Will CSX’s New Operating Management Structure Drive Efficiency?

CSX’s CEO on a new plan

Under former CEO Hunter Harrison, CSX (CSX) embarked on its Precision Scheduled Railroading operational turnaround plan. On August 7, the company’s president and CEO, James Foote, announced a fundamental shift from the headquarter-centric management approach to a function-centric management approach.

James Foote said, “This is a proven model that pushes decision making closer to the day-to-day field operations and eliminates bureaucracy and long-standing silos within our business. This new structure highlights the strength of CSX’s extremely talented operating leadership team, and will enable the company to continue driving performance improvements in a more effective and efficient way.”

Will CSX’s New Operating Management Structure Drive Efficiency?

CSX’s new organization structure

CSX believes in an operating management structure in which all functions are aligned with its core mission to provide the best transportation (IYT) product. Some of the highlights of its operating management structure are as follows:

  • CSX plans to create an East and West structure with leaders responsible for all three major operations functions: transportation, mechanical, and engineering.
  • CSX plans to integrate support functions such as human resources, labor relations, claims, and finance employees in the company’s day-to-day field operations.
  • Jim Schwichtenberg will be responsible for safety programs, policies, and practices with resources also embedded in the field.
  • CSX plans to keep the network-focused functions centralized. These include service design, dispatching, crew management, positive train control, and locomotive and car management.
  • Brian Barr will be responsible for system engineering and mechanical including locomotive shops, capital projects, back shop maintenance, communications and signals, design and construction, and regulatory compliance.

Peers’ initiatives

On July 18, Norfolk Southern (NSC) announced the consolidation of its operating divisions. The company consolidated its central division headquarters operations in Knoxville into three surrounding divisions to drive operating efficiency.

Last September, Union Pacific (UNP) consolidated its six marketing and sales business units from six to four: Agricultural Products, Energy, Industrial, and Premium. Genesee & Wyoming (GWR) on its second-quarter earnings call announced it would further restructure its asset portfolio in the UK/Europe region.

In the next section, we’ll look at analyst recommendations for CSX and peers.