Calgary Herald, Amanda Stephenson, January 20, 2017
A railroading genius who — in a stunningly short time frame — turned around the flagging fortunes of a struggling company.
A hard-nosed boss who created a “culture of fear” in the workplace, slashing costs and cutting staffing numbers to the bone.
An outspoken, larger-than-life personality who brought his brash American style to Canada, and had no qualms about speaking bluntly to governments, unions and customers alike.
Depending on who you talk to, each of these statements could be an accurate description of outgoing Canadian Pacific Railway CEO Hunter Harrison. The 72-year-old is a polarizing figure, admired and loathed in seemingly equal parts.
There’s no denying Harrison — whose departure from CP, reportedly to take on an opportunity at a competing railroad, was abruptly announced this week — was one of the most interesting personas to ever head up a Calgary-based company, though he leaves a decidedly mixed legacy in his wake.
Harrison took the helm at CP in July 2012, after a bruising proxy fight led by activist investor Bill Ackman, who called for the ouster of then-CEO Fred Green.
Already a railway legend for the turnaround he spearheaded at rival Canadian National Railway, Harrison was Ackman’s hand-picked choice for Green’s replacement. Though he took the job, he didn’t come cheap — to lure him out of retirement, CP paid him $49 million in 2012 (part of that was to make up for lost pension and stock options from CN that Harrison gave up when he took the position at CP).
Harrison remained among Calgary’s best-paid executives throughout his tenure, topping the list again in 2015, when he earned $19.9 million in total compensation.
When he moved into the corner office, CP Rail was the worst-performing major railroad in North America. Harrison pledged that he could reverse its fortunes. He set lofty profitability targets for the company that many analysts doubted he could achieve them.
Not only did he achieve them, Harrison met his targets two years earlier than planned.
From mid-2012 to mid-2014, CP’s share price more than tripled, and its operating ratio — an industry benchmark of railroad efficiency, expressed as a measure of operating expenses as a percentage of revenue — had fallen from the low-80s to the mid-60s. (When referring to operating ratio, a lower number is better.)
For the full year 2016, CP reported an operating ratio of 58.6 per cent — an all-time record for the company.
“In terms of disproving the analysts and thinking he was a one-hit wonder (with CN), that was shattered,” said independent railway analyst and consultant Tony Hatch. “He really is a revolutionary force.”
Harrison accomplished his turnaround plan by drastically cutting costs and getting rid of underperforming assets. He saved the company $15 million a year by moving its headquarters out of downtown Calgary and into a new building at the Ogden rail yard, in the city’s southeast. He also ran longer and faster trains in an effort to improve efficiency.
Key to Harrison’s turnaround plan, however, was the implementation of “precision railroading,” meaning the trains depart at regularly scheduled times — similar to an airline — rather than waiting until they are full of cargo, as is traditionally the model. Over time, the precision model reduces inconsistencies and eliminates the need for stand-by resources, Hatch said.
“If you can run a railroad like a conveyor belt, you get maximum use of the assets — whether they be crews, or cars, or track slots,” he said.
But while Harrison’s methods worked in terms of improving the financial performance at CP, they came at a cost in terms of labour relations. As part of his overall cost-cutting efforts, Harrison presided over a head count reduction that saw overall employee numbers at the railroad reduced by more than 6,000 since 2012. At the end of 2016, CP had fewer than 12,000 employees.
“Hunter Harrison’s legacy is a chronic shortage of skilled workers,” said Doug Finnson, president of the Teamsters Canada Rail Conference, which represents locomotive engineers and conductors at CP. “They don’t have enough engineers and conductors on the train, I can tell you that. The management ranks are reeling, employee retention is almost zero.”
Unions have also complained that Harrison implemented a “culture of fear” at CP, in which managers employ strict disciplinary tactics and dissent of any kind is not tolerated. In February 2015, engineers and conductors cited “dysfunctional working conditions” as one factor in a short-lived strike that lasted only one day before the federal government signalled its intent to force picketers back to work.
Currently, the Teamsters Rail Conference and CP are involved in a dispute over the company’s fatigue management practices, with the union complaining that workers are being forced to drive trains while physically exhausted from grueling, unpredictable shifts.
“I don’t have anything positive to say about him (Hunter Harrison),” said Finnson. “He’s leaving a lot of damage behind him that’s going to take a long time to clean up.”
There is also animosity for Harrison within segments of Western Canada’s agricultural community. In 2013, the combination of a harsh winter and a record crop combined to create a rail backlog that saw both railways — CN and CP — struggle to keep up with grain shipments.
Gary Stanford, who farms in the Lethbridge area and sits on the board of the Alberta Wheat Commission, said he believes farmers have been on the back burner for CP ever since Harrison took the helm.
“We were always trying to pressure Hunter Harrison to do a better job of moving our grain in a timely fashion,” Stanford said. “There are no farmers in Western Canada who have a love for Hunter. We’re happy to see him go.”
Harrison’s outspoken personality meant he often clashed publicly with those he disagreed with. For example, he called the grain-hauling legislation brought in by the Harper government in response to the 2013 rail backlog “political syrup,” and criticized what he saw as government attempts to over-regulate the railway industry.
In 2015, following the strike by engineers and conductors, Harrison warned he was training managers to run trains in the event of future labour disruption — saying union members’ eyes would “get awful big” when they saw a train coming down the track at them at 60 miles per hour with a “manager blowing the whistle.”
In 2013, Harrison found himself in Calgary Mayor Naheed Nenshi’s crosshairs. The mayor lashed out at CP and questioned its safety inspection practices when a flood-weakened railway bridge over the Bow River nearly collapsed.
However, Peter Wallis — senior adviser with the University of Calgary’s Van Horne Institute — said not everyone, within CP or outside it, would be turned off by Harrison’s brash, hard-nosed style and relentless push for change.
“Is it confrontational, or is it a vigorous exposition of the way forward by the CEO?” Wallis said. “Everyone’s going to go away with a different view of how you interpret that.”
Wallis added that in spite of Harrison’s polarizing personality, it’s clear the legendary railroader is also capable of inspiring great loyalty.
“To achieve the results he did, you have to have the drive and ability to persuade your team to make it happen,” Wallis said. “Clearly, Hunter Harrison had the drive to create the environment where people would get on board and make those results happen — frankly, faster than he had originally said they would occur.”