Meet your CEO, Hunter Harrison. He came out of retirement to guide Canadian Pacific's return to greatness. He knows what we need to do to get there, and he's confident we can do it.

A RAILROADER IS BACK IN CHARGE

At least by reputation, if you looked up hard-ass in the dictionary you would find Hunter Harrison's picture. He's tough, but fair and straightforward. You always know where you stand. He's a great storyteller with a deep voice, a folksy southern drawl, and a "colourful" vocabulary.

Hunter Harrison is a railroader. Plain and simple. He has been in the rail industry for his entire 49-year career, starting as a carman/oiler in 1964. His passion for railroading, talent for operations, and leadership skills helped propel him through the ranks at Burlington Northern before joining Illinois Central where he became CEO, and then at Canadian National where he had a key role in helping turn that company into a standard-setter.

Now the self-described "new sheriff in town" is nearly a year into breathing new life into CP.

He's driving rapid, fundamental change across our organization, building a new team, transforming our operational approach, improving the network and rationalizing our fleet. The goal is to improve our service, make us more competitive and open up new opportunities to grow. The pace is dizzying, but the potential is exciting.

FROM THE BIG PICTURE TO THE SMALLEST DETAIL

Our new CEO is a rarity, a leader with both a clear, big-picture vision, and an eye for detail. He likes to know what's happening at the ground level and he's not afraid to pick up the phone. That's Hunter, and that's how he drives culture change, one person at a time.

He doesn't spend a lot of time in his office. His greatest skill might just be his desire to be out in the field, visiting yards and offices, talking to people and watching them work. In his first six months at CP, he spent most of his days visiting our yards, terminals and offices, seeing for himself how we were operating. And true to his reputation, he found plenty of opportunities to challenge CP employees to think about why they do certain things a certain way, even the little things.

"Do you know why I pay attention to those details? When people know I care about them, believe me, they start caring about them too. And it's not just out in the field. When I first got here, I went to the mail room. I noticed we were paying to overnight packages across town. What? Give it to me. I'll drive it over there.

"That's the kind of thing I'm talking about. I know from experience that eliminating something like unnecessary overnight courier costs can save millions. But this is not just about costs. It's about culture. And we're going to change it."

WE'RE ALL RAILROADERS

The way Hunter sees it, everyone working at CP is a railroader. If you work here, regardless of your job title, you're a railroader. What you do impacts our success.

And there's a lot of potential for success at CP. He's been impressed with the railroading talent he's seen so far at Canadian Pacific. "If you look at the recent history of CP," he observes, "it's been an operating company run by marketing people. There are a lot of good railroaders here, a lot of talent to build on. I've sensed some excitement, with people saying, Oh, these guys want to railroad again. So we're letting people know that we're getting back to the basics."

To Hunter, those basics boil down to five key Foundations. "The secret to railroading hasn't changed," he says. "One, you have to provide good service, which is all about doing what you say you're going to do, every time. Two, you've got to manage your costs. Three, develop a strong emphasis on efficiently utilizing your assets. And four, accomplish the first three without getting anyone hurt.

"The fifth key Foundation is people. That's the most important one. You have to develop people; treat them fairly, train them, and reward them when they excel. Because without quality people, you can't accomplish the other four Foundations."

NO TIME TO WASTE

The CP turnaround starts with cost containment. In Hunter's view, it's critical to our ability to compete. "CP was doing okay for a while with what it had to work with, but costs got out of hand," he says. "This is really about getting our costs under control and developing the efficiencies necessary to become a low-cost carrier. Once we get there, it opens up a whole world of revenue potential we never had before. Efficiencies coupled with growth, that creates a hell of an opportunity for us."

Our CEO has wasted no time since joining us last July. He immediately saw opportunities to improve and modernize the network, closing humps at four yards shortly after coming on board. Four was huge.

"The thing is, these hump yards were 1950s or 1960s vintage. Back then, the traffic mix was very different. Virtually all the cars had to be switched and classified. So we looked at our book of business today, grain is unit trains, coal is unit trains. So are sulphur and potash. Even merchandise is unit trains. They don't have to be switched like they were in the past.

"Now, we only have to switch 25 to 30 percent of our cars. Then, it was 80 percent. Our infrastructure was out of date. I saw that, even before I joined the company. So when I came on, we got going right away, starting the process of closing hump yards in Toronto, Calgary, Bensenville, and Winnipeg.

"There's a lot of opportunity that comes from this kind of thinking. Our freight yard in Montreal was three times as big as it needed to be, automotive and intermodal were in separate locations, so we redesigned the operating plan for the yard.

The footprint going forward is automotive, intermodal, and freight, all in one yard. This frees up a large tract of land worth $30-$50 million.

"So closing those humps saves costs, but the main thing is, it makes us more competitive out in the marketplace by making our network faster and more efficient.

That's key to our future, to everybody's future."

FAST-FORWARD

We are changing how we interact with our customers, getting their involvement in changes we are making to improve the speed, reliability, and consistency of our service. On our end, those changes include a complete turnaround in how we schedule, design, and block our trains. The most notable example of this new approach so far is in our intermodal business, and it immediately created a revenue opportunity, a big one.

In September, we announced highly competitive, four-day premium transcontinental intermodal service that shaves a day off of our shipping time between Vancouver and Toronto, and that service runs two full days faster between Vancouver and Chicago.

The operational results have already improved across our entire network. During 2012 alone, we saw average train speed increase by more than 19 percent and car miles per day rise by 26 percent, while terminal dwell time dropped 10 percent.

With our improved speed and operating discipline, we need far fewer locomotives and rail cars to run our business. We're well underway to rationalizing the fleet, having announced plans to operate with roughly 200 fewer locomotives and more than 3,000 fewer rail cars. This will have a big impact on costs and network efficiency. We'll have increased capacity with fewer assets. That's a plan for success.

THE RIGHT PEOPLE AT THE RIGHT TIME

In Hunter's world, in any business, success is all about execution. Execution comes down to people knowing and delivering on what's expected of them. He puts it this way:  "I know how to run a railroad. I can tell you exactly what we need to do to get where we want to go, but our people have to believe it. We need believers or we'll never get there."

A new executive management team is largely in place at CP. Lines of communication and organizational structure have been streamlined. We're now much leaner at the top. Our planning is becoming more centralized, but much more decision-making authority and accountability is being given to the men and women working in the field. This will make CP more agile, more responsive to customers, and more formidable as a competitor.

We are also moving to reduce the amount of outsourcing we do, bringing as many functions as possible back in-house, where they belong. One major area of focus is Information Services (IS). The company plans to move from heavily outsourcing this critical function to develop the capability inside CP. Among a number of other functions, this initiative will also include track maintenance, which had also been significantly outsourced in the past.

Everyone is a railroader. That's one key reason CP made the decision to move its headquarters from leased office space in a downtown Calgary high-rise to company-owned land at its Ogden Yard, on the city's outskirts. As Hunter puts it, "I want everybody to look out the window every day and remember what business we're in."

CHANGE:  THE NEW NORMAL

Ask Hunter to boil our journey down to one word and he answers quickly:  "Change." Part of that change involves personnel. This is the toughest and most painful element of the Plan, no doubt. It started at the top with a new management team, and it has reached all levels of the organization.

"Listen, we don't want to lose good people," says Hunter. "If you're willing to train to learn new skills or open to moving to a different location, chances are you can play a role in what we're building here."

"A strong CP is good for everyone in the company," Hunter continues. "It's great to see the pride of performance start to come back. But if you don't like change, you're probably in a bad spot. I'll tell you what, though, I have never been in a place where more people were ready and willing to change than I have seen here."

READY TO COMPETE AGAIN

For the vast majority of CP employees, seeing our company underperform has been painful. Hunter Harrison sees that coming to an end, at least the part about CP under performing.

"Today at CP, we're ready to start catching up. People know you can't continue to play with a losing hand. Everyone reads the news and people get tired of hearing about how CP is the worst. I know enough about railroading to know what can and can't be done. We can do this.

"And what's wrong with a little competition? Competition is good. It's good for us, good for the railroad industry and good for shippers," he adds. "We're going to catch CN. They're watching us now."

This Canadian Pacific Magazine article is copyright 2013 by the Canadian Pacific Railway and is reprinted here with their permission. All logos, and trademarks are the property of the Canadian Pacific Railway Company.

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