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November 2022
By Pat Foran, Editor
Founded in 1983 by Dick Webb with a single locomotive, Watco now is a $1.5 billion company that owns and operates more than 40 short lines in the United States and Canada, as well as a number of terminals, ports and mechanical shops.
A lot of that growth came under Rick Webb’s watch. Since joining his late father’s Pittsburg, Kansas-based company in 1984, Rick has held various management and leadership positions in several departments — including operations, purchasing, marketing, accounting and financial management — and served as CEO from 1998 to 2018, when he was named executive chairman.
Dick Webb instilled a customer-first focus in Rick, and with Rick at the helm, the Watco team sharpened that focus. By listening (as in really listening) to customers, Rick Webb and his colleagues have kept the entrepreneurial spirit alive. Watco continues to enter new business ventures and take new routes to revenue growth.
“Rick’s fingerprints and DNA are all over this company,” says Dan Smith, who assumed Watco’s CEO reins from Webb in 2018. “Most of our core characteristics — humility, [thinking] customer first, service to others, service to your team — are core characteristics of Rick Webb. That’s who he is.”
Because of the person and leader he is, what he’s achieved and how he’s helped reshape the transportation services playing field, Progressive Railroading and RailTrends® in April named Webb the 2022 recipient of the Railroad Innovator Award.
He’ll receive the award during RailTrends 2022, which will be held Nov. 15-16 at the New York Marriott Marquis in New York City.
“While being one of the best wheeler-dealers in railroading, Rick is also one of the nicest guys — a rare combination,” says independent transportation analyst Tony Hatch, who serves as program consultant for the annual RailTrends conference. “He has expanded the parameters by which we judge short lines, and even short-line holding companies, by including services, logistics, ports and switching among other categories and attributes.”
Webb’s expanded all sorts of parameters in the transportation space during his 38-year-and-counting run. Not that you’ll ever hear him crowing or even whispering about it.
“Rick absolutely despises attention,” says Smith. “He never, ever, wants recognition.”
In a 2011 interview with this reporter, Webb worked hard to keep himself, the subject of the story, from being the subject of the story. Webb mostly talked about Watco, he talked up his team, he talked a lot about Watco’s customers. He shared without hesitation, about everything and anything. Except himself.
In the interview for this story, Webb wasn’t especially eager to talk about himself, either. But he didn’t deflect quite as persistently as he had a decade ago — it was harder to, perhaps, given the story is based on an award he consented to receive.
But Webb also has a different role at Watco than he had in 2011. As executive chairman, he no longer is responsible for seeing both the forest and the trees.
His job these days, he says, is to cheerlead. To challenge. To work with “investors who love Watco as much as we do.” To focus on innovation. And, maybe, to endure an interview about his life and achievements because a story about such is a story about Watco’s achievements. It’s a story about Watco employees’ successes. It’s a story about “team” in every Watco context.
“I’ll do everything I can to support the team,” Webb says.
Webb’s supportive roots run deep. So do his rail roots. Webb’s grandfather, Bus Johnson, was Kansas City Southern’s chief mechanical officer in the 1960s and early ‘70s. Webb’s father also worked in the KCS mechanical department. For the Webbs, home was Pittsburg, Kansas, where KCS maintained its back shops.
“All I remember from the beginning was having a railroad-oriented family,” Webb says. “It was the ‘60s and early ‘70s, and the railroad industry wasn’t doing real well. My grandfather told my father he needed to get away from the railroad side to the vendor side — he didn’t have seniority and would get laid off.”
So, Dick Webb took a job with a vendor; over time, he took jobs with several.
“Dad would leave the house early Monday morning, and come back Friday night,” Rick Webb says. “He was always on the road, taking care of customers.”
After graduating from high school in 1978, Rick enrolled at Pittsburg State University.
“I wanted to be an engineer,” he says.
Webb earned a bachelor’s degree in physics. Along the way, he also started and managed a bar.
Meanwhile, his father had gone into business for himself, repairing rail cars, and by 1983 had created Watco — a combination of Webb and Timms Co., “Timms” being Carl Timms, a KCS colleague of Dick’s. Rick helped with the launch.
“I was running that bar, going to school, teaching a masters class and working at Watco,” he says. “Something had to give.”
Webb stuck with Watco and, for a while, the bar.
“There was this beautiful girl who kept coming in,” Webb says. (Note: He married that beautiful girl, Stacey.)
A product of the Staggers Act and rail industry deregulation, Watco would help Webb shape his worldview. And over time, Webb’s worldview would help shape Watco.
“We had an idea — do what the customers need you to do — and we were focused on car repair because that’s where we came from,” Webb says.
Boise Cascade Corp. in DeRidder, Louisiana, was Watco’s first customer.
“It was a 30-day contract, but it was evergreen,” Webb says. “We still have that contract today.”
In the early days, Webb handled all the back-office work, marketing, strategic planning, capital raising and relationships with banks, he says. Talent acquisition was also one of his responsibilities.
“Our job was to find the best people we could find, do the job in the safest, most efficient manner, and then support them,” Webb says.
In 1985, Dick Webb opened a rail-car repair shop in Coffeyville, Kansas. Rick helped with this launch, too, working in the office and on the repair floor. In 1987, the company entered the short-line realm when it purchased a Coffeyville-to-Pittsburg line from Union Pacific Railroad — the Class I’s first post-Staggers spin-off.
Both business units grew quickly as Watco rapidly opened shops and acquired other short lines.
Watco’s early days were “blessed with a lot of customer input and guidance, and with a lot of great people,” Webb says.
There also were a lot of opportunities to learn.
“Literally, we spent the first five to six years just learning,” Webb says. “People would ask, ‘How did you guys come up with this plan to wind up where you are?’ We didn’t have a plan. Our plan was to stay in business. Our plan was to meet payroll. Our plan was to make sure we did what the customer wanted. … We made a ton of mistakes, but we learned as we made them how to become a service provider.”
In those days, focusing on service wasn’t always typical in the asset-intensive rail realm.
“A lot of the time, we in the industry put too much focus on the hard asset,” Webb says. “’How many locomotives do we have deployed?’ and ‘how long are trains sitting in the yard?’ [We asked those questions] instead of asking, ‘how are we taking care of the customer? How are we valuing them?’”
But at Watco, customer centricity always came first, sometimes at the expense of growth.
“There were several opportunities that we worked hard to get that we didn’t get,” Webb says. “It could have been the best thing that ever happened. We learned not to grow too fast.”
The Watco team also learned customers’ needs change. Accordingly, the team learned to be flexible and nimble, Webb says.
In 1998, Webb suddenly needed to learn something else: how to be a CEO. He became the company’s leader after his father stepped down for health reasons.
“My father was a bigger-than-life personality in the business, and he was really hands-on,” Webb says. “Now, my father wasn’t there to say, ‘Hey, it’s going to be fine.’ I had to say it. I had to change my communication style almost immediately. I had to make sure they knew Watco was going to be OK, that it was going to be the same. That we were still focused on the customer, service and safety.”
Dick Webb died in 2009 after a short battle with lung cancer.
In the years ahead, Watco’s operational structure evolved under Webb’s watch into what he has characterized as “decentralized management supported by a centralized culture,” an evolution that had everything to do with maintaining that customer-first focus.
“When I think of innovation, I think of innovating around your customer,” Webb says. “Everything that you do has to be continually monitored or stress-tested to make sure it’s the right thing to do for your customer. And the right thing to do for your customer is to create enough value that they get enough value and you get a portion of it, and both sides think it’s fair.”
Dan Smith has experienced Webb doing the right thing regularly since he joined Watco in 2008. A former Major League Baseball pitcher, Smith has witnessed Webb “do hundreds of deals” in which his total focus was on creating customer value.
“Rick knows if he creates value for customers, Watco will get its fair share,” says Smith. “This approach to creating value works in any walk of life. It sounds easy, but it’s really hard to pull off.”
It helps to see the world for what it is and isn’t — the way Webb does.
“His biggest skill is he’s a contrarian. He loves to see the world differently than everyone else, and it has created a tremendous amount of value for Watco,” says Smith. “Where everyone sees a problem, he sees opportunity. Where everyone sees opportunity, he says ‘Let them have it, we’ll find it elsewhere.’ He sees things others don’t see.”
Part of that comes from all the listening he does. When customers told Webb they needed Watco’s help with inventory control, Watco entered the service-intensive transload intermodal business in 2008, acquiring Reload Inc.
In 2014, Watco entered the logistics business, forming Watco Supply Chain Services. The company hired Eric Wolfe, who’d been president of BNSF Logistics LLC, as the new unit’s president.
“Almost everybody thought we were nuts,” Webb says. “The general thinking was railroads don’t do well with logistics because the logistics team doesn’t bring much business. But what we were hearing from customers was, ‘You guys are doing a really good job in the rail portion of the supply chain and with the terminal portion. But there’s also the trucking portion. ‘Can you help us?’ That was the driver of that investment.”
Webb’s honesty, humility and real-deal-ness also make him unique — and a joy to do business with, customers and counterparts say.
“He’s so open and transparent, and so open-minded and easy to be around, that he invites engagement quickly,” says Pat Ottensmeyer, president and CEO of KCS, a longtime Watco business partner. “We’ve talked to Rick about things in the past that didn’t pan out, but he’s always willing to listen.”
And sometimes, things do pan out. In 2017, KCS, Watco and WTC Industrial entered a joint venture investment to facilitate and expand the exportation of liquid fuels from the United States to Mexico. The project, Terminal Central de Mexico, included the construction of a unit train liquid fuels terminal located in the WTC Industrial Park in San Luis Potosi.
“It’s wonderful when we see an opportunity in Mexico and can bring someone into it who we trust, like Watco and Rick,” Ottensmeyer says. “It took a little bit of a leap of faith, but it’s worked out for all of us.”
Mike McClellan also knows a bit about listening and leaping, and about trust. Now Norfolk Southern Railway’s senior vice president and chief strategy officer, McClellan met Webb when McClellan took over NS’ industrial products division in 2013.
“I was instantly drawn to him — obviously, he’s a brilliant entrepreneur,” McClellan says. “He’s also one of the nicest guys you’ll ever meet and one of the most genuine people in the industry. And the thing about being a genuine person is people want to do business with you.”
Like Ottensmeyer, McClellan has talked with Webb about projects that didn’t materialize. But it’s all in the talking. The talking and the listening. It’s what leads to other conversations, other opportunities — the kind that do materialize.
In 2014, Watco subsidiary Blue Ridge Southern Railroad reached an agreement with NS to purchase three branch lines in North Carolina that feed into the Class I’s terminal in Asheville. NS also is a strategic equity partner in Watco.
“And Rick was one of the original founders of RailPulse,” says McClellan, who led the 2020 launch of the coalition of rail-car owners working together to support the development and use of GPS and other telematics technologies. “Rick took a bet on the technology, but also on me.”
That’s Rick. If he believes in you, he’ll bet on you. Just like he bets on Watco employees. Particularly in times of crisis.
During the global financial crisis of 2008-09, Watco was “still funding everything with bank debt — we didn’t have an equity partner at that point in time,” says Webb. “Everybody was unsure about what would happen. It was: ‘Oh my god, how are we going to survive?’”
To Webb, the answer was: Believe in your people, give them the support they need, and you’ll get through it just fine. And Watco got through it better than just fine.
“We had 70 profit centers at the time and every profit center was profitable but one because we came together, believed in each other,” Webb says. “You don’t make relationships in good times; you make your relationships when times are tough. So many great relationships develop from coming out of the fog together. We had our biggest period of growth coming out of that.”
That stretch represented a “step change” for Watco, he says.
“People began to say we could not only survive, but thrive,” Webb says. “It put us in really good spot to go right up to the pandemic.”
The Watco team is now 200 profit-centers strong.
“We don’t look at our business as a $1.5 billion business,” Webb says. “We look at our business as 200 businesses with 200 teams.”
Webb credits Smith — who Webb calls “the best leader Watco has ever had” — for steering the ship during the most recent period of uncertainty.
“Dan took our focus on the team and took it to levels I could not ever imagine we could get to,” says Webb, citing Smith’s non-traditional experience (professional baseball) as a key to Smith’s success. “One phrase Dan likes to use: ‘In order for you to win on the field, when you’re playing the game, you better have your locker room right.’ Well, our locker room is right.”
As evidence, Webb cites Watco’s No. 92 ranking on Newsweek’s Top 100 Most Loved Workplaces® list for 2022. Companies were evaluated based on employee surveys, analysis of external public rating sites, and interviews and written responses from Watco leaders.
“Dan’s done a great job of anticipating change,” Webb says. “The pandemic effects and what it would do to our people, the uncertainty. Inflation. Because of our anticipating change, we got ahead of that.”
Webb made the anticipating possible, Smith contends.
“Rick Webb has poured as much effort into my success as any person who’s made me successful in my life,” he says. “He’s had the courage to allow myself and others to be who we need to be, to do the things we need to do. Not everybody has that courage.”
Of course, Webb would prefer people use the “Watco” name instead of his own when discussing successes under his watch. But if Webb were to allow himself to think in terms of legacies, what would he like his to be?
“I hope my legacy is that Watco was created to serve a customer, and over the years, has served tens of thousands of customers,” he says. “I hope that customers would say we’ve served them well. I hope the people that did the hard work, who did the actual work, would say we treated them well, as well. And I hope the customers, which include Class Is, and all of our employees would say, under my watch, the value they created was shared fairly.”
If some part of this is true, he begins to say before he deflects.
“The employees should get all the credit because I don’t deserve it,” Webb says.
RE: deserving it — Smith, for one, begs to differ. As would many Watco customers, partners and employees.
“I thought making the major leagues would be the highlight of my life. I don’t even think about baseball anymore,” Smith says. “Now, it’s being with Watco, in part because of the way Rick makes me feel about what I’m doing. That’s what great coaches do. They inspire people.”
Email comments or questions to pat.foran@tradepress.com.
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