Volume 2, Issue 10
October 5, 2001

Inside this issue:
Simple performance plan means success
"Early retirement" brings Carlson to Watco
Employee News
Webb challenges Watco Family to help
Anniversaries

Simple performance plan means success By John Brown Chief Operating Officer Watco Transportation Services

Performance within the Railroad Industry, indeed any industry, is measured in many ways. Most of these measurements are based on what are deemed "lagging measurements", meaning they are historical or representative of how we did perform, as opposed to how we are performing.

History is only a useful performance tool, if we are able to learn from it, and therefore avoid the same shortfalls in performance and replicate the same victories.

Oftentimes, it is extremely difficult to apply solutions to problems, when we are unable to identify these problems until well after the event, which is why relying only on lagging measurements, such as monthly financials and annual customer surveys, is ineffective. The financial represents information that could be over 45 days old, and implementing corrective action at this point is generally a case of too little too late. Typically the parameters of our business and customers requirements change daily, making the above changes not only less effective, but detrimental to our profitability as the current requirements may be totally opposite to that measured over a month ago.

Knowing that we often were not nimble enough to manage every curve thrown to us, and realizing we must still make decisions based on some factual and relevant information, we have developed a system of simple quantitative measurements, measurable on a daily basis, that provides us with real-time information, from which our railroads are able to manage for change by plotting a much more timely course of corrective action. By timing the evaluation of these measurements mid month, we are able to provide enough time to correct any negative performances before the end of month financial period, maximizing our ability to show a successful end result of the past 30 days performance.

The measurement system has proven that daily management of railroad, and support center, labor, fuel, assets, incidents and accidents, and velocity, enables the old performance goals to be easily attainable. Our current system of managing our performance through these measurements has evolved over many years into the present blueprint. We now have a system in effect that can be easily understood by all employees, who in turn affect the performances, because we have broken down the measurements to their most basic form, and have minimized the measured activities to the events that have the greatest affect to the overall performance. These events are recognized as dependent events, further affecting the performance of many other factors not specifically targeted.

Why does the system work? The system works because it is simple. We have removed the dollars, and have focused on the truly controllable factor: consumption. It enables us to use the monthly financial information as a crosscheck of our performances. The financial is a lot like a school report card. Sure, it shows us our overall performance, but it fails to identify in what specific area we are under performing and we find out we have failed, too late to be able to change the grade. How well we react to the leading information, received daily and more component specific, will proportionally affect our final grade, or the profit centers financial statement.

Currently, our top performing railroads, in fact the top performing profit centers in the Watco family, the Eastern Idaho Railroad and the Palouse City /Coulee City Railroad, are the companies who are most effectively managing the quantitative information. The original concept of our present system of measuring was both created and tested on the EIRR. Fine-tuning the system using live data has enabled the system to evolve into today’s methods.

Jack Lisle and his management team have used the system to turn the EIRR, Idaho's largest shortline and the Watco shortline with the most number of customers and greatest switching demand, into consistently the most profitable company within the Watco system. Jack has consistently reinforced this system by collecting data and regularly managing through proper course correction. Reacting to the data in a timely manner has allowed the EIRR to reset the performance bar continually, for all of our railroads.

"Our measurements are simple, and the toughest part is the required discipline to constantly review the data within such a time frame to make the necessary adjustments. As will all systems, to achieve the success we force ourselves to continually focus, focus, focus." Jack Lisle-General Manager EIRR

The PCC turned the performance corner under the leadership of Paul (Kojak) Fries. With Paul's appointment came a fresh perspective to the PCC, which already had our measurement and management system installed. The results speak for themselves, with unprecedented improvements from what is the largest shortline in Washington, and the Watco shortline with the greatest loading challenge.

"The measurement system really works! When combined with the monthly managers meetings, held mid month to give us plenty of reaction time, the improvement in performance is inevitable." Paul Fries-General Manager PCC

Today, all of our railroads are performing at different levels of effectiveness and efficiency, which can be directly linked to how well we have been able to apply our principles of measurable management. In an industry that is resistant to change, we as a company are plowing fertile ground regarding performance improvements.

Can you imagine the success of Watco Companies when all of the profit centers have mirrored the improved performance achieved by the EIRR and PCC? Improvements that can easily be emulated by mastering our proven measurement and management systems.

O.B. Carlson retired from the Burlington Northern Railroad in 1995.

Before moving to Carl Junction, Missouri, he made a phone call. The recipient of that call was Dick Webb, Chairman of Watco Companies, Inc.

"I picked where I wanted to live, which was southwest Missouri, and then I picked a job," Carlson said.

As for how Carlson chose Watco Companies, it was a rather simple process.

"I picked them out of the equipment register, a book that lists all the railroads. I called Dick (Webb) and he hired me over the phone."

Carlson was familiar with the Kansas-Missouri area because he had spent time traveling in the Joplin area while working for the BN out of Tulsa, Oklahoma.

Years of railroad experience came with Carlson when he made the move. Currently he can lay claim to a total of 37 years on the railroad, including 27 years in management. Six of those years are with Watco Companies.

It all started right out of high school when Carlson went to work for the Northern Pacific railroad as a car oiler. Many positions, responsibilities and locations followed between 1964 and 1995: Carman in Washington, Car Foreman in Washington and Colorado, General Foreman in Nebraska and Oklahoma, Manager of Quality Assurance in Washington and Manager of Open Top and Special Loads System Mechanical in Texas.

Currently the Chief Mechanical Officer for Watco Transportation Services, Carlson is on the road most of the time. In charge of mechanical car repair for all of Watco’s railroads, Carlson travels to various repair facilities across the area. The Kansas and Oklahoma Railroad facility is located in Wichita, Eastern Idaho Railroad’s in Rupert, Timber Rock Railroad in DeRidder, Louisiana, and the South Kansas and Oklahoma facility is in Cherryvale. Carlson says plans are underway for an additional K&O facility in Salina, Kansas.

"I travel to all of these locations and insure cars are repaired to regulations. We plan on a new facility in Salina, one that will service the K&O. As for the Pittsburg car shop (Cornell), it was built after I came here. Dick (Webb) always had a vision of a carshop here. We made that happen," Carlson said.

Besides traveling to railroad car repair shops, Carlson still is involved with the rules and regulations that keep trains moving.

"When I was first hired as Superintendent of Car Maintenance, one of my responsibilities was dimensional shipments and American Association of Railroads (AAR) standards. I still do those things. I’m also the Vice-Chairman of AAR Open Top Loading Rule Committee. Also, I’m on the Rules and Figures Sub-Committee for the AAR. I represent the SKOL and Shortline Association of America for those committees," he said.

Through all of this work, railroad isn’t the only form of transportation that Carlson has worked with hands on. For 3 years, he was a Helicopter Crew Chief with the United States Army.

"During Vietnam, I worked on helicopters while they were on the ground and up in the air I was a door gunner," Carlson said.

After spending time as part of the 101st Airborne Division, Carlson was Honorably Discharged in 1970, but only after receiving Silver and Bronze Stars in 1969. Vietnam also brought such commendations as a Purple Heart, 6 air medals-one of those for Valor. Also, Carlson was commended for Cross Gallantry with a Bronze Star and Army Commendation Medal.

"This is a touching time to think of my military experience, considering the condition the nation is in. There’s a lot of interest in the military now."

Looking back, Carlson knows it was a good choice to come to Watco Companies.

It’s different here; you’re treated like a human being and not a number. Watco is very family oriented and a great company to work for."

Though Carlson wasn’t seeking a particular position, he’s pleased with the outcome.

"I would have done anything. I was in the location I wanted to live in and I’ve worked around railroads all my life. It really doesn’t matter what part of railroading. I like the concept of doing whatever you need to do for the good of the group."

Again, the echo of teamwork for the good of the Watco team.

Lucky Mitchell has been appointed to General Manager of the Kansas and Oklahoma Railroad in Wichita, Kansas. Lucky brings a wealth of experience in railroading, as he was formerly the Vice President of Operations for the former Central Kansas Railway. Lucky also has many years of experience working for Class I Shortline Operations.

Dee James joined the corporate office in Pittsburg, Kansas, as receptionist and office assistant in August. Dee has spent the last 7 and a half years working in an attorney’s office as a paralegal. Dee and her husband Rick have been married 15 years. They have 2 daughters and 6 grandchildren.

Along with the addition of Dee, the Pittsburg office also underwent a change as Julie Madl moved into an administrative assistant position. Julie has been with Watco for 7 months.

From the Timber Rock Railroad, Ron Martin and his wife Brandy welcomed a baby girl September 11th. Weighing in at 9 pounds and 2 ounces, Gracie Lynn is their first child.

Cody Midkiff joined the Timber Rock Railroad the 16th of September. Cody is working as a track laborer. Cody has a wife, Katherine.

Mike Wiggins joined Watco Switching in Leesville in September. Mike has 27 years experience working with Longview, Portland, a Northern Railway company. Mike has 4 children, Jack, 30; Jay, 28; Jennifer, 25 and James, 24. He also has 12 grandchildren.

Tuesday, September 11th began normal enough for most Americans, but during the early work hours of the morning thousands of lives were forever changed. The acts of terror that were taken against our nation and the people who felt safe here, created large voids not only for those living in New York, Washington D.C., and Pennsylvania, but for all Americans.

Even members of the Watco family were affected. Jerry Klidies, O.B. Carlson, Dennis Madison, Mark Blazer, Wayne Sigley and John Brown were among many Americans who had to make changes in travel plans so they could make it home to their families.

Rick Webb, President and C.E.O. of Watco Companies, Inc., felt like most Americans.

"The nation has gone through a terrible tragedy and now is the time for us to pull together to help those directly affected," Webb said. "We should all do what we can to help, whether we donate money or give blood to our local Red Cross.

"Whatever we do we should remember some of the great heroes of this last week. Our law enforcement officers, firemen or maybe one of our neighbors who had to step up and face the pressure of this attack, they are all heroes in my book.

From the first day Webb has encouraged Watco Companies employees to standfast and lend aid to the victims and the heroes of this attack.

Here is the letter, Webb sent to all employees last week:

To all members of the Watco Companies’ Family:

In the wake of the terrible tragedy that happened this week, I want to encourage all of us to do whatever we can to help the victims, their families and our Country to recover from this attack as quickly and as strongly as possible. If you can give blood, money, time and most of all prayer, they are all needed now more than ever. I want all of you to know that our company will support your efforts to assist the victims of this horrible, evil act. Should you need to take some time to give blood or provide some sort of service to assist in the recovery, please coordinate with your supervisor in order to insure service to our Customers doesn’t suffer in your absence.

How we respond to these despicable acts of war against our Country will have a profound effect on the future of the freedoms we hold so dear. Now is the time for us to unite in our efforts to comfort the victims and their families, to help rebuild what was destroyed and have the patience and discipline to prepare for a long, tough fight to bring those responsible for this tragedy to justice.

I am proud of the people of Watco Companies and proud to be one of them. On a daily basis, I witness great things accomplished by the most talented and dedicated group of people I know. It is time for that great group of people to help our fellow Americans in this time of need by doing whatever we can to help the victims and their families rebuild their lives and their communities.

Thank you and God Bless America.

Rick

Congratulations to the following dedicated employees who celebrate anniversaries with Watco Companies, Inc., in the month of October.

1 year-Teddy Johnson, Deborah Kendall, Jacinto Tavira, Sarah Coleman, Justin Webb, Phillip Beckman.

2 years-Darlena Springer, Lee Pool, Kenneth McCarty, Laci Mowdy, John Conti.

3 years-Ryan Ward, Clarence Griggs, Darrell Andrews, Norman Neal, Mike Blakly, Albert Gelnn, Jr.

4 years-Theodore Dobrey, Brad Schell, Brian Oleske, Rita Mitchell, Becky Fearmonti.

5 years-Kenneth Seely, Marc Ross, Craig Bywater, P. Lee, Edward Moore.

6 years-Steven Korell, Michael Moore.

7 years-David Carr, Greg Bartholomew, Lori Magee.

8 years-Darrell Hayes.

9 years-Bruce Huerter Robert Litts.

10 years-Anthony Clark, Leon Allen, Bradley Smith.

12 years-Herbert Liddell, Jr..

13 years-Michael Allen.

16 years-Keith Lacaze.

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