Inside CSX’s Hiring Difficulties

During an earnings call with investors last month to discuss second quarter financial results, CSX CEO James Foote talked about the difficulty his company was having hiring new workers.

CSX set out early this year to hire 500 new conductors and have them on the job by July.

But it fell well short of that goal, hiring only about 200 conductors. It continues to seek new conductors and has posted help wanted signs at 48 locations.

To hear Foote tell it, the railroad’s difficulties in hiring are not unlike the problems that other employers are having.

“It is an enormous challenge for us to go out and to find people that want to be conductors on the railroad, just like it’s hard to find people who want to be baristas or anything else,” Foote said. “It’s very, very difficult.”

Of course conductors at CSX or, for that matter, every other Class 1 railroad are paid far more in salaries and benefits than the typical restaurant or coffee shop worker.

But Foote said good pay isn’t enough to attract and keep workers.

CSX is not necessarily alone in having hiring troubles among Class 1 railroads, but an analysis published on the website of Trains magazine suggested that it is in a class by itself compared with its peers in having difficulties attracting workers.

Trains reported that Norfolk Southern is seeking new conductors at 30 locations to fill vacancies caused by attrition.

“We are facing some spot labor shortages, but they’re just that,” said NS CEO James Squires during his company’s second quarter earnings call.

To attract new hires, NS has upped its training wage and offered signing and retention bonuses to some new employees.

BNSF is not seeking to hire conductors; Union Pacific is hiring conductors at five locations;

Canadian National is hiring conductors at 30 locations, and Canadian Pacific is hiring conductors at 19 locations.

Both Canadian Class 1s have offered signing bonuses at a few terminals. Kansas City Southern, is hiring conductors at seven terminals.

Now you might be wondering how CSX could be having difficulties filling jobs when in recent years it has furloughed large numbers of train and engine crews.

CSX has recalled furloughed workers but to its dismay fewer of them returned to work than it expected.

Some furloughed CSX workers opted to take jobs in the construction industry where they also enjoy good pay and benefits with the added bonus of being able to sleep in their own bed every night.

The latter point underscores something Foote said last month about how the nature of the job is hindering hiring and retention.

Foote said many people don’t want to work nights, weekends, holidays, and outside in all kinds of weather. “People before liked that,” he said. “They don’t want to do that anymore.”

Nick Little, managing director of the Railway Management Program at the Eli Broad College of Business at Michigan State University, told Trains that he has seen the same dynamic play out in the trucking industry, which has a persistent shortage of drivers.

Like railroading, trucking involves being on the road a lot and away from home a lot.

Little suggested that anecdotal evidence indicates there is something about the work culture at CSX that is resulting in fewer furloughed workers wanting to return and some workers wanting to leave their jobs.

Many workers disliked the changes that came with the move to the precision scheduled railroading operating model.

“Feeling uninspired can make people leave,” Little said. “They want to feel valued. I’m not sure CSX does that as well as some of the other railroads do.”

Little cited a conversation he had with a CSX locomotive engineer who retired as soon as he could.

“He didn’t like the management relationship and he felt that he’d had enough. They [workers] were being asked to do more for less all the time.”

The latter point is not something exclusive to CSX or even the railroad industry.

In an era in which cost cutting is akin to a religion in corporate America, workers in a wide range of fields face expectations of doing more with less as companies reduce their payroll numbers through layoffs and attrition, a process they euphemistically refer to as “right sizing.”

Statistics released by the U.S. Surface Transportation Board show CSX had 1,129 fewer train and engine employees in the second quarter of 2021 compared with the second quarter of 2019.

During the same period, overall traffic levels were similar, with second-quarter 2019 volume 0.63 percent higher than this year.

What has changed is the mix of traffic with coal down 19 percent and crude oil volume also down significantly. That somewhat reduces the need for train crews.

CSX through June was operating with about 109 crews per million train-miles (train-miles annualized).

That places it as the second lowest in the industry but since the beginning of 2019 it has averaged 108 crews per million train-miles.

Little also thinks CSX has a tougher time than its peers because many of its terminals are located in areas where it traditionally have been harder to find workers.

“I think CSX would always have a tougher job — marginally tougher than NS but certainly a lot tougher than UP or BNSF — to retain its people and then to get new employees that will stay with them,” he said.

Matching a labor force with the ability to meet market demand has always been a challenge for railroads because of the nature of the industry.

Rick Patterson, is an industry analyst at Loop Capital Markets, once worked as a railroader. He said matching employment levels with market demand has long been a problem in the railroad industry.

“Crews are too expensive to have sitting around,” he said. “So it’s quick to furlough, then being perennially surprised when the economy turns out to be stronger than expected, and a bunch of the furloughs either don’t pick up the phone or have gone off to work for McDonald’s. Railroads have been making this mistake for a century and will continue to do so.”

Peter Swan, am associate professor of logistics and operations management at Penn State Harrisburg, told Trains that railroads have no incentive to invest in excess capacity to better handle growth or disruptions.

“The problem for shippers and the country as a whole is that railroad assets take a long time to develop,” he said. “Crews take time to hire and train. Locomotives take time to manufacture. Upturns in business are often unfortunate events for railroads.”

Figures released by CSX and contained in reports to the U.S. Surface Transportation Board show the consequences of not having enough workers.

Trip plan compliance in the second quarter at CSX was 69 percent for carload traffic. That is up slightly from the 67 percent of the first quarter but well below the mid-80 percent level CSX had in 2019.

That led Patterson to conclude that where CSX is having difficulty with crews is in local service.

“If local crew shortages are indeed the problem I’d expect to see trip plan compliance weak relative to overall service metrics, and a large gap between intermodal and carload trip plan compliance, given the former doesn’t have local service,” Paterson says. “Arguably, both have occurred.

Foote said last month that his company needs to figure out a way to make jobs more attractive. Although he didn’t specify how that could be done, one idea has already surfaced in the industry.

Class 1 railroads are seeking to get their unions to agree to one-person crews for most trains.

Rather than ride in the locomotive cab, the conductor would be assigned a geographic territory and supervise train operations in that territory from the ground.

The advantage is that conductors would be home every night and the job would become more set shift oriented rather than being subject to being called to work at all hours of the day.

Yet railroads operate 24/7/365 so that means shifts would still be assigned during times when many workers want to be off the clock rather than on it for an employer.

And railroad work will always be outdoor-oriented and subject to varying weather conditions from extreme heat to extreme cold.

In the meantime, though, CSX continues to seek new conductors and trying to maximize its existing work force.

It reached an agreement with the SMART-TD union to increase the availability of conductors by offering them a weekly bonus for perfect attendance. The bonus is, reportedly CSX stock or cash, the latter said by unofficial sources to be $500.

Still, the effect of crew shortages will be around a while. Noting that it takes six to nine months to find, hire, train, and place a conductor,” Paterson said the low hiring numbers of the second quarter will continue to show up in fourth quarter figures when crew attrition potentially exceeds new conductor placements in the field.

“So CSX may be running OK today  . . . but management is worried about tomorrow,” Patterson said.

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