Palace of Miracles

By Perry Glasser  |  Posted 11-15-2003 Print Email
Palace of Miracles

But the toughest part? Zollars inherited a culture molded by the conservative Powell family, which ruled Yellow as a family business for three generations in a culture that stifled change. Headquarters was perceived as being so out-of-touch and hierarchical, that employees nicknamed it the "Palace of Miracles"—the only place where any decision could be made. "An employee out in the field might want to do something for a customer," Zollars recalls, "but a salesperson had to go up through the sales silo to a guy here at headquarters." This not only hampered initiative, it was out of step in an increasingly competitive marketplace. "By the time a decision returned down the silo, the customer was probably gone," he says.

And when it came to strategy, management was too busy looking in the rear-view mirror. "Our whole focus used to be on doing autopsies instead of doing EKGs," he says. "We'd sit around all the time and say, gee, what just happened? We'd go back and tear everything apart and then say, aha! And then we'd wait for something else to happen and have another autopsy. We'd be looking back instead of wondering what might happen tomorrow."

So Zollars got busy. Not a proponent of what he calls the "warm and fuzzy" school of change management—"I'm not one," he says, "to do Outward Bound, climb a mountain together, build a boat out of string and sing Kumbaya"—Zollars set up his Monday meetings and then decided to do what truckers do. He hit the road.

Within his first months at Yellow, Zollars put together an executive SWAT team of a dozen or so business and IT evangelists and together, they flew and drove across country, staging town hall-style meetings among workers, customers, drivers and suppliers in 100 of Yellow's most bottlenecked or strategically critical locations, from New Jersey to California. Zollars' goal: to communicate where the company was, where it needed to go and how it needed to get there—one customer, one employee, one supplier, one dock worker and one piece of technology at a time.

The pace was grueling; during those road trips, Zollars and his team logged long hours that would get even a trucker grounded. Days began at 7 a.m. and ended at 10 p.m. "We'd meet separately with the sales force in the morning, and then with the drivers, then with the people on the loading docks and then the people in the office in the afternoon, and then we would follow all that up with a customer dinner at night," Zollars recalls. "I would give the same speech 15 to 20 times daily." He repeated those months-long tours two more times within his first 18 months on the job, first to help people make the changes he required, and then to warn those still having trouble that they would either have to change, or "find a different career path," Zollars says. "Change was made a condition of employment." Yellow executives still make those trips, to ensure change continues, but now Zollars' leadership team makes the journeys. Caddell, meanwhile, takes her cues from Zollars, requiring all IT managers and executives under her command to get out of the office and visit, in person, a Yellow service center, spend time on a loading dock, take a ride with a driver and spend an afternoon at a customer service center "to hear how people do their jobs and what customers are complaining about," Caddell says. "The message is that IT is there to help the business, and the only way to help the business is to understand the business."

Today, Zollars and Caddell work as a team. Zollars has declared that no tech initiative can take longer than 12 months to complete, and all projects have to promise at least a 15 percent rate of return. Caddell has upped the ante, bringing those project times down to seven months, and falling , she says. Furthermore, no project can go over budget. If it does, IT managers are docked pay and penalized at their next performance review.

Zollars and Caddell also shut down IT as a shared service and launched Yellow Technologies, an IT arm of 325 IT employees with an $80 million IT budget that's focused solely on testing IT-driven business strategies and getting the best ones rolled out into operation—and in months, if not weeks. For example, when market research showed that customers wanted an expedited, dated delivery service, Zollars and his Monday strategy team dreamed up Exact Express. Once again, Caddell delivered. Six weeks and 8,000 person-hours later, the Web-accessible Exact Express was launched. "It wasn't pretty," says Zollars, "but that service today is a $200 million business, and growing."

Another Yellow Technologies project, "Get Paid," was rolled out in six months and cost 80 percent less than estimated. Previously, late payments used to average 32 days but now, they average 30, a two-day difference. Which customers payments are up to date? Which are not? Which are eligible for discounts? Yellow Transportation's Smid shrugs his shoulders at the simplicity of it. "That's nearly a 10 percent hike in cash flow," he says. Debt write-offs also have shrunk.

But the crown jewel of Zollars' and Caddell's technology overhaul has been SYSNET, a state-of-the-art computer system designed jointly by Yellow and CASTLE Lab, an engineering, operations and finance research center at Princeton University. SYSNET is the central nervous system of Yellow Transportation. Operators with headsets and computer screens in front of them sit in office cubicles, routing customers and their loads electronically. On their monitors, there's a map of the United States with large circles marking more than 40 key cities across the country. Around each city are red and green markings, each numbered, representing a truck at a loading dock somewhere in the system. To see what's where, operators click on the map. Up comes the trailer number, the precise number of pounds it is hauling, what it's hauling, where it's going and for whom—and all in a matter of seconds. The software also lets Yellow change staffing on its loading docks daily, based on predictions of labor demand. The staff averages 90 workers per week, down from 100, even as the number of shipments has increased. That might not sound like much, but it's saving Yellow millions of dollars in labor costs. Says Zollars: "If the shipment going into Kansas City tonight requires 108 people, we aren't going to have 105, we aren't going to have 110. We're going to have 108."

Zollars' alignment work is also affecting on customers. Service quality has increased by 30 to 40 percent. As for Yellow's warring factions? So far, so good. Zollars instituted training programs for executives that required classes in communication and team problem-solving. Says CMO Reid: "No one any longer considers a business issue to be his or her own. Now we're expected to bring the talent and creativity of the entire team to bear on any issue confronting the organization." There are no marketing problems or technology problems, he says—only problems for what Zollars now calls One Yellow.

But Zollars is just getting started. He wants to make Yellow a global player by offering its technology systems to companies that want to hire others to manage their logistics and supply chains. Meridian IQ, a Yellow division launched early last year, offers to do just that: Dump your shipping headache over to experts who will have management systems up and running in eight weeks or less. Yellow's mission now: to be the leading provider of guaranteed, time-definite, defect-free transportation for business customers worldwide.

But when it comes to alignment, don't expect Zollars to try anything new. Expect more of the same. Expect repetition. "Alignment isn't something that can be achieved, and then, wham!, it's done," he says. "It takes continuous work, prodding." Indeed, when the recent $966 million Roadway acquisition is finalized, Zollars says, he and his SWAT teams will probably have to take to the road again, spreading the alignment gospel anew, now in the context of a merger that will nearly double the size of the company. That will mean at least another year of repeat trips, airport lounges, missed flights, motel rooms, 15-hour days and lining up the horses to pull the wagon straight and true.



 

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