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Senior Management of the Railroad-Do they know the business?

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Senior Management of the Railroad-Do they know the business?
Posted by Junctionfan on Thursday, December 16, 2004 9:09 PM
This is for me something I would really like some people like Limitedclear who has been in a management position to answer.

I have been watching and listening to some of the business shows and the all business network and have even listened to some of those boring business lectures at a University. It all comes down to thease questions that I come back to.

1/ Does the senior management really know what goes on in the companies?

I ask this concerning the issue of CN, CSX and UP in particular who are operating in ways that would get me fired at a job.

2/ Should the senior management physically visit a site and look over plans before making any business decision?

I ask this concerning CN's bottlenecking at Fort Erie. I'm not convinced that Harrison even knows about Fort Erie let alone its physical limits.

3/ Do thease executives have an overall plan and specific operation strategies that will improve the railroads profit and revenues or are they just making stuff up as they go along via outsourcing of operation

I ask this concerning CSX and the guy that they recently hired plus also the lack of commitment CSX has had with certain aspects of the business including CN's roadrailer.

4/ Does management have any strategy in dealing diplomatically with the unions or do they really care one way or another if there are strikes and other legal actions? Do they know how to attract flies with honey or do they use vinegar?

5/ Does management make too many unrealistic economic forecasts with the board of directors and the shareholders or are they givin their orders by the board et al?

6/ What do the senior management see as opportunity for profit?

7/ What do they want to achieve as a railroad and do they know?

8/ Is there anything that needs to be done in order for them to reach their goals or are they up to the job in the first place?

9/ If others are not satisfied with current management, who should take their place and why? What would thease people have that the current management doesn't bring to the table?

I am really exited what I may learn here so please don't be shy as it might shine some light on whether we the forum know how hard it is to run things or if we haven't a clue. I am not sure what the senior management have in their minds as I am not a shareholder and don't attend the meeting associated with shareholder rights.

Thankyou for any help in allowing me the opportunity to learn the basics of management and leadership roles within the railroad.[:)]
Andrew
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Posted by dldance on Thursday, December 16, 2004 9:54 PM
only about 25% (or less) of the CEO's job is involved with running today's business. The CEO also has to:
- manage relationships with Wall Street and the major stock holders,
- be responsible that all of the SEC requirements (include Sarbane-Oxley) are met in a legal, timely fashion,
- manage the relationship with all the government entities that the business touches (for a Class 1, that may be hundreds),
- develop a strategy to met customer requirements in 5 years (what ever those might be),
- address competition from all directions, and
- position the company to take best advantage of current and future business conditions - in both growing or shrinking economies.

Where does Fort Erie sit in that list of priorities?

dd
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Posted by Junctionfan on Thursday, December 16, 2004 9:56 PM
Thankyou Mark for your answers.

Do you find that they actually go to areas to survey the land. William Cornelius Van Horne did this when he ran the C.P.R and often personally over saw the building of the transcon.

I don't get the impression that the modern the CEO of the railroad does this kind of front line hands on foremanship style management and is too busy with the office and conference rooms and so he or she doesn't get the information that may be important if not critical, to make a good decision on operations. My concern is that they don't get enough information from their executives as to look at everything from every angle. I know this is largely the job of the COO but I figure that the CEO has the final say before he speaks with the board.
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Posted by jeaton on Thursday, December 16, 2004 11:36 PM
I would add-Rare is the sucessful CEO or senior manager that does not spend most of his or her waking hours attending to the primary functions of the job. Even those activities that most of us would consider recreational will often be tied to business. A trip to the field to mingle among the ranks is rarely for fact finding. More often it is something to boost employee morale or show that being at the top doesn't make one a mean SOB.

Jay

"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics

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Posted by daveklepper on Friday, December 17, 2004 3:04 AM
Given the problems, it is amazing that all the freight railroads do as well as they do.
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Posted by MP173 on Friday, December 17, 2004 6:53 AM
I would not want to be in a position of senior management of a railroad and probably not any other public traded company today. The pressures are far too great for me to handle, based on my current lifestyle.

Once you are a public company, things change dramatically. Sure the money is great, but lets face it...it is a 70+ hour/week job.

The truly great managers or companies are the ones that have vision. They can visualize what will make their company great in comparison to their peers. Then they have the ability to affect that vision into change.

I always enjoyed reading about management in Trains. The articles last spring on the managers in Detroit and Steve Patterson in Arizona offered great insite. A few years ago Trains also had an excellent article on Rob Krebs, then followed up later by a view of the new CEO, i believe his name is Rose. Mark, perhaps you wrote one of those, or at least had your hand on it.

A book dealing with the management of a railroad, at different levels, would be fascinating. It would require nearly total access and would require considerable time....access at say the CEO level, VP Operations, Marketing, and Finance, and then also down at the field level. Exploring how decisions are made and then filtered down and implemented.

Mark...what are you doing the next couple of years? This one has your name written all over it!

ed
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Posted by oltmannd on Friday, December 17, 2004 7:44 AM
I would add that railroads are large organizations and all the parts don't always march in the same direction at the same time. The CEO doesn't "drive" the company as much as he tries to get everyone to lean in the same direction at the same time to "steer" the company.

Having lived thru a few RR CEOs (6-1/2 so far), I can say that the whole organization tends to reflect the values of the CEO. When those values don't match your own, you tend to think the guy is wrong or just plain stupid, but that really isn't the case.

A CEOs performance and actions are also shaped by his view of the world and his background. A CEO with an operations background tends to think of the RR more in terms of "running trains" whereas one with a financial background tends to think more in terms of balance sheet and income statement. The former may tend to lose sight of the customers and owners while trying to get the railroad to run efficiently whereas the latter may tend to "shortcut" investment and maintenace to get the quarter over quarter numbers to come out right.

A good example of the "operations" type would be Al Perlman of the NYC who nearly drove the company to backruptcy trying to transform operations. David LeVan of Conrail is a good example of the latter. He drove the value of the company up even while overdue locomotive overhauls were starting to pile up.

CEOs can also have a lot to do with the culture at their companies. They set the tone for how decisions are made, organizational structure and communication.

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by Junctionfan on Friday, December 17, 2004 8:05 AM
Speaking as an "outsider" of course, to me the CEO should be able to tell if operations aren't working and do some investigation during the excutive meetings. I would ask the COO for some charts and the CFO for charts of revenue based on operation. I would take to two charts and compare to make sure revenue was up. If the operations were lowering and the revenue lowered too, I would wan't to know why.

I would once in a while call up my customers and ask if they were satisfied with my services because if they weren't, potential profit loss could arise and if the quarterly can't be reached, the board will grill you for it.

I personally would be more interested in a traveling office so I can multi-task. I can oversee what the track is like if my personal coach rode in front of a geometry train for example, while this is going, I can have a meeting with the officers or with potential clients. To me it's like being a general who surveys everything from the battlefield to the troops training. Making profit in this age is like a war to be won and so everything has to be "perfect" or you will suffer bitter defeat.
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Posted by Anonymous on Friday, December 17, 2004 8:06 AM
other qualities necessary for corporate leadership:
honesty: enron, tyco
other failings beyond intellect:
hubris: "new coke", martha stewart
there are a lot of ways to wreck a business as well as a train.
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Posted by jchnhtfd on Friday, December 17, 2004 9:33 AM
In general I would say ditto to all the above replies, Andrew -- particularly the ones about one of the marks of a really really top notch CEO is his (or her) ability to pick and coordinate really good subordinates, and then delegating both authority and responsibility to them. If this is done properly, no matter what the company (or, I might add, country!), things go well. If poorly, not so well.

Besides the more obvious ethical failings (cbt141's list is a start!) one of the worst business sins a CEO can commit is to micromanage -- that is, to try to take on (and even understand) too many of the details, and go to far down into the operational structure with his or her direct authority.

As a measure of whether the business community thinks the CEO's are doing a decent job, check the stock values of some of the companies you mention.
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Posted by CSSHEGEWISCH on Friday, December 17, 2004 9:52 AM
As a first-level supervisor, I am finding that I have more respect for the person to whom I report when she lets me know what is expected and allows me to supervise my own unit in my own style as long as the goals are met. Obviously, my supervisory style cannot be radically different from anybody else but I don't have to be a clone of the other first-level supervisors.
The higher-level management does have to know the business in a general fashion but I don't expect them to tell me exactly how to do my job down to the last memo and timesheet. I would lose respect for upper management if they stepped in and told me exactly how to meet expectations in excruciating detail.
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Posted by Junctionfan on Friday, December 17, 2004 10:51 AM
Don't get me wrong, I'm not a big fan of micromanaging either but sometimes I feel that the CEOs should occasionally check out something that doesn't seem to work well should their expertise help out. If they don't have the operational experience then don't bother but some of the CEOs who have been a "blue collar", might be a direct asset to certain situations (ie E Hunter Harrison who used to work on the Frisco before being a manager)
Andrew
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Posted by oltmannd on Friday, December 17, 2004 12:21 PM
QUOTE: Originally posted by Junctionfan

Speaking as an "outsider" of course, to me the CEO should be able to tell if operations aren't working and do some investigation during the excutive meetings. I would ask the COO for some charts and the CFO for charts of revenue based on operation. I would take to two charts and compare to make sure revenue was up. If the operations were lowering and the revenue lowered too, I would wan't to know why.

I would once in a while call up my customers and ask if they were satisfied with my services because if they weren't, potential profit loss could arise and if the quarterly can't be reached, the board will grill you for it.

I personally would be more interested in a traveling office so I can multi-task. I can oversee what the track is like if my personal coach rode in front of a geometry train for example, while this is going, I can have a meeting with the officers or with potential clients. To me it's like being a general who surveys everything from the battlefield to the troops training. Making profit in this age is like a war to be won and so everything has to be "perfect" or you will suffer bitter defeat.


Asking "why" is easy. Getting to the root cause is hard. Gettting to the root cause in a reasonable amount of time without resorting to gut feelings or guessing, even harder. Fixing the root cause, harder yet. Fixing the root cause within budget constraints, damn near impossible, sometimes.

The VPS, if they're worth their salt, should have their people on this continuously, as part of regular operations. The CEOs job is to set direction and lead, not administer.

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by Junctionfan on Friday, December 17, 2004 1:48 PM
Why can't they do some administration?
Andrew
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Posted by jeaton on Friday, December 17, 2004 2:35 PM
Andrew

I just found this challenge from Jim Jubak at CNBC. Here is a chance to see if you could apply your thoughts on how a CEO should function and see if you could offer turn-around plans for three major corporations that are having serious problems.

Go to http://moneycentral.msn.com/content/P101812.asp

Good luck.

Jay

"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics

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Posted by Junctionfan on Friday, December 17, 2004 3:18 PM
As far as those companies are concerned and the railroads, I would have to look over ALL of the accounting, payroll etc. I would need to look over everything financial, operations and marketing. I would like to see if thease companies have had any negative feed back from customers to see if how bad it is effecting revenue to profit.

I don't see how Mr.Jubak can expect someone to fix something without all of the facts and figures and I would never expect anybody (I hope nobody would) start messing with things until they got ALL the information that was needed before making such a drastic change if required. That's pretty much what I am concerned about; do the present management have all the information and is it accurate and do they know if it is or not.
Andrew
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Posted by oltmannd on Friday, December 17, 2004 3:30 PM
QUOTE: Originally posted by Junctionfan

Why can't they do some administration?


Because there's only 168 hours in a week and that's what the rest of Mgt is for. You really don't want your CEO making decisions like "annul 215 from Atlanta to Danville today", do you?

-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/

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Posted by jeaton on Friday, December 17, 2004 4:01 PM
Andrew,

That is part of the point. A CEO is looking at those kinds of things as well as trying to be proactive or at least effectively respond to externalities, i.e., laws and regulations, competition, fuel prices, on and on. Somebody has to set the strategy and the finger is pointed to the CEO. "That's your job." How much time is left?

Jay

"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics

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Posted by Junctionfan on Friday, December 17, 2004 4:33 PM
I can respect that? It would be nice how ever than maybe (if possible of course) they could monitor more carefully the performance of the underlings and make sure they do their job properly.

Some of thease guys really have attitude and they are in Customer Service? Not particularly good; that is just one example of oddities that can hurt the railroad.
Andrew
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Posted by Anonymous on Friday, December 17, 2004 4:54 PM

QUOTE: Originally posted by Junctionfan

This is for me something I would really like some people like Limitedclear who has been in a management position to answer.

I have been watching and listening to some of the business shows and the all business network and have even listened to some of those boring business lectures at a University. It all comes down to thease questions that I come back to.

1/ Does the senior management really know what goes on in the companies?

I ask this concerning the issue of CN, CSX and UP in particular who are operating in ways that would get me fired at a job.

2/ Should the senior management physically visit a site and look over plans before making any business decision?

I ask this concerning CN's bottlenecking at Fort Erie. I'm not convinced that Harrison even knows about Fort Erie let alone its physical limits.

3/ Do thease executives have an overall plan and specific operation strategies that will improve the railroads profit and revenues or are they just making stuff up as they go along via outsourcing of operation

I ask this concerning CSX and the guy that they recently hired plus also the lack of commitment CSX has had with certain aspects of the business including CN's roadrailer.

4/ Does management have any strategy in dealing diplomatically with the unions or do they really care one way or another if there are strikes and other legal actions? Do they know how to attract flies with honey or do they use vinegar?

5/ Does management make too many unrealistic economic forecasts with the board of directors and the shareholders or are they givin their orders by the board et al?

6/ What do the senior management see as opportunity for profit?

7/ What do they want to achieve as a railroad and do they know?

8/ Is there anything that needs to be done in order for them to reach their goals or are they up to the job in the first place?

9/ If others are not satisfied with current management, who should take their place and why? What would thease people have that the current management doesn't bring to the table?

I am really exited what I may learn here so please don't be shy as it might shine some light on whether we the forum know how hard it is to run things or if we haven't a clue. I am not sure what the senior management have in their minds as I am not a shareholder and don't attend the meeting associated with shareholder rights.

Thankyou for any help in allowing me the opportunity to learn the basics of management and leadership roles within the railroad.[:)]


Andrew-

Here's my take for what it's worth:

1) Yes. Generally they do. That is why virtually every major railroad has an institution known as a morning conference call.

2) Depends upon the situation. Most times it is probably not necessary and is delegated to others.

3) Yes.

4) There are several strategies. I think your question vastly simplifies the problem. Read Frank Wilner's book on the Dilemma of RR labor relations. It is a bit out of date, but it is a good place to start.

5) The Officers attend Board meetings and take their general marching orders from the Board.

6) Depends upon forecasting and information brought in by marketing and other departments.

7) The want to run a quality and profitable enterprise within the bounds of the law and regulations.

8) I don't know how to answer this question. It is quite vague.

9) Who are these dissatisfied "others"? Shareholders? Government regulators?

LC
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Posted by slotracer on Friday, December 17, 2004 6:07 PM
Too busy and my head hurts too much to get too deep into thsi right now.

The Senior execs do know how to run a railroad, but 2 major issues come into play.

Railroads are very inwardly focused they are slow to inovate. The thing that most puts them at odds with the general shiiping industries, is almost all indiustry is in an extremely competitve environment railroads for the most part are not. Theyhave done minimal amounts to position for future growth, they focus on cost cuttinf to the point they cut into theri own muscle. If you got the kind of service, attitude and response tehy provide at say Walmart, you'd soon be heading for Kmart. They serve teh way they do and charge and increase like tehy do becasue they can get away with it. They like to talk growth when teh economy is slow, but don't expand resources toa ccomodate it. When they have more volume than they can use they raise rates sky high. This is followed by the cycle of chasing all the business they lost from customers they spit on the year before and the cycle continues. It looks teribly inept but that is a result of being totally inwardly focused.

Wall Street. Railroads are an old line industry, in order to compete for investment intersest they have to forecast impressive numbers. Those projections are never nearly close to the reality of rate increases, new business and volume increaes tehy can obtain. This generates an insane cascade of decisons in management and marketing and insane budget cuts. The operating budget cuts typically come in the third quarter, right when all your intermodal, lumber, coal and grain is running at record levels.

So to me the 2 main factors is an old world thinking/inward focus problem, and poor priorities and drivers that parent endless strings of bad plans and decisions on those poor priorities.
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Posted by Junctionfan on Friday, December 17, 2004 6:32 PM
Thankyou L.C for your answers.

Your right, question 8 is rather vague isn't it. What I mean is do they appear to be flexible and do they appear to be able to control everything respectfully and confidently or do they hang on power by the thread and seem to be on the verg of a nervous breakdown? Is there anything the board and shareholders could do to make their jobs easier? Maybe the reason why E Hunter Harrison comes across as a jerk is because the board is always putting him on the edge. I know I get cranky if I'm always ragged on.

For Question 9;
What I mean is forexample, some folk are ticked off with E Hunter Harrison and *** Richardson as well as other executive officers. What I would like to know from them is fine but who would they think than would do better. Do they have an alternative to thease gentlemen?

Also for question 3, do you mean yes to the first part , second part or the whole question?
Andrew
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Posted by Anonymous on Friday, December 17, 2004 8:06 PM
Andrew-

3) It can be any or all depending upon what sorts of events are happening. Usually things are pretty well under control. A lot of time in big railroads is spent on projections and plans so that most issues are taken in stride. Major problems that have not been projected and thus not planned can cause wrinkles. One example might be UPs terrible planning of it's personnel needs and now having inadequate people to run their railroad.

8) This all really depends. I've never worked with Hunter Harrison and really have no idea what his team is like. Each is different and has its own dynamic.

9) There are always alternatives to anyone. No person is indespensible. As to whom the leading candidates to succeed Mr. Harrison or others might be, I have no idea.

LC
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Posted by Junctionfan on Friday, December 17, 2004 9:08 PM
I think right now my biggest concern with CN is that they modify the phyical plant too much to save money only to have to adjust it back to the previous status. A great example is removing of a mainline and in a short period of time, putting it back in. This seems like more financial work than if it was left alone and just pay the taxes.

I also am concerned how often they merge and is it for the right reasons. I understand that they bought GreatLakes Shipping because the company didn't want just sell them the D,M &IR. What does this mean than to customers and workers of the BLE and Lake Conneat Railway? Why did CN want BC Rail and what do they plan on doing to make it better than under previous ownership?

There are a number of operational decisions that don't make a lot of sense to me and seem to be more costly in the end than fiscally should be. On a thread, I explained my concerns about the situation at Fort Erie for example. I have also mentioned the abandonment of Hamilton Yard (Ontario) and the switching of very lucrative customers including 2 giant steel industries to Rail America. I'm just wondering what is going on and wouldn't the CEO (Harrison) start questioning some of the results as it must show up on paper somewhere for him to look at? Surely customers do some complaining and so wouldn't that reflect bad on the company in which the board of directors would be concerned as it could effect profit? I am truly fasinated on how CN has managed to do this without effecting negatively in the stockmarket; in fact, they are doing very well which bogles the imagination of myself and no doubtedly others. Can somebody share some insight as to what CN's secret is or speculate how a corporation can get away with this?
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Posted by Junctionfan on Friday, December 17, 2004 10:04 PM
You're right. I was just looking for something to influence a positive understanding of the way management thinks. For some time, I have leaned too much against the CEO so I thought I would try to learn and understand where they come from and see what the other side of the coin looked like.
Andrew
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Posted by Junctionfan on Friday, December 17, 2004 10:15 PM
Unless there is anything else to add, I'm satisfied with the answers here.

Thankyou everybody for the posts and your patience.[:)]
Andrew
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Posted by Sterling1 on Friday, December 17, 2004 11:51 PM
Hmmm, all this senior management info takes some time just processing and getting used to. I wonder what I could do to modify my plans for college. . .
"There is nothing in life that compares with running a locomotive at 80-plus mph with the windows open, the traction motors screaming, the air horns fighting the rush of incoming air to make any sound at all, automobiles on adjacent highways trying and failing to catch up with you, and the unmistakable presence of raw power. You ride with fear in the pit of your stomach knowing you do not really have control of this beast." - D.C. Battle [Trains 10/2002 issue, p74.]
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Posted by Anonymous on Saturday, December 18, 2004 12:53 AM
QUOTE: Originally posted by slotracer

Too busy and my head hurts too much to get too deep into thsi right now.

The Senior execs do know how to run a railroad, but 2 major issues come into play.

Railroads are very inwardly focused they are slow to inovate. The thing that most puts them at odds with the general shiiping industries, is almost all indiustry is in an extremely competitve environment railroads for the most part are not. Theyhave done minimal amounts to position for future growth, they focus on cost cuttinf to the point they cut into theri own muscle. If you got the kind of service, attitude and response tehy provide at say Walmart, you'd soon be heading for Kmart. They serve teh way they do and charge and increase like tehy do becasue they can get away with it. They like to talk growth when teh economy is slow, but don't expand resources toa ccomodate it. When they have more volume than they can use they raise rates sky high. This is followed by the cycle of chasing all the business they lost from customers they spit on the year before and the cycle continues. It looks teribly inept but that is a result of being totally inwardly focused.

Wall Street. Railroads are an old line industry, in order to compete for investment intersest they have to forecast impressive numbers. Those projections are never nearly close to the reality of rate increases, new business and volume increaes tehy can obtain. This generates an insane cascade of decisons in management and marketing and insane budget cuts. The operating budget cuts typically come in the third quarter, right when all your intermodal, lumber, coal and grain is running at record levels.

So to me the 2 main factors is an old world thinking/inward focus problem, and poor priorities and drivers that parent endless strings of bad plans and decisions on those poor priorities.


Slotracer,

You hit the nail on the head! The motto of today's railroad CEO's seems to be to borrow and jawbone against the future, resist investment in the future, lobby the government for protection from new entrants into your industry, get your stock options in early, and then bail out before the inevitable deferred maintenance implosion, unless you think you can get the government to bail you out beforehand.


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Posted by Anonymous on Saturday, December 18, 2004 8:40 AM
You really can't generalize as different CEOs have different styles, specialities, and skill sets. If you look at many companies over a long time period you find changes at the top corresepond to what direction the board and stockholders want to take. For example, if the 'plan' is to do a merger, a CEO with strong financial skills and ties to Wall Street is often brought in. He may come from another industry and know little about what the company actually does. He's just there to do a merger or buyout. If the plan is to restructure or radically change direction, you may see a 'slash and burn' type CEO. If the plan is to innovate and nuture growth, you get a different style and background than if the objective is cost control.

Most companies go through phases as economic and competitive conditions change. The frequent changes seen at the top don't indicate bad management. That's why the half-life for CEOs is about 18-24 months and they get those generous severance packages - they know they'll end up getting fired the day they're hired.

CEO's are sometimes criticized for not communicating strategic plans well, both to employees and the business media. But for publically traded companies insider trading laws mean very few managers inside the company know about a pending merger, IPO, etc. That's why you'll hear about merger talks held in secret, off-site, on weekends. Executive management is a 24/7/365 deal, your life IS the company.
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Posted by Randy Stahl on Saturday, December 18, 2004 9:33 AM
In my experience the senior manager are very well in touch with the day to day operation of the RR. I can attest to hundreds of 7:00 am conference calls with the kinds of questions that make you squirm. You better have the right answers for the boss, or at least know what he's talking about.
Randy

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