No railroads landed on the Wall Street Journal’s ranking of the 250 best-managed companies of 2024.
The annual Management Top 250 list measures corporate effectiveness by considering performance in five areas, including customer satisfaction, employee engagement, innovation, social responsibility, and financial strength. The ranking, developed and compiled by the Drucker Institute, is based on data provided by 16 third-party sources.
Apple claimed the highest ranking in a top 10 list dominated by tech companies. The top railroad was CSX, at No. 283, followed by Union Pacific at 290, and Norfolk Southern at 354.
The annual survey is limited to publicly traded companies based in the U.S., qualifications that eliminate the two Class I systems based in Canada as well as BNSF Railway, which is owned by Berkshire Hathaway.
Among the three Class I railroads in the survey, CSX earned the top marks for customer satisfaction and employee engagement.
Notably, CSX and UP saw their 2024 customer satisfaction scores rise and their employee engagement sink compared to 2017, which measured the period before they adopted the low-cost Precision Scheduled Railroading operating model.
CSX’s 2024 customer satisfaction score of 61.3 was in the same neighborhood as UPS (62.1) and Apple (64.7). UP wasn’t far behind at 56.5, while NS – which was still recovering from congestion in its merchandise and bulk networks for much of last year – scored 45.8.
In 2017, CSX’s customer satisfaction score was 43.7; UP’s was 44.3; and NS’s was 45.8. Their 2024 employee engagement scores – which ranged from 39.9 at UP to 55.2 at CSX – tumbled compared to 2017, with CSX standing at 34.6 in 2024, UP at 26.8, and NS at 26.2.
The CSX of 2017 made the top 250 list with a ranking of 224.
Peter Swan, associate professor emeritus of logistics and operations management at Penn State Harrisburg, said the results of the latest survey were not particularly surprising.
“The industry has been focused like a laser beam on operating ratio and return on assets. Some railroads have stumbled in chasing improved financial performance, but generally the industry is having its best results ever,” he says. “While this has been great for stockholders, it has not been so great for other stakeholders: labor, customers, and the general public.”
Although Apple’s relatively low customer satisfaction rate was a puzzler, the railroads’ customer satisfaction ranking was not, Swan says.
“The low railroad scores are not a mystery,” he says. “We have seen contentious Surface Transportation Board hearings on demurrage and customer service as well as the recent warnings from the STB on retaliation by railroads for shipper engagement with the STB. The recent Transportation Research Board report on long trains and testimony from many parties showed that railroads have not been proactive in avoiding societal costs associated with blocked crossings and Amtrak delays.”
Likewise, the low scores for employee engagement were a predictable outcome of contentious labor negotiations and trends toward automation, Swan says.
But Swan says the relatively low marks the railroads received for innovation did not properly reflect efficiency improvements. “Railroads’ basic product has not changed in decades and is unlikely to change much in the future,” he says. “This is not to say that railroads are not innovative, because they are constantly innovating.”
Swan says the railroads scored well on corporate social responsibility because they are the greenest form of land transportation and are developing battery, hybrid, and hydrogen fuel cell locomotives.
The railroads had plenty of company outside the top 250 in the latest survey. Only five transportation and logistics firms made the list: Uber (65), UPS (95), FedEx (141), Delta Air Lines (170), and Southwest Airlines (217).
Drucker simply have charted what everyone has already known. Hedge Fund driven companies who drain off capital that can be used for investment, and bonuses for excellent employees is instead driven into stock buybacks to meet their investment targets.
This method may make them “laser focused”, but in reality turns that company into profit drones who aren’t allowed to innovate or think.