A tough, charismatic and unapologetic executive who speaks in a lazy southern drawl, Hunter Harrison has the perfect disposition to shake up a sleepy Canadian company. The 69-year-old railroad veteran stormed into Canadian Pacific in June 2012 after a proxy battle led by activist investor Bill Ackman and has made good on his promise to repair the underperforming company. “I’m a pretty optimistic and demanding guy, and it’s far exceeded my expectations,” he says.
One crucial industry metric is operating ratio, which measures operating costs as a percentage of revenue. At CP, that figure exceeded 80% when Harrison joined, the worst in North America. But CP recently reported its lowest-ever operating ratio of 65.9%, only a few notches behind rival Canadian National Railway. Shareholders have been richly rewarded by his presence, with CP’s stock surging more than 90% since he arrived. “To be able to effect change that quickly, you have to have a lot of self-confidence, but you also have to know what you’re doing,” says Chris Rudge, executive chairman and CEO of the Toronto Argonauts Football Club, who was part of the Canadian Business judging panel that selected this year’s top CEOs.
Harrison says the biggest operational change was shedding approximately 450 locomotives and at least 10,000 railcars from the company’s fleet. He ripped through CP’s bureaucratic morass and changed procedures that didn’t make sense. The company previously prevented workers from getting on or off moving equipment, for example. Harrison argued hopping on or off a slow-moving boxcar was safer than waiting for it to fully stop, which could cause someone to lurch forward. “The committee that decided that didn’t know much about railroading,” he says. Eliminating the rule, and others like it, told workers that management actually understood the nitty-gritty details of the industry. Harrison also felt the company had lost focus on its core railroading business, and quickly decided to move the company’s headquarters from downtown Calgary to a rail yard in the city—a plan that had been talked about for years but one apparently stuck in limbo.
As with any turnaround, there have been substantial job cuts. CP plans to eliminate 4,500 positions by 2016, though most will be achieved through attrition. Employees who “were ready for change but bogged down” in bureaucracy when he arrived have been given more responsibility, Harrison adds. His approach to running a railroad is no secret. “I’ve written books about it,” he says. So why couldn’t someone else have patched up CP before? “They could have,” he says. “But it’s hard for some people to look somebody in the eye and say, ‘You’re not doing your job.’”
His blunt style has so far resulted in succes
s, but the long-term challenge is building what he calls a “controlled, sustainable, profitable” business to prove CP’s stellar results are not temporary. “Then there’ll be doors that will open up for us that we’ve not even made public yet,” he says.