RAILWAY AGE, NOVEMBER 2020 ISSUE: Katie Farmer joined Burlington Northern’s management training program in 1992. In January, she becomes BNSF President and CEO—the first woman at a Class I to hold that title.
Engaging with employees, customers, short lines and the communities BNSF serves: For Kathryn M. “Katie” Farmer, it’s about listening and involving, and inclusion. That approach will remain key to her leadership when she takes over the top spot in 2021—and works to ensure the railroad continues to evolve through the pandemic and into the future.
Soon after news broke Sept. 14 that Farmer had “broken the glass ceiling” as the first woman ever named chief executive of a Class I, Railway Age Editor-in-Chief William C. Vantuono contacted her and BNSF executives to offer congratulations. He noted: “This is historic. Encouraging. Positive. Significant.”
Farmer knows the railroad inside and out. She’s held leadership positions in every major function of the company, starting as a management trainee at predecessor Burlington Northern in 1992. On Sept. 22, nearly 30 years later, she celebrated the 25th anniversary of BN’s 1995 merger with Atchison, Topeka and Santa Fe Railway as Executive Vice President Operations.
On Jan. 1, Farmer takes over as President and CEO of BNSF from the retiring Carl R. Ice, a mentor, along with former Executive Chairman Matthew K. Rose, who retired in 2019. She will oversee the 32,500 route-mile network that spans 28 states and three Canadian provinces for parent company Berkshire Hathaway, Inc., and lead the Board of Directors.
Among Farmer’s priorities: driving productivity and delivering the kind of service customers have come to expect; modeling the way for communication across the railroad and ensuring that connections continue to be made with all the constituencies it touches; and supporting employees—some 36,000—so they, too, can reach their full potential by taking advantage of the professional development opportunities she was afforded.
Farmer is looking forward to working with her team to shape the legacy of BNSF, she told Railway Age. It’s about helping the company and the workforce, railroaders who “know how to do hard,” thrive for the next 25 years and beyond.
RAILWAY AGE: What prompted you to go into railroading?
KATIE FARMER: I am a proud graduate of Texas Christian University (TCU) here in Fort Worth, and I learned about an opportunity for an internship with what was then the BN. I was awarded the internship working in the engineering department [between my junior and senior year], and that began what is now a 28-year career.
What attracted me to the rail industry back then and what’s true today is the importance of what the rail industry does and the relevancy. The railroad is really the backbone of the U.S. economy, and I liked that aspect. Through the pandemic, we have seen that with great clarity. BNSF has delivered critical PPE [personal protective equipment] to the front lines; we’ve helped restock the shelves. We make a difference, and that’s because of our employees—the hard-working men and women at BNSF.
On a personal note, I have a son who is a senior in college and a daughter who is a freshman in college, and as they think about their careers and what they want to do, doing something that makes a difference is a big draw.
RA: How can you, as a leader, encourage more people to consider a career in railroading? And how do you retain talent?
KF: It’s about helping more people to see the importance of railroading. I work hard to do that. As an example, I talk to college students several times a year. Oftentimes, they’re really surprised to learn what it is that we do and the impact that we have on the economy and the day-to-day things that they might take for granted.
What I tell them is if you look back to our predecessor history—170 years—we’re as relevant and as important today as we were then. So I think that’s a big draw and will help to encourage people to want to join our railroad.
As far as retention, we focus on that a lot at BNSF. It is about creating an environment that talented people want to come and work in. When you combine talented people who enjoy what they do, like the environment they work in, and feel like they’re making a difference, then typically we find that those are the folks who want to make a career out of railroading.
RA: How will you approach diversity—not only within the company, but also through recruitment?
KF: BNSF employees should expect to be treated with dignity and respect. That is foundational. Diversity and inclusion is foundational to what we do. It’s a part of our recruiting efforts. It is not only foundational to what we do; it’s really been key to our success.
We absolutely, through our recruiting efforts, are looking to bring in talented employees, who bring a diversity of background and experiences to the railroad. We’ve been very fortunate that we’ve been able to attract really talented folks. We also know that all of this is a journey, and we want to continue to make an impact.
Among the things we share with folks when we’re recruiting is that we provide mentoring programs. We have business resource groups and diversity councils. Those don’t just exist in Fort Worth; they exist across our system. We have 36,000 employees across the country, so we focus on giving them resources; and through recruiting efforts, they can feel comfortable that when they come to work for the railroad, we’re creating a network and connection for them.
We make it personal because retention is personal. You don’t often hear people say in an exit interview that they left because of money. People leave because they don’t feel a connection, and so that’s what we focus on at BNSF.
— “BNSF employees should expect to be treated with dignity and respect. That is foundational. Diversity and inclusion is foundational to what we do. It’s a part of our recruiting efforts. It is not only foundational
to what we do; it’s really been key to our success.” —
RA: How will you keep communication open and engage with employees, customers, short line connections and the communities BNSF serves?
KF: Communication is one of the five key tenets of our leadership model. We train our leaders every year on this model. If you look at the description of that key tenet, the first thing it says is: Listen and involve. It’s engrained in our culture, and it’s an expectation that as leaders, we will do this with our employees, we will do it with our customers, and we’ll do it with the communities we serve.
We have a pretty robust communication package. We have an app, BNSF Connect, to give employees important information they need. As a part of that, often we have communication from the CEO. [For our customers and short line community], we send out an advisory every other Friday; we try to be as transparent as possible with information about the health of our network and what customers can expect to see. We talk about expansion projects we’re working on—anything that can help our customers and help us integrate more closely into their supply chain. We also do numerous customer symposiums.
With that said, the most important communication that we need to focus on is the day-to-day communication that happens between, for example, our commercial folks and a customer—again, back to listening, understanding what our customers need. It’s the communication that happens between our frontline supervisors. As they’re doing a safety briefing, how does that frontline supervisor make safety personal for that employee?
And that’s what, as a leader, I need to continue to model the way on, because what our customers tell us is that we differentiate ourselves in the industry by the way we communicate and interact, both with each other and with our customers.
RA: What are your thoughts about PSR (Precision Scheduled Railroading)?
KF: Well, let me start by saying that I don’t like to comment on other railroads’ operating philosophies. But what I can tell you is how we think about our railroad and our operating philosophy.
We are tied very closely to the industrial and consumer economies, and if you look back over time, there have been peaks and valleys in volumes. What we believe at BNSF is we have to have a bias for growth. That means we position ourselves to be flexible enough that when we have opportunities for growth, we capture them. To do that, you have to have a competitive cost structure. So we have a relentless focus on efficiency, productivity, and having that competitive cost structure. And when you have a competitive cost structure and a focus on growth, you have a great opportunity to have a return that justifies investment in capacity. And when you invest in capacity, it positions you to be able to say “yes” to customers. That’s our business model. We want to be able to say “yes” to customers.
RA: As service recovers in a post-COVID-19 world, where are the opportunities for BNSF?
KF: In the depth of the pandemic, we were loading about 150,000 units a week. Fast-forward, we are now [early October] in the 200,000-unit-a-week range. What has helped lead us out has been our consumer products business—our domestic intermodal, our international intermodal and automotive business. We have seen volume increase quickly. Over-the-road capacity has tightened. There is a restocking going on in the supply chain, so we are helping to refill the distribution centers.
Something that we were seeing in this country before the pandemic was the move from bricks-and-mortar to online retailing; we have seen that accelerate as we’ve moved through the pandemic. We’re excited about that. We think that is a great fit for our railroad. We have the largest intermodal network in the world—the fastest, most consistent network—and that’s a great match for what our customers need. Working closely with the large retailers, the steamship companies, the trucking companies, we believe that’s going to be a great mutual opportunity. Parcel shipments, truckload shipments, anything in our consumer products business will continue to be strong through the balance of the year.
That hasn’t been the case across the board for us as far as those kind of peak-like volumes. In our industrial products business, we have seen a more gradual increase. Anything tied to energy has really struggled to rebound; for us, that’s sand for fracking, any kind of petroleum products. Anything related to construction or housing, we have seen a nice increase. So it’s kind of a mixed bag.
The agricultural commodities side was probably the part of our business that was least impacted by the pandemic; so we have seen strong volume.
We would anticipate, moving into the fourth quarter, that we will see a strong export program, and that will continue to be a mainstay for BNSF.
Finally, coal. We saw a structural decline that was happening prior to the pandemic. Unfortunately, we saw reduced demand for electricity and low natural gas prices, and while we, at the railroad, were happy to see a mild winter, that didn’t bode well for coal. Those volumes have stabilized now coming out of the pandemic, but they were certainly impacted by the shutdown.
— “Retention is personal. You don’t often hear people say in an exit interview that they left because of money. People leave because they don’t feel a connection, and so that’s what we focus on at BNSF.” —
RA: Going forward, where do you stand in terms of capital investments in assets and infrastructure?
KF: We want to continue to invest in places where it helps us to be able to say “yes” to our customers, as well as it helps with the efficiency and productivity of our railroad and drives improved service and ease of doing business for our customers. That’s our long-term perspective. In the short term, we have to work to match our resources with the demands—our locomotives, our track, our terminal capacity, our workforce.
One of the things that we are consistent about and that BNSF has demonstrated over a long period of time is the commitment to investing in the integrity of our infrastructure. So even through periods when volumes have been lower, we have continued to maintain that part of our capital plan.
This year, we have a capital plan that’s around $3 billion. We’ll spend about $2.4 billion of that on infrastructure.
The challenge for us is when we look at projects, we can’t look at capital on a one-year timeline; we have to look at it with more of a 5- to 10-year lens. Even in a period like this year where volumes are lower, we’re involved in multi-year expansion projects. We think it’s the right thing to do—again, to position ourselves to be able to say “yes” in the future for customers.
An example of a project that improves service for customers along with consistency and efficiency for the network is a fourth main track that we in-serviced in Winslow, Ariz., earlier this year. The value is that Winslow is a crew-change point on our Southern Transcon. It allows us to be able to handle different profiles of freight, meaning we can handle grain trains, high-speed intermodal trains, all through the terminal, and make crew-changes, do inspections, without impacting the velocity for any of our customers. Why we’re particularly excited is we now have that kind of capability at every one of our crew-change locations across the Southern Transcon.
RA: What other projects are on the horizon?
KF: We believe that we will continue to see growth in the parcel business, the truckload business, international business, so we will continue to invest in our network for that. We are in the process of adding additional main track along our Transcon—50 miles. More than 99% of our Transcon is double-tracked today. This project will give us not only additional capacity, but it will give us additional recoverability in our network; so when we have service interruptions, this gives us additional capabilities to run around interruptions and deliver the kind of service that our customers require.
RA: BNSF has embraced advanced technology in preventative equipment maintenance, for example. (See Railway Age’s September feature, “You Can Fix What You Can’t See.”) Where do you see this technology expanding?
KF: When we look at technology, we look at it through the lens of: Does it improve safety for our employees, the communities we serve or the freight we move? Does it improve asset utilization? And does it generate either ease of doing business or improved capacity and service for our customers? That’s how we start as we think about where we make capital investment.
An example is our use of machine vision systems to look at wheels as they move across our system. Every day, we get 750,000 images. We now have artificial intelligence that can quickly sort through all of those images and detect where there’s an issue. [If] there’s an issue, it sends an alarm to a mechanical desk in our network operations center that’s manned 24 by 7. [Mechanical] employees diagnose what they’re seeing and they’ll make a call as to whether we need to stop the train immediately.
We are going to continue to look at where we can roll that out across our system for additional equipment components.
But as great as the data and artificial intelligence is, it takes really good people to understand what to do with it. And I think that’s important because you get a lot of data, and what we need is our talented people who know how to railroad and know what to do with the information to really make an impact and make it actionable.
RA: What has been your greatest accomplishment at BNSF?
KF: I want my greatest accomplishment to be ensuring that every BNSF employee has the opportunity to develop to their full potential and to have the resources and the opportunities that I’ve been afforded through my career. Our culture at BNSF is a culture that is focused on development, it’s focused on giving people resources to meet their full potential, and I am a product of that culture. I feel incredibly blessed that I am now in a position to ensure that happens for our employees well into the future.
(This story has been edited for length; listen to the Rail Group On Air Podcast for the entire interview.)