Forum Replies Created
-
Posts
-
Pete:
The SP had a very sophisticated costing system. It was used to identify where we were making money or losing it. Across the whole SP system, we had a high cost railroad. One of the components was the situation you described where management was unable to manage. Gradually traffic migrated to other forms and the guys spotting the plants saw the plants close or the business shift to trucks. On a macro level, when inflation was rampant during the late 1970s, we kept asking for across the board rate increases from the ICC to cover increased labor, fuel and declining productivity costs. It could not last and the SP slowly lost the ability to attract enough business to stay in business on its own.
On another note, I knew Bob Thurston after he became head of sales in Houston. He was great to work with. He ran interference for me one day when we were about to have a contract negotiation with Kimberly Clark. I got word that VP Sales Bob Wynkoop was thinking of joining us without knowing anything about the situation. I called Thurston and asked for his help to divert Wynkoop away from the negotiations. He said, no problem, I’ll schedule a golf match. Problem solved.
Gene
Brad, I remember you well – a calm voice of reason as inter-department conflict swirled about the Traffic Dept. I recall asking your help. We had a serious problem with profitability on sanitary paper (TP and tissue products). I asked for a research report to identify the markets, what were the competitive issues, and what changes were affecting how sanitary paper was distributed among other things. One of your people produced the most comprehensive research report I have ever seen in 50 years in business. It was the bedrock on which, as Market Manager – Paper, I could decide how to approach repairing the loss producing business we had as well as formulating programs to go after business that we could make a descent return on.
There was a clash of cultures on multiple levels. The commercial part of the SP was organized to oppose change. I found the Operations personnel much more oriented to adapting to changing conditions. It was easy for people to resent formation of the marketing group 1) we were brought in at salaries often higher than what was typical within the SP, 2) the offices we moved into had been remodeled though previously we had digs similar to the rundown offices found on much of the One Market Plaza building, 3) leadership failed to get everyone focused on taking care of customers rather than fighting among ourselves. They/we failed to quell the angst and fear we encountered. 4) Deregulation forced changes that few were prepared for or understood since federal and state regulation had provided a safe competitive environment for so long lulling many railroads into complacency while the trucks roared down interstates in ever increasing numbers. SP as a company was not prepared for any of these changes. Moving on was the best choice for most of us and you pulled out earlier than many.
I was struck at our Sparks event last May by the contrast between those of us who joined the SP at the beginning of the Marketing Department and those who worked in marketing from the late 1980s until the UP acquisition. The latter group had a much more positive outlook since the conflicts within Traffic (renamed Marketing in 1983) were gone. It was a better place to work by that time even if it was too late to turn the firm around.
Brad, thank you for your post and I welcome your further comments.
Jack, thank for joining the forum. Krebs made his comments to King the first day he was promoted to assistant to King when King was VPO. It earned Krebs a period in purgatory with no assigned work. I have never heard the story about why King was reassigned to Traffic. I have been told that after he was “promoted” he disappeared for three days to lick his wounds.
Pete, thank you for your comments. When Marketing was formed, it was done with less than adequate communication with other departments. It was not even clear at the executive level. As an example, Mr. John Kaufman, VP Transportation and Distribution for Weyerhaeuser, one of our top 10 customers, came to our offices one day in 1978. Mr. McNear, Bob King, Pete Vajta, Dave DeBoer and I were in the meeting. Mr. Kaufman wanted to know what the new marketing group meant for Weyerhaeuser. Mr. McNear attempted to describe it and was completely at sea. What he said made no sense. Pete stepped in and described the reasons SP started a marketing department and what we hoped to achieve. The communications both within the company and with our customers left a great deal of ambiguity with both groups.
Then there were the resentments carried by some parts of the SP organization. Many in Pricing and Sales felt threatened by a new group that did not fit within the existing structure and by implication indicated they were not doing a good job. Salaries paid were more attractive than typical SP salaries (I came from the ICG where I was a Market Manager to the SP with a raise from $24,000 to $29,000 annually in 1978). About 1/3 of the new hires came from outside the rail industry or straight out of colleges; about 1/3 came from other railroads and the balance from within the SP. There were some real boneheads in all three groups but most washed out quickly.
Leadership in the SP failed to end the sniping especially within the Traffic Department. The AVP Sales in Oakland threatened to fire anyone of his salesmen who promoted intermodal or worked with Marketing people. In my experience, George Scholibo, AVP Sales in Portland, was a backstabber in contrast with all his sales staff with whom I worked closely and effectively. I also found working with operating personnel very helpful and supportive. Al Heinrich and the pricing crew in Houston were extremely cooperative. Bob Thruston later became head of Sales in Houston and he was terrific to work with.
One of the major causes for friction was the combative relationship between Bob King and Pete Vajta. Vajta never really accepted the older SP culture and would roll his eyes at inopportune moments which did not go unnoticed. King’s approach to business, as described to me by Rob Krebs, was to run the department from a switch list. He was purely transactional and when he put Yogi Sethi in as head of pricing the house of cards began to crumble. Price cuts do not pass for strategic business decisions and this is what was going on after deregulation. By 1980 the recession hit SP just when deregulation came in. King and Sethi fount back with rate cuts even when they were not required. Oftentimes customers think a rate cut is what they want but what they really need is transit time predictability or other non-oricing solutions to their supply chain problems. It was the perfect storm for the SP with inadequate leadership to pilot us through the mass of competitive and economic challenges we faced.
As for your comments on the new offices let me tell you many SP offices were a shambles. Our first marketing offices on the 7th floor at One Market Plaza had broken linoleum floors with wires taped across them, broken furniture, poor lighting and mice. It was a place you would never bring a customer. The fact that many other SP offices looked like the 1940s reflected more on the top management’s unwillingness to create a professional work environment than anything Vajta did to create one for the Marketing Dept.
In my opinion, in the long run, establishing Marketing at the SP took hold long after the SP was already headed for absorption by another carrier. The company suffered too many structural and management deficits and no amount of skillful marketing after 1978 could have altered the outcome. It was too late.
Gene Harmon
