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11/9/2023
By Pat Foran, Editor-in-Chief
Since Norfolk Southern Corp.’s now-fabled investor day on Dec. 6, 2022, President and CEO Alan Shaw has been talking publicly about a better way forward, a better way to run a railroad. About NS becoming more resilient. About striking (and constantly maintaining) the right balance between service, productivity and growth.
Since NS’ highly scrutinized Feb. 3 derailment in East Palestine, Ohio, Shaw also has been talking about another kind of right. He’s been talking about — and focusing on doing — the right thing and the next right thing for the people of East Palestine.
The right (and better) way to run NS calls for making decisions in the best long-term interest of a broader range of stakeholders, notably the Class I’s employees, customers and shareholders, as well as the communities it serves.
“Since investor day, Alan’s been talking about managing through a cycle and thinking longer term,” says transportation analyst Tony Hatch, a Progressive Railroading columnist. “It’s a re-righting of the ship after the pendulum swung too far for those who might have only considered precision scheduled railroading (PSR), for example, in a cost-cutting context.”
And post-East Palestine, Shaw and NS have strived to make decisions in the best long-term interests of the community and its residents. For the past nine months, Shaw’s message hasn’t changed: “It’s about doing the right thing, and the next right thing,” he says.
From articulating his vision of what a better way looks like going forward and reorienting the railroad’s priorities accordingly per NS’ response and commitment to East Palestine, Shaw continues to demonstrate he and his team are charting a different course, working toward a better way — and that they’re committed to doing the next right thing.
For those reasons, Progressive Railroading and RailTrends® in June named Shaw the 2023 recipient of the Railroad Innovator Award. He’ll receive the award during RailTrends 2023, which will be held Nov. 16-17 at the New York Marriott Marquis in New York City.
“After seeing Alan at Norfolk Southern’s investor day, I instantly thought of the Railroad Innovator Award,” says Hatch, who is the program consultant for the annual RailTrends conference. “Alan’s looking ahead. Other rail leaders are, too, but he was the first CEO to crystallize it.”
Although the road that led Shaw to rail is circuitous, even serendipitous, his route to doing the next right thing is clearly rooted in his upbringing.
Shaw grew up in historic Williamsburg, Virginia. His father, Terry Shaw, who served two tours of duty in Vietnam and received three Purple Hearts, served as a pillar of strength from afar. Shaw’s mother, Mary Ruth Payne; his aunt, Meredith Rivers; and his grandmother, Edith Marsh, provided it at home.
“I was raised by three really strong women,” Shaw says.
Working as a secretary in the financial aid department at public research university William & Mary, Shaw’s grandmother raised four kids and “put them all through college,” he says.
Her children weren’t the only ones she helped through school.
“My grandmother gave students money, her own money, for things like groceries,” Shaw says. “This woman was doing the right thing.”
Her passion to do that didn’t go unnoticed: Shaw says she’s listed among the 100 most influential women at William & Mary, which was chartered in 1683.
A strong work ethic, too, was important to the Shaw family. As a teenager, Shaw worked at theme park Busch Gardens® Williamsburg, serving as “head sweeper in London,” he says, chuckling. He also sold soft drinks at William & Mary football games.
In 1985, Shaw enrolled at Virginia Tech in Blacksburg, Virginia, about four hours west of Williamsburg. He majored in aerospace engineering.
“I was a bit more left-brained back then,” he says.
During Shaw’s freshman year, his father, a retired major in the U.S. Marine Corps who’d been exposed to the herbicide Agent Orange in Vietnam, died after a seven-year battle with cancer.
Shaw pushed ahead though, concentrating on his studies and earning his bachelor’s degree in 1989. But after the Space Shuttle Challenger tragedy in 1986 and the Berlin Wall’s fall just months after he graduated in 1989, Shaw wasn’t entirely sure how to chart his career course.
“What I knew was there weren’t going to be any jobs building fighter jets,” he says.
As it turned out, there were super-high-tech vessels to build. Shaw’s first employer out of school was Newport News Shipbuilding in Newport News, Virginia, where he installed nuclear reactors on aircraft carriers — notably, the USS George Washington, which was christened in 1990.
While Shaw loved that first gig and loved being an engineer, he wanted the opportunity to climb an organization’s ladder. So, he went back to school, re-enrolled at Virginia Tech in 1991 and earned a master’s degree in finance the following year. There, he met Tiffany Tilley, an undergraduate in environmental science and the woman he’d eventually marry.
Shaw’s first finance job was serving as a commercial loan officer — or a “relationship manager,” as he puts it — with Bank of America predecessor NationsBank in Norfolk, Virginia.
“I actually worked out of a building where NS was leasing space,” he says, adding that while he liked the bank job, he realized he wanted/needed to get into “a specific business,” something that allowed him to be part of the process to drive cash flow.
Meanwhile, serendipity played a hand. Shaw isn’t sure how, but an NS recruiter obtained his resume. The railroad provided an opportunity for him to be part of the aforementioned process. So, in 1994, Shaw joined NS as a cost systems analyst.
“My wife and I moved to Roanoke, and she got a job with NS, as well, in environmental safety,” he says. “For a while, her career was advancing more than mine was. She was a rock star.”
She left the railroad 10 years later. Shaw never did. He spent the next five years in finance, learning the numbers side of the business while sharpening his seemingly innate relationship-building acumen.
“Alan’s bright and he has a high level of integrity,” says Wick Moorman, who served as NS’ president and CEO from 2005 to 2013. “He’s also very personable. He’s someone people like to interact with.”
He’s also someone whose talents stood out to NS leaders. Shaw says Senior Vice President of Coal Marketing Bill Fox “took an interest” in him. Fox, who rose through the railroad’s ranks in operations positions, was one of the most customer-centric people he’s ever met, Shaw adds.
“He wanted me to go into marketing — ‘You’d be good at it, if you want to do it,’ he told me,” Shaw says.
The personable Shaw did want to do it, and in 2002 he began serving as NS’ director of coal transportation services. He held the post for the next six years.
“I’d get in early and by 7:30 a.m. make more decisions than some people make in a day,” Shaw says. “There was a high, a buzz, in solving problems.”
In 2008, he was promoted to group VP of coal transportation services.
“He was in the marketing department, working hand in hand with people working in the coal fields,” says Moorman, who talks with Shaw from time to time. “We needed that interface.”
A year later, NS brass tapped him on the shoulder once again, this time to serve as group VP of chemicals. Shaw quickly realized he had relationships to rebuild within the group. One customer in particular “raked him over the coals” for the railroad’s less-than-stellar service, he says.
“It was all about doing the right thing — for the customer, and also for the railroad,” Shaw says. “I want to build long-term relationships. That way, you can innovate and solve problems.”
Gradually, the relationship was rebuilt. The customer’s problems? Solved.
“We did a deal that started out on the back of a bar napkin — we didn’t lawyer up,” Shaw says, noting the relationship’s still strong today. “We still call it the ‘Bar Napkin Deal.’”
Now clearly on the C-suite track, Shaw in 2013 was named VP of intermodal operations.
“I knew the staff at operations from being in coal, but everything was completely new,” he says. “Rail’s been ceding share to trucks for 25 years, even though rail is safer, less expensive. ... We can grow intermodal if we provide a reliable service product. You’ve got to develop that best-of-class, customer-oriented experience.”
Improving the customer experience was still a priority when Shaw was named EVP and chief marketing officer in 2015. Six years later, it still topped the list when Shaw was appointed to succeed Jim Squires, who was retiring as president and CEO in May 2022.
Shaw was the right person for the CEO job, Moorman says.
“Here’s this guy with a strong financial background — P&L and margins and all of those good things — he got significant experience with marketing and customers, and really significant exposure to operations,” Moorman says. “He’d developed a thorough understanding of both sides of the equation, of two different worlds that have to communicate. Alan has that ability to communicate on both sides of the business.”
It’s a trait customers and representatives of other links in the supply also notice — and appreciate.
“When they have a customer meeting, and Alan’s there, he gets involved,” says Griff Lynch, president and CEO of the Georgia Ports Authority (GPA), which counts NS as a major stakeholder. “If there’s an issue that needs to be resolved, he gets the right people on it. He brings options to the table. He’s a great listener. He’ll also say, ‘Hey, I disagree.’ The point is, Alan tells it like it is. He doesn’t blow smoke. He’s actively engaged.”
That’s because Shaw is the genuine article, says Mark McEwen, managing partner at Cameron Crittendon, a grain brokerage and logistics firm.
McEwen — whose firm works with the railroad’s marketing team — met Shaw at an NS customer appreciation event about nine years ago.
“We talked and I could tell right away — I like this guy. He’s one of those people, the moment you meet him, you just know,” says McEwen, who considers Shaw a good friend. “Right then, I knew he was genuine.”
And Shaw genuinely likes and respects people, former and current colleagues say.
“When Alan found out he was going to be the next CEO, he went out and spent the first month riding hi-rails and meeting people,” Moorman says. “That’s something I love, too — that touch. That touch is one thing that characterizes him. He is a people person, and it comes across right away.”
Shaw says he continues to get out in the field several times a month.
“Engagement with employees is really important to me,” he says.
What Shaw also considers important is finding a better way to serve all NS’ stakeholders — in good times, yes, but during downturns, equipment shortages and other network disruptions.
“The thing is, the U.S. economy always comes back,” Shaw says. “We needed to take the longer-term view.”
For example: During the early and middle phases of the pandemic, and the corresponding economic uncertainty, some companies in a variety of industries assumed shorter-term views and actions. In the transportation realm, links in the supply chain focused on optimizing their respective pieces, losing sight of the interconnection, the bigger picture, in the process, Shaw says.
Meanwhile, customers and the customer experience weren’t always included in the aforementioned optimization. Railroad employees and their quality-of-life concerns weren’t factored in, either.
Traditionally, the major railroads furloughed workers to cut costs and recall them when conditions improved. It might have helped the bottom line and the operating ratio in the short term, but when the economy and business bounced back, railroads scrambled to recall workers, placing service and growth plans at risk.
Shaw and his leadership team determined it’s better to keep headcounts steady to keep service performance consistent — and that it wasn’t good to be singularly focused on reducing the OR. It’d also help improve the railroad’s relationship with employees and improve their quality of life, they believed.
Meanwhile, customers told them they’d use rail more if service were consistently reliable.
Enter what the NS leadership team dubbed “resilient railroading.”
“It’s a mindset that’s comparable to and aligned with our balance between service, productivity and growth,” Shaw told Progressive Railroading Managing Editor Jeff Stagl in March. “It also means incorporating time-honored principles such as simplicity, executability and a high degree of compliance.”
Resilient railroading calls for consistent investments in key resources to help reduce the volatility of capital investments and long-term assets, from freight cars and locomotives to track and intermodal terminals and workers.
“It’s all part of the customer centricity we need to have,” Shaw says.
Shaw and his team started having conversations with investors about the new approach in the summer and fall of 2022; there was “not a lot of buy-in” at first, he says. But at the December investor day, “we did the math for them and the numbers were compelling,” Shaw says. “It was pretty well received.”
Transportation analyst Hatch was among the first to sing NS’ (and Shaw’s) praises. In a Dec. 22 message to his clients, Hatch wrote that the railroad’s investor day “may prove to be a watershed moment, and by focusing on resiliency and ROIC, NS carried the water for their peers. Perhaps now we can replace the old war horse that ‘the rails only care about OR.’”
Meanwhile, by January, NS was “beginning to deliver,” Shaw says, noting train speeds were rising and terminal dwell times were falling.
“A faster railroad is a less expensive railroad,” Shaw says.
But then came Feb. 3. Through January, Shaw had been talking about growth, achievable in part by putting employees and customers first. The East Palestine derailment changed things.
It required NS to put the town’s people first. It’s the right thing to do, Shaw told NS stakeholders.
So far, NS has invested millions in the community’s recovery — $96.9 million as of Oct. 30, according to the Class I. But making it right isn’t about money, Shaw maintains. It’s about doing the right and the next right thing over the long haul for East Palestine residents.
“A concern is, ‘You’re going to leave,’” Shaw says. “We’re not.”
He cites the 15 employees who live in East Palestine and the 300 contractors working on recovery activities daily. Shaw himself returns frequently.
“When you become CEO, you think it’s all about strategy and vision, and it is about those things,” Shaw says. “But it’s really about accepting accountability. You have employees. Shareholders. Customers. The communities you serve. And you better keep your promises. It cycles back to the issue of trust. Our strength is based on trust.”
On a system-wide basis, it’s also based on zeroing in on zero tolerance for safety failure.
“We’re going to be the gold standard on rail safety, so we went to the nuclear navy,” Shaw told attendees of the North American Rail Shippers Association’s annual conference in Chicago in May, noting NS had enlisted Atkins Nuclear Secured (ANS) to review its safety culture.
In September, ANS issued its initial findings, recommending NS strengthen its collaboration with local labor leaders; enhance post-incident continuous improvement processes; invest in the locations where employees work; and expand its field assessment team.
Shaw subsequently established a team of internal experts and leaders to identify additional areas the railroad can improve its culture and operations, ensure appropriate follow-up implement recommendations from ANS and others.
One thing about doing the right thing and the next right things is there’s no endpoint — it’s a continuous approach, a way of life that isn’t necessarily measurable in the short term.
“One of the issues about investing longer term, it takes longer to prove you’re on the right path,” Hatch says. “With the slowdown and freight recession, and East Palestine, it’s a very difficult time to be pivoting to growth and moving away from PSR.”
Hatch is heartened Shaw hasn’t wavered.
“He’s spending a lot of time in East Palestine, making it right — he and Norfolk Southern have risen to the occasion,” Hatch says. “He’s maintained the Great Experiment while doing the right thing. They’re not competitive thoughts, they’re not mutually exclusive.”
To Shaw, they’re one in the same. He won’t waver, he says. He isn’t going anywhere, he says. Everything tells him — from his grandmother’s example and his innate relationship-building acumen to his NS colleagues systemwide — that he’s on the right track doing the next right thing.
“When I go out in the field, it’s the reaction I receive from employees when I ask, ‘How do you feel about things?’” Shaw says, citing a visit to Conway Yard in western Pennsylvania right before the East Palestine derailment. “I asked a crew member, ‘What advice do you have for me?’ He looks at me and says, ‘Just keep it up.’”
Shaw intends to.
“As a partner of Norfolk Southern’s, you could wonder: ‘Is this guy going to be here awhile?’ With Alan, I know he’s going to be around,” GPA’s Lynch says. “He’s got a long runway ahead of him. That excites me as a partner with Norfolk Southern.”
And Shaw will be his genuine self, striving to do the next right thing every step of the way, Moorman and others believe.
“Again, with Alan, there’s no front, no pretension. He’s never trying to be anyone but himself,” Moorman says. “I think that bodes well for Norfolk Southern.”
Email questions or comments to pat.foran@tradepress.com.