In late 2008 and early 2009, as the recession wrapped its fingers around the collective neck of American business, Richard Phillips Jr. was in the same position as many business heads.
The CEO of Pilot Freight Services was facing a dwindling customer base, and reduced business from the customers that were still doing business with the international freight forwarder, which generated $423 million in 2010 revenue.
But Phillips still had a few cards to play. The biggest ace up his sleeve was his company’s unique position in the market.
“We are the largest privately held U.S. freight forwarder,” Phillips says. “What that means is that everyone larger than us is publicly-traded, so they are chasing their quarterly statements. Every three months, they are worried about their stock price, so they were cutting people in droves — not all that concerned with how it might impact the business 10 years down the road, or how it might impact the customers, but to show a profit regardless of what was going on in the marketplace.
“The companies that were smaller than us were very fragmented. There are a lot of mom-and-pop establishments that rely on credit to maintain their cash flow, and those guys were closing offices or closing down entirely.”
The challenge for Phillips was to leverage Pilot’s unique market position as a means of not only helping his business to survive the recession, but thrive once the recession had ended. It required him to form a game plan for attacking the conditions of the recession, and rally 2,000 global employees around the plan. All the while, continuing to show evidence of Pilot’s capabilities to the customers that remained.
“I went to my shareholders, which are members of my family, and said, ‘Look, we may not make a ton of money right now, but this is a historic opportunity to gain market share and do something for our customers that no one else is doing,” he says. “We were in a uniquely strong position to attack the recession, and that’s what we did.”
Protect your niche
Pilot was Phillips’ first experience in leading a private company. It also happened to be a company run and owned by his family. The son of the company’s chairman, Richard Phillips Sr., Phillips was general counsel for Vermont Sen. Patrick Leahy before joining the family business in 2005. He was named CEO in 2007, shortly before the economy’s downturn.
“My entrance into the company was really getting dropped into a storm all at once,” Phillips says. “I was dropped into a football game and found out I was the head coach.”
Phillips needed one question answered before he could proceed any further: “Who are we?” They are three words that indicate a mountain of stated and implied meaning for any business.
To answer the question, Phillips gathered 25 of his top leaders from around the country and took them on a retreat. Over the span of days, those at the retreat deconstructed Pilot’s mission, purpose and capabilities to try and form a definition for what the company is, and what the company would be moving forward.
“It was funny, because I thought we were going to be there to figure out what we wanted to be doing five years from now and 10 years from now,” Phillips says. “But it turns out the most valuable aspect of that retreat was focusing on that question of who we are as a company. It started out very simply; people said ‘We’re a freight forwarder.’ But we also do third-party logistics. We also do value-added warehousing. We also do all this other stuff to help customers with their supply chain. So who are we, really?”
After rounds and rounds of tough questions and some heated debates, Phillips and his team were able to boil Pilot’s definition down to an essential description: The company is an extremely customer-centric supply chain expert.
Defining the company helps you define your niche in the marketplace. And defining your niche is essential to protecting your niche, which in turn was essential to helping Pilot weather the recession.
“When you are wondering whether or not to enter into a new market, you have to have the analytical tools to decide whether or not it works for you,” Phillips says. “When you are decided whether to take a risk, you have to know whether or not the risk falls within your parameters. So defining who we are helped us tremendously.”
Defining the company niche also helped Phillips to put innovation and idea generation in the hands of the local teams. The employees based in Pilot’s service stations interact with the customers in the marketplace on a daily basis, and have an inside track on generating ideas that can directly benefit Pilot’s customers.
“The best ideas very rarely come from senior management,” Phillips says. “The best ideas come up from the field. They come up from the guys driving the trucks, the forklifts, the guys working the freight, local sales reps. We encourage them and completely empower them to solve problems for customers, and we’re able to do that because we’ve already had this companywide conversation about who we are and what we do. Any individual should feel empowered to solve a problem for a customer. They shouldn’t have to come to senior management.”
If there is a lesson to take away from all of this, Phillips says you need to always come back to defining your company, and making sure that everyone in all areas of the organization understands what it is your company does.
“This is what worked for us: No. 1, get every single person involved. Whatever strategic plan you come up with, it’s going to be more about implementation than planning. If people are on board with your plan, even if the plan isn’t perfect, the plan will succeed. If your people are on board and you implement the plan well, you’re going to do well.
“Second, it really is about starting out with those simple, boring questions — ‘Who are we?’ and ‘What do we do well?’ and ‘Why are we different from the competition?’ It could be asking questions of management, like ‘Why are you here and not working for the competition? What makes us different?’ If you ask those simple questions, you’ll be amazed at the debates that ensue among the management team. It might seem like you’re creating conflict or tension, but in the end, everybody leaves having a much better idea of what the company is all about.”
Continue the conversation
Defining the company niche and mission isn’t going to do much good if you don’t demonstrate the reasoning behind why it’s all going to work in the end. That’s why, as the leader, it’s not enough to roll out a new plan. You have to promote it and make it continually accessible to your people.
In the depths of the recession, one of the most critical jobs on Phillips’ list was to keep reminding his staff that no matter how bad the recession got, it would end.
“One of biggest challenges was keeping the message out there that the recession is going to end,” he says. “If you remember when we went into it, Lehman Brothers was going out, Bear Stearns, it was disaster after disaster. It was like Armageddon. And the challenge was to say to everybody, ‘It’s a recession like every other. It’s going to end, we are going to come out of it, so let’s talk about how to come out of it stronger.’ And once we did that, it started to become a lot simpler to figure out what we needed to do in order to emerge stronger.”
Strength came in a well-defined plan, but it also came in the form of unity. And to foster unity, Phillips had to keep the companywide conversation going through all levels of the organization. The conversations helped reinforce the vision and plan, and it also gave employees throughout the organization a sense that management would support them, and do right by individual employees and the company as a whole.
“That is how you maintain confidence in the system,” Phillips says. “It requires a lot of conversations about what is going on. A number of those ongoing conversations focused on buy-in and the overall strategy, our philosophy and reminding people why we were doing what we’re doing.
“Some of those conversations were as simple as how we were going to help a particular sales rep who might have been struggling to get through the next month or two as they try to make commission. Once the management team saw that senior management was genuinely concerned with the sales reps and making sure that they were making money, I think it set a decent tone, and everybody started to get on board and get with the program.”
Developing those connections helps everyone throughout the organization learn about each other. That familiarity helps a sense of teamwork take root, and your people will be more inclined to get behind your plan for the future.
“It helps if they see senior management really being a part of their daily lives,” Phillips says. “If they see you making sure that people are doing OK and letting them know that the company won’t abandon them at the first sign of struggle.”
Strengthening the ties that bind is great for facilitating teamwork, but Phillips says you don’t necessarily have to have every person in the company thinking exactly alike regarding where the company should go, or how it should get there. You should allow for some diversity of opinion. It’s not a sign of dissent; it’s a sign of a healthy company where differing viewpoints are accepted.
However, you do need lockstep on where the company is. If you have disagreement on that, you have not accurately defined what you company is, and what it stands for.
“You do need absolutely everyone to have the same idea of who you are,” Phillips says. “Everyone needs to know what the company is, what it does well and what it stands for.”
With the company well defined, its market niche defined and team members on the same page regarding the company’s definition, Phillips thinks his company is well-positioned to take a leap forward in the freight forwarding industry as the economy recovers.
“If you take that time to bring everyone together and reach for the potential of who you are, not only will you be able to starting thinking about charting a course forward, you’ll also find that you have embedded leaders throughout the company who are making great decisions, coming up with great ideas and chart that growth themselves to a large extent. On a daily basis, I can give you example after example of local decisions that solve a problem for a customer — solutions that I never would have come up with. They are doing it because they see the customer every day. The see the customers’ needs changing, so they are better able to respond. It’s that embedded leadership that really drives the growth.”
How to reach: Pilot Freight Services, (610) 891-8100 or www.pilotdelivers.com
The Phillips file
Education: History degree from Yale University, master’s degree in international relations from University of Cambridge, juris doctor from Georgetown University.
Background: My dad actually joined the company about 11 years ago, but it existed before him. It was started in 1970. My dad assisted the company as it went through a relatively painful transition. When it emerged, he was a position to buy it. He had fallen in love with the company, so he started buying in about five years later, and within a few years after that, he owned it outright. I moved home to Philadelphia in 2005 to start running the company. I took over as CEO in 2007.
More from Phillips on weathering the recession: I remember speaking to one of our franchisees, and he called me up, and he was hurting. He was considering local layoffs. I’m not big on the big, inspirational sports metaphor, but I used one in this case.
I do long-distance triathlons. The purpose of long-distance triathlons is really to see how much pain you can endure. You will feel the pain regardless. The game is how you respond to it. If you think of pain as evidence of your body breaking down, that you’re pushing your body beyond its limit, that you are in territory you can’t maintain, you are going to respond negatively to it. You’re going to back down and go slower. If you understand that the pain you’re feeling is a symptom of success, that you’re doing something challenging, that you are doing something few other people can do, then you have the right approach to it. You are still going to feel it, but it is going to give you the mindset you need to respond to the pain in a way that leads to success, which is to say to go harder.
If you know the pain means you are winning, that you are doing something exceptional, then you can break through, and you can hopefully get to a position where you are not in pain. The goal is not to always be struggling, but you need to understand it for what it is: evidence that you are doing something extraordinary.