So the CEO and the leadership team are at the bottom of the pyramid. At the bottom of the pyramid to bear the weight for the decisions they make, for the actions that they take, you bear that weight so you can actually free up your people to take care of their customers.
You were happily, I think happily retired.
I was happily retired sitting on the board of UPS.
Well, you know, I had the incredible pleasure of working for Home Depot for most of my career and after that I did retire, went out to my farm and started a family foundation with my husband and was on a couple of boards. So, I thought life was good.
But UPS when they were going through succession planning put together the skills and the attributes of the CEO of the future. And when they took those skills and attributes and matched them up against the existing leadership team, they said, "Well, this team is awesome, but they're not quite ready." And so the board decided to go to the outside. And when they made that decision, they came to me and they said, "Well, Carol, we think you have those skills and attributes." And I'm like, "Really?" So I'm like, "Okay, well, if you do, let me reflect on why I might throw my hat in the ring." Because they were doing a search. I'm like, well, first of all, I'm a values-based person and my values are aligned with UPS, so check. Second, you know, I know what happens when succession planning doesn't go well and I love to develop people and if I got into the company, I think I could develop the next CEO of the future. So, check. And then I like to create value and I thought if I got in there, I could turn the dials and figure out how to create some value. So, check. And then I went to my husband Alan. We've been married now over 42 years. And he's fully retired. I'm like, Ramon, what do you think? He said, would you please go back to work? You are driving me crazy. So check. And never did I imagine actually it was going to happen.
And did you have, how long had you been on the board at that point?
I went on the board in 2003, right after, you know, there was a change in requirements where boards needed to have financial experts on their boards. Yeah.
So, having been on the board all that time, did you have a pretty clear theory of the case? Did you go in knowing this is what I need to do or did you go in and kind of like Mike Tyson when the first punch hit you, your plans went out the window?
So, I had some big learnings actually. What I learned is that management was telling us what they wanted us to hear. They were showing us buildings that they wanted us to see. And when I got inside, I'm like, "Oh, there's some things that are very different." For example, I onboarded in March of 20. So, you know what was happening then? The world was shutting down and we were essential workers and we couldn't shut down. So, we didn't have the personal protective gear for our employees. All we could tell them to do was wash their hands. And I had pictures come in from buildings with sinks hanging off the wall like how am I supposed to wash my hand? Like what's up with this? I had only been in the bright shiny new buildings. I hadn't been in the old tired buildings and we have lots of buildings that are over 50 years old. So it was a big learning for me and launched what we still have today which is programmatic maintenance for all of our buildings because I'm like absolutely we got to have sinks working, break rooms updated, so on and so forth. So that was a big learning. The other big learning was customer profitability. I used to ask questions about customer profitability because I didn't really understand it. And what I was told is it's a smart global integrated network. It's too hard to calculate customer profitability. And I'm like really I think we can do that. So when I got inside I saw customer profitability. I said oh we've got some opportunities here on the customer.
They didn't have a clear sense of... they didn't have a clear sense.
Okay. I want to come back to that because that's been central to your... it has been strategy. But before I do that, I also want to talk about the people piece. And let me say before I ask you this question, you come from a CFO background.
But you are extraordinarily committed based on everything I've heard and been told to a people first without management.
And my understanding is you were kind of surprised by the people policies.
Well, very surprised by the people policies. Very surprised by the people policy. So gosh, if you were African-American, you couldn't have natural hair. If you were male, you could not have facial hair. And our tattoo policy was more restrictive than the US Army. And I'm a big believer in letting people bring their real, genuine, authentic self to work. Of course, we need to be professional. Of course, we must be professional. But you know, bring your real genuine authentic self to work makes a happier place. I also looked at just how happy UPSers were and that we do a culture survey every year and we measure happiness along a number of factors and it all rolls up into a likelihood to recommend and when I saw the likelihood to recommend number I was really quite shocked because it was only 51%. Which meant that 49% of the respondents would not recommend us as a place to work. Now these are great jobs, right? I'm like what is up with that? So we put together action plans. We changed our parents' policies and we put together action plans to actually really do a few things. Most of the decisions were coming up. They were coming up to the top and many of them being made by the CEO. I'm like, "No, no, no. We're going to push the decision-making closer to the customer." And we did a number of other things, Alan. And I'm pleased to tell you that our likelihood to recommend is now 61%. And in our industry, in transportation, that's best-in-class.
But I'll tell you one of the things that shocks me about that story. We've got a number of members of our board of directors council in here. You were on the board for all of those years and you didn't know that the likelihood to recommend score was 51%. Were they not telling you about... this was not talked about?
This was not talked about. Again, things that were talked about were about growing and investing and other things. But I'm a big believer of the people. I think everything rests on their happiness.
Yeah. I don't want to get too much of a detour here, but we are at our board of directors meeting in November. We are going to talk about what are the policies that boards, what does the board of the future need to look like? And one of the issues that a number of our members have raised is we spend all this time auditing the financials. You know, we have like Deloitte or PwC or somebody who comes in and we spend, you know, we have the audit committee. We spend tons of time on the financials. Yet the CEO tells us that the people are his most important asset and we don't have anywhere near the same kind of review of the people.
It's so important. And so I've changed all of that. We now even changed one of the committees of our board. It was the comp committee. It's now the human capital committee. And yes, they talk about comp, but we talk about people in every board setting and it's about walking the talk. So, you know, when I worked for Home Depot, I would put on an apron and work in the stores because I really wanted to understand what that experience was like. So, when I got into UPS, I put on my browns and I went and delivered packages. And then I'm like, you know, those 18 wheelers, those big feeder trucks that travel the highway, you know, they come into our hubs and I'm like, you know what? I'm gonna see what it's like to unload one of those trailers and I'm gonna load one because loading one, you got to build a really tight wall to make sure that the packages don't fall over. Well, I did. It is hard work. And guess what happened to me? Because I have a unique workforce. The majority of 460,000 people, the majority of the workforce are employed under some sort of a collective bargaining agreement. So, I'm building my wall and I'm feeling pretty happy about that, but I was touching a package and I am management and I'm touching a package. So, I had a grievance filed against me. I did for moving a package. Yeah. But we got that taken care of because I'm like, "No, really, really, if you let me into your space, I will find ways to make it better for you."
Yeah. Wow. I want to come back. There's so much to talk about, but you talked about customer profitability. So you, as I understand it, you go in, you see the customer profitability numbers and you then formulated a strategy which is I'm going to make this company better but not bigger. We don't hear that very often from CEOs. Big is an aspiration. How hard was it to come to that conclusion? Well, you were basically firing some of your customers.
Yeah. So we sold several businesses that were either not making money or were capital intensive with very low margins. And then we looked at the package business, the small package business and said, "Wow, that old myth that all packages are created equal and volume solves all problems is really not true." And our largest customer is a customer you all know. They're headquartered in Seattle and probably all are members of their prime program. But we...
But you're not going to use the name.
Well, I will happily move because it's all public. So, you know, Amazon made up at one point over 13% of our revenue and yet we were not making money on that revenue.
Nothing.
So, I'm like, all right, this is not nutrative for us. How can we continue to grow and put resources against this relationship? We got to reconfigure that relationship. So, 18 months ago, we launched a pretty big transformation of our company, which was to take their volume, glide it down by half. That's a hard thing to do. It was hard for them too because they had been relying on us for this service. But we reached agreement together on the packages that made sense for our network like returns and the packages made sense for their network. And we got it done in 18 months. We took that volume down by 50%. We had to close buildings. Our workforce is smaller. But guess what happened, Alan? In the second quarter of this year, we returned to revenue, profit, and operating margin growth.
Good. Good for you. But I'm curious how much push back you faced before you got there. From your board, from your investors.
So, it took about a year to get the board, you know, bring the board along with me.
Because this is a big deal. This is a very big scary deal. It took about a year to get the board. And from an investor perspective, massive amount of blowback. Just a massive amount of blowback. But you know what? I'm like, you got to play the long game here because if you're not playing the long game, you're playing quarter by quarter. And that's not going to work for us. It's just not going to work for us.
So now we're through that. As you said, the other thing you had to do was bring down the workforce. Tens of thousands.
We are. Yeah. Now, and we just talked about you being a people first leader. How does that work?
So it's about understanding that shrinking is important to reset the company so that you can return to growth and for everyone who's left is investing in them in a meaningful way and for the people that left treating them with the utmost grace and dignity and in some cases money. So, in our US business, in our unionized workforce, you really can't fire anyone unless the behavior is egregious. You can lay them off, but then they continue to earn their benefits. So, to actually get the cost out of the network, they must leave. We had too many drivers in our business because of this change. So, we're like, okay, how can we help them leave? How can we help them leave? So we offered them each $150,000 and you can appreciate it was way oversubscribed. So we were able to reach the...
They were happy. Now leadership was not so happy. But the people who were impacted, the people of the company were very happy. It allowed them to go on. Some went back to school, some retired, some started their own business. It was just what they needed to move on. The theme of our conversations these three days has been resilience. You heard some of that earlier theme.
Well, you took this job at the very beginning of the pandemic. You've been through, you had major union negotiations, almost a strike. They voted for a strike.
Well, it is which is oftentimes the case in a negotiation.
It is a tactic. But it was loud and it was late and we ended up seeing some volume divert because our customers were worried about a work stoppage. So gosh you know as I reflect back Alan resilience is so important. It's almost table stakes I think for all of us as companies because you know who would have thought you know when I joined the company now almost seven years ago that you would have the global pandemic, two wars, two wars and we operate in over 200 countries and territories around the world. So those wars have impacted us, you know, when Russia invaded Ukraine. I'm like, "Oh no, what are we going to do now?" So we ended up leaving Russia, Ukraine, and Belarus. And yet we paid our people a year after that happened because we wanted to... It wasn't their fault. So we're like, we had no business, but we continued to pay them because it wasn't their fault. So we had two wars, high inflation, the largest labor contract in the history of the United States.
