Adapting to Change: Part 23,453

A student who is a union member wrote to describe how the management of his railroad is decommissioning new assets despite their efficiency. This is a good example of how organizations fail to understand how methods must adjust to climate. Railroads have a rare opportunity right now. Fuel price rises are hitting their main competitors, the truckers, hard. Asset utilization is not a bad focus for a capital intensive business like railroads, but to improve utilization, what is better: removing assets or increase sales? When an industry is shrinking, as railroads have for generations, you sell assets, but when there is opportunity, you have to focus on capturing new ground. The problem is that most management, especially top management in large, older businesses continue doing what has worked in the past because they lose sight of the big picture. Railroads have been shrinking and consolidating so long that that is what “good management” means to them. They think in terms of what they can control, that is, costs, rather than in terms of what they can win through competition, market share. They can no longer see other opportunities, even when staring them in the face. They just continue doing what they have been doing, missing the main opportunity. Others, probably smaller railroads, will handle the situation differently, expanding while the opportunity is there and eventually replacing their larger competitors.