Talent drain puts rail industry on the executive recruitment beat

By Pat Foran, editor

How do you find and recruit top talent? In the North American rail industry, you typically try to grow your own. Or poach people from other rail companies. Or, infrequently, look outside the industry. However railroads, suppliers and contractors do it, they'll need to pick up the talent replenishment pace, given the aging workforce and brain drain to come, rail recruiters say.

"The war for talent is the next battle for every company, not just railroads, but railroads are going to be hit by a talent shortage soon," says David MacEachern, who leads executive search consulting firm Spencer Stuart's transportation and third-party logistics practice. "The Class Is do a pretty good job of succession planning for the CEO. It's at the level below where the real issues are, where the talent training takes awhile. The talent has to start coming in."

It's something rail industry human resources managers have known for a while now. About a decade ago, looming retirements at North American railroads prompted H.R. execs to convince management to put talent recruitment and retention at a premium. But the Great Recession prompted some roads to put a few of their best-laid strategic plans — including some hiring and management training — on hold, recruiters say. At the same time, the bleak economy led some railroaders who had planned to retire to hold off. But the economy has picked up, and the retirement pace should, too. The rail industry is back on the recruitment beat. Big time. And it's keeping executive recruiters hopping.

"2009 was brutal, but from 2010 on, it's been crazy busy," says Edna Rice of Edna A. Rice Executive Recruiters Inc., a rail and transportation recruitment firm. "Everybody's hiring and it hasn't stopped."

That's everybody from freight railroads to transit agencies to rail-car repair shops to private-equity firms seeking senior managers to helm newly acquired rail assets.

"Almost all of our customers are going to have to cast a wider net, primarily because we don't have enough talent coming up through the ranks," Rice says.

Whether they'll broaden their search technique anytime soon remains to be seen.

"It's a very close-knit industry," says Rice, who's been a rail recruiter since 1986. "It's still relationship based."

"They'd rather have somebody come in and hit the ground running," adds David Strauss, director of talent acquisition for Executech Global Inc., which specializes in rail engineering recruiting.

Especially for operating roles.

"Among the Class Is, there has been a slight shift in philosophy toward recruiting from outside the industry — for human resources, communications, marketing — but there remains a very high bias toward recruiting executives with railroad experience," says MacEachern. "I get it. There are a lot of nuances to running a railroad."

So, competition for known rail talent is fierce — perhaps as fierce as it's ever been.

"Smaller firms find that their [top talent] is getting picked up by medium-sized companies, or medium companies are having people picked off by larger companies," Strauss says. "There's a shuffling of expertise."

There's only so much shuffling that can be done, especially as freight railroads develop new business opportunities and new rail transit systems are built — in North America and beyond.

"There are projects worldwide, with a lot of foreign governments [seeking] to import talent from the U.S.," Strauss says. "We're seeing senior expertise traveling from the U.S. and bringing it to the Middle East, Europe or Asia. It's becoming more and more difficult for some North American firms to maintain their expertise."

Being a competitive employer also means having at handle on what's critically important, both personally and professionally, to next-generation leaders. Work environment? Location? A schedule that fits their lifestyle? A clear sense of career path? Railroaders and the recruiters who guide them in battle— with workforce planning assistance, as well as talent acquisition — have plenty to consider.

"It's going to be interesting the next three or four years," Rice says.