I picked up this week’s BusinessWeek and took a glance at their cover story, “The BusinessWeek 50: the Best Performers.” As I scanned the list of the top 50 financial performers, I was surprised to see a logistics company, Expeditors, included on the list (they were number 28). I’ve always viewed logistics as a leading indicator of the economy. When the sector starts to perform poorly, it’s a sign that the economy is heading south, and when the sector’s performance starts to improve, it’s a sign that the economy is on the rebound. Further, what makes Expeditor’s inclusion even more noteworthy is that they are engaged in global logistics management, including ocean and air freight forwarding. As such, they are particularly influenced by global trade patterns.
Obviously, the global economic recession has adversely impacted global trade. Yesterday, I received an email from Panjiva announcing that after completing an analysis of global manufactures, they found that there was an “astonishing” 10 percent decrease, from January to February of this year, in the number of manufacturers shipping to the U.S. (there were 118,000 manufacturers shipping to the U.S. in February 09, down from 131,000 in January 09). Compared to February 2008, there were 30,000 fewer manufacturers shipping to the U.S. this past February. These statistics underscore the 9 percent decrease in global trade volume forecasted by the World Trade Organization.
BusinessWeek attributed Expeditors’ success, and several other top 50 performers, to a pay-for-performance culture. At Expeditors, each branch office keeps 20 percent of its pretax profits which feeds their merit-based system for disbursing options. This intrigued me enough to review their annual report.
Like many other logistics companies, Expeditors has operational excellence programs focused on achieving cost-effective customer service based on business process reengineering. But in an industry famous for high turnover, it’s clear to me from reading their annual report that Expeditors puts an emphasis on people. The terms “employee retention,” “employee development,” and “training” appear many times throughout the annual report. In the South Pacific region, the management team bragged that staff turnover was at “an all-time low” and that they were focused on “retaining the best performing employees.”
Expeditors’ goals for customer retention and expansion are clearly linked to their employee retention goals. In addition to a focus on employees, they also have a goal of “working closely with world class service providers.”
Actually, the front section of the annual report is semi-entertaining in an “in-your-face” kind of way (how many annual reports can claim that?). The company hits back at the financial analysts, consultants, and pundits who evidently had pressured them to carry less cash (which makes companies vulnerable in economic downturns), grow through acquisition (which they believe would dilute one of their key assets, their corporate culture), and thoroughly explain their corporate governance processes (they believe a culture of honesty, not regulation, is the only true protection for investors). The report goes on to say, “So here’s what we have to show for not listening to them: 30 years of consistent, reliable growth driven by our consistent, deeply rooted culture.”