The Former CEO of DHL Express on Leading the Company Through an Existential Crisis
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It was November 2007, and DHL Express was facing an existential crisis. Our performance across all major markets was deteriorating, and without a fundamental overhaul, our losses were posed to threaten the profitability of the entire Deutsche Post DHL Group. Three hundred and fifty company leaders had gathered in Cincinnati to confront this challenge head-on. As the meeting began, a beating heart appeared on an immense screen at the back of the stage. Strong and steady at first, the pounding heartbeats grew further apart, faltered, and then ceased altogether.

You could have heard a pin drop.

I knew I had the crowd’s attention. Now I needed to convey that we had only two choices: act or face extinction.

The Downward Spiral

Deutsche Post acquired DHL in 2002 as part of its bold attempt to transition from a state-owned domestic shipping service to a global logistics player. From our founding, we had been an international express business; our expertise lay in navigating cross-border shipping. Deutsche Post’s new strategy of becoming a global “one-stop shop” for logistics, however, required DHL to move into domestic markets.

To get a foothold in the U.S., we acquired Airborne Express, then the country’s third-largest player in domestic package delivery. The differences in company cultures and operating models proved considerable, and most of the Airborne Express management team left shortly after, taking much-needed expertise with them. Our leadership struggled to grasp the dynamics of the domestic business, and DHL’s performance suffered as a result.

The basic problem was that we had lost focus. Domestic shipping involves high volumes with thin margins — a challenging environment for any company, let alone one lacking expertise in it. Behind the domestic expansion was the belief that high volumes in domestic shipping would reduce our unit costs for international as well. Due in part to this belief, there was continued pressure to make domestic work, even as the losses began to grow. As the years progressed, the outlook did not improve. By the time of that fateful Cincinnati meeting, 70% of our shipping volume was domestic, which was like having a loss leader as the majority of our business.

I’ll never forget one of the first management meetings I attended after taking over DHL Express in 2007. The loss that month was $113 million, but the management team was proud — the planned loss had been $116 million! We couldn’t even tell where the problems were because the profit and loss account was just a sea of red.

It was clear that we had stretched ourselves too thin with the expansion in domestic markets. A sense of resignation had set in within the management team and the general workforce.

The Power of Simplicity

For executives, the question of “what to do” is often better thought of as “what not to do.” Every day half a dozen opportunities land on my desk that promise to be the next big thing, but successful managers know how to turn down opportunities that could distract from the sector where they can deliver the most value.

By 2007 I knew the gaping wound in DHL’s profit and loss account needed more than a Band-Aid. We had to retreat from unprofitable activities and shift into areas where we could better differentiate our company. International express delivery offers a higher revenue per shipment and requires a more customized skill and level of service. For us, domestic shipping turned out to be “what not to do.”

But dropping domestic shipping would be a major strategic shift. I had to convince other members of senior management that our new direction was worth the enormous price tag of market withdrawals and restructuring. That was my goal at the fateful meeting in Cincinnati, where the still heart projected on the screen conveyed that it was now or never. Paraphrasing management guru Jim Collins, I put a question to everyone in the room: Were they going to be on the bus or not? I offered my colleagues, the leaders of our division, the chance to respond. One by one, they stood and pledged their dedication to the turnaround. It was a moving experience, but more important, it was a visible sign to everyone present that we were in this together.

We would need support from other stakeholders as well. First, we had to attract new customers with our international express service, while not losing the accounts we had. To do so, we worked with other countries in our network to identify U.S. exporters that were trading with customers in those countries, as well as U.S. companies sourcing from those markets. Many of these customers were shipping 90% of their volumes domestically. Convincing them of the value of sending their international shipments through a different provider was a huge challenge.

Second, our employees were about to experience a huge cultural and operational adjustment. People who had spent their careers shipping between U.S. states would be learning an international service that involved paperwork and duties for customs clearance, compliance with sanctions, and more-complex routing. They would need training for their new roles, and we started planning for how to provide it.

In addition — and this was the most difficult decision by far — we had to part ways with 10,000 of our own people. With our complete withdrawal from U.S. domestic shipping in 2008, a number of roles became redundant. Many of the people who would not remain with the team had committed years to DHL Express or Airborne Express. We tried to be as transparent as possible about the decision-making process, basing it on role, expertise, and fit with our strategy. It was incredibly hard, but we knew the company’s survival — and with it, the jobs of employees both in the U.S. and around the world — had to come first.

Despite these challenges, I knew we were putting ourselves on the right course by concentrating on what we did best. Over my 20 years with DHL Express, I had seen some of the best times of the company’s international expansion. I had also seen the challenges that organizational complexity and incoherence can bring. Our turnaround strategy was based on one central tenet: focus. DHL Express would have the single focus of being the world’s premier international express shipping company.

Executing the Strategy

Every second of every day, approximately 17 direct interactions take place between a DHL employee and a customer. Our employees define the customer experience. Recognizing this, our focus strategy positioned our people as the key part of a four-link chain of success: Motivated employees (1) would provide great service (2), leading to loyal customers (3) and, ultimately, a profitable network (4).

But a new strategy can take many months or even years to trickle down from management to every last employee, and we had to reach 88,000 employees, spread across more than 220 countries and territories. We needed a simple, stirring message that could carry far.

We organized a series of intranet videos and countless town hall meetings worldwide to share the new strategy. PowerPoint slides and flowcharts aren’t great at inspiring people, so I chose a type of communication that goes straight to the heart: music. Each link in the chain of success was coupled with a song, and we didn’t just play the songs in the background at these meetings — I and the rest of the management team sang them. We belted out Dionne Warwick’s “What the World Needs Now Is Love” to emphasize the loyalty we wanted to inspire in our customers and the Ashford & Simpson classic “Ain’t No Mountain High Enough” for the levels of motivation we needed from our people. Through these famous songs our strategy became clear, catchy, and relatable to thousands of employees across countries and cultures. I still remember the shock — some might say horror — on our managers’ faces when, at a management conference in 2010, I introduced our first landmark profit target by treating them to a solo rendition of the Bruno Mars chorus from “Billionaire,” the Travie McCoy song.

Enthusiasm Is Contagious

Once everyone knew the strategy, we set about achieving the first pillar — motivated employees — through our new Certified International Specialist (CIS) program. Through in-house workshops, the foundational CIS course introduces every employee at DHL Express to the fundamentals of international shipping and company strategy — in just two days. Additional modules offer deeper dives into specialized topics like customs clearance. This incredibly successful program is about more than just training, and it is undoubtedly the achievement I am most proud of in my career to date. It was also a risk, as it required an investment of over €100 million in our people at a time when we were struggling to achieve profitability. But since its inception employee engagement and profitability have increased in perfect tandem.

We based CIS on the premise that for employees to feel engaged, they need to believe in the company, feel valued, and see that their managers are role models for passion and commitment.

The program helps employees believe in the company by taking them back to DHL’s entrepreneurial roots, teaching them about the leaders who pioneered our international expansion in the 1970s and 1980s. It helps them feel valued by equipping them with knowledge and tools to create more value, using interactive games and audiovisuals to make the information more engaging. And it gives them role models in the form of the 2,000 DHL employees who are trained as program facilitators.

Most engagement programs fail because of a lack of ownership at the top; early on we decided that if CIS was going to fail, that wouldn’t be the reason. The other directors and I used time at our board meetings to review content and design, and we came to walkthroughs of the activities. This gave us insights into what was and wasn’t working. For example, we learned that the translations of CIS’s content, which had been done by a third-party service, weren’t capturing the language and spirit of our company. So we had the translations — in more than 40 languages — redone in-house to be exactly what we wanted. Most important, the board members and I went through the program ourselves. Like new hires in customer service, we learned about our company’s history, enjoyed spirited discussions with colleagues about the direction it was headed, and got excited about its future.

To really push management’s involvement in the program, we started holding annual events to celebrate how we had built on our focus strategy year after year. Management teams from every country returned from these events with a clear strategy and the directive to spend more than 70% of their time with employees and customers, which would make them physically accessible and intimately connected to the front line, as we in the board strive to be.

It wasn’t all smooth sailing, and we learned some important lessons from the aspects that didn’t pan out. It proved difficult, for example, to take frontline staff like couriers out of operations to attend CIS. This meant that in some markets we needed to ask them to commit time on weekends or adjust their schedules in other ways, which in turn meant the program would really need to live up to its promises. We also learned that, depending on what cultures employees come from, there can be major differences in how open they are to sharing ideas in public or how they interact with others in a hierarchy. Having a diverse central team overseeing the program and ensuring that courses were led by a combination of local staff and international facilitators helped us to bridge this gap.

People Drive Profit

Investing in our people paid off big time. All the key metrics — market share, EBIT (both absolute and margin), customer satisfaction, and employee satisfaction — have consistently increased over the last 10 years. And our employee engagement efforts resulted in Great Place to Work recognizing DHL Express in 2017 and again in 2018.

Our efforts to motivate our employees brought us from a loss of over 3 billion dollars in 2008 to a profit of more than half a billion dollars in 2010, and it’s only gone up from there. In 2018 we reached an EBIT of more than 2 billion dollars, taking us to the highest levels of profitability in our history.

And our focus strategy has remained remarkably consistent over the years; we even use the same internal strategy brochure for our managers, adjusting the date and timelines but keeping all the core elements — such as the four links and the requirement for managers to spend 70% in the field — identical from year to year.

On January 1 I handed the leadership of DHL Express over to John Pearson, a good friend and instrumental figure in our turnaround story. He was a key member of the leadership team that navigated those challenging times, and he understands the factors that have underpinned the turnaround and the company’s success in recent years. What’s more, his singing voice is better than mine!

As I move into my new role as CEO of our eCommerce Solutions division, a slew of promising ideas continue to land on my desk each day, but my principles remain the same: Focus on what you do best. Invest aggressively in the right culture. Make sure your management is visible and accessible. These are lessons that apply to all startups and companies embarking on a rapid expansion, and they are lessons that will stay with me for the rest of my career.

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