Hello,

Here is the copy of my comments to The Journal of Commerce Online of the Surface Reflections column of August 16, 2000. My commentary is at the end.

Enjoy!
Jason Hilsenbeck

*****************************************
SURFACE REFLECTIONS by Lawrence H Kaufman - JoC ONLINE
Updated 5:57 p.m. ET, Wed Aug 16, 2000

Who will run America's railroads tomorrow?

All of America's major railroads will undergo significant management changes in less than a decade. The calendar is inexorably running out on the men who now run the Class 1 carriers.

The youngest of the group, Mike Haverty, chief executive of Kansas City Southern, is 56. Rob Krebs of Burlington Northern Santa Fe is 58, as is Union Pacific's Dick Davidson. John Snow at CSX is 60, and David Goode at Norfolk Southern is 59.

The impending transition to a younger generation of leaders raises some intriguing questions and poses interesting prospects for the future of the railroad industry. It's human nature for executives to stay in a comfort zone when it comes to selecting their successors.

In other words, they tend to replicate in their own self image.

In the cases of Krebs, Davidson and Haverty, that's a career railroad executive up through the operating department ranks. Snow and Goode both are lawyers. Barring another round of mergers that reduces the industry to two players, that means five boards of directors soon will begin to deal with management succession issues. Boards of directors, not being any more omniscient than the rest of us, tend to select chief executives who are well-suited to deal with the problems and issues facing the company that the board is able to identify when the choice must be made.

The railroad industry has its share of good managers, even of good executives. But, with a few exceptions, it has a lack of depth when it comes to outstanding leaders at or near the top.

So, will the railroads tomorrow be run by men -- they're likely to continue to be of the male persuasion -- in the mold of today's leaders, or will the next generation of rail chiefs reflect the changing times and needs? The answer to that question will also tell us a lot about the railroads' ability in the future to focus on customer service and finally to have a commercial and financial renaissance.

There are some encouraging signs that the institutions themselves recognize that 'the same old, same old' won't be good enough tomorrow. In the last year, both UP and BNSF have brought in executives from outside the railroad industry, still a relatively rare occurrence. Just last week, UP named Lance Fritz vice president and general manager of its energy business. Fritz came from Fiskars, a Madison, Wis., international marketer ofconsumer products.

It's going to take a different kind of executive to run the railroad of tomorrow. We're talking about different, not better. Today's leaders made their marks as cost-cutters, and they are good at it. But after decades of pruning, there are precious-few opportunities left for railroads to cut their way to prosperity. Tomorrow's leaders will have to find ways to grow the top (revenue) line and grow it with profitable traffic.

It takes a different set of skills to manage growth. The near-constant pressure to cut costs has spawned a risk-averse culture in which executives tend to resist change. Growth calls for risk takers. Several very fine railroad executives, all retired, have told me they spent so much of their careers trying to do more with less that they question whether they could manage tomorrow's railroads.

Rail leaders aren't the only ones facing retirement. Many veteran rank and file employees will be leaving the industry in coming years.

Their replacements will have different aspirations for their careers, and that will require a different kind of executive to lead them. Quality of life issues, for example, will be more important to the work force than has been the case in the past.

Tomorrow's -- and today's -- railroad workers won't accept what their fathers had to; seven day a week availability, no regular work schedules, and a harsh 'us-them' discipline system.

Members of so-called Generation X march to a different drummer. It will take a different set of managerial skills and attitudes to motivate and lead them, if you can even get GenXers to work for railroads. Some years ago, I recall a conversation with a railroad recruiter who explained that his company did not visit Harvard or Massachusetts Institute of Technology because graduates of those schools expected to have private offices and secretaries by the time they were 28.

Since that wasn't likely to happen, the railroad avoided bringing in management people who would become malcontents or who wouldn't stay. It also avoided employing the best of the best.

Tomorrow's railroad cannot afford to pass up highly talented people just because they are ambitious. It not only has to recruit them, it must find ways of encouraging them and advancing them as fast as they can handle challenges. That, too, will require a different type of executive.
------------------------------------------------------------------------------
Lawrence H Kaufman can be reached at 303-526-2128.
*****************************************

My thoughts:

I really enjoyed this article. Near the end of the article as to why Gen X'ers such as me, who is getting to close to 30, and our reasons why we don't desire to work for the railroad, do indeed apply to me. Those of you who know me and my family ties to railroading understand how much I love railroading and the lure of being a railroad man moving the nation's freight. But the reality of working railroad operations isn't as desirable when I compare it to careers with better pay, set time schedules and innovative environments.

When I think of today's class one railroads, my thoughts are big, cumbersome, impersonal, churning people over, under utilizing technology. But you know...these words can describe any big business, not just railroads. I think many big corporations have the problem of getting the best people to the top. This challenge isn't new. It's just natural that as a company gets bigger, it reacts slower and less adept to change. That's why thousands of new businesses are formed each year because big corporations miss opportunities and/or cannot react quick enough.

I'm not saying someone can lay down new tracks and become bigger than the Union Pacific. I am saying anyone can drive their tractor trailer along side the railroad tracks and stop at the next siding holding a box car. That person can easily knock on the shipper's door and offer the shipper an alternative solution when the railroad doesn't meet requirements. Chances are that truck driver would be willing to communicate to the shipper by connecting to the Internet via satellite and then send an email message to the shipper next to the railroad tracks. What are the chances the crew sitting in the cab of the locomotive of the passing train cares enough to radio the dispatcher to in turn contact the way billing department to inquire on the boxcar sitting at the shipper next to the railroad tracks? Do you think the railroad crew will ever be supplied a link to the Internet and then use it to directly email the shipper next the tracks?

So where will talented workers go? Will they stay at a big corporation that pretends to listen, but nothing changes... or to a company in tune with the market place, technology and it's workers...where the person's ideas and influences have an affect? No wonder big railroad corporations find it difficult to get good people at the top.

Freight is always going to move, one way or another. I do wonder what kind of people will be moving it. Just one of the challenges of moving freight in the world of information technology.

Take care,
Jason Hilsenbeck
President
www.loadmatch.com
(630) 428-9230
(630) 428-9229 fax

Intermodal's Connection for Loads, Trucks, Equipment and Jobs

*****************************************

Some comments on my thoughts from associates in the business:

-----------------------------------------
Jason:
As a person who recently left the "good ole boy" network of the railroad mentality I truly agree with your comments. Most of them make short term decisions without looking at the long term ramifications their decision will have.
Theresa Lewis

-----------------------------------------
You go Jason you are right on. This railroad mentality must change or rail is a dinosaur. By what is happeing at CSXI I believe the demise of Intermodal will be the start of the chain reaction. I have written Glenda Morgan of the NSTB, got a reply but nothing has happened. Executive railroad people of this generation are not concerned about the next generation.
Tim Lake

-----------------------------------------
Jason,
An intelligent essay at the end. You never wrote that articulate when I had you in class ;) Best of luck,
Jim Kenny

-----------------------------------------
I am impressed with your thoughts and comments at the end. Very Jerry Maguirish. It's interesting to see how much younger and younger this industry is getting. Soon the days of the Traffic Manager who has been doing his job poorly for 25 years and having the 3 martini lunch with his LTL salesmen will be over. I am glad I am on the young side.

Eric Topa

-----------------------------------------
Thanks, it was great.
Sam Farruggio

-----------------------------------------