AIDC :: YELLOW CORPORATION

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YELLOW = CORPORATION=20

At Yellow Corporation, CEO Bill Zollars = has=20 made alignment between business and IT = executives=20 a condition of employment, enlisting CIO = Lynn=20 Caddell in his team-driven push to = reinvent the=20 $2.6 billion transportation services = company=20 around IT-driven innovation and = efficiency.

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

The four-hour meetings, called One = Yellow, are=20 as mandatory as they are time-consuming. = People=20 have tried to beg off, but Zollars won't = allow it.=20 Illness is the only acceptable excuse, but = it's=20 not used very often: attendance counts on=20 performance reviews. Says Chief Marketing = Officer=20 Greg Reid: "We're expected to arrange our = time.=20 Bill forces senior management to sit down = at the=20 same table."

And once there, two more rules apply. = First,=20 you can't simply talk about your area of=20 expertise. That means Caddell, usually = seated to=20 Zollars' immediate right, must discuss = sales and=20 marketing as much or as often as Reid = does, if=20 appropriate to a potential strategy = problem or=20 solution. Second? Nobody can talk about = yesterday=20 or today. In Zollars' strategy meetings, = it's all=20 about tomorrow=97the next stop on the = company's=20 business road map. Is Yellow still on = track to=20 meet strategic goals? Why not? Where do = people=20 think Yellow needs to be next year?

For a Q&A with Bill Zollars = about=20 his strategies that foster alignment, click here. =

Sure, not everyone wants to talk = strategy on a=20 Monday, the one day of the week when = managers are=20 most likely to hear of the newest problems = begging=20 urgent attention. But that's the point, = Zollars=20 says. "It's so easy to become overwhelmed = with the=20 urgent, rather than the important," he = says. Adds=20 CIO Caddell: "At Yellow, we've got a CEO = who holds=20 alignment meetings every Monday. How = unusual is=20 that?"

To Zollars, it's all about money and = change.=20 Poor alignment means poor communication, = missed=20 deadlines and wasted effort, and all of = those add=20 up on the balance sheet in a business that = can't=20 afford inefficiency. Silos remain standing = at a=20 price. And when Zollars, a 24-year veteran = of=20 Eastman Kodak Co., arrived at Yellow in = the fall=20 of 1996, "the silos were nearly = impenetrable," he=20 says, and the cost of those silos was = staggering.=20 "The stock price was in the ditch," = Zollars=20 recalls, and customers were not the = priority.=20 Internal surveys showed that 40 percent of = the=20 time, both shippers and recipients of a = shipment=20 perceived Yellow deliveries to be late, = incomplete=20 or damaged=97or all three. While that = percentage was=20 well within range of the dismal industry = average=20 at the time, Zollars found it = unacceptable. "We=20 were the tallest midget," he says.

Not anymore. In the six years Zollars = has been=20 in the driver's seat at the $2.6 billion, = Overland=20 Park, Kansas-based transportation services = company, it has continued to make money, = despite a=20 30 percent slump in the overall market for = freight=20 services for "less-than-full-load" = truckloads=20 (LTLs).

But even more remarkable in a = rough-and-tumble,=20 unionized and newly deregulated = marketplace that=20 forced Yellow's largest rival, = Consolidated=20 Freightways Corp., into bankruptcy last = fall,=20 Zollars has not only managed to keep = Yellow on the=20 road, he's also begun to diversify the = business=20 into Net-enabled express delivery and = logistics=20 services, boost customer satisfaction, cut = waste=20 and improve delivery speeds, driving what = used to=20 be an also-ran company into the No. 1 = berth in its=20 industry.

But Yellow is hardly out of the woods = yet.=20 Since 1997, amid stiff competition from=20 lower-cost, non-union, regional rivals, = including=20 FedEx Corp. and Pacer International, = Yellow's=20 market share has combined to fall = precipitously:=20 According to analyst Dan Moore of Little = Rock,=20 Ark.-based Stephens Inc., an investment = advisory=20 firm, Yellow has lost 12 percent of its = business=20 since 1997 when it should have grown by at = least=20 17 percent in market share to keep pace = with the=20 economy. While Moore lauds Zollars' = leadership, he=20 adds: "The clock is ticking for Yellow and = the=20 rest of the unionized LTL companies, which = are in=20 a state of secular decline." Only = diversification=20 away from the unionized LTL business, = which=20 accounts now for roughly 90 percent of = Yellow's=20 revenues, Moore says, will help Yellow = keep on=20 trucking over the long haul.

Zollars, therefore, sees technology as = the=20 company's key to survival: During the past = six=20 years, Yellow has invested hundreds of = millions of=20 dollars on computers and sophisticated = logistics=20 and customer data systems, not only to = stem the=20 loss in share but to reduce employee head = counts=20 and create new businesses and sources of = revenue.=20 Improving alignment between IT and = business=20 executives has been critical to that = strategy,=20 Zollars says. "You can't separate IT from = other=20 functions," he says. "It's all one." = Indeed,=20 acting on the belief that information = technology=20 is both the company's edge over rivals and = its=20 hope for future earnings, he's enlisted = CIO=20 Caddell as a top soldier in Yellow's = battle for=20 long-term survival. "Leaders are change = agents=20 while managers maintain the status quo," = says Rick=20 Watson, Director of the Center for IS = Leadership=20 at the University of Georgia. "Bill is a = leader, a=20 silo-buster."

From the start, Zollars had a lot to = redo.=20 First, Yellow had no centralized dispatch = system.=20 A shipment could sit on a dock for days = awaiting=20 the next truck bound for the right = destination. At=20 one moment, there might be seven or eight=20 employees at a docking station with = nothing to do;=20 at other times, a poorly scheduled = shipment might=20 languish untended because there weren't = enough=20 workers on hand when the truck arrived. = And, since=20 Yellow's customers had become more = sophisticated=20 users of technology than those in the = shipping=20 industry, the definition of what = constituted good=20 customer service was changing, too, and = with it,=20 their levels of frustration. For example,=20 customers like Wal-Mart and Lowes wanted=20 standardized electronic bills of lading. = "While=20 that was not Yellow's No. 1 priority, it = was=20 theirs," says Michael J. Smid, Executive = Vice=20 President of Yellow Transportation, the = trucking=20 arm of Yellow.

Palace of Miracles

But the toughest part? Zollars = inherited a=20 culture molded by the conservative Powell = family,=20 which ruled Yellow as a family business = for three=20 generations in a culture that stifled = change.=20 Headquarters was perceived as being so=20 out-of-touch and hierarchical, that = employees=20 nicknamed it the "Palace of = Miracles"=97the only=20 place where any decision could be made. = "An=20 employee out in the field might want to do = something for a customer," Zollars = recalls, "but a=20 salesperson had to go up through the sales = silo to=20 a guy here at headquarters." This not only = hampered initiative, it was out of step in = an=20 increasingly competitive marketplace. "By = the time=20 a decision returned down the silo, the = customer=20 was probably gone," he says.

And when it came to strategy, = management was=20 too busy looking in the rear-view mirror. = "Our=20 whole focus used to be on doing autopsies = instead=20 of doing EKGs," he says. "We'd sit around = all the=20 time and say, gee, what just happened? = We'd go=20 back and tear everything apart and then = say, aha!=20 And then we'd wait for something else to = happen=20 and have another autopsy. We'd be looking = back=20 instead of wondering what might happen=20 tomorrow."

So Zollars got busy. Not a = proponent of=20 what he calls the "warm and fuzzy" school = of=20 change management=97"I'm not one," he = says, "to do=20 Outward Bound, climb a mountain together, = build a=20 boat out of string and sing = Kumbaya"=97Zollars set=20 up his Monday meetings and then decided to = do what=20 truckers do. He hit the road.
Within = his first=20 months at Yellow, Zollars put together an=20 executive SWAT team of a dozen or so = business and=20 IT evangelists and together, they flew and = drove=20 across country, staging town hall-style = meetings=20 among workers, customers, drivers and = suppliers in=20 100 of Yellow's most bottlenecked or = strategically=20 critical locations, from New Jersey to = California.=20 Zollars' goal: to communicate where the = company=20 was, where it needed to go and how it = needed to=20 get there=97one customer, one employee, = one=20 supplier, one dock worker and one piece of = technology at a time.

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

3D""=20 Today, Zollars and Caddell = work as a=20 team. Zollars has declared that no tech = initiative=20 can take longer than 12 months to = complete, and=20 all projects have to promise at least a 15 = percent=20 rate of return. Caddell has upped the = ante,=20 bringing those project times down to seven = months,=20 and falling , she says. Furthermore, no = project=20 can go over budget. If it does, IT = managers are=20 docked pay and penalized at their next = performance=20 review.

Zollars and Caddell also shut down IT = as a=20 shared service and launched Yellow = Technologies,=20 an IT arm of 325 IT employees with an $80 = million=20 IT budget that's focused solely on testing = IT-driven business strategies and getting = the best=20 ones rolled out into operation=97and in = months, if=20 not weeks. For example, when market = research=20 showed that customers wanted an expedited, = dated=20 delivery service, Zollars and his Monday = strategy=20 team dreamed up Exact Express. Once again, = Caddell=20 delivered. Six weeks and 8,000 = person-hours later,=20 the Web-accessible Exact Express was = launched. "It=20 wasn't pretty," says Zollars, "but that = service=20 today is a $200 million business, and=20 growing."

Another Yellow Technologies project, = "Get=20 Paid," was rolled out in six months and = cost 80=20 percent less than estimated. Previously, = late=20 payments used to average 32 days but now, = they=20 average 30, a two-day difference. Which = customers=20 payments are up to date? Which are not? = Which are=20 eligible for discounts? Yellow = Transportation's=20 Smid shrugs his shoulders at the = simplicity of it.=20 "That's nearly a 10 percent hike in cash = flow," he=20 says. Debt write-offs also have = shrunk.

But the crown jewel of Zollars' and = Caddell's=20 technology overhaul has been SYSNET, a=20 state-of-the-art computer system designed = jointly=20 by Yellow and CASTLE Lab, an engineering,=20 operations and finance research center at=20 Princeton University. SYSNET is the = central=20 nervous system of Yellow Transportation. = Operators=20 with headsets and computer screens in = front of=20 them sit in office cubicles, routing = customers and=20 their loads electronically. On their = monitors,=20 there's a map of the United States with = large=20 circles marking more than 40 key cities = across the=20 country. Around each city are red and = green=20 markings, each numbered, representing a = truck at a=20 loading dock somewhere in the system. To = see=20 what's where, operators click on the map. = Up comes=20 the trailer number, the precise number of = pounds=20 it is hauling, what it's hauling, where = it's going=20 and for whom=97and all in a matter of = seconds. The=20 software also lets Yellow change staffing = on its=20 loading docks daily, based on predictions = of labor=20 demand. The staff averages 90 workers per = week,=20 down from 100, even as the number of = shipments has=20 increased. That might not sound like much, = but=20 it's saving Yellow millions of dollars in = labor=20 costs. Says Zollars: "If the shipment = going into=20 Kansas City tonight requires 108 people, = we aren't=20 going to have 105, we aren't going to have = 110.=20 We're going to have 108."

Zollars' alignment work is also = affecting on=20 customers. Service quality has increased = by 30 to=20 40 percent. As for Yellow's warring = factions? So=20 far, so good. Zollars instituted training = programs=20 for executives that required classes in=20 communication and team problem-solving. = Says CMO=20 Reid: "No one any longer considers a = business=20 issue to be his or her own. Now we're = expected to=20 bring the talent and creativity of the = entire team=20 to bear on any issue confronting the=20 organization." There are no marketing = problems or=20 technology problems, he says=97only = problems for=20 what Zollars now calls One Yellow.

But Zollars is just getting started. He = wants=20 to make Yellow a global player by offering = its=20 technology systems to companies that want = to hire=20 others to manage their logistics and = supply=20 chains. Meridian IQ, a Yellow division = launched=20 early last year, offers to do just that: = Dump your=20 shipping headache over to experts who will = have=20 management systems up and running in eight = weeks=20 or less. Yellow's mission now: to be the = leading=20 provider of guaranteed, time-definite, = defect-free=20 transportation for business customers=20 worldwide.

But when it comes to alignment, don't = expect=20 Zollars to try anything new. Expect more = of the=20 same. Expect repetition. "Alignment isn't=20 something that can be achieved, and then, = wham!,=20 it's done," he says. "It takes continuous = work,=20 prodding." Indeed, when the recent $966 = million=20 Roadway acquisition is finalized, Zollars = says, he=20 and his SWAT teams will probably have to = take to=20 the road again, spreading the alignment = gospel=20 anew, now in the context of a merger that = will=20 nearly double the size of the company. = That will=20 mean at least another year of repeat = trips,=20 airport lounges, missed flights, motel = rooms,=20 15-hour days and lining up the horses to = pull the=20 wagon straight and true.

Will it be easier this time? Don't = count on it.=20 In fact, looking at how Zollars and his = team=20 transformed a pokey, conservative trucking = company=20 into an IT-driven leader that offers full = service,=20 including supply chain management, the = only thing=20 Zollars says he'd do differently now is = "go=20 faster."

Yellow Corporation - Driving = Change
By Perry=20 Glasser
November 15, 2003 =

This page was last updated on: = 03=20 February 2004=20 =

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