Canadian Pacific Railway: Large scale organization design (Now CPKC)

Ronald Capelle:  Peter Edwards is the Vice President of Human Resources at Canadian Pacific. Peter joined Canadian Pacific partway through the project, entering at the point where the assessment report had been written, and he was responsible for its implementation. Initially, Bob McIntyre reported directly to him, followed by Mary Ellen. Peter is a key figure in the entire implementation process. In Bob's absence, I will introduce the third person. Bob was the only one of the three present during the early part of the project. Normally, Bob would have presented this part, but he and his wife are on a month-long vacation trip to Asia. For reasons I can't understand, Bob wasn't willing to change his plans to be here. So, we will proceed as best we can without Bob. I will provide some initial commentary that Bob would normally have done.

There are two parts I'd like to introduce. One is an overview of the approach to organizational design. The methodology used in our project, which will be discussed in more detail after lunch with Capital Power, was identical. The projects are very different, but both involved an assessment and an implementation. In the assessment phase, we gathered documents, and employee information, interviewed all managers, conducted a comprehensive analysis, wrote a report with detailed recommendations, and met with executives to assist in decision-making. Typically, 80% to 90% of our recommendations are accepted due to our robust methodology. Then, we move into implementation. An organization can implement on its own, but we believe the best value comes from a joint internal-external team. The external team brings in methods and materials, works with the internal team who knows the organization better, adapts materials, develops skills, trains, and qualifies the internal team, and then works together on implementation. This cascading implementation involves people working in their natural teams, receiving education, making changes, and aligning positions.

The second part of my introduction is about this case study. This organization design change involved 16,000 people, both in assessment and implementation, over twelve months. It was a significant change process. Uniquely, they chose to implement operations first, due to business reasons, before winter. We usually implement across the entire organization, but in this case, operations were prioritized. I will ask Mary Ellen to discuss the implementation soon, along with Peter's overview. Canadian Pacific is a Class One railway, one of five in North America, operating in Canada and the US. The decision for organizational change was influenced by a presentation seen by the then-Vice President of Human Resources, Andrew Shields. He invited me to speak to the executive group, who decided to start with two pilot projects in locomotive reliability centers and information technology. Following their success, they proceeded with a full organization review. Understanding the starting point is crucial in designing an organization. For Canadian Pacific, it was the physical infrastructure. Other organizations may have different starting points, such as a bank branch or, in Fisheries and Oceans Canada, the migratory pattern of salmon. The strategic decision was to operate as one integrated business, leading to the recommendation of a Stratum Seven organization, with opportunities to improve vertical alignment, functional organization, managerial practices, titling, job evaluation, and spans of control. Significant cost savings were also identified. After initiating the project, Andrew Shields retired, and Peter, coming from Canadian National Railway, took over. Peter's perspective was valuable, especially considering the change in operations management, with a new person from Canadian National Railway. I invite Peter to share his impressions and discuss the implementation.

Peter Edwards: Ron often asks me these questions, but I answer as I see fit. Dr. Frankenstein's relationship with his creation mirrors how organizations develop over time. We create and grow attached to our organizations, making it hard to enact necessary changes. That's where external help, like consultants, becomes valuable. They offer a second opinion and new ideas, helping to break established structures and bring fresh perspectives. When I joined Canadian Pacific, coming from the more successful Canadian National Railway, my insights were initially met with skepticism. But with Ron's similar recommendations, they gained acceptance. In my role, I focused on structure, the right people, clarity of roles, accountability, and delivering consequences. Defining job roles and evaluations was particularly challenging, which is why I relied on Mary Ellen's expertise. The implementation involved redefining accountabilities and decision-making processes. We also focused on the importance of having the right people in the right roles, a significant change from past practices. The Human Resources Business Partner team played a crucial role in sustainability, gaining knowledge through formal education and practical experience. The implementation also emphasized cross-functional work and understanding the distinction between policy-setting and execution roles. The operations group has continued to apply these learnings, demonstrating the lasting impact of the implementation. The project also involved reassessing our internal project staffing, particularly for a large-scale SAP implementation, ensuring the right people were assigned to these cross-functional projects. Finally, we revised our job evaluation process to align with the new organizational structure, moving away from traditional point-based systems to a more relevant approach. Despite challenges, these changes have significantly impacted our organization.

Ron Capelle: Thank you, Peter. Your insights and approach are enlightening. I'd like to shift focus to the specifics of the implementation and invite Mary Ellen to elaborate.

Mary Ellen Selby: As the only one who saw the implementation through from start to finish, I can attest to its focus on clear accountabilities. This shift away from consensus decision-making was a major cultural change for CP. Our talent pool process was a breakthrough, allowing us to objectively match candidates to jobs, moving beyond tenure-based promotions. The Human Resources Business Partner team, instrumental in this implementation, gained valuable education and experience. We also helped our operations leadership understand cross-functional work, aiding in their recent restructuring efforts. Our approach to job evaluation has evolved, adopting a more relevant methodology. This comprehensive implementation has left a lasting legacy and continues to influence our organization.