Browning-Ferris Industries, the nation's second-largest waste management company, wasn't always a favorite of environmental regulators. But then a leading environmental activist became chief executive of the company.

William D. Ruckelshaus, former chairman of the Environmental Protection Agency, will complete a seven-year stint as CEO of BFI today. Over that time, he has instilled what BFI executives describe as an "obsession with compliance." He also has helped make BFI a much more aggressive company, with new markets and sharply increased revenue.

Ruckelshaus took two major steps that helped move the company forward: He extricated it from the hazardous-waste business and turned it toward recycling at a time when it wasn't profitable. Both moves were upsetting for the company -- which had always seen itself in the trash-hauling and disposal business -- but they made very good business sense.

Ruckelshaus, who will remain as chairman, turns over the chief executive's job to Bruce E. Ranck, who has served as BFI's president and chief operating officer since November 1991. Ranck, who started working in the industry during summers between college semesters, has spent 25 years at BFI.

BFI officials and industry analysts say they don't expect major changes in the way the company is run. "This transition is evolutionary," said Mark H. Sulam, an industry analyst with Donaldson, Lufkin & Jenrette Securities Corp. "Bruce Ranck has been the heir apparent."

When Ruckelshaus took over, the change was closer to revolutionary. The solid-waste industry always had been an industry of insiders. But in 1988, BFI needed something different. The industry was changing, and the old methods weren't working anymore.

Ranck explains the factors that led BFI to bring in the consummate outsider: "We were a company that, over our first 20 years of existence in the collection and disposal business, could add revenue by buying more businesses, selling more customers or raising our prices," he said.

"When we hit the wall, because of a combination of recessionary trends and higher disposal fees, we got to the point where the formula that we practiced for 20 years really wasn't working," he said. "It took somebody from outside to show us it wasn't working -- to show us there were other ways to skin the cat."

"It was a wise decision to appoint Ruckelshaus," said Allen Hershkowitz, a senior scientist with the Natural Resources Defense Council. "The company now has someone there who is politically accountable and accountable to the environment. It doesn't mean that they haven't made some questionable decisions since he's been there, but on the whole the company is viewed much more favorably by the environmental movement since he's been there."

What Ruckelshaus brought to the company and will leave behind is "a recognition that a company constantly needs to be looking around the curve up ahead," said Barry A. Mannis, an industry analyst with Goldman Sachs & Co.

Mannis remembers the moment it became evident that Ruckelshaus was determined to change the company: "He spoke to the analysts in 1990. The stock had started to come down from its peak and there was a lot of dissatisfaction. He stood right up and said recycling is the direction that the solid-waste business is going, and we will build the best recycling facilities there are. At the time, he made people sneer."

In 1989, the first year Ruckelshaus was in charge of BFI, recycling revenue was about $10 million out of $2.6 billion in revenue. In 1994, recycling produced $370 million of the company's total revenue of $4.3 billion. For fiscal 1995, which ends today, recycling is expected to account for more than $650 million in revenue.

Profit growth has been less spectacular. The company reported a $44.7 million loss in 1990 because of a write-off of hazardous-waste operations that were discontinued. Net income has grown from $65.2 million in 1991 to $278.7 million in fiscal 1994 -- a solid gain, but just slightly above the $263 million net income the company posted in fiscal 1989.

But BFI has created a solid base for future growth. With a capital investment in recycling of approximately $300 million, the company is now the nation's leader in collecting and processing recyclables and has more recycling centers than landfills.

"Today we have a saying around here, that . . . we will always make money in the recycling business, and sometimes we will make a lot of money," said Norman A. Myers, vice chairman and chief marketing officer at BFI. Myers said that Ruckelshaus's emphasis on recycling generated at least as much skepticism within the company as it did with the analysts. "We would never have tried it if Bill hadn't been such a believer."

"When I first arrived I was looking at our monthly grow summaries that show how many customers we gained and how many we lost," said Ruckelshaus. "I saw that we were gaining several thousand because of a large sales force, but we were also losing several thousand every month. We were marking time but not really making a lot of progress."

To turn things around, Ruckelshaus pushed BFI executives to listen to what customers were telling the company and try to meet their needs. "A lot of the revolution that was going on about how to understand the customer and respond had not really penetrated the waste industry," he said. "That is a theme that I have constantly pushed since coming here."

Ruckelshaus encouraged the company to embrace and open up to regulators, the investment community and to the media, said analyst Mannis. The striking thing, recalled Mannis, was that the company started opening up during a period when it wasn't doing well.

The new openness was another hard sell within the company. But it has paid off, in terms of better relationships with regulators and community groups, said Hugh J. Dillingham III, senior vice president for processing and disposal.

"I think our success in {obtaining permits for} landfills is testimony," Dillingham said. He noted that the company's success rate in acquiring permits for landfills in new sites is about 70 to 75 percent now, compared with about 20 percent before.

Ruckelshaus also brought strategic planning to the company, said Ranck, who was part of the leadership team that Ruckelshaus built. "I remember how proud I was sitting in the budget meetings in the late 1980s," said Ranck, who was executive vice president at the time. Ranck presided over a detailed budget presentation that took hours, anticipating "how impressed I thought Bill would be at the command of detail that resided here."

"At the end we rolled all this detail up and presented our budget to Bill, and he said, How about growth in the business as we roll forward? How about new regulations and acquisitions?' "

It was an eye-opener, said Ranck. "Budgeting what is there is simple. What is thought-provoking is budgeting and imagining what you can be. He was daring us to imagine where we wanted to be and what actions were needed."

Looking forward, the company anticipates continued segmentation of the waste disposal business, as new markets develop for different types of recycled waste. "I think the economy will drive it," said Ruckelshaus. "You can, with environmental safety, dispose of waste in landfills or incinerators, although there are some doubts in the public mind that that is true. Where it makes economic sense to recycle, that's what we'll do with the waste."

The company also will continue to expand globally. In terms of its balance sheet, BFI has set a goal of 11 percent to 15 percent revenue growth each year -- and even higher growth in profit.

In recent years, Browning-Ferris has made a concentrated effort to crack the market for commercial waste hauling in New York City -- a market that Robert M. Morgenthau, district attorney for Manhattan, has charged is controlled by a mob-dominated cartel. BFI cooperated with a five-year investigation that led to the arrest and indictment earlier this year of industry executives.

Ruckelshaus and Morgenthau both worked for the Justice Department during the Nixon administration, and Ruckelshaus has said that he will continue to be involved with the New York City cleanup as chairman of BFI.

New York City is the largest solid-waste market in North America -- a fact that has kept BFI interested in the face of such unusual competitive gestures as the severed head of a dog that was delivered to the company's regional manager with a note tucked in its mouth: "Welcome to New York."

BFI has grown by acquisition both in the United States and abroad. This year it completed a $615 million takeover of Attwoods PLC of Britain. Besides being a major player in England, Attwoods has substantial operations in Florida and the mid-Atlantic, where it operated as Eastern Waste Management. Most of BFI's acquisitions abroad have been in countries where the solid-waste business is heavily regulated and highly sophisticated, said company officials.

"We are anticipating the day that growth by acquisition will slow," said Ranck. "Whether that is five years out or 10 or 20, we anticipate that it will occur, and we're ramping up our internal growth mechanisms so that if it slows we can still meet our objectives of 11 to 15 percent annual growth in revenue."

One opportunity for internal growth is in BFI's North American collection business, said analyst Sulam. "You want to maximize the capital and assets you've got in place," he said. "That's no different than what any other industry is going through."

"The beauty or opportunity in the solid-waste business is that it's a $33 billion business, where all the publicly traded companies have about a third of market share," said Sulam. "There's an opportunity to take market share." BOOSTING RECYCLING -- AND REVENUE William Ruckelshaus brought a forward-looking perspective to BFI when he arrived in 1989, realizing that the solid-waste industry was headed for recycling -- and taking his company there. Since 1989, BFI revenues (including projections for 95) have increased 121 percent, while revenue from recycling is 65 times higher. CAPTION: (This chart was not available) CAPTION: Ruckelshaus in 1992 in Milan, Italy, on company business. CAPTION: Ruckelshaus completes a seven-year stint as CEO of BFI today. He will remain as chairman. Bruce Ranck, right, will become chief executive.