CSX Boss Says Railroads’ Efficiency Model Wasn’t Implemented Properly

“The best-run companies that provide service to other companies focus on their employees. They focus on employees’ morale, their attitudes, how they’re feeling about the company,” said Mr. Hinrichs, 56 years old, who runs the Jacksonville, Fla.-based freight railroad whose network runs largely throughout the Eastern U.S.

Precision scheduling “was heavily indexed toward controlling costs and improved asset utilization and, in many ways, didn’t prioritize improving the employee experience and improving customer service,” Mr. Hinrichs said.

The appointment of a railroad outsider to run CSX was a surprise to some investors, after recent bosses such as the late Hunter Harrison —a champion of precision railroading—and industry veteran Jim Foote. Mr. Hinrichs spent 30 years in the automotive industry, including time working at Co. and Co.

Mr. Hinrichs recently spoke with The Wall Street Journal about rebuilding trust with employees, improving CSX’s relationships with its customers and spending more time than he expected talking with regulators. Here are edited excerpts: 

WSJ: In your time at CSX, you have faced a potential rail strike, continued service issues and broader scrutiny of derailments and train accidents. How do you sum up the state of the industry?           

Mr. Hinrichs: We know that the rail industry can serve our customers better, and we’re working hard at doing that at CSX. There’s a tremendous opportunity to build a better relationship with our employees, especially our employees in the field, and improve the employee experience.

WSJ: What have you learned from your conversations with the railroad unions?        

Mr. Hinrichs: We’re 196 years old, and there’s been a lot of distrust over the years between employees and management. Any hope of having trust, there has to be a relationship. There has to be regular and constant communication and interaction. This industry is ripe for change when it comes to employee and union relations.

I have found that, maybe because I’m new to the industry, they’ve been very accepting. People want to see progress, they want it to be a place where people feel valued and respected and appreciated and included, and that’s what we’re spending our time on. 

I think our railroad is running the best it’s ever run because we’re engaging with our workforce. We’re solving paid sick leave, attendance policy issues or other things, and I think they go hand in hand. We’re getting the service to our customers because our employees know we’re listening to them.            

WSJ: How do you see the future of precision-scheduled railroading, or PSR, playing out at the railroads?   

Mr. Hinrichs: You read all of the Hunter Harrison books, if you look at even the CSX website, it says the five guiding principles are first: improved safety. Second: control costs. Third: improve asset utilization. Fourth: improve employee experience. And fifth: improve customer service. 

Those five guiding principles are relevant today. They’ll be relevant tomorrow and they were relevant five years ago. 

Now, it was implemented in a way that didn’t really take the employee experience into account and frankly, didn’t prioritize better customer service. 

It’s not an issue of, ‘Is PSR bad or good?’ It’s an issue of balance and making sure that you have the right priorities constantly and including employees and customers in how you implement scheduled railroading.           

WSJ: Have you seen any notable differences between how companies in the railroad industry and automobile industry are regulated?

Mr. Hinrichs: The rail industry lately has had a more strained relationship with its regulators, largely due to customer-service issues as opposed to, until recently, safety or cost or other things. The facts are the railroad industry has gotten significantly safer over the last 10 years, and the data say that.

When I’m out in the field talking to our employees here in the railroad industry, safety is very much on their minds. None of us take any pride at all when there’s any kind of accident or injury or derailment.

I don’t get the sense that there is a lack of commitment or that people are not focused on it. The fact is, there’s a lot going on. It’s very heavy equipment. It’s all this older technology, and you have to have a process in place. When you have a high-risk environment, you need to have very strong discipline to follow processes.  

WSJ: You were once a railroad customer. Now you’re on the other side of the table talking to customers. What are your customers telling you now?           

Mr. Hinrichs: They’re so happy to have somebody as CEO of a railroad who was a customer of the railroads because it’s a different experience on the other side. I’ve been very vocal inside CSX about what it’s like to be a customer of the railroad over the years. 

They want us to do what we say, to do what we commit to do and then do it repeatedly. So they can have confidence in that because they run their business based on our schedules, based on assuming we’re going to do our piece of it.

Write to Esther Fung at [email protected].