, arguing that the rail service was a commodity.
If he didn’t get it, the customer would take his business elsewhere. Harrison closed his briefcase and left.
It took two years, but the customer came back when he realized he had full tank cars sitting on a siding that he’d been trying — unsuccessfully — to move for three months.
There were similar bumps in the road in convincing employees to sign up for the new way of doing business. He tried what he called “leading from the pulpit,” holding regular “Hunter Camps” where he’d preach his gospel.
“His father was a lay preacher and Hunter learned to lead and motivate and tell stories from him,” Green said. These were nonunion employees put up in deluxe hotels — making it clear to them that the line was a first-class operation and expected first-class results.
There’d be 200 or so at a time. “He’d speak for eight hours without notes,” Green continued. “They’d never seen anything like this. They were captivated.”
And, he added, “They were trapped.”
Managing From The Front
Of course, not all employees were persuaded by Harrison’s verbal abilities.
Early on in his career, Harrison worked alongside an old-timer; each was assigned one side of a train. Harrison did his side and then found his “partner” asleep in a shanty. “If your side gets there, my side will get there,” the old-timer reasoned. “I’ve never seen half a car get there yet. It all pays the same. Good job. Bad job.”
That experience stuck with Harrison. One of the first things he tackled when he took over CN was a similar and persistent rail problem: early quitters. A supervisor told him that it would be impossible to stop. Those workers “will shut the place down.”
Hunter told Green: “If we’re gonna have a fight over this we might as well start at the toughest place.” That was Vancouver. He flew out there to confront “the meanest son of a bitch” — Harrison’s words — at the terminal.
He didn’t have to do it often. Harrison felt that — correctly, as it turned out — “that kind of thing would send a message throughout the organization.”
Harrison also got the message through by the practice of “leading from the front of the train” — getting in the trenches when necessary. One evening, monitoring the CN network from his home computer, he saw an anomaly. Something was wrong between Jackson, Miss., and Memphis, Tenn. He called the dispatcher and told him to stay on the phone while Harrison pulled an all-nighter clearing up the gridlock.
On another occasion a dam broke, flooding an important segment of track. Even when the water substantially receded, the engineers were afraid to take the train across the newly formed lake. So Harrison jumped in the cab and did it.
As Green wrote: “While it was perhaps a case of major bravado, it also sent a message throughout the organization about leadership.”
Hunter Harrison: Keys
Turned around the fortunes of four major railroads.
Overcame: Resistance from railroaders to change.
Lesson: You learn how to run a railroad on your way up the ladder. Don’t forget those lessons.
“Don’t forget what got ya there. If that’s one of your powers, that’s your strength; don’t lose it.”
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