Brown Blood

Michael J. Pallerino

August 6, 2007

There is belief within the walls of the United Parcel Service that if founder Jim Casey were to visit the company today, a few things would surprise him. He might be surprised to find UPS has more than 427,000 employees. He might be surprised to see the company in more than 200 countries. He might be surprised annual revenues exceed $47 billion. He might even be surprised his airline is the eighth largest in the world. What would not surprise him is the values he created 100 years ago as the foundation for his small messenger service are as strong and important today as they ever were.

“Best Service — Lowest Rates.” That was the ideal that Casey and his partner, Claude Ryan, had printed on placards to market the premise of their new delivery service. The American Messenger Company had its collective hands full. In 1907, the fl edging company was founded in the midst of Seattle’s already crowded delivery market. After receiving a $100 loan, the partners opened up shop in the basement of a saloon in Seattle’s commercial district.

Their philosophy was simple. To differentiate themselves from their competitors, they would offer customer courtesy, reliability, round-the-clock service and low rates. Casey’s plan was as straightforward as it was ingenious. He devised a set of value points that would guide the company’s culture, laying a foundation of success still followed to the letter. The company would adhere to the ideals of integrity, trust, partnership, an unwavering commitment to service and promotion from within.

In the 100 years that would follow, Casey and the management teams that succeeded him have always endeared these principles, creating a culture built on execution and a willingness to transform. “What Casey would recognize immediately if he were to come back today is those values he passed down to us,” says David Abney, president of UPS Airlines. “Talk to any UPSer for a little while and you’ll find how important that culture is. We call it having the ‘brown blood.’

“These values not only [drove] our success for the first 100 years, but they will help set the foundation of success for the next 100 years,” he adds. “We’re going to pat our people on the back. We’re going to celebrate the centennial. But at the same time, we’re going to talk about how we transform this company and make that second 100 years even more successful. Our vision and mission may change with the world as it changes, but those key values — those core principles — will never change.”
038_BtoB_BrownBlood1

The driving factors behind the continued success of UPS are more than delivering and sorting packages. To the UPS brethren, success is about never being satisfied. It is about having the discipline to execute. And it is about a corporate culture that pulls together as a team to transform when the time comes.

Abney is a perfect example of that UPS brown-blood culture. Growing up in Greenwood, Miss., his UPS career began in 1974 as a part-time employee loading and unloading packages while attending Delta State University. He admits he thought the idea of growing with the company would mean living and working around the Mississippi area, maybe even moving as far as Memphis. He never envisioned his commitment would take him around the world and provide him with a front-row seat
to the company’s global reclamation.

“My story is going to be the same as any other employee,” Abney says. “When I started out, I wanted to be a history teacher. But as I continued to get more involved with UPS, I started to see something about this company — that brown blood — that made me want to follow this journey.”

From part-time loader, to driver, to division manager and so on up the line, Abney eventually worked his way up to a spot on the company’s 12-member management team. In fact, he is one of several managers who may be in line for the chairman and CEO position when current boss Mike Eskew retires. Today, Abney is responsible for directing all UPS operations worldwide and for overseeing the pickup and delivery of 15.6 million packages and documents all over the world. And in keeping with the tradition of how Casey wanted his managers to be well versed in every facet of the business, Abney not only discusses where the company is going, but also where it has been.

Transformation No. 1: “Best Service — Lowest Rates”

With eight or nine competitors scurrying around Seattle in the early 1900s, Casey knew the key to success was differentiation. During the company’s fi rst transformation, he staked his reputation on providing superior customer service, which included staying open 24 hours a day, seven days a week, and delivering anything to anybody, anywhere.

To complement his vision, Casey established a uniformed dress code and required that each messenger, who were all in their teens, understand the products and procedures of the packages they delivered — a policy that has survived the years.

Transformation No. 2: The retail era

In the early part of the 20th century, with no cars or subway systems, many retail stores implemented truck fleets to deliver their goods. That’s when Casey made a bold decision. He approached the stores with the idea his company could provide better service, with better-trained drivers at less the cost. Casey’s strategy paid off. In 1918, three of Seattle’s leading department stores abandoned their own internal delivery efforts and became customers.

040_BtoB_BrownBlood2

With the acquisition of its first delivery car, a Model T Ford, the company changed its name to Merchants Parcel Delivery. The new name not only reflected the merger with a competing service, but also its shift in primary focus from delivering packages from grocery and drug stores to customers’ homes. The company also started consolidating its deliveries so that all packages for a specific neighborhood would be loaded onto the same vehicle, maximizing its resources.

It also expanded operations to Oakland, Calif. To reflect this change, the company again changed its name. The new name: United Parcel Service. The word “United” reminded customers the operations in each city were part of the same organization, “Parcel” identified the nature of the business, and “Service” indicated what was offered.

One of the company’s most strategic moves was the acquisition of a Los Angeles–based company that utilized an innovative practice known as common- carrier service. The service, which only a few other carriers used at the time, included automatic daily pickup calls, the acceptance

In the early 1940s World War II caused a labor shortage on the home
front. At UPS, women began work as loaders, sheet writers, package
sorters, and later, drivers. UPS drivers were often called “Brown Buddies,”
and these UPS women became known as “Brown Betties.”

of checks made out to the shipper (c.o.d.), additional delivery attempts, automatic return of undeliverable items and streamlined documentation with weekly billing.

Transformation No. 3 : Common carriers

After World War II, much of the U.S. population was moving to the suburbs, buying cars and shopping at large new shopping centers. By the early 1950s, while UPS continued to expand its retail store services, business was threatened by a more self-suffi cient consumer.

To adapt, the company expanded its services by acquiring common-carrier rights to deliver packages between

“ We’re going to pat our
people on the back. We’re
going to celebrate the
centennial. But at the same
time, we’re going
to talk about how we transform
this company and
make that second 100 years
even more successful.”
— David Abney

all customers, both private and commercial. The decision placed UPS in direct competition with the U.S. Postal Service, as well as in direct opposition to the regulations of the Interstate Commerce Commission (ICC). In 1952, UPS began common carrier operations in cities where they could do so without the authority of state commerce commissions and the ICC. Over the next 30 years, UPS pursued more than 100 applications for additional operating authority.

Transformation No. 4: A global reckoning

Casey knew the airplane could play a vital role in the company’s business. So, in 1929, the company became the fi rst to provide air service via privately operated airlines. But a lack of volume, due in large part to the Great Depression, put an abrupt end to the service. It was 1953 before UPS resumed air operations by offering two-day service to major cities on the East and West Coasts.

As UPS continued perfecting its service in the states, its management team eyed the global arena. In 1976, UPS took its fi rst step into the international market by offering its services in Toronto. Soon afterward, operations were established in the Americas, Eastern and Western Europe, the Middle East, Africa, the Pacifi c Rim and Germany.

At home, a growing demand for faster service saw UPS enter the overnight air-delivery business through its UPS Next Day Air service. To strengthen its mission, UPS established its own airline in 1988. Up and running in less than a year, UPS Airlines became the fastest-growing airline in FAA history.

Transformation No. 5: Enabling global commerce

The findings from the UPS Strategic Planning Committee in 1998 were clear. While the company’s work in the global marketplace was paying off, there was more work to do. The committee’s recommendation: enable global commerce by extending UPS business services around the world.

After conducting an IPO, the company strengthened its resources by acquiring some 30 companies, including a custom brokerage company, a freight forwarding company, a freight trucking company, a retail store operation, a Latin American airline and a bank, just to name a few.

The next 100 years

Delivery Intercept. Worldwide Time of Day. These technologies are on the forefront of UPS’s march into the next 100 years of service.

A consulting fi rm sends the wrong version of an RFP response but realizes the mistake after the UPS driver picks up the package. With deadlines hanging in the balance, all the firm can do is call the client and promise to correct the mistake.

Not anymore. Thanks to UPS Delivery Intercept, the shipper can intercept the package, return it to the sender and put another package into the UPS network with the correct information. The Web-enabled program is an automated service that gives the customer ultimate flexibility and control by enabling shippers to intercept and reroute packages before they’re delivered.

The program is powered by an innovation known as Package Flow Technology, which enables UPS to not only map more efficient routes for its drivers but also to flag packages for special handling while they are in the UPS network. In fact, an interception can be made after a package is on a truck. Shippers can access the service 24/7 to intercept packages shipped from and to anywhere in the United States and Puerto Rico.

041_BtoB_BrownBlood3

UPS stock debuted as an initial public offering
on Nov. 10, 1999. The certificate shows images of UPS employees
and delivery vehicles surrounding the globe, as well as the signature of
the company’s then-president and CEO, Jim Kelly.