Name: XPO Logistics CEO & Founder steps down: “Company’s in great shape”
Uploaded: 2022-09-09
Duration: 9 min 28 s
Description: Brad Jacobs’ leadership advice for his successor: “Take care of people”

Brad Jacobs’ leadership advice for his successor: “Take care of people”

XPO Logistics CEO & Founder steps down: “Company’s in great shape”

Leadership

XPO Logistics CEO & Founder steps down

brad. It is so great to see you again and there's so much to talk about XP Oh logistics, big changes in the company structure and your big decision to step down as Ceo and we're gonna talk about that in just a minute. But first let's start with why you've been spinning off or selling off so many of your business units. I mean what's the thinking behind all this thinking behind that is very simple to create shareholder value. We've always had a focus on what's the best way to create immense shareholder value and because we've had that mindset, that focus, we were the seventh best performing stock of the Fortune 500 of the last decade. But it seems so out of character for you brad because you're best known for building X. P. O. Through a series of very aggressive acquisitions. And now it looks like you're unwinding those acquisitions. I mean what's your goal here? What do you want to accomplish? So we never set out to build an empire and to become bigger and bigger for the sake of being bigger. We set out to create shareholder value and to do service to the people in the institutions and the endowments and pension funds who trust us with their money and to give them very, very good returns. And that's the whole thought process behind everything we've done. Let's talk about what you've spun if you spun off the warehousing business and you're about to do the same for your freight brokerage unit, you're selling your european business, how would you describe the new XP oh what does it look like the new X. P. O. Once we complete the spin and once we complete the sale in europe will be a pure play less than truckload carrier. So most of the trucks you see on the highway are full truckloads, they have one customer, the same freight in the whole truck. Sometimes you see two smaller, we call them pups next to each other and those are less than truckload which means we have many different customers. We consolidate the freight for those many customers. So is this L. T. L. Part of the business, the most attractive and fastest growing part of the business for right now the truck brokerage business is actually faster growing because we've been growing at 27% kegger three times the rate of growth of the competition. So the industry has been growing at about 9% kegger in brokerage, we've been growing about 27% but L. T. L. Has strong pricing power and I expect that pricing power will say will stay strong even in difficult parts of the cycle. Tell us about the timing that you're doing all these transactions? I mean it looks like the economy is headed for a serious slowdown. Maybe a recession. Why does it make sense to make do these transformative changes at a time when the economy is slowing down, there's never a bad time to pay down debt now with the sale of europe, that will pay down debt to almost nothing. So it will be almost debt free, nice unlettered balance sheet. And in terms of the spin, whether the market is up, whether the market is down where the economy is good, whether whether the economy is bad, there still is strong logic to creating two separate pure play companies, one in brokerage and one in L. C. L. But still how the economy does is very important for your business for anybody's business right now. And you told investors not long ago that you're not concerned about what you call an economic hurricane hitting the U. S. Now you have more data that you can examine and look at. Do you still feel that way? We just reported our second quarter. A few weeks ago we had record revenue, we had record Ibadan, we had record GPS, we had record margins, we had record returns on invested capital. We have a lot of records. So I can't be complaining about the economic environment. Well it is true you reported those really solid numbers. Can you keep up that momentum looking ahead for the rest of this year, into 2023 do you think you're gonna be able to match that kind of performance? I can't predict 2023 because I don't know what the macro condition is going to be. So it could be a very big range for the whole industry for most industries frankly, but for the rest of the year we have a good line of sight and visibility to the numbers and we've raised guidance for the rest of the year but we have been seeing interest rates going up. I mean what do higher interest rates? I mean for a company like XP oh it can't be a good thing. No interest rates going up is bad for the transportation industry because it tends to slow down growth. So the less freight that's out there, the less business there is. So raising interest rates is not a positive thing. Having said that we have many idiosyncratic things that we're working on inside the company and the L. T. L. Business were exerting various healthy pricing power, double digit pricing. We have a lot of technology initiatives to improve what we call our pickup and delivery network or line haul network, our workforce planning network that's irrespective of the macro. So what are you hearing from your customers? Especially when it comes to you raising prices, what are they telling you about their businesses? Are they slowing down well so far this year it's in an inflationary environment and a significant inflation. And so everyone's been raising prices on everyone along the chain. And unfortunately that ends up with the consumer paying high prices that won't last forever because interest rates are going up. We don't have quantitative easing anymore. We have quantitative tightening so that'll slow down the economy inflation will slow down and pricing in our retail business will likely stay strong but not not double digits like it is right now. And in our truck brokerage business, we're still going to take market share in general, customers are a little more cautious and slowing down just a little bit, but I wouldn't call it a disaster. So what is the biggest issue facing your industry right now? Is it a shortage of truck drivers? Is it these high gas prices we've been seeing or something else? Fuel prices going up is good and bad for us. We we purchased a lot of fuel so it's bad when those expenses go up. But we have pricing power, it's good for us and our less than truckload business because we charge a fuel surcharge to make a profit on that labor? If you'd asked me that question a few months ago, I would have said, yeah, it's almost impossible and sometimes impossible to find labor certain categories in certain parts of the country Today. That's changed remarkably in the last few months and labor availability has gone up 44%. We monitor how many people apply for each job that we post. It's up 44% in the last several months. And why do you think that is? Interest rates have gone up. Economy has slowed down. Government subsidies have subsided so people coming back to work. So is there anything on your worry list? I mean what concerns you most right now? I wouldn't say worry, but I always pay a lot of attention to the people in the organization because the real secret of success to build a high growth companies to have an organization where the people are empowered, the people are engaged. People have high morale. People like the company, they like each other. They like the vision, they see how they fit into the whole vision and how they're actually contributing to that. And so I always pay attention that as any good Ceo should do well speaking of good ceo you surprised everybody announcing that you're going to step down as ceo. Why now especially with so much going on at your company companies in great shape. I've got great successors in place for both parts of the business and I want to do my next big thing. We've known each other for a long time. You know, every every decade or so I get into a new industry and figure out a way to create a large value for shareholders. So what's the next industry, have you decided on that yet? I haven't decided on that yet. And I just barely started the hunt and most of the times in the past, all the times in the past where I ended up was not where I started the search and that's that's the fun part of the process. You know, people look at how you build X. P. O. From a relatively small company into this mulch, billion dollar powerhouse and a huge fortune 500 company in just 11 years and they wonder how did he do it? What is the secret to your success? I built up great teams. We had a good strategy and we always kept focused on creating shareholder value. There's so many distractions and management team can have and sometimes they take their eye off the ball. We've kept our eye on the ball, but it's also leadership. And what would you say are the most important things you did a good leader if they're going to create tons and tons of sharing has to a bunch of things. It's not just one simple thing. You have to have a good strategy. You have a good plan, you gotta have good tactical execution of that plan. You have to have a team that's really fired up and really charge and all in and you've got to make them all coherent and cohesive so that they're killing proverbially the competition instead of killing each other. And that's what we've done. We've created a very good machine of people that are focused, focused focused on serving the customer, creating a great employee environment and creating value for shareholders. You've chosen Mario Harrick to be your successor as Ceo. Why did you choose him? What does he bring to XP? Oh he's fantastic. He was the third guy heart Back in 2011. He's been chief information officer that whole time and when you're running technology, you learn the business inside and out. He was chief customer officer, so he knows customers. He's been running the less than truckload business for the better part of last year and has created a great improvements in the business. So I had a successor in place that was just perfect for the job. This is Mario's first job as ceo of a really big company. What's the best leadership advice that you can give him as he takes charge. Take care of people, make sure that people are happy, make sure that people understand what we're trying to do, make sure they understand what they contribute to the vision and make sure they get along well.