Building a people-first culture

REMI ERIKSEN

Welcome to Trust and transformations - leaders navigating change, a DNV podcast. I'm Remi Eriksen, DNV’s Group President and CEO.

In this series, myself and our business area CEOs sit down with other global leaders to talk about how they tackle transformation, build trust in their business and people, and what they think is coming next for their industry. Right now, they are experiencing a series of historically significant transformations, making trust more important than ever.

This episode is hosted by Barbara Frencia, CEO of Business Assurance at DNV.

BARBARA FRENCIA

Hello and welcome to Trust and transformations - leaders navigating change. I'm Barbara Frencia, CEO of Business Assurance at DNV. Today, I'm pleased to welcome John Pearson, CEO at DHL Express, to the podcast.

DHL Express is the world's leading provider of international express shipping, employing 120,000 people in over 220 countries and territories. Thank you, John, for joining me in this podcast.

I will start with some questions on transformations and people. I'm sure our listeners would love to know what a typical working day looks like for you as the leader of a global company? What might typically be in your diary, John?

JOHN PEARSON

Well, that's one of those easy but hard questions. Bonn is our global head office. It's our European head office, along with some other centers, it's really quite a center of gravity. And it's also the corporate head office for the DHL Group. So I suppose my day in Bonn is filled with really just catching up with, I try and keep my diary as clear as possible for just catching up with my team.

And that time is important to me. And I suppose my Bonn time is eight or nine days in total in a month. And the rest of the time, that other bucket is traveling. And I think the way I like to phrase it is that, you know, our purpose is our presence. So quite often I may go to a country with quite a light agenda.

I always have my priorities in terms of how I spend that time in country. And I typically say, you know, people, customer facilities and media. Quite often I might see three or four different facilities on a trip. And it's also when you see your people and that's a big thing in DHL Express, our physical presence and our willingness to get out there, be authentic with our people and say thank you.

On some occasions it's the first time they've ever seen someone from the global management board or the divisional CEO. On other occasions it's not. They probably wish they'd see us a little bit less. But I'm pleased to say there's no such thing as a typical day. There's a high degree of variety. I'm blessed to have that in my role. I think I've got one of the best jobs on the planet working for the most international company of all, means you're always thinking and dealing with, you know, people across the world.

BARBARA FRENCIA

Thank you, thank you, John. And we will touch upon people a bit later on in the conversation.

 

Now, having joined DHL in the Middle East in 1986, I think it's safe to say that you are a veteran of the industry. So what has been the most positive industry transformation you have seen during your career? And what has been the biggest challenge the industry has had to overcome?

JOHN PEARSON

That's a great question, Barbara. I think on the positive changes, I think there's been a lot of them because the express industry and you know from partnering with us for several decades, the express industry is rather a young one. You know, we founded it in 1969. You know, our competitors were - UPS stretches long before us 1908, but principally domestic US and then FedEx came along in ‘76 and TNT were always there - but we pretty much founded the industry in San Francisco. So in the last 50 years, the industry has moved fast. So there's lots of positive changes. I think one would be the express transportation is seen not just as the emergency document or passport that someone left behind, or not just the part for a aircraft on a ground or a vehicle off a road or an oil rig that's not working, it's really part of people's fundamental supply chain set up.

So it's not just something for an emergency situation, it's become part of everyday supply chain and logistics. And I think that's positive because that means we can grow.

In 2015, I went to the UK. I noticed, I asked for our top 10 customer list. Always our discussions when we visit our, what's happening with our people, what's happening with our customers. I looked at our top 10 customers in the UK. I have to say, I was a little bit embarrassed that I hardly knew any of them. Because just a year before or just two years before, they weren't even trading with us. So it's a classic case of from nothing to a lot, or as my children say, from zero to hero in the space of two years. And that precipitated a real aha moment where I sat down with the team, understood it a bit more.

And then from that moment in 2015, much of my time over the next two years was consumed with seeing how DHL Express could be ready for e-commerce. And maybe we talk more about this, maybe we don't, but that was a real moment in time. They say there's only one China in your lifetime, well also there's only one e-commerce in your lifetime. And it really happened around ‘15 or ‘16.

And in terms of the challenge, it might sound a bit cheesy to say this, but honestly, nothing keeps me awake at night really, in the sense that if you have great people and you know, our philosophy is P equals GQ, ‘people equals growth and quality’. Or said more specifically, it should be ‘peak people equals quality’, which drives our loyal customers and growth. There's nothing you should fear. And I say that authentically in the sense that when the pandemic came, we saw something that hadn't been seen in 102 years and none of us had ever experienced as individuals. It was pretty clear to me within two months that our people would get us through it.

People were coming up with all sorts of ideas about washing their hands in vehicles and just hundreds of ideas about how we keep on delivering to our customers. And in most cases Barbara, as you may know, we were given some sort of essential status category that meant we were able to drive the streets on knock on customers' doors. So the pandemic wasn't even a challenge, it was a busy time. It was a time where we needed to talk as a team daily. It was a time that any data you had, if it was more than two weeks old, it was like a cave painting - it was older than you could use. So you had to the ability to look around corners. But, you know, we enjoyed it. And, you know, we're fortunate again that it was a busy time for logistics. I feel very sorry for anyone in hospitality, anyone in entertainment, their lives and their carpets were just ripped up from under their feet if you're in that industry. But it was a time where the world depended on logistics, not just for the movement of vaccines, obviously, where everyone said the vaccines would be produced, but the logistics companies would struggle to deliver them. Well, it was so untrue. We delivered four billion vaccines with a 0.000 basically infinitesimally small number amount of spoilage.

So, you know, I think the integrators, the express operators, the freight forwarders all did an incredible job because the demand shock - I want masks, I want this, I want that - was as intense as we've ever seen and the logistics industry did a great job. So it was a challenge in one way, but not in another. But I revert to my first statement that if you've got great people, almost anything that comes your way can be handled.

BARBARA FRENCIA

That sounds really, really great, John.

Let's move a bit to the strategy because DHL Express has had the same four strategic pillars as its foundation since 2009, right? Motivated people, great service quality, loyal customers, and a profitable network. So how do these pillars guide the decisions you make day to day?

JOHN PEARSON  

Yeah, firstly, I think when you've got 110,000 people across 220 countries, we hope to get back into Afghanistan, we're actually 219 today, when we get back into Afghanistan with 220 again. You've got to have something that's simple.

Firstly, I'm a believer that culture beats strategy day in, day out. Strategy is important strategy needs to be clear and simple and understood by 110,000 people. And that's why we describe it as the four pillars you say there - motivated in people highly engaged people, driving service quality, the daily grind, 96 % on time delivery every day, creating and keeping customers loyal - out comes the end delivering a profitable network. So that's basically the service profit chain. I say to people if they can't remember four things, then just remember P equals GQ. That's only three. I say to people if they can't remember three things, just remember their red CIS passport that every person in DHL Express carries their Certified International Specialist passport, me included. Just remember that because that is the one thing that keeps us running straight and true.

So the four pillars guide us every day as to the decisions we make really. And the best example I can give you, I'd have to draw back on the pandemic for a second. When we met as a team at the beginning of the pandemic we said, should we furlough our people? Should we lay off people? You know, the government will pay us, let's move out, you know, 10 ,000 people. And we'd made an agreement to say, no, we won't furlough anyone. And we basically furloughed no one. Firstly, that was helpful because in the space of six weeks, we needed more aircraft and more people than we did when it started. But we use those four pillars, and the point I'm making here, is to guide our decision-making. Every question and everything that came up, we said, is it right for our people? Is it right for our business? Is it right for our customers? Is it right for our brand?

So that one about furloughing, we had to ask whether it was right, well, for our people, firstly, that we furloughed them. And secondly, for our business that we wouldn't be ready if business picked up. In other cases, it's more about the brand. In other cases, it's more about the customers. So we use those four pillars just to, just as our, you know, it's an overused word, but our compass. And if we make a decision that isn't gonna strengthen the motivated people pillar, we'll think twice about it. If something comes our way that impacts service quality and someone makes a suggestion that we should cut costs and cancel this or cancel that and impact service quality, we'll think twice about it. So I think it's a nice framework and I'm big into frameworks. I like to say the corporate head office should draw the lines on the pitch.

Because if our people feel they're at the heart of everything we do, then our customer will get what they should have and what they deserve anyway. But you have Barbara to keep on proving this, because every company says ‘our people are our most important asset’. But I haven't met a company that doesn't say that. But those that can give you 50 proof points of things over and above that really demonstrate that you are a people centric company.

BARBARA FRENCIA

Yeah, I definitely see the point. And thank you. And I think you have partially also answered the next question, but I will ask it because it's so important. I mean, it's about people. Despite the number of people employed by DHL Express, you are the company that has one of the lowest attrition rates globally.

So as I said, you probably partially answered already to this question, but what is the secret to be able to cultivate people-first culture and retaining employees in such a large global company?

JOHN PEARSON

Yeah, so, you know, that is the ultimate question. And just like a good Christmas cake or a good panettone or something, it's getting a lot of little and big things right. And, you know, I think making the statement perhaps that, you know, people are the most important thing. Having sufficient engagement and rewards and recognition.

We have five or six employee of the year awards which we go to all over the world, which are a significant expense for something that recognizes the front line. Letting people subscribe to our purpose - our purpose is connecting people and improving lives and having programs - go green, go teach, go trade, go help, you could sort of imagine, you know, your listeners could probably imagine what those things, especially go teach and go help, how we encourage our employees to take part in our purpose. And that manifested itself as something that is truly, truly remarkable - DHL's Got Heart. We launched in 2012 maybe with Jane Seymour, the actress that was in one of the Bond movies in Dubai. And here we are more than a decade later having just rolled out DHL's Got Heart and paid money to five individuals in each region. So that's 30 people paying a sum of money to the charities and the causes that they personally supported in their working hours. So DHL's Got Heart is a, I think it's, I shouldn't think there's any company doing anything like that in quite the same way.

And then lastly I think in 2011 or something like that maybe longer ago came up with this phrase respect and results and so simple in its construct that it encouraged us inadvertently to look at all our managers asking, are they too far on the respect side, not driving enough business progress? Are they too far on the results side? And knocking people over in their way and unbeknownst to us it became this little compass to use the phrase again of looking at people that were just too far one way or the other.

BARBARA FRENCIA

And now let's move to sustainability. DHL Group has committed to reduce all logistics related emission to net zero by the year 2050. So can you tell us about the DHL Express Go Green initiatives and how this will help you to reach this quite ambitious target?

JOHN PEARSON  

Sure. Firstly, on sustainability, it's like those simple one-letter words in business, diversity, e-commerce, and there's others where suddenly digitalization is another good example. There's just a word and you want 110,000 people to understand it.

So firstly, we encourage everyone to, what I say, read a bit, learn a bit, maybe go to a conference, go to a summit, you know, do whatever you can to understand what journey the company's on. And then it's about doing. And with sustainability, the time for talking and learning and calculating is gone. And the time for doing firmly came two, three, four years ago. So we need to be doing stuff. And in Express, the biggest lever we've got, although 110,000 people are pulling every little lever of reusing water for the washing of the vans and having a culture of saving electricity. I say you can have a process to save electricity, switching off the light, but if you don't have the mindset and the culture, someone walks out the room without flicking the switch. Having an investment bucket that puts solar panels on the top of every single facility we have so that every new facility for the last three years is carbon neutral. That's all well and good, but the big lever in our business is sustainable aviation fuel and putting fuel, which will be a new concept to many of your listeners, but known to some, putting fuel into the fuel farms of airports and DHL hubs. Sometimes the fuel we buy will go in our aircraft, sometimes it'll go in another aircraft. But either way, it's part of the blend of aviation fuel that means the emissions from aircraft are less than they would otherwise be. So we're the only one of our competitors to buy, in my division. to buy sustainable aviation fuel. In fact, the DHL group purchased 15 % of all the available feedstock on the planet last year. So of the available sustainable aviation fuel, swilling around in tanks and so on and so forth, we purchased 15 % of that, which is remarkable if you think about how many transport companies there are.

And we will continue to increase our blend. It's conceptually new. Think about how long it's taken the world to adopt electric automobiles. This is far more complex and far newer than that. But our customers are responding very positively. We're selling it globally in all countries. In fact, funny enough, three years ago, we were able to sell it, we were able to buy it easily, but not so easily sell it to our customers and now we're finding it very easy to sell to our customers and it's not so easy to buy. The price of sustainable aviation fuel has gone up considerably over the last three years when our projections were formed. And the ability to source it, well, if you're prepared to pay the price, you can certainly get hold of it, but the ability to source it is less than one maybe would have imagined. So we're on a full steam ahead course on sustainable aviation fuel. We're doing a lot of good things across the entire division.

So yeah, there's a lot going on in that space and I think we're going to all see exponential increases in all sorts of activity as companies near their 2030 targets get closer to their 2040 targets, and even their 2050. And you will see some companies fall by the wayside and retract maybe the claims they've made. So there's a lot of learning going on in this world and in this particular part of our business and I'm very proud to say that the DHL group has a well, well thought through strategy and structure and set of aims and express are doing their bit as the only express operator that is either buying it or selling it.

BARBARA FRENCIA

And building on what you said, John, I mean, obviously we know sustainable aviation fuel is predicted to be the aviation industry biggest bet in hitting the net zero carbon emission goal. You mentioned some of those, but what are the biggest challenges when it comes to scaling the sustainable aviation fuel in the express delivery industry. You mentioned the sourcing. Is one of those and any other you may think of?

JOHN PEARSON

Yeah. I think it is, it is, you know, we've been ready to commit financially. So that's a bit of a green checkmark. It's being able to source it at the most economic price is the challenge, I think.

I think the second challenge would be is education of our customers in order to, carbon free doesn't come for free. So customers are demonstrating a high willingness and recognition to pay for this extra additional costs that the sustainable aviation fuel comes with, so the education side is being worked through. It's, you know, the blend, you know, the blend in your aircraft, or the blend in a fuel tank, or the blend anywhere can sort of be utilized up to a level of about 50%. We aim to get to a 30 % blend by 2030.

And I think technically, you know, the aviation industry is ready to continue to developing, you know, aircraft engines and so on and so forth to be able to manage a higher blend. But I think it's really the sourcing of it and the economic, you know, the economics of it.

BARBARA FRENCIA

Thank you. All right. Now I would like to move a bit to another of those words you mentioned earlier, digitalization. Digitalization and security. What digital transformation projects is DHL Express investing in to improve the experience of customers and employees, while also obviously increasing operational excellence? Do you have any?

JOHN PEARSON

Yeah, so I think the most useful thing I can discuss with you here, Barbara, is the concept of digitalization. I think, you know, we had digitalization firmly as part of our group strategy last time around. Our next strategy will be released strategy 2030. But strategy 2025 was basically themed around digitalization. So, you know, digitalization or digital or digitalization is not a new word. There's a company called the Digital Equipment Company that was founded in 1954, for example. So I thought, hang on, this is a big part of our group strategy. How do I get 110,000 people thinking down the right path with a word that is already in place has been known for, you know, just about 70, 80 years, and charging ahead, you know, or something that is a little bit conceptual if you're not careful.

So we came up with this phrase that digitalization is best described as the ability to have people, our people, embrace technology for the improvement of customer satisfaction, employee engagement, or operational efficiency, or all three. And some of the initiatives we have worked on have been all three and some of them have been very much around customer satisfaction.

And then we listed out our top 10 express Digi initiatives. So some of those could relate to pricing and data mining within our customer pricing structures to see where pricing could be adjusted, so the sort of operational efficiency, if you will. Some related to the scanning technology that we gave our couriers in the hubs or on the road, something that was more comfortable, whether that be a ring or a handheld scanner, something that was lighter and would give them less repetitive strain. Other things that related almost exclusively to operational efficiency; predictive analysis on how empty an aircraft would be going from one hub to another, or how much space would be on that aircraft, enabling the people that sell the product which fills up the empty space on our aircraft more ahead of time, made it more efficient for our operation.

And the last was some of the things in the fuel optimization program around the taxiing speed of our aircraft, the center of gravity, the correct loading of our aircraft so that the center of gravity gave the optimum fuel efficiency. And that drove down fuel burn, which not only saved money, but was good for the planet. So it was, as I say, it’s one of these words like sustainability, diversity, e-commerce, you can throw them out from the corporate center and hope that people understand them. And you know, ‘women in management’ understand them and then charge ahead. But unless you give them talking points, unless you make things simple, they're not necessarily gonna do anything with that one word.

Oftentimes when you're rolling something out across such a wide universe, you have to put these things into context, make them simple. The job of the head office is to put something in a box, put a ribbon around it, put a manual together, give it to Australia and say, there you go. And they get it, they understand it, they run with it. And then you've got net what we call network adoption.

BARBARA FRENCIA

So how important is digitalization, globalization, e -commerce in the company's future market strategy?

JOHN PEARSON  

So we've got to say what impacts us and not have 25 things but have four things back to that element of focus. So we say globalization, that's global trade, global connectedness, how countries are open and connected to other countries, geopolitical fracturing of trade between China and US, all in the globalization bucket. Sustainability, we talked about, digitalization, we talked about and e-commerce we touched on. So those four things are a little bit like the four pillars in a different way, something that keeps us grounded, keeps us discussing the right topics. You know, maybe the fifth one day would be labour, the able to attract labour, able to keep labour, the whole how people have, there's so much of a gig economy out there, people aren't even getting contracts or minimum working hours and so on and so forth. So there's things that have evolved and I think this labour thing is really important since the pandemic, even work from home is in that bucket and how you attract people, how you keep people. So I think there's something that are sort of torch that's permanently on four things that stops us losing our focus and becoming too fragmented in our thought. And you know, from working with Express Barbara, that focus is, focus and execution are two of our hot one-liners or one-worders, because if you lose that focus, you lose everything. And so those four things, globalization, digitalization, et cetera, the four pillars, motivate employees, et cetera, keep on bringing us back to things that we know we should be doing, things that are nice to do.

And I heard this Korean professor many years ago, over 90 now, say, companies got good at doing the wrong things right. And definitely DHL Express 15 years ago was a great brand, the best brand in a great industry. But I think we became so distracted by many things, we got good at doing the wrong things. And as an organization now, I know we're in the space of doing the right things righter. We're getting better and better and better at doing the things that we should be doing. And that's, that's again, our focus.

BARBARA FRENCIA

Sure, but I think I mean, I like a lot of the focus on execution because that goes really to the core of where to really to work on. A bit still on digitalization, becoming an integral part of the express delivery. You talk about the technology that you are adopting. There are, I mean, that doesn't come without cyber threats that can pose increasing risks, right? So in your view, how critical is cybersecurity for your industry?

 JOHN PEARSON  

Yeah, sadly, I have to say it's nearly got to the stage, it's not if but when you know now, unless you have the best possible people with the best investments protecting you for a lot of companies, it's when not if. In fact, the awful situation that impacted TNT, you know, getting close to a decade ago now was also put into our system in Ukraine. It was just lucky it started in Ukraine, but it's lucky that it didn't get beyond Ukraine in our case, but it really damaged a great company TNT. So super important. I have a big picture in my office of three men in black capes looking very sinister and scary. And I remind everyone of the three things that can harm us; safety, compliance and cyber security. Three men in black capes, you can't see their faces. So, yeah super important, you know, in a network business like ours of hubs, aviation, gateways, service centers, where literally trillions of data points just about every night. You know, it's devastating. So, you know, all I can say here and now is that we put commensurate resources in terms of people, money and activity to the threat that exists out there. And that's a threat that will never go away, can never totally be, you can protect yourself against but I think it's about organizations you know being ready for it.

It's not just for the guys in the, in our technical centers protecting us and so it is with safety and so it is with compliance. Everyone has some sort of activity which they can do to either make us more safe from these three nasty things or make us more safe or stop something from happening.

 BARBARA FRENCIA

Thank you, thank you. We are getting to the conclusion of this conversation, John, and I would like just to…

 JOHN PEARSON  

I was just warming up, I was enjoying it.

BARBARA FRENCIA

I know, I know, but time flies. DHL is using a lot of mantras as part of the culture, such as connecting people, improving lives. So which mantra is the most valuable to you as a leader and why?

JOHN PEARSON  

So if I'm quick, I'm going to give you seven. It's more fun that way, but I will be quick. I will be quick. And they range from, you know, and these, but you're absolutely right, Barbara. These mantras, if I want to get something across to someone in Papua New Guinea, I'm not going to send 40 pages. I'm not going to send a long email. I'm just going to maybe use a phrase at a kickoff meeting or an EOI gathering that they remember. They don't even have to write it down, but they just use it.

And the ones that keep me running straight and true is the main thing is to keep the main thing the main thing. It's all about focus. Nothing basic about the basics. When people, there's nothing common about common sense either, by the way. But when someone is doing what I call the daily grind, it's the daily grind that makes us great.

And no one should think their job is boring. No one should think that doing that little thing won't help us. No one should think that checking underneath the conveyor belt for a flyer bag or something is a boring thing to do. So there's nothing basic about the basics that came from, you know, an airline that cleans the flip down coffee tray. The tray that's clean on the seat in front of you is more impressive than the tray that's dirty.

There's only one letter difference between employee and employer. There's only one letter difference, that's the R at the end, meaning we're all in this together. I don't like the concept of us and them. I don't like the concept of managers and workers. I don't like the comment, ‘oh, the boss is coming to visit’, we're all in this together. There's only one letter difference between employer and employee. There's only two letters difference between distraction and destruction. And distraction can lead to our destruction. I'm 100 % convinced if we lose our focus on the four pillars, the four boxes, the three letters, the one passport, whatever, that can lead to our destruction. Of that, no one would be able to convince me otherwise.

Culture beats strategy number five. You can't be a great place to work unless you're a safe place to work. Safety has to be our ultimate KPI. Sending more people home to knock on the door and say, hi honey, I'm home safely. Sending more people home every day than we did yesterday, last week, last month or last year.

And interviewing, my last one maybe, you know, the people that we bring into DHL, a lot of them are promoted from within. I heard a phrase the other day, it was to do with, you know, people and interviewing and trying to assess good people. And the person that I was talking to said, interviewing is all about matching up and not catching out. I think I like that because many people go to an interview, oh, what question do you think he or she will ask? Or maybe they'll catch me out. I think the concept of interviewing is about matching up.

So I think little mantras, as you say, keep us honest, keep us true to what we're trying to do here. And long documents and strategy presentations are a waste of time. We have to get something that all 110,000 people can at least talk for 60 seconds or two minutes and be 90 % right with what I would have said if I was asked. That's all I ask, two minutes. Even if it's said in a different way, if it's spiritually pretty close to what I would have said, that's good enough for me.

So I hope that wasn't too long.  

BARBARA FRENCIA

It was not. It was not.

JOHN PEARSON  

Take one not the other. If I only give one they'll either like it or not. If I give seven they might like one.

BARBARA FRENCIA

No, no, and I think that was great. Now, John, I really want to thank you for participating to this nice and lovely conversation. I could not have asked them more to celebrate this great anniversary that we are celebrating with this podcast series that is 160 years of DNV. And you know, it's really priceless to have the opportunity to have conversation with the long-lasting customers where I mean the trust and the partnership are the basis of the values between the two of us. So thank you so much for your participation John.

JOHN PEARSON

It's a pleasure. I'll say Barbara, you know, I say this from my heart, authentically, or I don't say anything. You know, firstly, 150 years is a big wow. You know, we've just done 50 years and that seemed like quite a lot, but 150 is amazing.

It's great fun talking like this, you know, in this sort of format anyway, it's a change from the daily grind -which is the most important thing I'm doing - but it's good fun and I have a lot of respect for you as a leader and what your company does. So big fan.

BARBARA FRENCIA

Thank you so much. Thank you.

JOHN PEARSON

Thank you.

 

REMI ERIKSEN

You've been listening to Trust and Transformations - leaders navigating change, a DNV podcast. Head to DNV.com to hear more episodes of Trust and transformations or subscribe on your favourite podcast platform so you'll never miss an episode. Thanks for listening.