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NS aims to convert freight from highway to rail

December 2016

CEO Jim Squires, left, and Chief Marketing Officer Alan Shaw talk business with Norfolk employees during a December town hall meeting. Squires began the “Join the Conversation” town halls in August with members of his senior management team to engage employees in discussions about opportunities and challenges facing NS.

Positioned to grow, NS focuses on customer service

After a tough business year, Norfolk Southern has emerged as a stronger, more nimble company well-positioned to grow and adapt to a changing economy.

That’s the word from CEO Jim Squires and Chief Marketing Officer Alan Shaw, who delivered an upbeat end-of-year message during a Dec. 7 employee town hall meeting in Norfolk.

Meeting customers’ service needs is the key to future success, they said, and NS currently has a variety of initiatives underway to improve customer experience and how NS engages with customers.

“We’re winning business based on service,” Shaw said. “Over the long-term that’s how you get a differentiation in price and how you get more revenue.”

A key to improving service is closer coordination among the NS work groups that touch customers, and that is happening, Squires said. In particular, marketing, operations, and information technology are becoming more closely aligned in working with customers, he said.

"Alignment is a word we're using a lot these days," Squires said. "It's a common theme: People across departments have forged bonds and are working together to plan the future. That's really important."

Responding to market changes

During the year, NS aggressively cut operating costs as traffic volumes dropped, particularly in the railroad’s energy markets. “It was not a lot of fun, but we did what we needed to do,” Squires said. “Now, we are well-positioned for a recovery, and there are some signs out there that things may be positive, that maybe things are turning.”

Squires said cost-cutting and restructuring, while painful, were needed to adapt to economic conditions and fundamental shifts in business markets.

“Over a long period of time the economy has been changing and morphing into a more service-, consumer-oriented economy,” Squires said. “We want to make sure that our strategy mirrors that overall change.”

“We’re going to take trucks off the highway, and that could come in the form of a container, a boxcar, a gondola, or a multilevel.”

- CMO Alan Shaw

Six or seven years ago, he noted, coal accounted for nearly 30 percent of NS’ railway operating revenues. Now, it is about 15 percent of revenues. That has had a “profound impact” on NS’ bottom line, Squires said. NS has gone after intermodal and other traffic connected to the consumer economy to fill the gap. That puts NS in head-to-head competition with long-haul trucks for business needed to grow.

“Our primary form of competition is truck,” Shaw said. “We’re going to take trucks off the highway, and that could come in the form of a container, a boxcar, a gondola, or a multilevel.”

NS’ opportunity lies in raising the bar on service to make it easier for customers to do business with the railroad, Shaw said.

“We’re here to serve the market, so we need to develop a service product and customer experience that makes people want to do business with us in a highly competitive truck environment,” Shaw said.   

A place for employees to thrive

In addition to focusing on customers, NS is looking to better engage employees, with an eye toward enhancing benefits and helping them develop and advance their careers.

“It’s everybody’s job to serve the customer, from me on down.”

- CEO Jim Squires

“We want this to be a place not just where you work, but a place where you thrive personally,” Squires said.

Squires began hosting town hall meetings with members of his senior management team in August to engage employees in discussions about the opportunities and challenges facing the company. With the theme “Join the Conversation,” the Dec. 7 session with Shaw at the Sheraton Norfolk Waterside Hotel was the third of the year.

Following are more details of the meeting:

All about the customer: Reflecting NS’ renewed focus on customer service, the Marketing Department’s 2017 theme is: “It all starts with the customer.”

“It’s everybody’s job to serve the customer, from me on down,” Squires said. During the past year, Squires has led NS delegations on monthly customer forums on each operating division. The forums typically involve a visit to a customer facility, a lunch with a dozen or so of NS’ largest customers on the division, and an open discussion with customers about how NS could improve its service.

From those visits, combined with feedback from NS’ annual customer survey, the company has identified four areas it is addressing to improve service:

Customer engagement. The aim is to create a seamless way for customers and NS to engage, especially when shipping delays or schedule changes occur. The idea is to create a one-stop shopping place for customers to get or pass along information about their freight.

Equipment strategy. This area is multifaceted, but the core issue is ensuring that NS delivers to customers rail cars that are on-time, clean, and in good repair.

Shared key performance indicators. The goal is create a set of agreed upon metrics that NS and the customer can use to measure service performance. These measures might include on-time availability of cars for intermodal customers and consistency of car delivery for merchandise customers, for example.

Digital strategy. Customers accustomed to using a mobile app to order an Uber car or to track luggage on an airline want to be able to do the same tracking their freight across NS. This initiative includes making improvements to the company’s e-commerce platform, accessNS.

“This is not going to happen overnight,” Squires said of the service improvement initiatives. “We’re busy making the investments and doing the envisioning we need to do to make this a reality, but we’re confident we’re on the right track.”

2017 business outlook: Both Squires and Shaw voiced optimism about NS’ business prospects in the year ahead.

Squires said he sees encouraging signs that the economy is picking up. Investor confidence in economic growth appears stronger as reflected in the stock market. NS’ stock price during December has been up double digits from the first of the year.

While the future is never crystal clear, Squires said NS has demonstrated its ability to quickly respond to changing market conditions and achieve the goals in the company’s strategic plan.

“We look at the opportunities and the risks, and we know that based on what we did this year that we can respond either way,” Squires said. “So we’re feeling pretty confident.”

“What we’ve been accused of in the past is not reacting quickly enough to the markets and changing our course,” Shaw said. “This year we absolutely did that, and put a better service product out there.”

Diversity and inclusion: Under Squires’ leadership, NS during the past 18 months has created grassroots diversity and inclusion councils on each of the company’s 10 operating divisions and at its office locations in Norfolk and Atlanta. Squires stressed that he wants NS to be a place where “we create a culture of opportunity for everyone.”

“Diversity and inclusion are very important values for me personally and very significant for this company as well,” Squires said. “We want this to be a place where everyone has an opportunity to shine, to grow, and to succeed.”

The senior management team wants employees to share their ideas about improving the business and to feel safe questioning the status quo, Squires and Shaw said.

“We need all of your ideas,” Squires said. Added Shaw: “We want everybody to have a voice.”

CEO Squires, left, and CMO Shaw