Over the last two decades or so, the railways industry roadmap has witnessed considerable change. Successful railway managers have been changing what Peter Drucker calls ‘the business theory’. Driving this change is not technology, because it remains essentially the same – diesels still pull cars on four-wheel trucks, using air brakes and knuckle couplers. What has changed is attitude. Those companies that could change did, and evolved into companies that we see on the map today. Those who did not perished. One of the success stories in managing this transition is the American railtrack company, CSX.

The big question is how does a railway company like CSX change its business theory? CSX's success can be attributed partly with coming up with a new paradigm and partly with being able to firmly implant it within the company. In the management of this transition, internal marketing was a crucial step in the process of change. Otherwise, railway staff who felt threatened by a change in the status quo would have resisted change tooth and nail. The only way to market change internally was to make it non-threatening and to show employees how it meets their needs for increased productivity, more job satisfaction, or even perhaps more tangible rewards.

Internal marketing to identify internal needs

Internal marketing can often help identify employee needs that otherwise one would never consider. For example, in the mid 1980s, Seaboard planned to improve accuracy and timeliness in a number of clerical areas. To assess the viability of this, they decided to do some internal market research. To management's surprise, the results of the internal marketing exercise uncovered that clerical groups had an entirely different agenda. They were raising a number of workplace-related hygiene concerns that were hampering their ability to do their jobs. Factors such as:

   noise levels in the work area;

   secondary smoke;

   strict group break times;

   limited washroom facilities;

   inflexible working hours.

Once management addressed these issues, employees felt empowered to make the real changes in the work process. Soon thereafter, employees overhauled their billing process to reduce errors and increase timeliness. Morale went up, mistakes went down, and so did the cost of failure.

Eventually, Seaboard merged with Chessie to form CSX. Many of the people who ran Seaboard (or Chessie) remained in position because they were good at managing the transition, in which internal marketing played a notable role.

Employees are at the centre of paradigm shifts

In the new world of the 1990s, competitive intensity cut out the luxury of making mistakes and redoing work. Change was rapid and there was a need to constantly adjust and adapt because the validity of the current business theory was questioned daily. Assumptions regarding the outside (customers, connections, cabotage supply) and assumptions about the inside (skills, train size and scheduling, track maintenance) are what drive the business theory. But these internal assumptions must be everchanging, at the very least in line with changing external assumptions. The danger is that they are cast in stone and ossify the company in the process. That is what had happened to once great companies like IBM and GM, resulting in their severe experience of difficulties.

Keeping the company vibrant and flexible means constantly rethinking internal and external assumptions. Managers can no longer say ‘we know’, they must move to a position in which they say ‘let's ask’. And there are no better people to begin asking than your own employees. No matter what some commentators may say, in most cases employees are the most dedicated and the most knowledgeable about what they do and about what their companies do – or should be doing – because they face the coalface every day of the week.

Changing hearts and minds, not just directions

At the beginning of the 1990s, railroads traditionally operated a batch process, yet customers wanted customization. The pull was in two opposing directions: the ultimate batch is a unit train while the ultimate customization is a private fleet of trucks. The railroad trade-off becomes: how far can I customize my batch without hurting economies of scale? The shipper's trade-off is: how far can I batch my custom movements without hurting flexibility? Making these trade-offs work depends on the ability of workers in each organization to make changes in their assumptions about the work.

Some time earlier, the Milwaukee and New York Central tried short, fast, frequent freight trains over short distances. They were not very successful: the reason was that they were running a custom process with a batch mentality. The people who had dreamed up the idea had failed to consider their internal market and failed to do any internal marketing. Now, on the other hand, it is common to see short custom trains, mostly on short lines. The technology is not different but the attitude is.

Sharing thinking and involving means getting things done

To be effective at managing change through internal marketing, you must begin by marketing a willingness to embrace change – at all levels of management. Change is nowhere nearly so threatening when it's understood, and when it's a something you've been involved in thinking up and developing. The fact is that employees, and that applies to all sectors, intuitively embrace changes in the way they work when they can see tangible benefits for their customers (shippers in the case of railway freight), for themselves (rewards – extrinsic as well as intrinsic) and for the company (in the efficiency of their operations). The truth is, insofar as management let them, employees will and do initiate change to achieve organizational ends.

Source: Blanchard, R. H. (1993). Change – or die. Railway Age, 194 (3), March, 64–5.