OMAHA, Neb. – People who worked closely with E. Hunter Harrison are skeptical about Union Pacific’s plans to implement his “Precision Scheduled Railroading” operating model.
“We think it’s mission impossible unless the entire organization embraces it,” one person said. “It’s a cultural change.”
Trains News Wire spoke with several of Harrison’s former colleagues, all of whom all spoke only on the condition that their names and specific railroads not be identified. UP declined to comment on their views.
The Precision Scheduled Railroading process itself is not a secret, Harrison’s former colleagues note. Harrison wrote two books explaining the philosophy while leading Canadian National.
The keys to success, they say, are execution, transforming all aspects of the company, and having a willingness to make disruptive changes like the hard-driving Harrison did at the helm at CN, Canadian Pacific, and CSX Transportation.
“If you have the resolve and the detailed planning, you can implement the new system at UP without an EHH at the throttle,” one person says. “But can you have that type of resolve without a hard-assed management team?”
Based on the details UP executives released during a conference call with investors and Wall Street analysts last week, Harrison’s former colleagues questioned elements of UP’s plans.
Their biggest concern? That UP was adopting a watered-down version of Precision Scheduled Railroading. “I think they won’t go all-in on it. And it won’t work,” one person says. “I think the UP can do elements of PSR, but unless they cut bureaucracy and layers, it will fail.”
“In my mind, you need to take a deep breath and make a clean break with the new system,” another former Harrison colleague says. “Love or loathe him, EHH … had the damn-the-torpedoes mindset on scheduled railroading.”
UP CEO Lance Fritz assured investors and analysts that the railroad would apply lessons from its “Blend and Balance” pilot program, which shifted some unit-train traffic to the merchandise network and included daily departures in both directions.
“We learned a lot from that pilot and now believe that a more unconstrained implementation of those concepts, and other PSR principles, is warranted across our entire rail network,” Fritz says.
Nonetheless, some industry analysts said UP’s conference call — which was light on details — helped create a different impression.
“It has the whiff of going halfway, not being fully committed. They denied it, without specifics,” says independent analyst Anthony B. Hatch of ABH Consulting.
The specifics UP did provide also raised questions.
UP doesn’t anticipate idling the humps at any of its 14 classification yards or closing or consolidating any of its regional yards. And it will open its 15th hump yard, Brazos Yard in Texas, in early 2020 as planned to support the growth in Gulf Coast merchandise traffic.
This stunned one of Harrison’s former colleagues. “That’s a death knell from the get-go,” he says. Harrison idled four out of CP’s five humps and eight out of CSX’s dozen humps after making significant changes to each railroad’s operating plan and train blocking patterns.
But UP is not CN, CP, or CSX. It operates the largest merchandise network in the industry by far, which UP officials have said justifies its strategically placed network of classification yards.
“Humps are volume-related,” Hatch says. “UP has volume!”
Hatch also notes that converting hump yards to flat-switching facilities has typically been a byproduct of Precision Scheduled Railroading, rather than an initial maneuver.
Harrison’s former colleagues questioned why UP would roll out the new operating plan in phases over the next 15 months, beginning with the Mid-America Corridor linking Wisconsin, Chicago, and Texas.
“Significantly, I can’t see UP doing this as it plans: on a piecemeal basis, with the full implementation put off until 2020. You’ll end up with different parts of the UP system — as well as Class I and shortline interchange partners — hitting up against each other,” says one scheduled railroading veteran.
UP says it decided to implement the new operating plan in phases to minimize the potential for disruption. Service suffered at CN, CP, and CSX as Harrison rapidly rolled out systemwide operational changes. The service problems at each railroad prompted shipper complaints and regulatory scrutiny.
“UP is going this route because Wall Street is demanding it. I wouldn’t want to be a UP customer at this juncture,” a former Harrison colleague says. “With tight transportation markets in both rail and truck, there will be few alternatives to pick from if UP fouls up. And it will.”
The skepticism is a role reversal for advocates of Precision Scheduled Railroading.
Harrison developed and refined his operating model at Illinois Central. Critics contended that scheduled railroading would not work on a large Canadian railroad like CN. Then they said it wouldn’t work on CP’s mountainous railroad. And they said it would be unsuitable for a railroad like CSX, with its complicated route structure in the Eastern U.S.
Yet Harrison significantly improved the operations metrics and financial performance of each railroad, with dramatic reductions in operating ratio, the key measure of efficiency.
And in 2016, when CP was pursuing a merger with Norfolk Southern, CP argued in a white paper that Precision Scheduled Railroading “is a set of non-discriminating principles that can be effectively applied to any railroad in the world. Geographic, network, and business-mix differences are irrelevant in the application of the underlying principles that guide day-to-day decisions.”
UP officials say they are implementing the principles of Precision Scheduled Railroading to improve service, cut costs, and boost profitability.
Harrisonism is a failure it always has. yards close, railroader workers are laid off and go on strike, Dash 9s idol in the terminal with no crews and older engines end up on the dead track, freight cars sit in the yard with no destination and goods spoil, and rail lines are shut down and signals are turned off causing delays, accidents, and deaths. This is not how you run UP or any railroad Harrisonism needs to be driven out of america and sent back to Canada and overseas where it came from. Don’t use Harrisonism on America’s railroads! it violates OSHA rules, it causes bankruptcy, it is greed, it violates FRA safety rules, it cost jobs, and it is bad for our railroads UP get Fritz back at the helm fire and fire Thomas Lischer. Lischer worked for Harrison and he was his mechanical officer at CN, CP Rail, CSX, and NS and both men bankrupted these four railroads. UP please abandon this practice you are 150 years old and you don’t need another bankruptcy. Look at your history UP this type of practice is used by robber barons and you were bankrupted twice and Ed Herriman got you out of the hole. Do you want to enter your 150th anniversary with a bankruptcy? I think not GET RID OF HARRISON”S PEOPLE! and put real railroaders in the cab.
As an actual railroad shipper, I can tell you that once fully implemented, PSR provides better service and attract business. The short term pain is worth the long term gain.
The problem with EHH’s version of PSR it is used only to cut costs. The problem with railroad mangement is managing
for Wall Street instead of Revenue enhancement through increasing business, especially with trucker shortages and the damage big rigs are doing to public infrastructure. When I first heard of PSR my though, great, maybe railroads will schedule services to customer needs. Customers want reliable service and deliveries even if RR’s are a couple days more than trucks, lower RR prices will compensate as long as they can guarantee delivery times. No more hold for tonnage or lousy connections etc.. Imagine an individual ordering from Amazon and told you will get your order when you get it..? I worked as an assistant freight agent and this was biggest reason for loss of business, inconsitent service.
To bad these Harrison people don’t talk to and listen to the customers about how poor the service is on the schedule railroad. The only way it works is to get rid of customers. The CP and now the CSXT go out of their way to do this. Unfortunately it’s all about the shareholder
Thank you Mr. Charles Ham. You said it better than I could have.
I’ll also add mention to Mr. Landey’s comment that when UP took over CNW and SP, when you read in Maury Klein’s history books of UP, particularly volume III, the contributing problem for UP during the ’95-’03 period was Davidson’s very poor leadership. Unless there was significant pressure on him to act, he dragged his feet until the outside carnage had taken its toll on everything (that’s ultimately how Arthur Shoener fell from UP). On top of that, rather than taking time to integrate and rework employee contracts, Davidson “barged” in and things just an absolute nightmare for UP, SP and the CNW, plus loused up the final merger phase of MoPac into UP in 1997, of which Jim Young would have unsnarl everything starting in January of 2004.
So, yes Hunter Harrison did snafu CN, CP and CSX, but in spite of his nonsense, at least Harrison did not have to face mergers and buyouts on the scale of what UP did, so I’ll give him credit for that (I know he expanded CN throughout the 2000’s via mergers, but still not to CNW/SP scale.)
Top drawer management team? Dick Davidson from MP presided over the SP meltdown and set the tone of “arrogance” in UP management that it took Jim Young years to erase.
UP should talk? Despite the top-drawer management team picked up from MoPac, UPRR blew it when they picked up CNW and far worse with SP. Even Hunter Harrison couldn’t wreck a railroad they way UP did to itself.
The biggest problem the East/West railroads have with the PSR system…balancing traffic in both directions, unless you’re willing to give up significant volumes it’s nearly impossible to do because of the difference between consumption/production factors…that will be the biggest hurdle to overcome, unless the UP is willing to leave a ton of traffic on the table.
Regarding Steve Roberts’ comment, why not? Wall Street analysts criticize companies operating strategies all the time when they really have no standing to do so. Why not the EHH acolytes? UP will do whatever it is going to do regardless of the sniping from the sidelines. The proof will be in the success or failure to meet Union Pacific’s objectives of the program.
The underlying tenets of Precision Scheduled Railroading that improve operating efficiency seem generic and able to suit different business purposes. EHH always deployed PSR in conjunction with a plan to reduce the operating ratio and perhaps that is what most people mean when they say PSR. But it seems to me that a railroad could use the tenets of PSR to achieve different outcomes. If UP wanted to increase their traffic handling capacity, improve delivery times or customer service then PSR might be used for that purpose because it makes the railroad more efficient. PSR releases operating and capital assets that are eliminated in the EHH version but a different railroad might redeploy them for business growth. If a company can hold its expenses constant while capturing more revenue then the operating ratio will improve at the same time as total revenue.
The EHH PSR colleagues probably use the term PSR exclusively to describe a company reformation to reduce the operating ratio. Other people, possibly UP, may have different definitions.
Is this for real? Why would, or should, former Harrison folks have a say in what Union Pacific does in their business? All the roads that Harrison was on did not have to contend face to face with the Chemical Coast like UP does, nor did Harrison ever deal with the unique traffic patterns inherited from SP and so many other things i could mention, but don’t have enough room to here to put them in.
I find it disgusting that the god of Harrison has to be used to compare every railroad out there. What ever happened to the days when individual roads could be looked at without in-depth critiquing of every single thing they do/don’t do? UP has their own unique problems with the immense volumes of manifest related traffic that no other road contends with (just like BNSF has their own unique issues with high volumes of intermodal traffic), so does everyone else with their own unique issues.
As I have said before, give UP a chance with their version of PSR.
Also, remember that UP’s own EHH was not that of E.H. Harrison; their EHH was E.H Harriman.