Brad Jacobs - Chairman CEO XPO

Do what we intended to do and plus some more on top of that. So it's kind of a blur. It's been 11 years of very fast action, not a lot of time to stop and reflect, to be contemplative about it. But essentially, we started in 2011 and the vision was to become, through a combination of M&A and organic growth, a five billion dollar company. We thought that would be a kind of an aspirational goal that would give us a certain critical mass, a certain status in the industry. And fast forward to a couple years ago, we were 18 billion dollars in revenue. Now, you said currently because I'm not going to be the CEO in a couple months. Mario Harroch's going to be the CEO. I'm going to be executive chairman and I'm going to do another startup. So I'm going to start all over again.

Well, it's an easy choice in the case of Mario. Mario was the third person I hired back in 2011 and we both shared a vision right in the first interview of automating brokerage and replacing human community involvement with technology. And in a most recent quarter, 80 percent of our loads in brokerage were either sourced or covered digitally with no human involvement, it was all machine and machine. That would have been zero percent 11 years ago. So it's been a huge, huge trajectory on that. So that Mario was an easy choice because he's been involved with the business from day one, so he knows the business inside and out. He was also Chief Customer Officer, so he knows customers. And he was also running our LTL business, or less than truckload business, which will be the pure play that XPO becomes after the spin. He's been running that for the better part of the last year and done amazing results. It was an easy choice. Now I have two other leaders that have succeeded me. One is Malcolm Wilson who's running our, well not our anymore, running the company we spun off, GXO. It's the largest pure play contract logistics company, think warehouses and automated warehouses. And he was running that business for us before we spun it off. I acquired, quote unquote, Malcolm when we bought Norbert Dentressangle in Europe and he was a senior executive there and then he rose to the ranks here and did a fantastic job. And then the third successor will be Drew Wilkerson who's going to run RXO, which is the truck brokerage business that we're spinning off. And Drew I hired from C.H. Robinson, one of our great competitors, and he has a sales background and he's been running that brokerage business for us for the better part of the last decade and he knows the business well. Now, very interesting, Karen, very, very interesting. All three of these guys have very different demographics. One's from the UK, one from Lebanon, Lebanon in the country, and the other's from South Carolina. So very different. They're different ages, they have different accents, they have different backgrounds in many, many different ways. But they have certain commonalities, certain thread throughout them that I get attracted to in a leader. They're super honest, you don't have to worry about interpreting what they're telling you, they're just very straightforward, lots of high integrity. They're also extremely hard working. I don't have to make them work hard, I have to actually make them work less hard. All three of them are very, very married to the business, so to speak. And they're also very intelligent and I like to hire people who are more intelligent than me. I like to be surrounded by people who are smarter than me and they are.

Well, I measure success on many different levels. One is shareholder value creation because we're a for-profit business. So if we're staying true to our knitting, we're creating significant shareholder value. So and the teams I've led have done that. We've outpaced the S&P 500 by 5.6 times at United Way, by 2.2 times at United Rentals. I haven't calculated it for XPO, but I know I invested and my friends and family invested at, and investors who believed in me invested at seven dollars a share. And today, including the shared dividend for GXO, we're trading at about 15 times that, about 108 a share. So we've created a huge, huge amount of shareholder value. And I think that's the most important test for a CEO is, so how much value did you create for the people who actually own the company, right? And so that's one thing, but it's not the only thing. The other thing that we did is we created companies that made sense, made sense for customers. Customers have a choice. Customers, we don't have a monopoly in any, we never had a monopoly in any of those businesses. So customers could choose to do business with us or choose to do business with someone else. They could choose to give us a big share of their spend, a big share of their wallet, or small spend. So we positioned ourselves in ways that made ourselves valuable to the customers by listening to the customers, by analyzing the market, by figuring out what's the need that we're going to fulfill, what do we bring to the table, like what's our purpose, like why do we exist, what's going to get customers to wire money from their bank accounts to our company's bank accounts. And so we positioned the companies to fill needs that were gaps in the marketplace. We got together fantastic people. That's the critical ingredient. All this, of course, you need a great industry and a great strategy, but you need fantastic people. You need people like Malcolm and Mario and Drew who can get along with each other and not going to kill the competition, to help each other, proverbially speaking. And that's what it's all about in the end is putting together strong talent and talent that's collaborative, that's collegial, that gets along with each other and shares the vision of what our goals are. And then aligning compensation to that. You have to, you have to, you have to always think about what's in it for the person. And what's in it for the person in part is compensation. So we want to make people have maybe lower than average base salaries but higher than average incentive compensation with the incentives aligned with what's important for creating shareholder value.

Okay, well, that question is going to take the rest of the interview for me to answer. That's an important question, but I'm going to try to be succinct. Okay, great. So most roll-up strategies, strategies that are heavily dependent on acquisitions, on M&A, actually don't create a lot of value because you need a lot of different ingredients and you need all of those ingredients in order to create successful value from M&A. So first of all, you have to have the right kind of companies to buy. That's to be a compelling strategic reason of why are we buying this company, what is it bringing to us that we can't do ourselves, and how does it fit with the existing business, and will the cultures be compatible, how are we going to play it, how we're going to integrate the technology, how are we going to figure out quickly where's the redundant headcount that needs to be exited, exit gracefully and generously but exited because it's superfluous, and who are the keepers, who are the people that we really need to keep, those people in order to be very, very successful, and then to give them appropriate compensation in order to motivate them to achieve the company's goals. So the first step is figuring out what are the right acquisitions to do and what other acquisitions not to do. And our strategy has always been to look at lots and lots of deal flow simultaneously so we can just cherry pick the very best one as opposed to feeling we have a gun to our head because we're only looking at one or two deals and we want to do a deal and so it may not be optimal but we do it anyways. That we don't, we don't want to get into that place. You see sometimes people getting into that category which is not good. And then, then you've bought the acquisition, that's the easy part, right? The more challenging part is okay now you're going to integrate it. You've got to make that company part of you. It can't be two separate companies. And we, we rip off the band-aid, we integrate very, very, very fast from an HR perspective, from a tech perspective, from a sales perspective, from a customer facing perspective, from a culture. Now our culture changes every time we do an acquisition. We don't impose our culture on the company we're buying. We're buying a company because they're great and we like to keep and maintain those great qualities and cross-fertilize them to us, to the acquiring part of the organization. And we don't go into a company and arrogantly say, yeah, we know everything and here's how it's going to be. It's the last thing we'd want to do. And a lot of companies, a lot of acquirers make that mistake. They come in with a heavy hand, with a know-it-all attitude and you know, the people naturally feel disrespected and a lot of them leave. And the ones who don't, you know, they don't really get all jazzed up about working real hard and really, really well. So what we do more is ask questions and listen, and listen very respectfully, listen very carefully of what should we not change in this company, what made this company great that would be crazy to change, what's been your secret sauce. And on the other hand, what are some things about the company that you see that have not been good, that has been holding the company back, that should be done differently. And I found that, that people ask that, so many companies that we've bought over the years, management never asked them that. Oh man, never, never asked them, so what do you think of the company, how are we doing, what can we do differently, what can we do better. They've just never solicited such valuable input from the people who are actually on the front line and at all levels of management. So people feel empowered, which they are, they feel respected, they feel cared for, and which is great. It motivates them, gets them engaged, and we benefit from, you know, we don't have to pay a management consultant millions of dollars to help us figure out, okay, what do we do next. The company itself that we're acquiring helps us build the roadmap.

So, so even apart from acquisitions, Karen, we're always soliciting feedback from the organization. So we send out surveys, electronic surveys to everyone who has an email. And we now, we've come up with a way we can send it to the front line workers who are not on an XPO email through an app. But so far we've done email surveys to tens of thousands of people over the years and we do them very, very regularly. And we just ask four simple questions: what's your employee status, what's your level of job satisfaction on a scale of one to ten. And then the follow-up question is, well, if it's not a 10, what would make it a 10? What would make your job satisfaction at 10? And the information we get back on that is very, very helpful to see. And then we ask, what's your single best idea to improve the company. And again, tons of great ideas and you see patterns and you do word cloud analysis and you can see how sentiment has changed and you can see how different ideas are clustering around different parts of the company. It's very, very actionable intelligence. And sometimes we just ask three questions, those three questions, and sometimes we ask a fourth question which is, what's the silliest thing the company's doing? And that's a very important question to ask too because inevitably we find out that we're doing a lot of dumb stuff. We're finding places, waste, inefficiencies, things that aren't just perfectly laid out, process is wrong, and we can act on that. We can't act on it if we don't know about it. So by asking, we can find out about it. And people, they're anonymous surveys, so people aren't shy about speaking up. It's great.