Thornton's Chances of Success

SAMUEL O. DUNN November 15 1922

Thornton's Chances of Success

SAMUEL O. DUNN November 15 1922

Thornton's Chances of Success

SAMUEL O. DUNN

THE writer is editor, of "Railway Age,"

Chicago, the world’s outstanding expert on railway problems, because he knows them from the public as well as on the technical side—knows them so well that he has on several occasions swung the great U.S. railway executives to his view on big questions. He was recently consulted by an European government on the reorganization of their system. He began life as a printer, studied law, took up journalism and was editor Chicago Tribune when he was invited to specialize in technical journalism.

THE most conspicuous railway man in the world for months, or even years, will be Sir Henry W. Thornton, recently appointed chairman of the Canadian National Railway System. He will be so prominent a figure for several reasons.

Born an American citizen, he will, after he has entered on his new work, have served as a railway officer in three different countries. Until forty-one years old he got his training and experience as a railroad man on the Pennsylvania System, the largest system in point of investment, traffic and earnings in the United States. He was then called to become general manager of one of the principal railways of England—an event unprecedented in history. Having succeeded as a railway manager in England, and won high honors in the military transportation service of that country during the Great War, he is now to come to Canada and become the chief executive officer of the largest railway system in point of mileage on the North American continent. There is a touch of the picturesque and the dramatic in such a career which infallibly makes it attract wide attention.

But the thing about the change Sir Henry Thornton is making that arouses the most interest in the student of transportation matters is the magnitude of the task he is going to undertake. He will find the conditions with which he will deal in Canada as different from those in England, as he found those in England were from those in the United States. Under these unfamiliar conditions he will undertake the solution of the most gigantic problem of reorganization and management which ever was undertaken by any

He will become the executive head of a railway system of over 22,000 miles. It is not really a single system now, because its several huge parts extending across a continent have not either physically nor in their organization been as yet welded into an operating whole. To integrate them into a single system, and at the same time leave each part enough autonomy to avoid excessive centralization, will be one of the most difficult parts of his problem.

The government-owned railways of Canada are incurring a deficit which, measured by the population and wealth of the country, is enormous, and that imposes a burden on the taxpayers which would be minimized were it called less than vast and almost unsupportable. He must, if his work is to be successful, conceive and carry out means of reducing and finally wiping out this deficit. He must do this in the face of a growing demand in both the United States and Canada for the reduction from the high levels reached during the war of railway rates, especially on freight, and particularly on agricultural products.

Will He Succeed?

HOW successful is it reasonably to be expected Sir Henry Thornton will be in his struggle with the gigantic problem the Canadian government has paid him the extraordinary tribute of turning over chiefly to him for solution? It takes a big man to solve a big problem. A man may be very big, however, and yet fail to solve a big problem, because the problem may be too big for any man.

I shall not attempt to pred.ct with what success Sir Henry Thornton will meet. That will not depend on him alone. It will depend even more on the kind of a chance the Canadian public and government give him. I shall try only to tell something about the man and about the problem he is confronted with, and mention some of the things that must be done if he is to have a real opportunity to render the great service to them that the Canadian Government and people desire.

The conditions essential to the successful management of a railroad system are much the same everywhere. They are the same on a government railway as on a private railway. They are conditions, however, which long world-wide experience shows it is much more difficult to create and maintain on government than on private railways. This undoubtedly suggests the greatest of the difficulties Sir Henry Thornton will meet.

Sir Henry Worth Thornton is fifty-one years old. He received an engineering education at the University of Pennsylvania and entered railway service as a draftsman on the Pennsylvania Lines west of Pittsburg when twenty-three years old. The Pennsylvania has had a unique method of developing and training officers. On most of the railways of North America most of the officers have “risen from the ranks.” They have come up from telegraph operators, clerks, brakemen, firemen

and so on. The Pennyslvania alone has for many years followed systematically the policy of taking collegeeducated men, usually engineers, into its organization, and after advancing them step by step through its engineering department, transferring them to “operating” positions. To make the meaning of this statement clear it should be said that the engineering department of a railway designs, constructs and maintains tracks, tunnels, shops, locomotives, cars and other physical properties. The “operating” department has direct charge of the making up, breaking up and movement of trains. Almost every high operating officer of the Pennsylvania has graduated from the engineering into the operating department.

Sir Henry Thornton worked his way up through the engineering department and was made superintendent of a division in 1901. He was superintendent of different divisions for ten years. Now, being a superintendent on the Pennsylvania System means something. This railway has one of the densest businesses in the world. A large part of its mileage has double track and much of it four tracks. Under the Pennsylvania’s organization the superintendent has duties and responsibilities comparable to those of the general manager of many large single track railways. When, therefore, it is stated that

"VJ Thornton was ten years a superintendent on the ^ ' Pennsylvania it means that he had a long and valuable experience and training as an operating officer. He was next made assistant general superintendent and then general superintendent of the Long Island Railroad. This is a subsidiary of the Pennsylvania which handles a large suburban business on Long Island into and out of New York City. It was at about this time that the Pennsylvania built its large passenger terminal in New York City, tunneled into the city under the Hudson River on the west and the East River on the east, and electrified its line into New York, and likewise the Long Island Railroad. Being general superintendent of the Long Island during this period gave Sir Henry Thornton new and valuable experience.

In 1914 a sensation was created in both the United States and England by the announcement of Lord Claud Hamilton, chairman of the Great Eastern Railway of England, that Thornton had been appointed genera! manager of that railroad. The general manager of an English railway performs virtually the same duties as the president of an American railway. Lord Claud Hamilton explained his action in coming to America for a general manager by asserting that the English railways had not developed any young man who was equipped for the position. This raised a storm in England. Lord Claud Hamilton’s explanation -was resented by the officers of English railways, and he was roundly criticised by the British press.

Thus it was under unfavorable auspices that Thornton went to England. There was much curiosity among railway officers on both sides of the Atlantic as to how he would make out. The writer of this article had opportunity to visit him in London three months after he became general manager of the Great Eastern. Mr. Thornton frankly stated then that he had come to England knowing he would meet with a prejudice that he must live down. He began at once trying to adapt himself to English manners and customs. He reassured the officers and employees of the Great Eastern by refraining from calling over from America a single officer or employee. He did not at first make any considerable changes in the personnel or organization of the railway, and later refrained from making any except after counseling fully with his board of directors and the members of his official staff.

He made it clear that he had not come to England to revolutionize English railway practice by introducing American methods, but to make whatever improvements were practicable by the introduction of American or any other methods that would be effective.

He said he thought he had already destroyed most of the prejudice against him. Inquiry among persons familiar with English railway affairs confirmed this. Adaptability is one of the principal requisites to success in every field of practical human endeavor. No man, whatever his other qualities, can be successful in practical affairs if he wants adaptability. Young men usually have more of it than old men. Thornton was only forty-one years old, and he showed he had it to an eminent degree.

Within three weeks after my visit with him England entered the Great War. Control of all the railways was at once taken by the government, and a committee of general managers was appointed to operate them. Thornton was appointed on this committee. In 191R he was. appointed director of inland water communication. Early in 1917 he was appointed assistant director general of railways and sent to Paris. All members of the railway executive committee had the rank of colonel. Thornton n his new position was given the rank of brigadier-general. Finally he was given charge of all British army transportation on the continent with the rank of major-general.

Showered With Honors

THIS was four years after he had become general manager of an English railway. He was still an American citizen. He did not become naturalized as a British subject until March, 1919. Soon afterward he was gazetted Knight Commander of tho Order of the British Empire, and became Sir Henry Thornton. He is also Commander of the Legion of Honor of France, an officer of the Order of Leopold of the Belgians, and holder of a Distinguished Service Medal conferred by the United States government.

Thornton’s Chances of Success

Continued from page 15

The writer next met Sir Henry Thornton when he was attending the Congress of the International Railway Association at Rome last spring. He was still, as ever, an American among Americans; but it was plain he had become a good Englishman among Englishmen. I met other English railway officers there and later in England. They had nothing but good words for him. The general manager of a great English railway who himself has been conspicuously successful in dealing with labor problems, was especially hearty in extolling the contribution Sir Henry Thornton had made toward bringing about the improvement in the relations between English railways and their employees which has occurred since the war. Sir Henry Thornton had continued to use his talent for adapting himself to conditions; but he had helped to change some of the conditions formerly existing in England. Having grown up in a democratic country he was not influenced by the traditions of caste which always have prevailed in England, even though it has had for years one of the most democratic governments in the world. It is easy to believe this had helped him in dealing with the English railway labor problem.

And now Sir Henry Thornton is coming to Canada. He always has been a big man physically as well as mentally. He has grown to be a bigger man physically and hard work and strenuous and varied experience undoubtedly have made him a bigger man in other respects. The officers and employees of the Canadian government railways and the Canadian people will like him. He is frank, bluff, accessible to everybody who has any business with him, democratic, abounding with vitality and initiative. He is, however, leaving a railway which is small according to American standards, and which handles a large business, and especially a very large suburban passenger business, in a small area near London, to take the management of a railway system which is very large, even according to American standards, and most of whose mileage extends through sparsely settled territory and has a very thin traffic. The social and economic conditions in Canada are widely dissimilar from those in England. He will need all his powers of adaptability to adjust himself to these new conditions and to adjust them to him. He will not even find much similarity between them and the conditions on the Pennsylvania and the Long Island.

In fact, along a large part of the Canadian government railways the conditions resemble those on the western railways of the United States about twenty years ago, after the panic of 1893. Most of the western railways of the United States were then bankrupt. Between 1880 and 1890, 70,000 miles of new railway lines had been built. They were extended much faster than population and production could increase. In many

cases lines were duplicated, and even triplicated, where there was not half enough business to support one. Vast losses were suffered by investors in them.

Can Old Records Be Repeated?

WITHIN a decade, however, a remarkable transformation occurred. The recovery of general business began in 1896, and by 1906 large railways such as the Atchison, Topeka and Santa Fe, the Union Pacific, and the Northern Pacific, which ten years before were streaks of rust just emerging from insolvency, had been put into excellent physical condition and become highly prosperous. The population of the west had increased with extraordinary rapidity. Production and railway traffichad increased in proportion.

It may be that Sir Henry Thornton is taking charge of the management of the Canadian government railways just when changes in conditions are beginning in Canada similar to those which occurred in the United States in the ten years from 1896 to 1906. Canada, like the United States in the 90s, now has a railway mileage greatly in excess of what its present population and business need. But it is just emerging from a profound business depression, and entering a period of prosperity during which it may see an increase in population and production, and railway traffic and earnings, such as occurred in the western part of the United States in the ten years ending with 1906. If this should prove to be the case the economic conditions surrounding the problem of reducing, or even wiping out, the enormous deficit of the Canadian government railways would not make it insoluble.

But before anybody draws the conclusion that the Canadian government railways under Sir Henry Thornton’s management can, and probably will, be transformed within a few years as were the large railways in the western part of the United States in the decade ending with 1906, he should consider the points of dissimilarity as well as the points of similarity between the conditions with which railway managers in the United States had to deal and those with which Sir Henry Thornton must deal.

Harriman, Hill, Ripley and the other great American railway men who created our large western systems, dealt with the problems of railways which in the early 90s had only 3,000 to 6,000 miles of line. Sir Henry Thornton is to try to solve the problems of a railway system of over 22,000 miles that extends clear across a continent. The Canadian Pacific is one of the largest railway systems in the world, and yet it has only 19,800 miles of line. The various railways now composing the Canadian government system had in 1920 over 109,000 employees. They paid $185,000,000 in wages. They had 3,379 locomotives, as compared with 2,255 for the Canadian Pacific. They had 127,000 freight cars, as compared with 88,000 for the Canadian Pacific.

On American .railways twenty-five years ago there were labor problems, but labor unions were nowhere near as strong as they are now. The present type of radical leader had hardly appeared, and the railway executive managed the property with a freedom from labor difficulties which it is hardly to he expected that Sir Henry Thornton will enjoy.

The railways of the United States at that time were not only privately owned and managed, but were subject to little government regulation. The so-called .“Granger” laws and the Interstate Commerce Act had been passed, but the railway managers of those days had almost as much freedom from government interference as other men had in managing their businesses. In the exercise of this freedom they did what their judgment told them was good. They ruthlessly tore up duplicate lines where there was not enough business to support them, and at the same time built new lines into promising territory, without asking the consent of any regulating body. They fixed freight and passenger rates according to “what the traffic would bear,” and this meant a very high rate when traffic would bear it and a very low rate when traffic i-ould not move without it.

Under this policy the population and production of the western part of the United States were increased with amazing rapiidity. Owners of railway stocks who a few years before had concluded

that their holdings were worthless, awaki ened to find them worth from $100 to ¡ $200 a share in the open market, and paying dividends from 6 to 10 per cent, j But the owners of railway securities were I not the only persons who profited. The increase in the prosperity of the railways j was accompanied by a corresponding dej velopment of the resources of the entire ( territory and a corresponding increase in I the wealth of its farmers and business !

Will the People Back Him?

CONTRAST with this the situation with which Sir Henry Thornton must deal. The vast railway system he is to manage is owned by the Canadian government. The other members of the board of directors are John H. Sinclair, a public man with a reputation for caution and ability; Richard P. Gough, a successful business man; James Stewart, general manager of a large milling company who, it is understood, was appointed to represent the Western Progressives; Ernest R. Decary, for some time head of the Montreal Civic Commission and a representative of the French-Canadian interests; Frederick G. Dawson, a wholesale merchant; Tom Moore, a prominent labor leader; Graham A. Bell, deputy minister of railways; and Gerard G. Ruel, a railway lawyer of experience. The personnel of this board shows it was selected to give representation to all the different parts of Canada, and also to its agricultural, business and working classes. This is the way almost everybody would agree the board of directors of a government railway system should be constituted. But there is no similarity between its personnel and the personnel of the boards of directors of the western railways of the United States twenty-five years ago. Their boards were composed of business men whose only thought and purpose was that of having their railways so managed that they would get more business and make more net earnings. Their principles of railroad management may have been wrong. It was, however, under the application of those principles that the transformation of our western railways occurred in the ten years before 1906.

The people of Canada had government ownership of railways on a much smaller scale than at present for many years. In a majority of the years it has been under government management the Intercolonial Railway has not earned enough money to pay even its operating expenses. Never in any year has it earned anywhere near enough to pay interest on the investment in it. As the National Transcontinental, the Grand Trunk Pacific, and the Canadian Northern have been built or acquired by the government, they have displayed the same fatal gift for incurring large deficits to be paid by the taxpayer which always has been the most outstanding characteristic of the Intercolonial.

The government announced deficits on the operation of its railways between 1918 and 1921 varying from $28,000,000 to $70,500,000. But everybody familiar with the accounting methods of the government knows that these figures have not told the whole story. They do not include anything for interest not earned on the capital the government has in• vested in the Intercolonial, the National Transcontinental and other lines having a total of about 4,500 miles. If all the facts were disclosed they undoubtedly would ¡ show that the total deficit incurred by the : lines composing the Canadian govern| ment system in 1920 and 1921 averaged [ not less than $125,000,000 a year. The Grand Trunk, the latest addition to the government system, was, until recent years, a comparatively prosperous railway. But the Grand Trunk in both 1919 and 1920 had deficits after paying its fixed charges, that for 1920 being almost $6,500,000.

The reasons for the enormous deficits that have been incurred on the Canadian government-owned railways are perfectly obvious to every person who has studied the facts. The reasons for the deficits being perfectly obvious, the methods which must be used if they are to be stopped are equally obvious.

Tremendous Difficulties

IN THE period of active railway construction which preceded the war in Canada there was a great deal of duplica-

tion in the building of new lines. In other cases lines were built into very unpromising territory. If the deficits are to be reduced or stopped, lines which do not promise to become able within a very few years to earn enough to pay at least their operating expenses must be abandoned.

The service and operating methods on a large part of the government lines must be so changed as greatly to increase the average tons handled per train. Nobody can compare the operating statistics of the government railways with those of the Canadian Pacific or railways in the United States without being convinced that the average train load of the Canadian government railways could be increased, and that thereby a large economy could be effected.

The management must get greater efficiency from the employees and must restrict the increase in their number in future periods of large business and more drastically reduce their number in periods of bad business than it has in the past. In 1919 the traffic of the Canadian railways declined. The Canadian Pacific reduced the number of its employees by 2,596. The Canadian Northern, under government management, increased the number of its employees by 8,052. Statistics illustrating the same point can be given for railways of the United States. There was a decline of traffic in this country in 1919. The railways were under government operation, and the number of employees increased 72,000. In 1921 the railways of the United States had been returned to private operation. There was a heavy decline of traffic and the number of railway employees was reduced over 370,000. It was only by such economies that in 1921 the railways of the United States were saved from almost universal bankruptcy.

The deficit of the Canadian government railways cannot be wiped out, however, merely by increasing the efficiency and economy with which the lines are managed. No matter how much the operating expenses may be reduced, deficits will continue to be incurred unless the railways are allowed to adjust their rates according to what the traffic will bear, and to charge high enough rates to cover not only all operating expenses but also interest on the entire investment in the railways.

When Sir Henry Thornton undertakes the work of putting the Canadian government railways on their feet, physically and financially, he will, simply because they are government railways, have to overcome difficulties such as the men who built up the great railway systems of the United States never encountered. He cannot tear up unprofitable lines without depriving some communities of railway service. Will they not bring political pressure to bear to prevent this? He cannot increase the average freight train load without reducing the speed and frequency of the freight service rendered to many communities. The writer was told on good authority some months ago that the Canadian government railways were taking live stock traffic away from the western lines of the Canadian Pacific because they were running live stock trains with smaller loads and on faster schedules than the management of the Canadian Pacific regarded as warranted on sound operating principles. Whether this was the case or not, it is undeniable that railways operated by the Canadian government have in the past furnished service the earnings from which did not anywhere near cover the expenses, because an unwise or wholly selfish local public sentiment demanded it. Will public sentiment support or resist Sir Henry Thornton if he attempts to make i changes in service which are essential to economical operation? Undoubtedly the j attitude assumed by the public will deI termine the attitude assumed by its rej presentatives in parliament.

Unanimous Support Required

SIR HENRY may be favored in the early part of his work by an increase I in traffic due to improving business which will cause the railways to need all the men they have and render it unnecessary in the interest of economy to reduce the number of employees. But there will be pressure brought to bear under these conditions to cause an unnecessary in-

crease in the employees. Besides, every business, whether owned by a government or private company, has its periods of depression when good management requires a reduction in employees. There will be resistance to such reductions on the government railways when they are needed. The time will come when economic conditions will demand further reductions of the wages of the employees. Will Sir Henry Thornton be able to get the labor member of the board of directors to support him in his efforts to secure the most efficient work from employees and to avoid in periods of both good and bad business carrying any more of them on the payroll than are needed? Will he be able to get the support of the labor member for needed reductions of wages? If he cannot do so, will he be able to get the support of public opinion and the public men at Ottawa?

While railway rates in both the United States and Canada are higher than they were before the war, it is easily demonstrable that they are too low in proportion to the expenses of most railways. This is conspicuously true of the government railways of Canada. If their rates and operating expenses bore a reasonable relationship to each other they would not be incurring the large deficits they are. Nevertheless, in both the United States and Canada there is a strong demand, especially from the western farmers, for reductions of freight rates. Railway rates in Canada are regulated by a board of railway commissioners. If Sir Henry Thornton opposes reductions of rates which he knows will result in large deficits continuing to be incurred indefinitely, will he be able to get the support from public sentiment necessary to make his opposition successful?

It is easy to anticipate the argument that will be made in favor of reductions of rates. It will be said that high rates are imposing an undue burden upon producers and shippers, and preventing the development of the country. The argument that low railway rates are needed to develop business is always made in every country under either private or government ownership. In only one country in the world where government ownership has prevailed has the demand for low rates been so successfully resisted that the incurring of large deficits on state railways has been avoided. This was in Prussia before the Great War. The state railways of that country for years earned more than the interest on the investment in them; and they are the only system of government-owned and operated railroads which ever did this for a long period. Undoubtedly this was due to the fact that it was impossible to put effective politica! pressure upon the autocratic government of Prussia. Since the war Prussia has become a democratic country; and since the war her railways, like those of other democratic countries, have been incurring huge deficits. Is it not singular there are so many people, even including many business men, who cannot see, or refuse to see, that if railway rates are not made high enough to cover operating expenses and interest on the entire investment in a government system of railroads a deficit must be incurred which must be paid from taxes, and that a given amotint collected in taxes imposes just as heavy a burden upon and tends just as strongly to hinder the development of the industry and commerce of a country as the same amount collected in railway rates. Furthermore, when the entire cost of furnishing railway service is covered by the rates, those who receive the service pay for it; white when the rates are not made high enough' to cover the entire cost of the service, those who get the service pay only part of its cost, the rest being paid by the taxpayer. It is plainly inequitable to give railway service to some persons for less than the cost of furnishing it, and then force others who do not receive it to make up the difference in taxes. Furthermore, when the business principle of miking railway rates and earnings cover all expenses and fixed charges is departed from, the door is left wide open for every kind of inefficiency and extravagance, the burden of which falls upon the taxpayer.

He Must Be Given Freedom

EVERYONE who has looked into the facts knows what influences have prevailed in the management of the government-owned railways of Canada in

the past. The government railways have had some very able men among their officers. When, however, one compares data regarding the operating results obtained on the Canadian Pacific with corresponding data regarding the operating results which have been obtained on the Intercolonial, and on the other railways which have been under government management a much shorter time than the Intercolonial, he can reach only one conclusion. This is that the Government railways have not been managed with an efficiency and economy which approach the (efficiency and economy attained on the Canadian Pacific. The difference in the results secured doubtless has been partly due to differences in official personnel. But undoubtedly it has been more largely due to the fact that the officials of the Canadian Pacific have had a free hand to manage that railway on business principles, while the officials of the government railways always have been subject, directly or indirectly, to political influences which have irresistibly compelled them, in many important matters, to subordinate business considerations to political considerations. In many countries where railways have been operated by governments attempts have been made completely to free the managemen ts of the railways from political influences. Such attempts have been made in every one of the Australian states. Never, however, in any really democratic country has such an attempt been successful.

The most important question that remains to be settled regarding Sir Henry Thornton’s work as chairman of the Canadian government railways is whether he will, or even can, be given freedom and authority to manage them in practically the same way that he would manage them if they were owned by a private company and he were its president. If he is given this measure of freedom of action and authority he may succeed in time in accomplishing some such improvement in their physical condition, operating efficiency and financial results as was achieved in past years by Harriman, Ripley and Hill on the Union Pacific, the Atchison, Topeka & Santa Fe, the Northern Pacific and other western railways in the United States. If he does succeed in doing this he will confer benefits upon the people of Canada which the imagination cannot now even estimate. On the other hand, if a short-sighted and mistaken public sentiment causes political influences to interfere with what he tries to do to effect economies, maintain rates and carry out other policies essential to establishing a business-like relationship between the expenses and the earnings of the government railways, his work will not be successful; and the responsibility for its failure, as well as the losses which will have to be paid because of his failure, will fall upon the people of Canada.