UPS: From Local Startup to Global Titan
United Parcel Service (UPS) began a century ago, founded in Seattle by 19-year-old Jim Casey, as a local messenger service. Today the 400,000-employee, $47.5 billion company transports some 15 million packages a day in more than 200 countries.
On the occasion of Big Brown's 100th anniversary, the company offered unprecedented access to writers Mike Brewster and Frederick Dalzell to chronicle its rise from fledgling startup to global heavyweight. Along the way, the duo distilled the company's management strategies, and the result is Driving Change: The UPS Approach to Business (June, 2007; Hyperion). Co-author Brewster recently spoke with BusinessWeek's Stacy Perman about lessons the company learned in going global. Edited excerpts of their conversation follow:
Is UPS really a "big" small company?
I think that's a good way of putting it. It has a very strong "customer intimacy." There really is a smal-town aspect to UPS. For instance, there is one driver who has been delivering packages on the same side of West 25th Street in Manhattan for 20 years. He told me that he says hello to 300 people by name every day.
Also, what UPS is doing is really one simple core thing. Even though it has expanded its offerings, it is replicating one service several million times a day. It is a small company that has expanded into 200 companies around the world.
How did UPS originally go global?
At first it was doing so well in the 1970s and 1980s that there was a movement in the company to stay domestic. But the founder, Jim Casey, who even in his 80s was still active in the company, went to West Germany and saw how inefficient the Bundespost (national post office) was. He saw an incredible opportunity—not in service between the U.S. and Germany, but in domestic German service. UPS sent over four executives for a few months to gauge the climate and see if the country needed delivery service and how to respond. At the time, West Germany had its post office and a few mom-and-pop delivery services.
What lessons does UPS have for a small business that wants to expand and go global?
I do think the cultural thing is a big deal. UPS had a lot of problems in Germany at first. For one thing, it didn't know that a truck driver had the lowest prestige [of any job] in Germany. It couldn't get anybody to work there. Also, at that time, in about 1976, Germany had 3% unemployment, so it was really difficult to attract and keep people who would be proud to work there. Also, it didn't expect the backlash against the brown uniforms and trucks. They reminded people of the Nazis' brown shirts. It didn't anticipate the cultural problems of going global.
It is also really important to think about structure when you are going global. UPS built its business in Germany from the ground up, but in retrospect it would have done much better if it had acquired a small group of driving companies with their own staffs—which is what UPS ended up doing.
Also, one should have a high tolerance for risk. You can lose money for a long time. It was probably a decade before UPS profited by going global.
Lastly, you need really strong leadership abroad, coupled with a local presence on the ground. Do what you have to do to start, but make sure you have a strong local presence. Nobody knows the climate better than someone there. You don't want a bunch of expats running things for too long.
What were some of the mistakes UPS made when it went overseas?
Again, a lot of it was simply cultural. When UPS went to Asia, it started in Singapore. It made executives wear formal suits, but Singapore is really hot and humid and most people there wear golf shorts. There were huge problems in requiring people to dress formally. To a larger degree, there was a clash with the American work ethic. Singapore, like a lot of countries, doesn't have overtime. It was hard to expect drivers to work 12 to 13 hours delivering van loads of goods. It goes back to relinquishing some control to local management to understand. Today, only 1% of UPS global managers are American.
How has UPS been innovative with its global operations rather than just replicating its domestic model?
One of its biggest business challenges is to make sure its customer-service level is similar all over. For example, in Turkey it has maintained a high level of customer service despite problems like terrible roads. So UPS maintains a huge tractor trailer near the airport, so customers can drop off their packages to make on-time deliveries to Europe. This way customers can take their packages right to the plane and don't have to wait for a pickup. It's a different way to do business, to allow for a crazier atmosphere. Even though UPS is global, they do allow for local product offerings.
How has UPS used its corporate culture to its advantage?
It has a sense of ownership. You now have this international company with 400,000 employees and wherever you go, they know who UPS's founder was, and they know the early history of the company. At meetings, they still refer to the policy book, as they have for 90 years. They all know how to treat customers and the people they work with, and even how drivers should carry their keys and move away from left-hand turns. It's the same in Turkey as it is in China. They all have the same playbook, and they pass it down through the generations and globally by spreading it around. The people in charge spread UPS's culture around at each location more so than any company I've seen.
Now, UPS has been doing this for 100 years—and that has made it at times inflexible and too dependent on looking inward. So when the competitive landscape heats up, it has also been a little slow to adapt.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.