Beware the company, or industry, with a one-track mind. General Electric had one for years, consumed by Six Sigma, whose gospel the U.S. conglomerate helped spread to boardrooms far and wide. At Kraft Heinz , the cost-saving dogma was zero-based budgeting, which caught on with other packaged-goods makers and beyond. For North American freight train operators, the obsession is precision scheduled railroading, or PSR. Like other cultish management fads, it worked for a while and has now gone too far.
As with most brand-name strategies championed by consultants and CEOs, PSR boils down to boosting productivity, in this case by shrinking workforces, running trains faster and optimizing schedules. Despite its multiple interpretations and approaches, success is widely gauged by a railway’s operating ratio, a simple measure of how much it spends to make a buck.
Union Pacific also found itself unable to bring back enough furloughed workers in areas where they were most needed. Strict attendance rules led to tense industry-wide negotiations with labor unions, prompting When he was hauled up to Capitol Hill earlier in March, Norfolk Southern CEO Alan Shaw used the opportunity to emphasize his $47 billion company’s recent decision to distance itself from PSR’s core tenet. “In a significant departure from the railroad industry's recent past, we deliberately moved away from a singular focus on operating ratio,” helawmakers. “Instead, we are taking a more balanced approach to service, productivity, and growth.
In September 2020, Chief Executive Miguel Patricio tried to steer Kraft Heinz in a new direction. In unveiling its new strategy to investors, company executives invoked “costs” two dozen times compared to nearly 250 mentions of “grow” or “growth,” according to a transcript of the event.
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