‘He was on a mission to prove everyone wrong’
During his tenures as chief executive of Canadian National Railway Co. and later at Canadian Pacific Railway Ltd., Harrison turned both into efficient railways that boasted record operating ratios, a metric key to his model that involved running trains on a strict schedule, regardless of whether they are empty or full.
“There is no doubt that he completely transformed the Canadian industry,” said Wallace, the only executive allowed to be recruited from CP to join Harrison as he began implementing his model at U. S. railway CSX Corp.
Before CN’s $ 2.4 billion purchase in 1998 of Illinois Central — the railway where Harrison had begun his executive career at — CN’s market capitalization was $ 5.76 billion while adjusted revenues topped $ 4.35 billion. Harrison became chief executive in 2003 and by the time he retired in 2009, market capitalization sat at $ 27.01 billion while adjusted revenues were $ 7.38 billion.
CN’s operating r ati o, which measures expenses as a percentage of revenues, fell from 89 per cent in 1998 to 61 per cent in 2006.
Harrison was able to do accomplish this by shedding costs through his precision scheduling model, said Anthony Hatch, a railroad analyst at AFP Consulting who first met Harrison in 1990.
For example, Hatch said once Harrison put his model in place there was no longer a need for additional equipment, so the number of cars controlled by CN and its customers went down. The system also eliminated the need to have extra crews waiting around, because the network was more reliable.
“He reduced cost, made CN more efficient, which led to a better service product,” Hatch said.
Harrison’s transformation effort at CP was quicker, and more drastic. Under Harrison’s leadership, the company’s operating ratio fell to 58.6 per cent in 2016, from 81 per cent in 2011. Before he arrived in 2012, CP’s market capitalization was $ 11.73 billion, with adjusted revenues of $ 5.12 billion. By the time he left at the end of 2016, the company’s market capitalization grew by $16.29 billion, with adjusted revenues reaching $ 6.2 billion.
“His time at CN made him one of the most respected rail leaders of all time, and what he did with CP was revolutionary and one of the great business turnarounds,” Hatch said.
“Part of the reason why he was so successful was his single-minded focus that ignored all other things, such as diplomacy.”
During his time at both CN a nd CP, t housands of workers were laid off, straining labour relations and forcing the companies to mend fences after his departure.
CP had cut its workforce by 40 per cent during Harrison’s four- and- a- half year reign. At CP’s annual general meeting earlier this year, chief executive Keith Creel vowed to rebuild the relationships with its employees.
While Harrison’s method clearly worked at CN and CP, Wallace said it was part of Harrison’s goal to prove that it was his model — not just his role as chief executive — that could be successfully implemented outside of Canada.
“I think there were a lot of people that said that his models could not work in the U. S. He fundamentally disagreed with that. He was on a mission to prove everybody wrong,” said Wallace, who was Harrison’s chief of staff at CSX.
Wallace said working at the eastern U. S. railroad was the biggest challenge of Harrison’s career, more difficult than the turnarounds at CN and CP because of the complexity and size of the network.
“I would say my experience at CSX has been like CP on steroids. Everything has gone faster. Hunter, in the last couple of months, has been less patient. He has demanded and driven a lot harder, and demanded change a lot faster than at the other two railroads,” Wallace said.
Hatch said it remains to be seen whether Harrison had completed enough of the transformation at CSX to precision scheduled railroading, but it is clear he had enacted many of the key changes in his so- called playbook. About 150 middle- managers at CSX have already gone through the “Hunter Camp.”
“Hunter’s l egacy is i ntact,” Hatch said.
“His view was that, ‘ I’m going to show those U. S. guys that this works, up yours.’ That’s the kind of guy he was, in a good way and in a competitive way that makes the business better, and makes the rail industry better.”