Letters from an old railway official (second series)/Letter 6
LETTER VI.
PREVENTING INSTEAD OF PAYING CLAIMS.
Phoenix, Arizona, May 13, 1911.
My Dear Boy:—You ask me to give you my views on the handling and settling of freight claims.
I restrain my impatience and consequent desire to jump on you hard. Allow me, therefore, with expressions of distinguished consideration, to invite your esteemed attention to the fact that your valued request contains no mention of an intelligent desire for possible enlightenment on the most important feature of the problem, namely, the prevention of claims, the eradication of causes.
A railroad is a complex proposition. Seldom can we discuss one of its problems independently. So ramified are its activities that the penumbra of one shadow coincides with the outline of the next. Studied from the broadest view of railway administration, freight claims are found too often doing duty as a shadow which hides the real substance, poor operation. It was formerly the almost universal practice on American railways for freight claims to be handled and settled by the freight traffic department. It was felt that the man who secured the business, who dealt with the shippers, was the man to placate the claiming public. No, this did not always lead to rebating. It placed before the man hungry for gross revenue a temptation which he often resisted. Since the passage of the Hepburn act and the consequent inspection of claim disbursements by the Interstate Commerce Commission, the general trend of railroad practice has been to place the so-called freight claim department under the accounting department. Railroads are waking up to the fact that the new order of things means more than an accounting proposition; that in government regulation and supervision the whole matter of railway administration is involved. What we technically term “operation” is the largest of the component elements of administration.
The tendency of overspecialization has been to leave to the accounting or the legal department the matter of relations with the various branches of government, both state and federal. Since a part can never equal the whole the results have been disappointing. Railroads are learning by costly experience that traffic men and operating men must have an active part in these vital relations. Government in the long run reflects the spirit of its people. The American people as a nation are positive and constructive. The training of railway lawyers and railway accountants is often negative and resisting. The general counsel and the general auditor are inclined to tell us what we can not do. The traffic manager and the general manger, on the other hand, tell us what we can do. Out of it all should come a well-balanced administrative machine. We need the whole machine, not a specialized part, the positive as well as the negative elements, when we move alongside the reciprocating engine of government.
Again, putting a man in the accounting department does not make him any more honest than the rest of us. There is more logic in taking freight claims away from the traffic department than there is in placing them under the accounting department. The traffic man, the accounting man, or the legal man can settle or refuse a claim. None of these can eradicate its cause. Only the operating man can do this. Many roads cling to the belief that their wonderful interior combustion and hot air harmony give the operating department sufficient information to serve the practical purpose. My observation has been that this information is not sufficiently fresh; that it trails along too far behind the actual transaction. Some roads, like the Southern and the ’Frisco, have organized special bureaus in the operating department to minimize the causes of freight claims and to follow up discrepancies while the case is fresh; in other words, to investigate before the claim is filed. Sometimes this duplicates the work of the freight claim office and sometimes it does not.
So bad have been freight loss and damage conditions on most American railroads that almost any kind of attention has resulted in improvement. Nearly every road can cite figures in defense of its particular treatment of the situation. There are many good ways. In the absence of an absolute unit of comparison the best way must be largely a matter of opinion. To me the logical and practical principle has been discovered by two of the best managed railroads in the country, the Chicago & North-Western and the Chesapeake & Ohio. These roads, among others, place their freight claims under the operating department, thus reserving the hair of the dog for treatment of its bite. With such a system the general manager controls the disbursements to operating expenses for which he is responsible. Under other systems the general manager accepts charges which he does not directly control. Some roads have endeavored to correct this last defect by requiring claim vouchers to be signed by the general manager and the division superintendent. This beautiful example of circumlocution is expensive. There are only twenty-four hours in a day, and even claim papers can not be handled for nothing. Furthermore, the claimant himself refuses to see the beauty of delaying payment to carry out a theory. In some states he has secured legislation penalizing railways for delay in settling intrastate claims. Can you blame him? The claimant aforesaid may happen to be a country merchant waiting for the way freight to come in. It brings him six boxes of groceries. In his presence, and that of the agent, the way freight brakeman drops and spoils a box. On many roads, not only is the agent not allowed to pay for this spoiled box, but is expected to require the indignant consignee to pay the freight on all six boxes before removing the other five. The consignee is told to file a claim, which then makes its weary round through the circumlocution office where clerks are called investigators. Such companies say in effect to the agent: “Yes, you are a good fellow; you get us a lot of business; you handle thousands of dollars of our money; you represent us in many things; you must understand, however, that a freight claim is a specialty requiring expert advice; a bad precedent might involve us in the future; you know, too, we might be criticised as opening the way to grafting by some other agents if we let you pay out money without authority from the accounting department; yes, we like your work and expect to promote you in the sweet by-and-by,” etc., ad nauseam. Fortunately, these narrow views are giving place to more enlightened practices. On several railways in Texas most station agents are authorized to settle instanter certain classes of palpably just claims up to $20 or $25.
Among the practical advantages of claim control by the operating department are quicker recognition of lax methods causing claims, better discipline and morals of train and station forces, prompter settlement, and greater attention to seal records. The Chesapeake & Ohio makes surprise tests by breaking a seal and resealing the car with a different seal to see if the next man copies the last record, or actually takes his seal record from the car. This road also appeals to the human element. Claims settled are tentatively charged to the conductor or agent apparently at fault, and he is given an opportunity to explain. This is not real money, but a combination of Brown system, Christian Science coin, and 1907 clearing house certificates. The practical effect is very real, however. Each man learns to feel a responsibility which is reflected in a desire for a clean record. The general claim agent, who is under the general manager, sends monthly to each division superintendent a list showing the name of every freight conductor on the division, with number of claims, if any, charged to him on account of pilferage from train, rough handling, etc. The local divisions of the Order of Railway Conductors have been interested and feel some responsibility in keeping the work of their members upon a plane above the imputation of collusion with pilferage. Seek, my boy, to develop the higher natures of your men and you will be astonished at the response. Let them know that you know what they are doing, and it becomes easier for them to withstand temptation.
Freight claims are a fine example of an exaggerated specialty resulting in unnecessary centralization. The whole proposition can be decentralized for the good of the service. Because the division superintendent can not well settle interline claims of other divisions is no reason why his forces should not settle such local claims as concern his division.
A thorough study of freight claims will bring you early to a consideration of personal injury, stock and fire claims. The fad has been on many railroads to take these items of operating expenses away from their former location in the operating department and give them to the legal department. This exaggerated view of the laws of liability is partly responsible for the growth of the damage suit industry. It is another case of considering a part of the railway at the expense of the whole. We need legal advice and expert knowledge. The true function of the expert and the specialist is to see how much working knowledge he can impart to the layman for everyday use and reserve himself for the real complications which, if his tutelage has been sound, the layman will quickly recognize and bring back for expert assistance.
Not long ago I happened near a freight wreck. One of the cars in the ditch contained an emigrant outfit in charge of a man. This man was bruised, but not seriously injured. With the superintendent and the wreck train came a specialist, a claim adjuster for the legal department. He could settle only the personal injury. The damage to property was a freight claim and belonged to another department, the accounting, not formally represented at the impromptu function, and over which the superintendent as master of ceremonies had no jurisdiction. The various items of operating expenses involved on this occasion were in a decidedly diverged condition. What the spiritualist medium calls the control was in this case the office of a busy president some fifteen hundred miles away. Of course, the company spirit and common sense guided the superintendent, and he made the best of circumstances; perhaps risking criticism and censure for crossing sacred departmental lines. What do you think of a system that breaks down in emergencies? Is not an emergency a test of a system, a proof of its elasticity? Can we develop the highest efficiency of superintendents when we, the executive and general officers, place upon them the burden of departing from a system that fails to meet their practical problems? Is it not a species of unconscious administrative cowardice for boards of directors to impose implied and practical responsibility without conferring corresponding authority? Can such questions be ignored as exceptional, trifling, and captious? Do they not reach to the heart of railway organization and efficiency? Will the railways correct such errors themselves, or will they await once more the remedy by legislatures and commissions?
If a study of conditions does not convince you theoretically that one claim bureau should handle freight, stock, fire, and personal injury claims—in short all claims covering injuries to persons and damages to property—go down on the Chesapeake & Ohio and watch them do it practically. Instead of several specialists duplicating each other’s itineraries, you will find some all-round claim men doing a variety of practical stunts. When they do strike a really different and highly technical case, they utilize the services of their best specialist in that particular line, not infrequently the general claim agent himself. Overcharge claims are very properly handled under their traffic auditor, being a matter of correction and not of operating disbursement. Were it up to me, I would make the general claim agent an assistant general manager, so that in claim matters he would have rank and authority superior to the division superintendent’s. The division claim agent I would make an assistant superintendent, so that in claim matters he would have rank and authority superior to all employes on the division.
On this last division feature I once convinced my old friend, Cant B. Dunn, by a long, practical test.
Affectionately, your own,
D. A. D.