Case Study: Yellow Corporation

By Perry Glasser  |  Posted 11-15-2003 Print Email
At Yellow Corp., CEO Bill Zollars has made alignment between business and IT executives a condition of employment, enlisting CIO Lynn Caddell in his team-driven push to reinvent the $2.6 billion transportation services company around IT-driven innovation

Every Monday around noon, in a top-floor conference room in Yellow Corp.'s suburban Kansas City office tower, CEO Bill Zollars and his 12 top lieutenants, including CIO Lynn Caddell, sit around a large conference table and take a hard look at their world from 20,000 feet, rain or shine.

The four-hour meetings, called One Yellow, are as mandatory as they are time-consuming. People have tried to beg off, but Zollars won't allow it. Illness is the only acceptable excuse, but it's not used very often: attendance counts on performance reviews. Says Chief Marketing Officer Greg Reid: "We're expected to arrange our time. Bill forces senior management to sit down at the same table."

And once there, two more rules apply. First, you can't simply talk about your area of expertise. That means Caddell, usually seated to Zollars' immediate right, must discuss sales and marketing as much or as often as Reid does, if appropriate to a potential strategy problem or solution. Second? Nobody can talk about yesterday or today. In Zollars' strategy meetings, it's all about tomorrow—the next stop on the company's business road map. Is Yellow still on track to meet strategic goals? Why not? Where do people think Yellow needs to be next year?

For a Q&A with Bill Zollars about his strategies that foster alignment, click here.

Sure, not everyone wants to talk strategy on a Monday, the one day of the week when managers are most likely to hear of the newest problems begging urgent attention. But that's the point, Zollars says. "It's so easy to become overwhelmed with the urgent, rather than the important," he says. Adds CIO Caddell: "At Yellow, we've got a CEO who holds alignment meetings every Monday. How unusual is that?"

To Zollars, it's all about money and change. Poor alignment means poor communication, missed deadlines and wasted effort, and all of those add up on the balance sheet in a business that can't afford inefficiency. Silos remain standing at a price. And when Zollars, a 24-year veteran of Eastman Kodak Co., arrived at Yellow in the fall of 1996, "the silos were nearly impenetrable," he says, and the cost of those silos was staggering. "The stock price was in the ditch," Zollars recalls, and customers were not the priority. Internal surveys showed that 40 percent of the time, both shippers and recipients of a shipment perceived Yellow deliveries to be late, incomplete or damaged—or all three. While that percentage was well within range of the dismal industry average at the time, Zollars found it unacceptable. "We were the tallest midget," he says.

Not anymore. In the six years Zollars has been in the driver's seat at the $2.6 billion, Overland Park, Kansas-based transportation services company, it has continued to make money, despite a 30 percent slump in the overall market for freight services for "less-than-full-load" truckloads (LTLs).

But even more remarkable in a rough-and-tumble, unionized and newly deregulated marketplace that forced Yellow's largest rival, Consolidated Freightways Corp., into bankruptcy last fall, Zollars has not only managed to keep Yellow on the road, he's also begun to diversify the business into Net-enabled express delivery and logistics services, boost customer satisfaction, cut waste and improve delivery speeds, driving what used to be an also-ran company into the No. 1 berth in its industry.

But Yellow is hardly out of the woods yet. Since 1997, amid stiff competition from lower-cost, non-union, regional rivals, including FedEx Corp. and Pacer International, Yellow's market share has combined to fall precipitously: According to analyst Dan Moore of Little Rock, Ark.-based Stephens Inc., an investment advisory firm, Yellow has lost 12 percent of its business since 1997 when it should have grown by at least 17 percent in market share to keep pace with the economy. While Moore lauds Zollars' leadership, he adds: "The clock is ticking for Yellow and the rest of the unionized LTL companies, which are in a state of secular decline." Only diversification away from the unionized LTL business, which accounts now for roughly 90 percent of Yellow's revenues, Moore says, will help Yellow keep on trucking over the long haul.

Zollars, therefore, sees technology as the company's key to survival: During the past six years, Yellow has invested hundreds of millions of dollars on computers and sophisticated logistics and customer data systems, not only to stem the loss in share but to reduce employee head counts and create new businesses and sources of revenue. Improving alignment between IT and business executives has been critical to that strategy, Zollars says. "You can't separate IT from other functions," he says. "It's all one." Indeed, acting on the belief that information technology is both the company's edge over rivals and its hope for future earnings, he's enlisted CIO Caddell as a top soldier in Yellow's battle for long-term survival. "Leaders are change agents while managers maintain the status quo," says Rick Watson, Director of the Center for IS Leadership at the University of Georgia. "Bill is a leader, a silo-buster."

From the start, Zollars had a lot to redo. First, Yellow had no centralized dispatch system. A shipment could sit on a dock for days awaiting the next truck bound for the right destination. At one moment, there might be seven or eight employees at a docking station with nothing to do; at other times, a poorly scheduled shipment might languish untended because there weren't enough workers on hand when the truck arrived. And, since Yellow's customers had become more sophisticated users of technology than those in the shipping industry, the definition of what constituted good customer service was changing, too, and with it, their levels of frustration. For example, customers like Wal-Mart and Lowes wanted standardized electronic bills of lading. "While that was not Yellow's No. 1 priority, it was theirs," says Michael J. Smid, Executive Vice President of Yellow Transportation, the trucking arm of Yellow.



 

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