I wonder what Gus would think of current national contract negotiations, which to put it politely, are “tense.” Since I can’t ask him, I turned to long-time railroad investor and board member Gil Lamphere for some current thinking—his own “lines on labor”: “Labor has historically been treated as a retractable Elmer’s Glue Stick: hired, trained to remain stuck with the railroad and hold it together, but getting furloughed when the economic cycle turns down. That changed when the railroads’ Baby Boomers (people born between 1946 and 1964) retired with 30-40 years of experience, mainly following changes to the Railroad Retirement Act. “The Millennials (‘Generation Y,’ people born between 1981 and 1996), lacking institutional knowledge that requires years to develop, came on board with different expectations for rapid advancement after being trained. But they didn’t want to stay in one place anymore, let alone the railroad that had trained them and given them experience. They wanted and developed job options elsewhere. So much for restoking the institutional knowledge firebox. “Michael Ward, when he was Chairman and CEO of CSX, saw this coming. Ward recognized labor as an essential element of railroading. Ward showed his Board of Directors the statistics and described the Millennials’ characteristics. His strategy was ‘we will meet the Millennials halfway.’ One year later, he reported back to the Board of Directors on how his strategy was working. ‘Halfway is not working,’ he said. ‘The Millennials win. They won’t compromise. We are the ones who have to adjust.’ “Wall Street loves a low labor number, which means lower expenses and higher profits. But Wall Street has a hard time realizing that current low labor figures are an artificial number, and a hard time devaluing the railroad sector if it doesn’t run on time. And Wall Street is confused when the rails are scrambling to increase labor after years of Wall Street enjoying and rewarding increasingly lower labor figures produced by PSR or simple redundancy reductions. “Labor should not be the retractable Elmer’s Glue Stick, but the Super Glue necessary to permanently hold a railroad’s complex network and on-time function together, binding a highly efficient, balanced, on-time railroad together. Wall Street needs to accept the fact that railroading is a complex, long-term outdoor game that requires experienced, robust players on a permanent team. This is especially true if rail wants to blend the competitive dynamic growth of intermodal with its traditional, semi monopolistic bulk commodities business and maybe even grow carload business. Much like capex, labor is the permanent capital in which railroads need to invest.” The term “human capital” has replaced “people” or “staff” or “employee,” especially in large companies. It makes perfect sense. As Gil Lamphere and other experienced railroaders will tell you, there is no more important area of investment. The post ‘Lines On Labor’ appeared first on Railway Age. Continue reading...
