2014 NITL Executive of the Year: Lots of logic and a little luck

To truly appreciate the remarkable achievements of the recipient of the 2014 National Industrial Transportation League’s (NITL) Executive of the Year award, one has to begin by understanding the challenges that faced the nation’s railroads when this year’s winner began working his way up the executive ladder in the 1970s.

Back then, most railroads focused on competing with motor carriers on cost while appeasing shippers with service enhancements that were symbolic at best. Curt Warfel, the NITL director who was instrumental in this year’s nomination, says Michael Haverty changed all that.

“He was transformational, and he understood the potential for intermodal partnerships and the advantages of cross-border trade before anyone else,” says Warfel. “He took a big chance, and it obviously paid off. Presenting him with this recognition is long overdue.”

For his quiet dignity and game-changing work at the border and on the nation’s rails, the NITL and Logistics Management (LM) magazine are proud to present Michael Haverty, chairman emeritus of Kansas City Southern (KCS), with the 2014 NITL Executive of the Year Award. The award is named after John T. McCullough, a former chief editor of Distribution magazine, a predecessor of LM.

The award will be given to Haverty on Wednesday, November 19, at the NITL’s 107th Annual Meeting & TransComp Exhibition being held in Ft. Lauderdale, Fla. (Nov. 15-19).

A fourth generation railroader, Haverty began his railroad career with Missouri Pacific Railroad Company (MoPac) in 1963 as a brakeman/switchman. After working the summers for MoPac during college, he completed its management training program in 1967, following his graduation. 

In 1970, he moved to the Atchison, Topeka, and Santa Fe Railway where he held various operating positions before serving as president and chief operating officer from 1989 to 1991. During his tenure as president of Santa Fe, he reorganized the company to become an intermodal juggernaut.

“Having anticipated the near-shoring trend is another part of his vision,” says Tony Hatch, rail analyst and principal of ABH Consulting. “Haverty represents the critical lynch pin of intermodalism and its hemispheric influences. The deals he made with regional rail companies in the United States and Mexico were of historic proportion.”

In the early 1990s Santa Fe also implemented—with the cooperation of the United Transportation Union—the first reduced train crew. This was a precedent for improved labor productivity throughout the entire rail industry. The innovations didn’t stop there. In a legendary handshake deal aboard a train, Haverty and the late J.B. Hunt established their historic intermodal partnership, marking the first time a Class I railroad went into business with a truckload carrier.

“A lot of what I achieved can be credited to simple logic,” says Haverty. “It made perfect sense to drive a deal with truckers to share economies of scale. Then, when it came to penetrating new markets, Mexico seemed like the best fit. I may have been regarded as a ‘Kansas hillbilly’ in those days, but I just got lucky, I guess.”

Owen Zidar, vice president at KCS, agrees with some of this, but insists that Haverty is being too modest. “Teaming with trucks may have seemed like a risky proposition at first,” he recalls, “but it proved be a brilliant move that immediately buttressed the bottom line for both partners.”

In 1995, Haverty was named as director and executive vice president of Kansas City Southern Industries, Inc. (KCSI) and director, president and chief executive officer of the Kansas City Southern Railway Company (KCSR). It was then that he made the bold move into Mexico.

“While many people were skeptical about NAFTA [the North American Free Trade Agreement] I wanted to expand our franchise in Mexico,” Haverty says. “There were two principal reasons for this. More manufacturing was going to move out of Asia, and Mexico’s infrastructure was improving. There was also more transparency in supply chains because of better regulatory compliance.”

Haverty recalls that relationships between shipper sand carriers in the 1990s were also in need of mending. The new era of collaboration has changed that attitude, he says, and the NITL now embraces the balanced membership that includes transport providers.

“The League realized some time ago that cooperation with logistics partners made more sense than continuing to view them as adversaries,” says Bruce Carlton, president of NITL. “Mike Haverty’s vision was critical in driving that development.”

LM recently sat down with Haverty prior to him accepting this year’s award. Here are some of the insights he shared.

Logistics Management (LM): How do you describe your leadership style?
Michael Haverty: My style is probably described as focused and determined, and I’m not afraid to take a risk. With that said, I guess you can say I’m more entrepreneurial than staid or bureaucratic. I would like to view myself as a tough, but fair leader: tough from the standpoint of being no nonsense, but fair from the standpoint that if you did your job, you’ll be treated with the utmost respect and be appreciated for your services. I’ve always preached that true leaders are not out to win popularity contests, but to make decisions that result in them being respected by their subordinates and peers—even their enemies.

LM: What had the most influence on the way you managed people and forged strategic partnerships?
Haverty: I was probably most influenced on how I managed by my early days on the Missouri Pacific Railroad (MoPac). It was a mid-sized railroad in a turnaround process, and the style was to run a very tight ship in a no-nonsense manner. Consequently, MoPac became a most efficient railroad that provided customers good service and increased shareholder value. That’s where I learned my basics.

LM: The expansion of the Panama Canal is moving toward completion. What impact will that have on domestic rail and intermodal?
Haverty: The U.S. East Coast and Gulf Coast ports will capture more direct ocean carrier calls, and the rail networks in those regions will have to accommodate this. At the same time, however, U.S. West Coast ports will continue to keep busy moving trans-Pacific cargo into the Midwest using a variety of intermodal providers. We will also see increasing volumes moving in north-south directions within NAFTA as a consequence of the Canal’s expansion.

LM: Your bet on Mexico proved to be spot on. Do you see Latin America gaining more momentum?
Haverty: I do believe that Mexico will continue to expand and is already “the next big thing.” Just look at all the new automotive manufacturing facilities that have been announced the past few years. And, with Asian companies producing in Mexico, they’ve created more near-sourcing opportunities for all of North America. As for other Latin American countries, I don’t think they can be lumped together. Some are doing well, such as Chile, Brazil, Panama; and even Columbia; but others have political tensions and corruption problems that will not allow them to be regarded as prospects in the near future.

LM: Some transportation analysts suggest that there’s a demographic shift in North America that may alter supply chain networks. Do you agree?
Haverty: There’s no question that more manufacturing is being done near our borders, and that trend is only going to get stronger. NAFTA has been good for the entire continent, and for Mexico, that means more middle class jobs. The demographic shift in populations within North America makes our entire continent a powerful piece in the global trade marketplace.

LM: With this, NAFTA ports have their work cut out for them, especially because ocean cargo vessels just keep getting bigger. What kind of pressure does that put on other parts of the supply chain?
Haverty: Obviously, the biggest ports with the deepest drafts and intermodal connections will be the preferred gateways; and I would not be surprised if Mexico’s Lázaro Cárdenas becomes more competitive when super mega vessels are introduced. But smaller ports can compete in this environment, too, if they market the advantages they have in serving high-density population centers.

LM: And that’s good for companies like KCS?
Haverty: You bet it is. But more importantly, it’s good for all of our nation’s shippers and carriers. We have moved into a new era of logistics management, requiring a different way of looking at the world and our way of working toward improving it. 

LM: You were an early adapter to IT. What role will IT play in the future for transportation professionals?
Haverty: As shippers make demands for more measurement and velocity, carriers will become increasingly reliant on IT—and that’s a good thing. Everyone managing the supply chain will benefit when the movement of goods is safe, efficient, and secure. The free and open exchange of information expedites all of that. So, to answer your question, yes, logistics managers will need to keep up with the wealth of data due to come on line in the future.

LM: Freight transportation is still not regarded as a glamorous industry. How do you see it?
Haverty: I guess I’ve not regarded transportation as being especially glamorous, either. I view it more as a tough business that requires an around-the-clock focus to make it work. Over the last dozen years it’s become more attractive to the investment community due to all of the products moving in international trade and the re-
emergence of transportation as a key industry that helps our economy compete in the world marketplace. 

LM: What advice would you give to young people seeking a career in this industry?
Haverty: Young people need to understand that transportation operates around the clock. If they think it is an eight-hour a day job, five days a week, then they’re in the wrong industry. They need to also understand that while IT is critical to the industry, you can’t sit in your office and run things with a computer and telephone.

You have to get out on the ground to see and understand what’s going on and let employees see and know their leaders. Thomas Durante, the man assigned to build Union Pacific back in the 1860s said, “Railroading is not for the weak of heart.” That was true back then and it is true now, not just of railroading but for anyone in transportation management.

LM: So what’s the upside for new folks to the industry?
Haverty: Having said the above, I don’t want to come across negative about transportation careers. It’s very gratifying as a manager or employee to see a company run safely, efficiently, and economically while providing top-notch customer service. Plus, most transportation employees and managers are well compensated. For managers working in publicly-traded companies, this can be a very rewarding career.