Conrail at 40: An experiment that worked

April 1, 1976 was a watershed day in U.S. railroading history. On that day, Consolidated Rail Corp., better known as Conrail, began operating under the auspices of the U.S. government a new railroad cobbled together from six bankrupt Northeastern carriers: Penn Central, Erie-Lackawanna, Jersey Central, Lehigh Valley, Reading, and Lehigh & Hudson River. Conrail, now 40, continues to thrive, albeit in a very different form from when it first turned a wheel.

CONRAIL THEN AND NOW

First, some history. To address the looming collapse of freight and passenger rail traffic in the East as a result of those railroad bankruptcies, Congress passed the Regional Rail Reorganization Act of 1974, the 3R Act, which provided interim funding and created Conrail as a government-funded private company. Under the 3R Act, the United States Railway Association (USRA) prepared a Final System Plan, identifying the rail lines from the bankrupt railroads that would be transferred to Conrail. Congress approved Conrail’s Final System Plan as part of the Railroad Revitalization and Regulatory Reform Act of 1976, the 4R Act, which was signed into law on Feb. 5, 1976. The 4R Act also turned over ownership of most of the Northeast Corridor to Amtrak.

Conrail began operations on April 1, 1976. Its mandate was to revitalize rail service in the Northeast and Midwest and to operate as a for-profit company. Conrail’s economic recovery and turnaround began in 1980 when the Staggers Rail Act, which largely deregulated railroads, was signed into law.

Conrail’s first profitable year was 1981. Its financial situation greatly improved following passage that year of the Northeast Rail Services Act (NERSA), which relieved the railroad of responsibility for operating unprofitable commuter rail services, turning them over to pulic agencies  New Jersey Transit, SEPTA and Metro-North (New York MTA). “Given its history as both a passenger and a freight railroad, Conrail  built up a culture whereby its employees were very responsive to passenger issues, even as they focused on their freight service improvement goals,” recalls former NJ Transit executive D.C. Agrawal, now a consultant. “Conrail always had the right attitude to resolve common problems. I wish more of today’s freight and passenger railroads had that mix of people with service in both sectors.”

By 1983, Conrail had become a for-profit, freight-only railroad. That year, under the leadership of the now-legendary L. Stanley Crane, it had become the fourth-largest freight hauler in the U.S. In 1985, the Conrail Privatization Act was enacted, authorizing a public stock offering to return the railroad to the private sector. In 1987, Conrail was returned to the private sector in what was then the largest initial public offering in U.S. history, raising $1.9 billion. Interestingly, most of its route-miles had their origin in the Penn Central, which when it went belly-up in 1970 was at the time the largest corporate bankruptcy in U.S. history.

“Conrail began in 1976 as a federally subsidized operation with 100,000 employees, losing $1 million per day,” notes Vice President and Chief Engineer Tim Tierney. “The Staggers Act led to substantial deregulation, and the company took full advantage of that. By its 1987 IPO, Conrail was starting to make $1 million a day. Management identified premium markets such as intermodal and automotive. But success required many sacrifices: employee reductions, line and division consolidations, line spinoffs to short lines, etc. The remaining employees were true survivors who became very efficient and productive.”

In 1997, during the era of railroad megamergers and following a contentious battle for control, Norfolk Southern and CSX agreed to acquire Conrail through a joint stock purchase. CSX and NS split most of the company’s assets, CSX acquiring 42% and NS acquiring 58%. The split was structured generally along the lines of the two railroads that merged in 1968 to form Penn Central—the New York Central (CSX) and the Pennsylvania Railroad (NS). The Surface Transportation Board approved the acquisition and restructuring of Conrail on July 23, 1998. NS and CSX took administrative control of Conrail on August 22, 1998.

Conrail, however, did not simply go away. To preserve competition in three critical urban geographical areas—Northern New Jersey, Southern New Jersey/Philadelphia, and Detroit, Mich.—the STB-approved merger plan created an S&T (switching and terminal) railroad owned jointly by CSX and NS and operating about 1,200 miles of track in the three regional areas. Its official name: Conrail Shared Assets Operations, though it’s simply still called Conrail.

On June 1, 1999—“split day”—Conrail began operating as an S&T railroad for NS and CSX in the three areas. In 2007, it expanded its operations in Northern New Jersey to Staten Island, N.Y. Both CSX and NS have the right to serve all shippers in these areas, paying Conrail for the cost of maintaining and improving trackage. They utilize Conrail to perform switching and terminal services within the shared-asset areas, but not as a common carrier, since contracts are signed between shippers and CSX or NS. Conrail also retains various support facilities, including maintenance-of-way and employee training.

Under the leadership of President and Chief Operating Officer Ronald L. Batory (pictured), Conrail today is an efficient and productive carrier with a strong sense of identity and a well-defined corporate culture. While there are still many employees that got their start with “Big Conrail” (and a handful of veterans from the company’s fallen-flag predecessors), the railroad’s demographic has gradually been getting younger. Such was the theme of Conrail’s annual management meeting that took place in Philadelphia on its 40th anniversary, April 1, 2016: “Running Your Railroad for Tomorrow.”

“Respect the past, understand it, and appreciate what it contributed to today’s Conrail,” said Batory in remarks to his employees. “Realize that the customer is king. Do what’s right to provide service without variability—derailments, injuries, and grade crossing and trespassing incidents.”

Conrail’s corporate culture is expressed by management as the “Four Es”: Education, Energy, Experience and Enthusiasm. Some refer to the corporate cultures of NS, CSX and Conrail as, respectively, “uniforms, suits and sweaters.” Conrail employees “are the railroaders in sweaters.”

The people in the sweaters are very focused and highly disciplined, characteristics that are reflected in Conrail’s reputation for providing good service. “We have a very good relationship with our parent companies regarding transportation services, mechanical functions and engineering projects,” said Tim Tierney. “We’ve set up Service Provider Agreements where we pay our Class I owners for such services as payroll, testing and police services. For example, locomotive heavy servicing and repairs have been turned over to our parent railroads. Light running repairs are performed at our shops. We’ve changed from a Class I mentality to an S&T mentality. And we looked at other S&T operations, like the Indiana Harbor Belt, St. Louis Terminal Railway Association and the Belt Railway of Chicago, and adopted some their best standards and practices. We’ve introduced technology advancements like locomotive GPS, remote-control operation of yard locomotives, and remote monitoring and operation of moveable bridges.”

Since 1999, CSX and NS have invested about $370 million in capital into Conrail’s infrastructure to add capacity and handle growth.

In 2006, Conrail, like many other railroads, began undergoing a wave of retirements of experienced employees. Today, nearly 75% of its workforce has been hired since 1999, many of those employees since 2006. “Our next generation is committed to the job, to teamwork and training,” said Tierney to the managers gathered in Philadelphia. “Railroading is a people business as well as a complex industry. There is much to learn and experience, but our laboratory is all around us. Everything you need to learn the business is out there.”

THE HUMAN FACTOR SIDE

Although not generally recognized, basic human factors and ergonomics (man-machine interface) theory has historically been applied in railroading. For example, while various rulebooks offer different signal aspects for medium speed and even “clear” signals, no railroad uses red alone for a permissive indication. Likewise, turning a dial clockwise or moving a control tab to the right increases the values of the parameter being controlled. Improvements to locomotive cabs and layout of modern dispatch centers and shops are examples of more complex applications of human factors engineering, yet they still remain focused primarily on equipment design.

Conrail has recently widened the internal application of fundamental human factor concepts. Conrail’s effort goes well beyond previous practice in that it incorporates an operational dimension as well as engineering principles. Conrail is now extending railway human factors to the training and thinking patterns of its operating and maintenance employees, with particular interest in those engaged in the direct provision of transportation. It considers the psychology of human attitudes and of workplace behavior. Yet, even in its approach to operational and behavioral applications, it remains analytically based. Ron Batory, looking for definitive and measureable improvements in operational performance, notes that there has been a 55% reduction in human factor-caused train incidents over the past 15 years, resulting in a .0003% human risk factor.

The application of human factors at Conrail falls into a comprehensive and highly analytical approach to running the business. Tim Tierney notes that due to continued and steady industry investment in rolling stock along with Conrail’s investment in fixed-plant infrastructure, mechanical and maintenance caused derailments on his railroad have been greatly reduced.

As Tierney points out, “Conrail continually reviews the needs of our line-of-road infrastructure, bridges, yards and facilities to prioritize the proper level of investment at the proper time. Additionally, projects to increase capacity and operational flexibility are designed and implemented to address existing needs and new business opportunities. Over the years, Conrail has also participated in many public-private partnership projects in all three Shared Assets Areas that further enhance and strengthen our assets and add capacity to improve the service product we provide.”

However, the greatest opportunity to be achieved resides in the category of operational causes, and this is where human factors can play a big role. Tierney notes that, despite its condensed geographic footprint, Conrail crews executed in excess of 15 million switching events in 2015 alone.

So how do human factors enter this equation? Obvious items are crew qualification of and rules compliance and the more subtle, man-machine interface issues.

As Assistant Chief Engineer Eric Levin observes, “Our Managers must learn how the ‘whole thing’ works in order to be effective.” Learning the equipment, technology and rules of one department is no longer sufficient. Conrail’s management team strives to be cross-functional and well-versed in all operating crafts, to be able to make decisions that will positively impact all departments. Levin’s insight about the need to learn how the different mechanical and engineering functions interact with the human element of railroading is well-taken. Clearly this not only tends to reduce incidents, it also makes for a more efficient business and a healthier bottom line.

Today, achieving such integrated experience and knowledge in the next generation of managers and supervisors represents an industry-wide challenge. How is this accomplished on Conrail? It starts at the top, where Batory notes, “Our young people, both agreement and non-agreement, constitute the future of Conrail. With the talent hired in the late 1970s now retiring, we continue to increase our work force by 7% to 10% each year. It is critical that Conrail maintain and strengthen its workforce.”

To further cultivate talent, Conrail has instituted a series of formal and comprehensive training and development programs “to accelerate and properly shape the experience factor.” In October 2015, Conrail hosted a training and education seminar at its Bellmawr facility in Southern New Jersey. The attendees were drawn from all of the operating departments, and participants were purposely mixed into pre-assigned cross-discipline workgroups. Conrail’s Risk Management Team spearheaded this particular seminar, derailment training.

Chief Risk Officer Neil Ferrone notes that Conrail’s investment in training and retaining is a bottom-line-driven process and covers all phases of a railroader’s career, from Conrail’s early observation of attitudes and aptitudes to train crew refresher training to performance of summer interns. The employee development process begins before new hires are on the roster. Pre-employment orientation for prospective trainees is stresses that these individuals and their families are made aware of the challenges as well as the benefits of life in a railroad operating environment. This occurs prior to their acceptance of a position with the railroad.

Conrail has been continually scouting, recruiting and training young talent over the past ten years. This has been accomplished by going to some of the best engineering schools in the country and offering summer internships to future civil and mechanical engineers. Conrail also seeks out highly motivated veterans with experience in leading and molding individuals into part of a functioning team while understanding the concepts of organization and mission. Conrail’s cross section of military experience, higher education and experienced operating employees forms an effective management team that can recognize real risk and develop processes to reduce it.

October’s training session cemented concepts of team building along with operational knowledge. Gary Wolf, principle of Wolf Railway Consulting and a recognized expert in track/train dynamics, assisted in training development and then execution by giving in-depth seminars in train dynamics and track infrastructure. Wolf went into such details as how to locate the actual point of derailment, differences between wheel climb and drop-in derailments, and the actions of freight car suspensions. “I’ve never been involved in such a well-designed training program,” he said. “It’s world-class.”

Atticus Consulting’s Randall Jamieson, an authority on workplace behavior and motivation, gave a seminar on employee attention-related errors and how supervisors can better understand their people. Insight was offered on how to communicate with many personalities. Jamieson noted that “Conrail’s management team consists of an earnest and dedicated group, thirsty to learn, willing to do the work, and appreciative of the opportunities provided to them.”

Attendees were assigned to work teams from different Conrail districts—a mix of mechanical, transportation, engineering and support personnel. They were given field instruction on equipment that included turnouts, partially disassembled switch stands, and freight car trucks.

A laboratory with several derailment stations, each of which included a scale model of a derailment with an incident summary, included an instructor drawn from the ranks of seasoned managers. Depending on the questions asked, or the requests made for specific measurements (track gauge, wheel tread), the facts were presented to a committee. If the appropriate questions were not raised, the discoverable facts remained hidden. With appropriate investigation, the sequence of events, primary cause and contributing factors were determined. These drills offered each participant an opportunity to use the knowledge and skills learned over the previous two days in a controlled environment.

Ron Batory views this training along with other educational efforts holistically: development of the individual and the fostering of an integrated attitude, one that respects the machines and the work performed. It all comes down to recognizing that the most important ingredient in the human-machine interface is the human, and that a well-run railroad is primarily driven by well-trained and highly motivated people of all crafts and disciplines working together toward a common goal.