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November 2020

Rail News: CSX Transportation

Next level thinking: CSX's Jim Foote earns this year's Railroad Innovator Award

“I think Jim Foote has the broadest strategic perspective of any of the Class I CEOs out there,” says Anacostia Rail Holdings Co. VP and COO Eric Jakubowski, who worked alongside Foote at CN in the 2000s.
Photo – CSX


By Pat Foran, Editor

Jim Foote long has been known for his ability to see the short and longer terms, the forest and the trees. For his strategic-thinking acumen.

CSX's president and chief executive officer may well have been a go-to strategy guy, if not the go-to strategy guy, at the four railroads he's worked for over his 40-year career, colleagues figure. It's certainly been the case since Foote joined CSX in October 2017 as executive vice president and chief operating officer.

As COO, he aligned the Class I's operations and sales and marketing departments to advance the precision scheduled railroading (PSR) model introduced at CSX by the late E. Hunter Harrison. Since taking the railroad's reins in late 2017, Foote has focused on safety and service, transitioning CSX into the next crucial PSR phase.

And during this unprecedented period in which strategists continue to feel their way through the planning fog that is the pandemic, the plain-speaking Foote is positioning his railroad to be ready for whatever comes next — including growth.

"In doing many of the things Jim said he would do, he has led CSX past PSR 1.0 into 2.0, what I call the Post-Hunter Railroad, or PHR," says independent transportation analyst Tony Hatch, who is program consultant for Progressive Railroading's annual RailTrends® conference. "While he follows some great rail leaders, it is Jim who has finally taken CSX to industry leadership."

In July, Progressive Railroading and RailTrends named Foote the 2020 recipient of the Railroad Innovator Award, which recognizes an individual's outstanding achievements in the rail industry.

"I think he has the broadest strategic perspective of any of the Class I CEOs out there," says Anacostia Rail Holdings Co. VP and Chief Commercial Officer Eric Jakubowksi, who worked alongside Foote at CN in the 2000s. "He knows when to take a risk, and when not to."

Superior and the Soo Line

For Foote, the seeds of perspective were sown in the northern Wisconsin city of Superior, where he grew up "surrounded by friends who lived on dairy farms," he says.

He also was surrounded by railroaders. Foote's father and grandfather worked for the Soo Line Railroad. His uncle did, too.

"If you lived in Superior, you worked for the railroad, or you did something in the shipping or grain industries," he says.

In the early 1970s, Foote went to work for the Soo Line. When he started, he was 18 and still in high school.

"Dad said there was an opening there," he says. "Next thing I knew, I was working nights at the roundhouse."

Foote stayed with the Soo Line while attending the University of Wisconsin-Superior; he spent days at school and nights at the railroad. He also began thinking about law school, which he viewed as a potential "pathway to finding a new career."

A half-dozen years later, with a Bachelor of Science degree in hand and a young family in tow, Foote headed south to attend the University of Illinois at Chicago's John Marshall Law School.

He also needed a job. Foote figured he had two choices: work at a steel mill in nearby Gary, Indiana, or work at another railroad. He chose the latter, signing on with the Chicago and North Western Railroad (CNW).

"There was a plan, but it was in Hunter's head. We needed a plan we could articulate to everybody." — Jim Foote

From the CNW to CN

For the next couple years, Foote worked at the Proviso hump yard in Chicago, digging ditches, laying signal cables and rebuilding car retarders. In 1980, fate intervened. By chance, he bumped into the railroad's VP of labor relations in the yard. The two talked.

"'Why are you working out here? Come down to the office, you're working with me,'" Foote says the VP told him. "That's how I began working in labor relations and arbitration."

Foote rose through the ranks during the post-Staggers 1980s and early 1990s, holding senior positions in labor relations, finance, law and corporate communications, eventually becoming the CNW's youngest-ever vice president as VP of corporate development.

"At CNW, we were the leaders in crew consist battles, as well as M&A," Foote says. "It kept me interested and intrigued."

After working through a leveraged buyout process, and helping to take the railroad private and then public, Foote left the CNW in 1995 shortly after Union Pacific Railroad acquired it.

"I saw it as an opportunity for me to practice law," he says.

But before he had time to seize that opportunity, he received a call from a financial community contact. Canadian National Railroad — a crown corporation — planned to privatize at the time, then launch an initial public offering. And the railroad was looking for the kind of help Foote, with his legal and financial background, could provide. Intrigued once again, he signed on.

"I figured it would only be a couple years," he says.

It turned out to be 14. With CN, Foote ascended through roles of increasing responsibility, moving from investor relations to the sales and marketing realms.

"I thought, 'OK, I can sell stock, so I can sell freight,'" he says.

Meanwhile, growth-minded CN was aiming to acquire the Illinois Central Railroad (IC), which was helmed by Hunter Harrison. ("We'd met — I'd talked with him a few times," Foote says.)

CN snagged the IC in 1998. And after Harrison joined CN as EVP and COO Foote was named EVP of sales and marketing. Foote was serving in that capacity in 2003, when CN CEO Paul Tellier left and Harrison succeeded him.

Harrison soon began implementing PSR, which at the time was known simply as "scheduled railroading."

"Scheduled railroading is really just running the railroad to a plan," says Foote. "If you run it correctly, you eliminate unnecessary events that can add delays, and also improve the quality of service."

Dream Teamers and transformation

As CN implemented and refined its approach to PSR, it also built a leadership team whose influence — collectively and individually — would be felt in the North American rail realm for the next two decades (and counting).

"I refer to it as The Dream Team," Foote says, co-opting the nickname of the United States' 1992 men's Olympic basketball team, which comprised NBA superstars.

In addition to Foote, Dream Teamers that served CN during this period included Harrison, Claude Mongeau, JJ Ruest, Keith Creel, Ed Harris, Jack McBain, Jim Vena and Mark Wallace.

"It was a lot of fun, and from a financial perspective, it has to be one of the biggest company transformations ever," Foote says.

Foote played a key role in CN's transformation, former colleagues say. And not just because of the multi-disciplined expertise he brought to the table.

"Like a manager in the World Series, Jim tried his hardest to take on the Hunter pressure and take it away from his guys," says Anacostia's Jakubowksi. "He absorbed that energy, that pressure, that angst that Hunter drove through the organization, and had the ability to redirect his troops so they could do their thing. That's what made him so effective at CN. Guys knew he had their backs."

When Harrison retired in 2009, Mongeau, who'd been EVP and chief financial officer, was named to be his successor. Foote, who wanted the job, decided it was time to leave CN.

After taking a little time off during which he learned "golf was harder than law school," Foote — through what he refers to as "happenstance" — began working with a good friend and Massachusetts Institute of Technology engineer on a venture. They developed products that enable railroads to switch locomotives to natural gas power and called their startup Bright Rail Energy. For the next few years, Foote served as its president and CEO.

"The technology was tested at [the Transportation Technology Center in] Pueblo and it worked," he says. "It's amazing."

When oil prices declined dramatically in the mid-2010s, the economics of the technology didn't make as much sense.

Again, Foote considered his next step. He had an opportunity to serve another Class I (Canadian Pacific), but turned it down. He considered hitting golf balls again, but decided against that, too.

He'd kept in "very close contact" with Harrison, who by early 2017 was CEO of CSX and just beginning to implement PSR there. The two lived near each other in Florida and were friends. Foote let Harrison know he'd be there, if ever he were needed.

In fall 2017, with CSX in turmoil on the management front, Harrison let Foote know he needed him.

"The minute we all heard that Hunter had brought him on, we knew — Jim didn't come there to be No. 2," Jakubowski says. "This is what he always wanted, to run a railroad, and he was going to give it 1,000 percent once he got it."

When CSX's board selected him to lead the railroad after Harrison's unexpected death in December 2017, Foote was ready.

"I told them, 'I'd been trying to do this all my life — this is what I do,'" he says.

CSX and The Service Promise

For the next year, Foote focused on carrying out Harrison's mission to transform CSX into North America's best performing railroad both operationally and financially while instituting several of his own modifications.

"I'd told the board, 'Hunter laid out a vision, there are a lot of really good people at CSX, and we're going to get this done,'" he says. "And the first thing I did was call Ed Harris."

A 50-year industry veteran, Harris signed on as an EVP of operations in January 2018.

"This is the great thing about Jim — I could tell him what I think we needed to be done, and he'd say, 'OK, do what you need to do,'" says Harris.

In part, doing what they needed to do meant striving to ensure PSR was executed properly, and that customers were better informed of any impacts from the operating plan. But the railroad had work to do to deliver on PSR's better-service promise. Foote emphasized strict adherence to individual car trip plans to improve service delivery and asset usage, and a heightened commitment to safety.

Next up was developing a 100-day plan.

"My customers were not happy with me about the service — as a result, and rightfully so, the regulators were not happy with me," Foote says. "So I needed to fix that."

Fixing it included launching an extensive outreach campaign ("the apology tour," as Hatch refers to it). Foote met with as many customers as he could to tell them what the plan was.

"There was a plan, but it was in Hunter's head," Foote says. "We needed to have a plan internally and a plan externally that we could articulate to everybody."

Meanwhile, Foote and the new CSX leadership team revamped the company's culture so employees recognized the need to be more service- and customer-oriented.

It was a crucial piece to ensure CSX reached the next level of PSR — or PHR (PSR, post-Hunter).

"This is why I knew Jim would be good at CSX — he told me exactly what Claude [Mongeau] would do at CN. They were on the same page with this," Hatch says. "Claude used language in very much the same way Jim did — to be kinder and gentler, post-Hunter."

The no-nonsense Foote uses other words to describe it, too: "Understand what customers want and what they need, and then do it."

As measured by trip plan compliance (TPC) — or the success in meeting end-to-end customer commitments based on estimated times of arrival — CSX has been doing a better job of doing it since Foote took the helm.

"That's what this company has been about since the first day I got here," he said during the railroad's Q3 earnings teleconference on Oct. 21. "You can't really sell anything until you've got a good product, and we've created a fantastic and excellent product. And now we're going to continue to sell it."

PHR and the post-pandemic landscape

Not that there haven't been challenges, or won't be going forward as the pandemic continues to mess with many a company's best-laid plans.

"The last six months have truly been surreal," Foote said during the Q3 teleconference. "On last quarter's call, we discussed the largest and most rapid sequential volume declines in CSX's history. Now, just three months later, [we had] record sequential increases."

It's required the railroad and its employees to try to be nimble, which is no mean feat for any railroad. The disciplined approach to running the railroad seems to help keep CSXers focused on getting better, whatever the economic weather.

"COVID served as an opportunity to look at our network," Foote says.

The reviews prompted fine-tuning that helped drive efficiencies, including a train design tweak when the automotive industry completely shut down this spring; a decision to put in more ties and ballast than they'd planned when traffic volumes declined; and a move to automate a process or two on the general and administrative expense side of the business.

The thinking, always: the more efficient the railroad, the better the service product.

"We were able to respond, we're able to pivot, we are nimble, we can add capacity, we could shrink capacity," Foote said during the Q3 teleconference. "We can rightsize our business and we can do that much more effectively and much more logically and thoughtfully."

Will freight volumes pick up in 2021? If so, how much? No one's sure, of course, and Foote wasn't offering too many forward-thinking thoughts on the subject as this issue went to press. But as of late last month, Q4 volumes were up year over year.

"We will analyze and execute and continue to work very closely with [EVP of Sales and Marketing] Mark Wallace's team with all new business opportunities that are out there," Foote said during the Q3 teleconference. "We've got a number of locomotives in storage that we can pull out."

CSX also will do some hiring, if need be.

"We have got some hiring classes out there with some T&E employees and I think it's important that we stay ahead of what we see coming forward," Foote said.

Preparing for measured growth — literally, given the data analytics at CSX's disposal — could make sense, given Foote's strategic perspective on things. Whatever the CSX planning team decides, count on it being thought out.

Studied. Carefully considered.

"Jim doesn't jump to conclusions, he doesn't work on whims. He's a studier," Harris says. "I've worked with Paul Tellier, who was very strong on the political side and knew everybody in Canada. I've also worked with Hunter, who was demanding, driven and tough as nails. Working for Jim is a little bit of both."

To Hatch, Foote is more of a combination of Harrison and Mongeau, and is, in many ways, "perfect for this job, given his marketing background, and coming in when he did after all the [PSR-related] customer pain."

Foote cites both Tellier and Harrison as influences. For mentors, he lists his father, who died in July at the age of 96, and former CNW President Robert Schmiege.

"My dad worked like a dog and expected everybody to work like he did — 'Don't count on someone to do if for you, do it yourself,'" Foote says. "And I always respected Bob Schmiege. He was a lawyer and I was a newbie, and he knew what it was like to try to get ahead in the railroad business."

Foote knows something about that, too.

"What Jim's been able to do, under all these circumstances, is just remarkable," Harris says.

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