How new UPS CEO jumpstarted stock after six years of its shares going nowhere

June 16, 2021

"I could get in there and swizzle the business model a little bit and create some value," UPS CEO Carol Tomé said at the CNBC Evolve Global Summit.
The former Home Depot CFO says the 114-year-old company had been slow to innovate, mired in bureaucracy, and since joining it has been spending more on ground delivery and growth among small and medium-sized businesses.
Tomé says UPS also is focusing on growing employee satisfaction, which includes relaxing restrictions on hairstyles and tattoos.

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The chief executive of package delivery giant UPS on Wednesday said that the company's stagnant stock helped drive her to take the role in June 2020 and install several changes that have pushed the share price higher.

"The stock price had been flat for about six years. I'm like, I think I could get in there and swizzle the business model a little bit and create some value," UPS CEO Carol Tomé said of her decision to come out of retirement and take the role while speaking at the virtual CNBC Evolve Global Summit on Wednesday.

Tomé, who has been on the UPS board of directors since 2003 and spent 18 years as the Home Depot chief financial officer before retiring in August 2019, said that some of her initial moves were focused around "changing the way and the pace of how we operated."

"This is not a negative on UPS; many companies who are all legacy companies, like UPS, you know, we're 114 years old, you get over-engineered with time," she said. "So, we just reverse-engineered some of those processes, and it really sped up decisions."

Tomé said that UPS had 21 different committees running its business, with decisions and ideas having to wait for the next committee meeting for approval.

"That's working by a calendar; we got to work off the pace of the watch," Tomé said. "We have review boards, but we just started getting the bureaucracy out."

Improving speed on the ground was another early goal for Tomé.

"The team said, you know, Carol, if we could just get faster on the ground we could win market share, and I'm like well, what's getting in the way, and they're like, well, money. It's expensive. I'm like, we'll we've got money. Now, let's go ahead and do that," Tomé said.

"So we pull forward that initiative, it was to conclude in June of 2021. We concluded that initiative in October of 2020. And when things started to settle out, well, we started to see a huge return on that investment. It actually makes us more competitive from a small- and medium-size, customer segment perspective. And we've seen growth in that segment north of 30%, in each of the past three quarters," Tomé said.

UPS is now looking at a same-day delivery option, Tomé said during the company's recent investor-day conference. FedEx, one of the company's biggest rivals, offers same-day delivery in only a select few markets.

Honing the company's focus on what was important was another one of Tomé's early tasks, something that was exacerbated by the pandemic.

"We had an exercise about stop work, and all the initiatives that were in flight were around the room and we gave everyone green dots and red dots. We said put up the green dots on those things we should continue and put up the red dots on those things that we should stop doing because they're not wildly important," Tomé said.

"All of the green dots went up, not a single dot went up. I'm like, no, we're not leaving the room until the red dots go up. So, the red dots went up, and then there were a number of initiatives with no dots, which means there's no passion, no energy behind those initiatives. So the red dots, the no dots, we were able to take those initiatives off and really focus on the wildly important."

Tomé said that while UPS had set its strategy around being customer first, people-led and innovative driven, it "hadn't set accountability metrics against those three prongs."

That led to a focus on boosting its net promoter score, increasing the rates of return on capital or the capital it deploys, and upping employee satisfaction.

"We are an engineering-driven company, we are so method-driven, so process-driven, that's why we're the best in the world at what we do," Tomé said. "We weren't actually empowering our people for innovation. In fact, we were very much command and control, we're telling people what to do, rather than listening."

That has led UPS to make some changes to its work environment that center around employees "bringing one's authentic self to work," Tomé said.

"We did not allow facial hair, we did not allow natural hair. So if you're African American and you wanted to have a fro or twist or braid, that wasn't permitted. Our tattoo policy was more restrictive than the U.S. Army," Tomé said.

"We can still be very professional, but we can also bring our authentic self to work," Tomé said.

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