When BN and Santa Fe merged in 1995, a second wave of cultural change came with it. The initial motivation was due to differences in culture between the two merging firms. BNSF’s first CEO, Robert D. Krebs, explained: “I wasn’t much on cultures until I got here and I realized how different the two were between BN and Santa Fe. I don’t think you can overestimate the differences.”15 The cultures seemed incompatible:
The Santa Fe had a reputation of being a cohesive unit of tough, single-minded executives. The BN, on the other hand, was considered “softer,” less disciplined. The BN people would hold meetings and seemingly reach agreement, but they would begin questioning everything as soon as the meeting ended.16
Krebs and his executive team, including COO, Carl R. Ice, helped meld the cultures together, which was not easy. Contrasting background assumptions drove these alternative cultures and their corresponding managerial approaches:
The guys from Santa Fe believed that people were inherently bad and [they behaved based on] rewards and punishments. [The BN guys] believed that people are inherently good and only do bad things when they are threatened.17
Krebs and Ice retained consultants to help BNSF managers develop a new culture. The effect was a practical compromise between extreme positions. Pragmatism would guide most issues, and resolution would differ with circumstances. For example, when asked whether the organization should be centralized or decentralized, the answer was both, depending on the context. Decentralization may be best for crew training programs, and centralization better suited for capital allocation decisions.
In 2000, Krebs was succeeded by forty-year-old Matthew K. Rose, whose background was in the trucking industry. The move echoed that of the BN board appointing railroad industry outsiders to lead the company after deregulation. Rose’s appointment came after a pivotal period in the industry. The newly forged culture had come about through the most radical and rapid change in railroad history. Command-and-control was out. As railroad historian Lawrence Kaufman wrote in his history of BNSF:
Today’s rail workers are not as willing as their fathers were to accept either the harsh discipline or the demanding nature of their jobs. Change comes slowly in the railroad industry, but the more progressive leaders like Rose are trying to foster a more cooperative and even collegial culture.18
BNSF promoted another cultural change in the railroad industry: customer service, especially in the intermodal sector. This refers to the high-speed transport of trailers and containers that can be moved easily among trains, trucks, and vessels. Such shipments begin on trucks, so customers need reasons to put cargo on rail. Railroads win business by providing cheaper, safer, more reliable delivery. BNSF, which leads the industry in intermodal transport, began to offer service guarantees to customers. Customers pay a premium, boosting revenue, improving service, and attracting more business—a virtuous circle.
Premium services include cross-border container service with customs clearance, track upgrades to handle heavier cars and freight, better routes to speed travel, temperature controls, and guaranteed on-time service. A marketing slogan backs this promise: “It’s on time or it’s on us.” BNSF led the industry in offering full money-back guarantees. It also was the first to offer an equipment guarantee program. The program lets customers secure specific car types, whether flatcar, boxcar, gondola, bulkhead, or refrigerated car. BNSF’s services enable its marketing and sales team to differentiate BNSF from competitors—including the trucking industry.
Krebs had put BNSF at the forefront of this shift to a customer service orientation, and the combination of Rose’s experience in the trucking industry and Ice’s operational commitment to promoting a coherent culture reinforces this BNSF strength. Service innovation has supplanted cost cutting as the industry’s strategic driver. BNSF moved from being the low-cost transporter to being a service provider that keeps its promises.
Today’s customer-focused BNSF moves enormous volumes of coal, grain, oil, freight, and containers across the continent, especially over the western two-thirds of the United States. One particularly valuable line, created in the 1970s by BN, hauls coal from Wyoming’s Powder River Basin. BNSF carries the coal north and south then in many directions via BNSF’s other lines to coal-burning power plants nationwide. Another franchise serves thousands of grain elevators across the Midwest, transporting grain to the Pacific Northwest for local use or export to Asia and south to Texas for local use or export from the Gulf of Mexico. BNSF runs rapid intermodal transport between Chicago and Los Angeles, carrying truck trailers and sea containers.