Raj Subramaniam

WEBVTT - Raj Subramaniam One of the most legendary corporate founders of a company in the United States the last fifty years was Fred Smith. He started FedEx. When he got ready to retire, he picked one of his four hundred thousand employees to succeed him. The employee is Raj Subermnium, who is an Indian immigrant, a graduate of Syracuse and somebody had a chance to sit down with recently to talk about what it's like to run FedEx and to succeed the legendary Fred Smith.

So in the old days twenty five years ago or so, if I wanted to send a letter overnight make sure it got there, I would do a FedEx and you you know, you package it up and you send it and we get there the next day. But today, with the Internet, do you really have many letters going overnight to people? No? Letters A very very small piece of the business.

And I think you sent some letters, so thank you about that. But it's if you open up our airplanes and look at them, if you imagine you can fill it up with letters, that's a lot of letters. So it's actually, you know, we move the high value economy of the world. In fact, last year we moved roughly two trillion dollars worth of goods across the world, and there are pharmaceuticals, aerospace, defense, in textiles.

You just think about the ones. The value per pound of something is very high. They usually go in our system. How do you envision your business growing in terms of more customers.

You've got a pretty good business already. Where are you going to take a market share from ups or from new entrance to the field. Well, I think the market itself is growing, and I think, you know, I feel like our industry, what we do as an industry is pretty significant and somewhat you know, underappreciated actually because it's been taken for granted, especially now in this day and age. What we do as an industry, whether it is like I said, two or three players that we have is I think there's a lot of value and within that, I think the market itself is going to grow.

The opportunity for players who really have standout capabilities to know this is now significant. And I think I'm confident in our value proposition that we can compete very effectively and win share as well. And how many trucks do you have delivering all these things? We have two hundred thousand motorized vehicles around the world.

And are you going to have many trucks that are driverless at something. We already have and we are you know, working with a partner in Texas where we have autonomous driving being tested and we'll see how that goes. Yeah, well there's the packages get there quicker. Well, no, it's the same speed.

The important thing is the infrastructure we already have. We have six hundred and thirty eight facilities right on the highway, so we can go facility to the facility on the highway and then can be human driver. So that is important component of this because you know, you don't I don't think we are yet able to see an autonomous truck driving down the street outside here. How is your business going to change with AI?

Is AI going to make it easier harder for your business? Yeah, it's going to be great because the fact that I told you we have two petabytes of data every single day. We'll realize back in twenty twenty that the data as we generate is a valuable asset on its own. So we had gone about, you know, really engineering and creating a platform using our data and creating a digital twin of fed X and then comes the revolution in AI and then suddenly that now we're able to use that AI to now supercharge our data.

So of course we're going to use to improve our efficiency, our network efficiency and so on. That's that's great, we'll do that's that's the base layer, but we're also using it to differentiate and create new value for our customers so they ship more packages. And when they ship more packages, they're no AI delivering packages. That's the more jobs.

In fact, last year we've added about twenty nine thousand jobs in America. You know, we're also looking at how do we use the insights that we have to orchestrate global supply chain, So we're you know, there's opportunity for us to leverage the inst that we have from our data and do different things with it. Now with all the data that you have, you've got as much data as much to any company. And where the US economy is, do you see a recession anywhere in the near future.

I'm more optimistic. There's a stealth industrial growth in this economy that's coming up, and we're seeing growth in the B to B sector. We'll see how it goes, but you know, we if you go back from September twenty twenty two to the next three and a half years, the industrial the Ism index was down pretty much thirty five or thirty six months. It was a very tough time.

But I think we're starting. You know, there's probably some issues. I say, I have a package I want to deliver it to the Middle East right now? Can you deliver packages in the Middle East because of the war going on there or do you is that a problem for you?

Yeah, short answer as we can. We have a large hub in Dubai and obviously we can fly FedEx airplanes into Dubai or we have an operation into Riad, so those things, no, we can't fly. But we have now using other carriers to move traffic in and out of Middle East as operational, but not the same way that it was before. So today, what do you want to accomplish the most?

We have changed our focus very clearly, and when we had to invested ate back in February, you know, we laid out goals of four percent revenue growth, which is you know, modest by historical standards, but something again focused on those high value verticals, but generate you know, fourteen percent bottom line growth because of o Kager because of the transformations that we're doing and generate you know, six billion dollars of free cash flow. So that's our financial those are our financial anchors that we are for.

So I noticed that when you are sometimes you have brought the pandas to the National Zoo and you've shipped some act Is that a for profitable business shipping? Those? They are the VIPs very important bandits. So you know, this is something that we have done for some time now and because we can do it.

You know, we have done I think fifteen or so pandas and we're looking at another one from Atlanta as well. So that's something that we do and we have you know, we have actually the delivery of the plane. It's called the pandex for us. And you do other animals likes or things like.

That, well, you know, we used to do animal charters the way before, but right now this is this is a more let's call it diplomatic move. What is the biggest challenge that Wall Street sees you as having as the company. What Wall Street analysts are always wanting more revenue, more profits? What does Wall Street mostly say that you should be doing that You're not yet doing.

You know, some of the investors are frustrated about you know, lack of generation of free cash flow for example. But you have to have investments capital to get the network that we've built so far. So the fact that we're here and we're turning a corner and then, you know, I'm not anticipating at this point and going to Moon or Mars. You know, we have this planet pretty much covered and the investments that we need are more incremental.

At this point, I think that realization is starting to sink in, and so maybe the frustration is starting to ebb some somewhat, and I think we also have the job to do then to put points on the board and demonstrate success on a consistent basis on this foundation, I think we'll be all right. Let's go through how you became the CEO. So where were you born. I was born in India, in a small state of Kerala right on the southern so the Florida.

And were you you always interested in distribution as a boy. Or something or I didn't. I wouldn't know what that was. No, I was very straightforward, you know, middle class childhood focused heavily in luckily for me, education plus sport, sport is very important in my life.

So were you in a big athlete or something? I was pretty good. You were in cricket, cricket and badminton and athletics. Everyone knew good education was a ticket to success.

So you're in India, in the Florida of India, and you decide you want to go to a cold weather college, Syracuse. How did you wind up at Syracuse? A very good school? But how did you wind up there?

Well, first of all, you know, you have to you have to imagine a world where there was no Google or information was let's say, much scarcer. So there was a well worn path you go. You know, in India, you know there's some you get into the indianstry of technology, very competitive school and once you're through that, there is usually a path to get a scholarship to come to America and you just get all you get, really information is about rankings of top twenty schools in America, and Syracuse wasn't in the top twenty four chemical engineering at that time.

I got a scholarship. Well, two ranks below which also got a scholarship was Florida. So and I learned because this was two ranks about I took Syracuse and Garomberg going to the councilate in Mumbai or Bombay at that time, and the lady says, you know it's going to be cold over there, and I said, yeah, cold whatever, And now you're at Romberg. I had not seen temperatures below seventy five degrees in my life.

Had you ever seen? So when I got this, no, no, no chance. So I got to Syracuse. The first day, I'm walking to school, it was seventy degrees in sunny and everyone's telling me a nice day, and I'm freezing.

So it went downhill from there. Did you ever consider transferring when you saw? It's kind of kind of crazy because by the time the next six months came around, my blood was thick and I was like, in the forty five degrees, I was in my T shirt today. Actually I can deal with cold pretty good.

So when you graduated, did you say I want to be the CEO of FedEx or what did you want to do? When I joined FedEx in ninety one and I barely knew Memphis, I didn't know anybody in Memphis. If someone had told me that this is the job I would be doing, then I would have set out a much better chance to play for the Indian cricket team. So how did you get the job?

You just interviewed for a job after college? Again, my MBA I was in. I was in campus in Austin, Texas. It's kind of a story around it too.

I was. So I came home one afternoon and my apartment made was on the phone and he's basically in the ones. Now, I can't do that, you know, he was leave us, leaving the country. So I said, who's on the phone?

He said, that's fed X. He said, they're you know, coming to campus. Won't to interview him and so, but he's not going to be there, So I said, give me the damn phone, you know. So I call over and I say, uh, you know, you just talked to my roommate.

But he's not done to me there. But I'm going to be here. Can I faction him my resume? I said him already said okay, come on over for the interview.

So, now this was a time when recession was pretty you know, pretty deep in ninety one. And also I didn't have a green card and that's all that's big that had become an issue from other interviews. So when I got to the interview, my euphoria had already come back down again. So I see these two gentlemen, very nice people, across the table, and I say, I didn't say good morning, I didn't say hello.

I said I don't have a green card. I said, if that's a problem, then you know, I don't want to waste your time or mine. And they look at me like, what is this is a strange kid, and say, son, let's first figure out whether you have what it takes to do a job at FedEx, and let's worry about the paperwork. And then so I got hired, and that's his history.

What was your job? I was the associate marketing analyst for international marketing at FedEx. So it can go lower for the staff. Position now, all right, so you what year was that?

That was ninety one, all right? So you work your way up over a series of jobs and eventually you became the president or chief operating officer. Well, yeah, in twenty nineteen, I was the presidency of. Okay, so your president COO and Fred Smith, the legendary founder, is going to be there forever.

People thought, did he call you one day and say, guess what I want you to be my successor. One day he calls over and says, I'm going to Los Angeles tomorrow. I've looked at your calendar. You're doing nothing.

I want you on the plane with me. And so it was I think the day before Valentine's Day or whatever it was. So I'm there, you know, and then he so he walks into the plane and we're going. Even before he sits down, in turns on and says, so would you like to be the president and CEO of FedEx?

And I'm looking at him. I'll be honored, sir, And he sat down for the next because we can't get out anymore because no, we've got a four and a half our flight. So you became the president and COO. And then how many years later before hecame the CEO.

It's three years. I mean, you become the CEO. You say that. Fred, Look, it's a nice company you built, but I want to make some changes, dramatic changes.

Was that hard to do because you made a lot of dramatic changes. Well, Fred was very very clear about this. This is the greatest thing about Fred. And I mean, I mean, I'm just going to count myself one of the very very fortunate persons in the planet that I have spent so much time with him.

It was very very clear that once the mantle shift is over that okay, you know, you'll give me all the input you want, but the decision making was mine. That meeting with him lasted about two minutes, all right. So when you became the CEO, one of the things you did was to focus on profitability. And one of the ways you did that is you began to, I guess, consolidate some of the divisions.

Can you explain there were four divisions at FedEx. Yeah, so we were set up in a way to operate independently with multiple operating companies and also multiple networks. So four parts, right, FedEx Express, FedEx Ground, FedEx Freight, and we had FedEx Office things like that, but three main companies. The main thing was in the United States.

There was the reason why it was set up this way. And again we talked about, you know, we were started off in the air express business. When the ground parcel business we were tiny at the turn of the century. We were only ten percent market share, so we had to make inroads and we need to be a differentiated play.

So that's what you know. You know, it took we basically, you know, grew our market share for many, many, many years in a row. But the profile of the traffic was changing and we needed to consulate our networks. So that was the impetus.

It was. It was an evolution, really, and so the time had come to do that, and I don't think there was any debate whether we should do it down, you know, so we started moving in this direction. So we consolidated networks, consolidated the operating companies into one FedEx, and we were you know, this is a lot a long cross. So the consolidations occurred, and I think the market capitalizations up about sixty three percent.

The stock is upset seventy three percent, but the revenues are roughly flat. Well it's that's not the way it works. Because at the turn of the twenty nineteen, before the pandemic, we were about sixty nine billion dollars in revenue. The next two years we grew twenty five billion.

So he got ninety four billion, Okay, then it went down to eighty eight the shadow of the pandemic, and now we're back. So when you say you're back, yes, but if you should look at the longer picture. We've grown about five percent cagre since about twenty nineteen, or six percent cares for us. Part of the culture that Fred drilled into a brain is that change is the only constant and if you don't like change, you will absolutely hate extinction.

Fred Smith always said that they fed Ox employees were like part of his family, and it was a Berlick family atmosphere. What do you do to make sure that people feel like they're part of a family organization and part of a company that's really doing something useful for society. High performance team, that's what he would say. And we are always a people first company.

In our philosop is crystallize in people's service. Profit you take care ever your people that provide outstanding service for our customers would generates profit for a company. We invest back in our people. This unending circle is what has been guiding FedEx from the very very good go and it's not a ethereal theory.

In a service business. We have five hundred thousand team members around the world. The difference between those five hundred thousand team members doing just enough not to get fired versus doing an outstanding job for our customers and in delivering what we call our prople promise. That's the difference between failure and success.

And so this philosophy is embedded into all of us. And a great thing about FedEx also is that this culture prevails globally. Anywhere in the world. Do you go, The language of the country may be different, but the language of FedEx is the same that I've told and I promise for for sure.

We may hire a new get new people, buying new companies, new technology, but the culture ain't going to change. That's that's what's guiding us going forward. Parents are in their early nineties and did they call you and say they're proud of you? They're very, very proud and they could not have imagined anything close close to this.

Uh. And so my dad's advice always to me is keep working out, keep working out, don't let them down, So keep moving. Yeah, and what about your children? Are they proud of what your much?

They are? Yes? So when you are introduced to people, you're people say you're the CEO and you're the are the CEO of Are they surprised that somebody that came from India is running this company that is legendarily built by Fred Smith. I was introduced as this minister from an African country.

He just could not digest this fact. It was like it was like double tack and triple tech. You are the CEO, you are the global CEO. So there is a little bit of that sometimes.

But I think you know, it's it's not it's that's meant me rare, rare at this point. So what do you do when you're relaxing if you're not you know, looking for you know, where your package was or something like that. What are you doing from a package you never have to look for you? No?

Yeah, I think for me, I mean at this point, either family time or tennis. That's kind of you're a tennis you're a tennis player, so that's my meditation as well as a relaxation. And do you ever play with like, have your employees you beat them? I assume you can beat them pretty readily.

No, it's I do we actually have Memphis of course, you know there's a lot of FedEx folks and so we play, but nobody gives me a quarter. Listen, I can assure you that they're not giving up. In fact that I would be upset if they did. Fred Smith came up with this idea years ago, and obviously it's built a big business and so forth.

But are you worried that some young Fred Smith somewhere else is going to come up with something that replaces your business. For us, part of the culture that Fred drilled into a brain is that change is the only constant and if you don't like change, you will absolutely hate extinction. And so we are constantly with that mantra in place. Now.

Having said that, the physical network that we have in place, and I keep repeating to this, is you can pick it up a package or shipment from any one part of the world and get it to any other part of the world. It's taken us fifty three years to build this incredible network that is going to be very very difficult to replicate. So unless someone is inventing it being me up Scotty machine and you know, moving through ether, this is going to get very very difficult replicated. So I think there are certain things that are clear modes for us.

But then the question for us is how do we innovate and change, continue to keep that energy up and move forward. All right, So, today, if somebody wants to get a job at FedEx and rise up. What's the best way to get a job at fed X these days? Well, it is, it depends on what job you want and your gradational you know, that's not open right now.

So but I think starting off at FedEx if it's at an operational side of the house. You know, obviously we hire a lot of people every single day. Like we said, we had twenty five thousand on the last year. And the great thing is a lot of people who start around as frontline careers, we had a fantastic career and in fact, you know, several of them rise to executive level positions in this company and there's a long history of that.

And then of course the staff jobs as well, because I feel we're in a very exciting time period here and the and that's and the words getting around. So the interest level is actually as increasing, and whether it is you know, you know, whether it's different functional jobs or especially in technology and the ability for FedEx to leverage what we have today and have a different view on how we can leverage technology to drive a eye. So we are getting a lot of interest in FedEx for that.

As I mentioned earlier, stock is up about seventy three percent since you took over, So you know, probably you can't do much better. So would I be better not to buy the stock now, would you say? Or No? I think that's not the way to look at it.

It's yeah, you've got to look at it from what's coming next? And so what are you going to do to make it even more proper? I think so. I think there are financial goals I told you are pretty very exciting, but also most importantly achievable.

The transformation that's underway at FedEx today, whether it is our network transformation that's the organizational transformation, or digital transformation, those are really livers for us and we can create a new businesses on which layers on on top of our existing physical business in a way. And so it's very exciting. We're all excited at FedEx and we think there's a lot more to go. How do you spend your time as CEO?

I've thought about it carefully because I know the first year was like I mean, I realized that the most important as that I have is time. So I actually sat down and thought about and said, what's my job? And so one, of course is the guide the strategic direction of where the company is headed, make sure I have the right set of people around me to execute, have an execution framework, but not get involved in every aspect of execution, and represent the company well internally and externally.

And once I kind of got clarified in my own mind that this is what my job is, then I actually went through my calendar and I just very disciplined, you know, put back and God's you know, some stef segment. I would say, about three or of the five days I'm traveling. Now, what's the most enjoyable part of your job? Oh, by a wide margin, is actually interacting with the FedEx.

Team members, not interviewing like this. That's quite a second. Maybe, No, I think it's a it's a it's a team members. It just you know, really it's an incredible set of uh tam.

It doesn't matter where you're in the world. And what's the least enjoyable part because we are in every part of the world and very kind of you know these days, I got to get up in the morning and say a little prayer before you look on my phone, so you know, because I. Don't know what's happening, and so that you know, just the unpredictability. Of it now, you met your wife at FedEx.

Yeah, just in the same timeframe and she joined FedEx what's six months before we got married. Yeah, you had to be in FedEx employee to be married or yeah. Other way around. I need to have a job before she married me.

You are now sixty years old, yes, sixty, You have virtually no gray hair. Why is that? That's a good That's a secret that's going to remain with me. Well, maybe you could whisper to me later.

I've done a great job for your shareholders and your employees. Well, and I'm sure Fred would be very proud of what you've done. Thank you. Thanks for listening to hear more of my interviews.

You can subscribe and download my podcast on Spotify, Apple, or wherever you listen.