Eastern Railroad Discussion > Maybe it's time to change how rail execs get paid?

The Wall Street Journal has an article tonight about how the Procter & Gamble company is changing the way it apportions bonuses to managers. The purpose is to focus managers on getting their own businesses running efficiently and meeting targets. The company has been criticized for being a morass, bureaucratic, and sometimes oblivious to operations on the ground. 

Under the current plan, managers in the detergent business will receive a bonus if P&G worldwide did well, even if detergent did badly. For senior managers, the bonus may be several times their base pay and be given in a mix of cash and stock. Under the proposed plan, detergent has to hit its division marks, and won't get a bonus if that doesn't happen. Worldwide performance has little impact on the local  bonus under the new rules. If detergent blows the doors off the washing machine, the detergent people may get bonuses even if the senior managers worldwide don't get bonuses.

If railroad executives received bonuses for efficient use of crews (minimal limbo time, start within an hour of sign up, etc), yard masters and dispatchers got their bonus based on minimized dwell time, faster time over the road, etc would things change?  Instead of collecting your paycheck, regardless of what happens, performance of trains on the Shennandoah region, or Montana Division, could be the difference between a two hundred grand bonus and zero / looking for a new job. 

Maybe that would encourage managers to prod dispatchers to speak with each other, sales execs and operations execs to understand what the other needs to deliver on expectations, etc. People in Chicago might even figure out ways to work together...

 

Waaaaay overdue, but which executives are going to police themselves? Much more fun to pick on the unionized rank-and-file... === === = === JLH



Edited 1 time(s). Last edit at 06/30/16 19:02 by highgreengraphics.

so, let's say dispatchers and their immediate supervisors of specific areas/divisions get bonuses for "on-time" performances and the least dwell time in the yards.

now, they have incentive to slam their trains asap to the adjoining areas/division without "looking at the big picture" on how it would effect that adjoining area/subdivision instead of doing what is best for the organization and eventually the customer.

sometimes trains getting delayed for a short time on one area/division are less then the bigger delays they could cause on an adjoining area/division............

66

 

How about forget bonuses entirely and simply let people do their jobs for their salary?

Posted from Android

Uhhh, I think you mean ALL execs...

People have talked about this since the beginning of corporations and the stock market, which incidentally is a legalized pyramid scheme. It's like world peace, sounds good to talk about but nothing ever happens. Or ever will. Would you give up guaranteed bonuses if you didn't have to because you controlled everything? Too many people that should care simply don't.

JG

Who would set & review the measurables?  One problem (of many) with using metrics as a performance tool is what happens when there are metrics that are opposed to each other - in other words one can't be met without having the other suffer.  If the measurables are set by those who will be measured against them, invairably they will know the "shortcuts"  and they will be met - with no improvement obtained.  If they are set by outsiders they most likely won't be realistic and all energies will be focused on meeting an unobtainable goal - while other things like customer service (to say nothing of morale) will suffer. Once the corporate community realizes that employee performance cannot - and should not, be measured like the machines that make their products they'll be amazed at how much better the workplace will become.

The article started with the strategic, and moved into the division examples.  Nobody at P&G seemed to botice that Chinese customers were buying upscale diapers, etc and PG lost market share in a booming market, for example.  And, why were they paying bonuses to people who were underperforming the rest of the industry in detergent.

I've often harbored the belief that whether trains leave / arrive on time, how much dwell time a shipment enjoys/suffers, is irrelevant to many senior railroaders. Unless there's a serious incentive, or penalty, it will get there when we're ready. We're making millions by cutting costs. Look at Chicago and CREATE.  Billions of dollars and several mergers later, does freight really move much faster into and through town?  Millions of dollars in assets are waiting on a $12 an hour van driver who got lost looking for a crew out in the middle of nowhere. Or whose van broke down, and he's looking for a pay phone...

NYC6001 Wrote:
-------------------------------------------------------
> How about forget bonuses entirely and simply let
> people do their jobs for their salary?
>
> Posted from Android

Sounds to much like right Frank!
I wanted the profit sharing factored in our trip rates as well instead current system! That way we'll never have to worry about not getting our money.



Edited 1 time(s). Last edit at 07/01/16 06:40 by espeefan.

IF, a certain railroad's senior railroaders are paying supervisors BELOW them (dispatchers, yardmasters, and their immediate supervisors) bonuses for good on-time departure/arrivals and dwell time, those senior railroaders care very much about on-time departure/arrivals and dwell time........

66 

 

goneon66 Wrote:
-------------------------------------------------------
> IF, a certain railroad's senior railroaders are
> paying supervisors BELOW them (dispatchers,
> yardmasters, and their immediate
> supervisors) bonuses for good on-time
> departure/arrivals and dwell time, those senior
> railroaders care very much about on-time
> departure/arrivals and dwell time........
>
> 66 
>
>  
Yes. 

I have a theory that the mergers of the past 30 years have relieved the surviving railroads of the need to compete seriously against each other.  Back when there were 30 combinations of rail carriers from Chicago to NY/Jersey City, you had to hustle. Or lose the business to somebody who did it faster, or broke less, etc. Now you have two rail choices.   Legendary trains like the Memphis Blue Streak, or the Alphabet trains in the northeast, or the Lackawanna + Nickel Plate freights delivered exceptional results. They had to, or they lose the business.

Take away the competition, loosen up the rates, and nobody needs to hustle anymore.  Either the customer takes it, or he takes the (more expensive) highway. Unless you want to pay through the nose for UPS expedited service

We all hear about how much money executives make - especially if the company over-achieves.  Some companies have implemented a bonus system for thier employees as well and those companies should be commended.  All EE's contribute to a company's success - not just the executives.  The executives should be paid more of course, but if there is a company where the executives make millions in bonuses in extra incentives and the EE's do not share in that - then shame on that company.   

NYC6001 Wrote:
-------------------------------------------------------
> How about forget bonuses entirely and simply let
> people do their jobs for their salary?
>
> Posted from Android

Bingo! Or share any profits more fairly as managers and execs wouldn't get the job done without their 'minion' supporters. There's no 'I' in team....

    Been there, done that and it is always crap in the ending. People were given ( promised ) bonuses for safety and of course their pay was cut prior to that. Ah!, Now by golly we have motivated these guys to do what is right ! Unfortunately the goals were set so high and wide that the employees could never affect the metrics. You were responsible for things happening 500 miles away to people you have never met concerning their safety. NO bonus, sorry Charlie. They were told you have to work harder at it. You are not allowed nor do you have any opportunities to go to that other place to do safety talks, . . . . . . or any other subject ! The employees quickly figured it out and said to hell with it all. The mis management got their bonuses of course for things that were rather foggy and hard to determine for anyone. More motivation was needed ( the beatings will continue until morale improves ) so they implemented punishment for employees not participating in things they could not affect. Time off without pay will fix their lousy attitudes. Hey, now we need to hire some people !!!
    Pay people a proper wage for what their job is and let them do their job. If the management believes they need to stand over their employees shoulder all the time, fire one or the other ( manager preferrably ) and get on with business. The board of directors is their own worst enemy, they crate the problem in the first place. The four hour lunch at the bar is with outsiders for more worthless ideas from people who know nothing. 

    Been there, done that and it is always crap in the ending. People were given ( promised ) bonuses for safety and of course their pay was cut prior to that. Ah!, Now by golly we have motivated these guys to do what is right ! Unfortunately the goals were set so high and wide that the employees could never affect the metrics. You were responsible for things happening 500 miles away to people you have never met concerning their safety. NO bonus, sorry Charlie. They were told you have to work harder at it. You are not allowed nor do you have any opportunities to go to that other place to do safety talks, . . . . . . or any other subject ! The employees quickly figured it out and said to hell with it all. The mis management got their bonuses of course for things that were rather foggy and hard to determine for anyone. More motivation was needed ( the beatings will continue until morale improves ) so they implemented punishment for employees not participating in things they could not affect. Time off without pay will fix their lousy attitudes. Hey, now we need to hire some people !!!
    Pay people a proper wage for what their job is and let them do their job. If the management believes they need to stand over their employees shoulder all the time, fire one or the other ( manager preferrably ) and get on with business. The board of directors is their own worst enemy, they crate the problem in the first place. The four hour lunch at the bar is with outsiders for more worthless ideas from people who know nothing. 
    Managers with more savvy usually come up through the ranks and that does NOT mean in 6 month training courses.

One major trend over the past 20 years is the growing divide between people who receive paychecks, and people who derive income from paychecks and stocks.  The give backs from labor in the past 20 years have increased company profits, which increase stock value.  For the most part, American labor, organized or not, has shown little interest in being paid partly in stock. So the give backs are producing gains which labor rarely sees.  The tech industry, where options and stock grants are expected, is a notable difference. Even lowly coders can do very well.

In Germany, organized labor typically owns 20% to 25% of the shares of a company. Your retirement is partially composed of those 3% dividends, on stock which has compounded since you were 20 years old. In the US, you got a paycheck, and sometimes a bonus. You could buy stock if you wanted, BNSF and CP are good examples of how well that can work out.

FWIW, the time horizons are different, and that's one reason why managers want to be paid in options on shares. They know labor's give backs and increased productivity (cabooses, second brakeman, telegraphers, etc) will increase the value of shares over time.

dcfbalcoS1 Wrote:
-------------------------------------------------------
>     Been there, done that and it is always crap
> in the ending. People were given ( promised )
> bonuses for safety and of course their pay was cut
> prior to that. Ah!, Now by golly we have motivated
> these guys to do what is right ! Unfortunately the
> goals were set so high and wide that the employees
> could never affect the metrics. You were
> responsible for things happening 500 miles away to
> people you have never met concerning their safety.
> NO bonus, sorry Charlie. They were told you have
> to work harder at it. You are not allowed nor do
> you have any opportunities to go to that other
> place to do safety talks, . . . . . . or any other
> subject ! The employees quickly figured it out and
> said to hell with it all. The mis management got
> their bonuses of course for things that were
> rather foggy and hard to determine for anyone.
> More motivation was needed ( the beatings will
> continue until morale improves ) so they
> implemented punishment for employees not
> participating in things they could not affect.
> Time off without pay will fix their lousy
> attitudes. Hey, now we need to hire some people
> !!!

After the Fowler Meet (http://www.ntsb.gov/investigations/AccidentReports/Pages/RAR9301.aspx) one of the internal investigations (http://www.trainorders.com/discussion/read.php?18,3772054,3772917#msg-3772917) developed, much to the chagrin of a lot part of the corporate establishment, that experienced train dispatchers were valuable and should be listened to. Given that we were going to go back to having authority to actually pursue our profession, we (via the union) agreed to a performance (company performance) bonus in lieu of a raise. We were absolutely sure that we could fix the hemorrhaging of money that was coming from the chaotic operation. That lasted a year. Regardless of direction from the top of the food chain, the middle of the food chain ignored or challenged us at every step. After a frustrating year, we (via the union) told them they can keep their bonus, since we had absolutely no control over the company's performance, we'll take the raise.

TAW



Edited 1 time(s). Last edit at 07/01/16 12:06 by TAW.

Lackawanna484 Wrote:
-------------------------------------------------------

> If railroad executives received bonuses for
> efficient use of crews (minimal limbo time, start
> within an hour of sign up, etc), yard masters and
> dispatchers got their bonus based on minimized
> dwell time, faster time over the road, etc would
> things change?

Dispatchers? See mine of a few minutes ago.

Executives and management? That would require a big change in corporate structure and culture that probably isn't going to happen regardless of bonus structure. The railroads are incorrectly organized for efficiency. It has been that way for about 30 years.

When I have a little time, I'll finish the article on BN RESBU wars. You will find it interesting, I'm sure.

TAW

On a Class I since folded into a larger railroad we had a two track bonus system.  I was a market manager for a group of commodities.  I was expected to see to it that we hit a target volume, revenue and contribution to overhead in my commodities.  If I made the target 10% of my salary went into my 401k.  Secondly their were performance brackets based on the railroad's return on equity.  Depending on how well we did we could see up to 30% of our salary going into the 401k.  


Lackawanna484 Wrote:
-------------------------------------------------------
> The Wall Street Journal has an article tonight
> about how the Procter & Gamble company is changing
> the way it apportions bonuses to managers. The
> purpose is to focus managers on getting their own
> businesses running efficiently and meeting
> targets. The company has been criticized for being
> a morass, bureaucratic, and sometimes oblivious to
> operations on the ground. 
>
> Under the current plan, managers in the detergent
> business will receive a bonus if P&G worldwide did
> well, even if detergent did badly. For senior
> managers, the bonus may be several times their
> base pay and be given in a mix of cash and stock.
> Under the proposed plan, detergent has to hit its
> division marks, and won't get a bonus if that
> doesn't happen. Worldwide performance has little
> impact on the local  bonus under the new rules.
> If detergent blows the doors off the washing
> machine, the detergent people may get bonuses even
> if the senior managers worldwide don't get
> bonuses.
>
> If railroad executives received bonuses for
> efficient use of crews (minimal limbo time, start
> within an hour of sign up, etc), yard masters and
> dispatchers got their bonus based on minimized
> dwell time, faster time over the road, etc would
> things change?  Instead of collecting your
> paycheck, regardless of what happens, performance
> of trains on the Shennandoah region, or Montana
> Division, could be the difference between a two
> hundred grand bonus and zero / looking for a new
> job. 
>
> Maybe that would encourage managers to prod
> dispatchers to speak with each other, sales execs
> and operations execs to understand what the other
> needs to deliver on expectations, etc. People in
> Chicago might even figure out ways to work
> together...
>
>  

Bob Wilcox
Charlottesville, VA
My Flickr Shots

I know all the words about CEO pay and I can tell you that a good one is worth the money. The company I retired
from three years ago was run by CEOs that had come up through the ranks, knew the business and were paid based on
results. Well four years ago the MBA crowd decided to change all that, bought what they thought was a good hire
based on his education and the bottom has fallen out ever since. The board, who seemingly has little understanding
of the business, supports him based on promises. So I agree that pay should be based on results though it's tough
to procure a really good candidate without some major carrots. For all that demean the role of the CEO, you might
be a but light in your understanding of how a business runs.

Out

callum_out Wrote:
-------------------------------------------------------
> I know all the words about CEO pay and I can tell
> you that a good one is worth the money. The
> company I retired
> from three years ago was run by CEOs that had come
> up through the ranks, knew the business and were
> paid based on
> results. Well four years ago the MBA crowd decided
> to change all that, bought what they thought was a
> good hire
> based on his education and the bottom has fallen
> out ever since. The board, who seemingly has
> little understanding
> of the business, supports him based on promises.
> So I agree that pay should be based on results
> though it's tough
> to procure a really good candidate without some
> major carrots. For all that demean the role of the
> CEO, you might
> be a but light in your understanding of how a
> business runs.
>
> Out

Board are often clueless. Buddies of the CEO, sharing the same boards, respectful of each other's sovereignity. You sit on my board, I sit on your board, let's have lunch.

That's one reason why I like the European practice of having the employees own 15%-20%-25% of the shares, with seats on the board to speak their interests. Both long term and short term. We're all in this together and we can make some money.