Disrupting The Status Quo in The Logistics Industry with Derek Leathers: An EOFire Classic from 2021

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. are brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Creator Science. Today, we're pulling a timeless EO Fire episode from the archives, so the giveaway may not be active. And we'll be breaking down, disrupting the status quo in the logistics industry. To drop these value bombs, I am brought to Derek Leathers and the EO Fire Studios. Derek is the vice chairman, president, and CEO of Werner Enterprises, a global industry leader. Leathers has over 29 years experience in the transportation and logistics industry.

0:38And today we'll talk about having an internal commitment to continuous learning and to be open-minded and ask for feedback from other people, how to recognize acceptable risks and take them, and so much more. And a big thank you for sponsoring today's episode goes to Derek and our sponsors. Artificial intelligence has made a splash in the headlines and for good reason. The digital landscape is changing quickly and AI is a huge part of that. If you're feeling behind the curve, don't worry. HubSpot has got your back. HubSpot's AI power tools, including their content assistant and chat spot, are a perfect place to start learning the power of AI.

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1:55Derek, say what's up to Fire Nation and share something interesting about yourself that most people don't know? Well, first off, hello, Fire Nation. I'm glad to be here. I'm glad to be with you, John. Yeah, so something they don't know. That's an interesting question. I would say one thing people wouldn't know or wouldn't realize is even, you know, based on the typical stereotype of a CEO is, you know, one thing I do is I love to cook. I'm a fanatical, you know, cook in terms of wanting to always experiment and have a good time in the kitchen. I grew up helping my stepfather at times run a catering business.

2:32My brother's a chef and it's kind of in all of our blood. And all of us just love to spend time around the kitchen and create new and exciting things. Derek, if I was coming over to your house and I said, cook me your favorite dish, what would that be? Boy, that's a tough one. If you were coming to my house, I'd probably want to cook you something that maybe you don't experience all the time. And so I'd make a killer gumbo, at least in my mind, But most people who've had it really love it. I grew up in the South, and so it was kind of something that seafood was more available down at the Gulf.

3:04And so we'd go down and we'd make gumbo on the beach even as a kid sometimes, and it's something I just love doing. I love me some gumbo. I'm actually a French-Canadian, but Dumas, so I have a lot of relatives down in the Louisiana, New Orleans area. So that would be right up my alley. And Fire Nation, as you heard, Derek has been rocking it in the logistics and transportation industry for 29 plus years now. And we have a lot to learn from him, how he's navigating this large company through a pandemic, what he's seeing as disruptions in the logistical industry and some other things. But first, I want to just get to know you a little bit better, Derek.

3:44So give us your background. How did you get to where you are today? Well, it's been a long road, that's for sure. But, you know, probably the most interesting aspect of it was, you know, coming out of college. I went to college at Princeton, had the opportunity to kind of experience what was the best amazing four years of my life. But coming out, I was going to go into investment banking. I was trained for that. I was an economics major with a minor in finance. I always thought that was my path. I had taken a job at Citi to be an investment banker. And then it got deferred. and just because of a slight economic downturn.

4:18And so I took a job as a dispatcher just to fill the gap. So I just wanted to go make some money. I had to make some money. I had nowhere to go and no money to cover the rent, so to speak. So I took a job as a dispatcher, headset on the head, with full intent of leaving that job once the time came to go pursue what I thought was my dream. And the second I put that headset on and started talking to drivers, it just felt right. And I'm a big believer in, you know, you got to find your own wave and whatever feels right for you, that's the wave you got to ride. And so I took a big risk, a lot less money, a lot less fanfare around being a dispatcher versus an investment banker.

4:56But that's what I wanted to do. And it's worked out well for me. I've held jobs in every aspect of trucking as I came up through the ranks, from safety to operations to training to really, really every role you could have. And then ultimately found myself in Mexico City running a Mexican truck company. And that was awesome. That was four or five years, partly pre-NAFTA, partly post-NAFTA, and really trial by fire. And kind of really, I would say that's the defining moment in my career where I had to cut my teeth and learn and make a lot of mistakes. But you get better for it and learn, hopefully, along the way.

5:32It is so fascinating how timing and luck play such a role in life. I mean, back in 2008, you know, I thought that I was, you know, in my full-time career path at John Hancock as a financial corporate guy, like making my way up the ladder. And then, of course, you know, that big crash happened. And I kind of left that path because of that reason. But, you know, if that never happened and the bull market was roaring, you know, I would have probably found myself with the golden handcuffs and never left. And like you could have been in a similar situation. And it's just really interesting how just like timing and luck and circumstances have such an impact, Fire Nation.

6:07And sometimes you're just going to be open to what's coming. And I love that phrase that you use, you know, just ride the wave that you're on and make it happen. And that's what Derek did. And Derek, now you're the vice chairman, president and CEO of Werner Enterprises. So for Fire Nation, break it down. What is Werner Enterprises? And let's really get into what your job duties are and entail as a Fortune 500 CEO. You know, at its basic level, what we are is a premier truckload transportation and logistics company. What's that mean? It means we help customers all over the globe move their goods and products that they care about to the customers that they care about and try to do it at the lowest landed cost we can.

6:47In terms of size and scale, we're one of the larger players in that space. Most people don't necessarily know the name because it's a B2B kind of model. But they recognize as soon as we talk about the blue trucks going down the road and blue trailers, and now over the last few years converted to white trailers. But we're a$3 billion market cap company, about 13 ,000 associates, founded in 56, truly the American success story. Our founder dropped out of high school to start the company with one truck and spent decades going from one truck up to 20 and then eventually 50. And as we sit here today, you know, we're knocking on the door of about 8 ,000 trucks, you know, 2.7 or so,$2.8 billion in revenue.

7:30Offices across the U.S., Canada, Mexico. We have offices in Shanghai and Shenzhen, China. And, you know, the business has just continued to evolve into not just trucking, but logistics and freight forwarding. And we do a lot of things for a lot of people. But at the end of it all, what it has in common is moving people's goods to their customers. And what do you do? What the heck does the president CEO of a Fortune 500 company do day to day? Yeah, I mean, so the biggest thing I think that you have to do is, you know, people talk about shareholder value and stakeholder value. Those things matter.

8:03Obviously, they matter. We've got to pay the bills. We've got to make profits and we've got to get people excited in the story. But the singular thing you do every day is you are responsible for sort of the culture and the people of the organization. And so you've got to start and finish your day thinking about, you know, how do you get the right people? How do you attract them to a company like yours? How do you train them and mentor them and develop them properly? How do you retain them long term? Because if you do all that and then you give them the right tools. And so you're usually, as the CEO, the one that pushes through certain decisions that maybe the ROI doesn't look right, but you know it's the right decision.

8:39And it's the right investment in the tool set or technology or whatever that you know your people would be more productive. If they had it, if you do those things, then all the traditional CEO stuff that people do think about, like earnings and earnings calls and profitability and shareholder value and share price will follow. And I've always believed that. I've believed that, you know, business is a blocking and tackling thing. Right. So you've got to you've got to do the basics well and you've got to out operate your competitors and you've got to give your customer a low cost, high value solution.

9:11And then all the profits will happen if you try to cut your way to profitability. It doesn't work long term. If you try to be so financially focused that you lose sight of the people, that's a diminishing return kind of model in my mind. So it's really setting the culture, setting the people and really turning them loose. That's probably the hardest part of that is turning them loose and letting them be their true self and really help make a difference. So maybe in a shorter sentence, it's kind of trying to become that true north of your company. Fire Nation, are you the true north of your company?

9:46And if you're one person, if you're leading a team of five people, 15, 30, that true north has to be clear. And let's be honest, Derek, there've been quite significant changes in logistics over the past few years. I mean, I've had some really interesting conversations over the past few days with driverless truck companies and with the president of Union Pacific and what they're doing in that logistical area. So what have you found is the single biggest change in logistics over the past few years? And how are you currently dealing with it? You know, there's so much change. I mean, you've talked about several of them.

10:24You know, the electrification and focus on alternative fuels to be able to still move all of these products is a key focus. But technology, if I was picking one single thing, It's really the advent or the integration of technology into what has traditionally been kind of a point A to point B business. Because if you're not optimizing your network every day, if you're not using machine learning and AI and other tech tools to make decision making better, You know, if we hadn't leaned in heavy to, you know, all of the visual tools that are available to take all this complex data that we have and present it at the desktop in a way that it's digestible, you know, it's just too big of a mountain to climb.

11:10There's too much data happening. We deliver over three, almost three and a half million miles of freight a day. Wow. Every day. And, you know, one thing I remind people of the complexity of our business is, you know, our factory has no roof, meaning, you know, our drivers are out there every day and wherever they are today was not where they'll be tomorrow. So you're managing, you know, nearly 13 ,000 associates, which with 85 percent of them being in a different spot today than they were yesterday. And you've got to manage all that remotely. And so putting more power into the palm of their hand as it relates to mobile apps and communication and video conferencing and the ability to try to stay connected to this mobile sort of, not just mobile, but mobile workforce that's constantly moving around the country.

11:57So a very popular phrase in the world today is adapt or die. So let's talk about how Werner Enterprises has adapted to the changing world and even talk about maybe how you've in some cases disrupted that status quo. Yeah. So, I mean, I think that applies to us very much. If you look back, you know, we were a premier player for a long time, always at the top of the game. And then they're kind of entered this period of the 90s where, and actually even more so, I would say the first decade from 2000 to 2010, where everybody was holding on to the roots. And the roots are one-way trucking business that you call we haul from A to B.

12:34And that business was obviously going to get continuously commoditized. And I was an early advocate to say we have to evolve. We have to be able to provide agnostic, kind of mode agnostic solutions to our customers. What that means is if that freight ought to move by rail, we should be the one involved in that decision. We should be consulting our customers, recommending a better solution. But to do that, that means you've got to have those solutions in your portfolio. Otherwise, you'd just be shipping business out the door. So, you know, we launched our logistics business. We're a major player at intermodal and truck brokerage.

13:10We launched Warner Global Logistics to provide solutions to our customers overseas. We've recently launched Warner Final Mile as people have been increasingly kind of in the click world as it relates to making large scale, big and heavy purchases. You have to evolve. And so today, as we sit here, that traditional business, that one-way truckload business is one of the smaller parts of our portfolio. It's still important to us. It's still our roots. It's still what we call the foundation. But our dedicated business is quite a bit larger than that. our logistics business will eclipse it in size in the coming years because we had to evolve and really meet our customers where they were at.

13:49Fire Nation, we have so many more important topics we'll be discussing as soon as we get back from thinking our sponsors. Success Story, hosted by Scott D. Clary, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Success Story features Q &A sessions with successful business leaders, keynote presentations, and conversations on sales, marketing, business startups and entrepreneurship. One of Scott's recent episodes was with none other than Jack Canfield, where they discuss adapting to life's twists and turns. Listen to Success Story wherever you get your podcasts.

14:23So Derek, we're back and something we talk about on this show quite often is how it's important for companies and even just entrepreneurs if they're doing the solo game to have core values, to be that kind of North Star that we've already talked about a little bit. what are the core values of Werner Enterprises and why are they important? When I became CEO, I looked at our values and I looked at how we presented them to newcomers coming into the business. And it was a multi-page document inside an employee handbook that frankly, you needed a couple of translators to really come out with something to understand.

15:00What we wanted to do instead was take that down to a really digestible back of a card. It can fit in the backside of your badge kind of framework and talk about who are we and what matters. And so our values are founded in integrity. And so we have this little diagram with integrity at the foundation. It's because I believe if you don't have integrity and the people around you don't, then none of the other values matter. Like if that crumbles, everything falls apart. And then the pillars of those values are teamwork, community, innovation, and leadership, because those are the things we think that really define us.

15:30It's interesting. We're going through an evolution with teamwork, and we're going to change that to inclusion because we think it's a broader term that more better captures what we mean by that pillar. And those pillars support safety and service because that's the business we're in. You know, we're not in the trucking or the logistics business. We're in the service business. And the only way to do it is to do it safely. And so everything we do leads to this sort of top of the pyramid that's safety and service. And people have them on the back of their badges. We actually take them out in meetings when there's tough decisions to be made.

16:02You know, I'll often ask, well, what's the compass tell you? And I really believe you've got to use your values almost like a compass to guide you in tough times. Fire Nation, integrity, the core value. What is your singular core value? Something that you need to eat, live, and breathe every single day. And Derek, we're going through a global pandemic. Nobody's untouched by this. I'm sure Werner Enterprises is not either. How are you navigating your company through COVID? Well, it's been tough, obviously, on everybody. But look, early on, we knew as soon as this became a reality, we knew that we'd be designated an essential business.

16:39And we were. We knew that for us, that means we're open for business and have to stay open for business, not only on the PPE front and getting those kind of supplies to hospitals and needed locations around the country. But you saw the barren shelves that took place early on when people were starting to hoard paper supplies and other things. And so we had to make different decisions than a lot of other companies. And so the first one we made is, you know, we knew we had to keep a larger than normal population in the office to be able to run the optimization and everything else that we do to make the network move.

17:13And there was a lot of questions about how we go about that. When in doubt, I always go with the simplest answer. And I said, let's ask them. Let's ask people to kind of sign up for those of you that don't have preexisting conditions or high risk comorbidities. comorbidities. If you don't have people in your household that are elderly and you're willing to stay on the ship and ride this out, then let us know and identify yourself. And everybody else, let's try to move and maximize the amount of remote working we could do. In the office, that translated to about 50 % of the office ended up working through the pandemic, myself included, from the office, and about 50 % worked from home.

17:50Doing that enabled us to immediately instill social distancing from day one in the office, provide PPE and sanitation equipment in the office, while also having the tech capability to spool up and be remote within numbers that we never thought possible. And one interesting thing I'll share with you and your listeners is, you know, our office infection rate is about five times lower than the work from home crowd. And that's something that doesn't get a lot of play out there, but it's interesting and I think makes sense because you can instill long-term discipline in an office setting with signage and sanitation and availability of supplies on demand better than you can when everybody's asked to fend for themselves from their own household.

18:30And so it hasn't surprised me that we've been able to create a very safe, very, very confident work environment in the office. And yet our work from home crew has done stellar as well. And they really rose up to the challenge. So that's one thing we did. The biggest thing we did, obviously, back to the remote workforce is developed a cadence on communication. We set up a COVID-19 task force. We had email blasts going out to the trucks every day. I did a weekly video to the truck every week, giving them an update on our infection rates and what steps we were taking to provide more PPE to them, and really just keeping them informed and reinforcing the behavioral things that we needed.

19:05Because if you add our truckers and our mechanics in, which can't work from home, we essentially were 90 % work from the office, if you will, counting truckers and mechanics through the entire pandemic. And our infection rate's been significantly lower than the national average, despite the fact we're crossing state lines every day. So it can be done. It just takes a lot of focus. I think it would surprise a lot of people that the at work rates are lower than the at home rates. But in addition to everything that you've already shared, Derek, I also think it makes sense for those reasons, but also because I feel like there's probably a sense of camaraderie and accountability when you know you're going into an office every day of being like, hey, we're doing all the right things at the office.

19:46Now, when I go home, I also need to be doing the right things. I'm not just going to go out to a bar that's crowded. I'm not going to go to this event or that event because I'm not going to be the person that's coming in and ruining it for everybody in this office. So there's kind of that sense of responsibility as well. So I bet people are being more proactive and protective outside of your office than people that are just at home being like, well, you know, if I get it, I get it or whatever their attitude might be. They don't have that added sense of responsibility. So you, Derek, have received a ton of advice over the years.

20:18I mean, some of it's been good. Some of it's been bad. Some of it's been terrible. What would you say is the best advice that you received over your tenure as a businessman? Yeah, I think the best advice is you really have to have an internal commitment to always be learning. If you wake up someday and think you know it all, or you've learned it all, or you've got all the answers, I think that's a really dangerous place to be. I have an expression I use it Warner all the time, which is, you know, the worst ideas come from the top. And what I mean by that is not that the people at the top are incompetent or that I'm saying I'm incompetent.

20:53It's just that they don't survive ideas that come from the very top. Don't have to survive what I call the gauntlet of nose. Whereas an idea coming from the front lines, there's so many people that want to say, I tried that before. That doesn't work. That doesn't make sense. That if it survives all of that, it's because it is truly a stellar idea. Yeah, from the top, it doesn't get that same vetting. It doesn't get that same friction. And it doesn't get scrubbed and evolve into really what the right plan or best plan might be. So I think you have to be open minded, ask for feedback all the time, always want to learn.

21:28I played athletics my whole life, played football in college. And so it's kind of ingrained in athletes that, you know, it's whatever stuck to the tape you need to learn from. And so that includes every speech, every presentation, every dialogue you have. you need to kind of autopsy it afterwards and figure out how to get better from it. So that would always be learning and then surround yourself with people that you can learn from. And that means diversity of thought. That means people from different backgrounds and different thought processes and the way they think about approaching problems is critically important as well.

22:02So those would be a couple of things that come to mind. The worst ideas come from the top. I love that. And no pressure here. If you can't think of anything, if nothing's top of mind, no big deal. Just say so. But what's a terrible piece of advice you received? Over the years, I've had several people try to advise around how the command and control approach at all times is best or how the boss is expected to weigh in on every decision or make every decision or be more authoritarian in their approach to keep people, quote, on their toes. I don't buy into that methodology at all. You know, I make a point in every meeting.

22:43There's this concept called a halo effect where if the boss speaks, everybody starts to fall in line. And I think if you really buy into that, and I do, that means you shouldn't be speaking nearly as much as other people. You really ought to wait and hold your thoughts until the end of a meeting so real discussions can take place. And then at the end of the meeting, don't weigh in with this group's right and this group's wrong. So we weigh in with open ended, provocative questions that make both groups kind of continue that debate. It takes a little longer, but, you know, the outcome is so much stronger when people buy in and believe it themselves versus just being told what to do.

23:18So I think I think anybody who thinks, you know, that that authoritarian approach or very directed approach is the best way to lead is just missing the boat on what's what's what you can get out of people if you if you if you pull it out of them and turn them loose. What advice would you give to our listeners who are trying to make their way in the business world today? A few things. I mean, I'll start with the obvious, right? I think hard work still gets just overlooked. I mean, you got to work hard. And in any business you go into, you want to be the person known as someone who really will get after it and get after the work and is always looking to consume more work that isn't always focused on, you know, what's in it for me or what's my next move if I do this project.

24:00but rather how much more complicated problems can I solve? And visibility is easier today than ever before in my view because that isn't as much the norm as it once was. So you can stand out even easier. I think another one is you've got to find out and figure out who in that organization really cares about you and foster that relationship. It amazes me the number of times people have an obvious mentor that's obviously weighing in and leaning into their career, but they're not really paying that back or given their half of that relationship. When you find those people, learn from them and lean into it and spend time with them because people want to help other people.