Knowledge: Yours is a very complex business from the way you’ve explained it to the MBA participants here [at the INSEAD Global Leaders Series].  Is that complexity causing real difficulties in managing the company?

Mullen: The basic business in Express and logistics is not complicated, in that it’s not high technology. It’s just a lot of steps in a long logistics chain, from picking up a parcel in Australia and delivering in Alaska. There are many, many steps and every one of those has to work, so it’s more about managing the complexity of the process and the flow, than rocket science of a particular piece of technology. 

In terms of M&A, you’ve acquired something like 40 companies within 10 years, so that must present huge problems in terms of integrating the different cultures, different systems and so on.

Very much so and just simple things like track and trace platforms, which are obviously crucial to our industry, are different in every single country and you have to work out do we throw all of the existing ones away and put one new global track and trace in place at a huge cost, or is it better to try to do an 80-20 solution where you bridge and link the ones that you have and make them work and gradually over time standardise them. And that runs through to absolutely everything.  You’ve got products all called different things in different countries, and if you’re trying to sell to a global customer then you need to align all of that. Again none of it is rocket science but it takes a lot of time and hard work and it’s spread across over 220 countries.

Would it not be better to offload some of the companies and focus more narrowly on what you would consider to be the core businesses within the company?

Yes absolutely.  All of those acquisitions were of course made at the time with the intention that they would be core businesses.  Over time, I think we’ve realised that some of them may not be, and we’ve already taken some steps in that regard. We moved the business in Germany out of Express, we recently sold a couple of businesses in the Benelux (Belgium, the Netherlands and Luxembourg) that didn’t really fit the model, and we’re working on one or two of the others at the outliers. I’m pretty confident that by the end of this year and going into next year, everything we have will be streamlined and conformed to our basic strategic platform and focus.

Although you’re a market leader of most countries, you’ve struggled in the US.   Perhaps it was a wrong decision previously to try to compete head on with the two main companies that are already established there?

If you go back 20 years, FedEx and UPS were really just domestic players in the United States.  They weren’t operating outside. We were operating outside and the two didn’t really meet, but today the customer wants a global solution. FedEx and UPS have gone global and we have to go the other way and compete on their home turf, otherwise we’re saying to our customers we can service you everywhere, other than the most important market in the world, and that’s not much of a selling proposition.

But at what point would you say you’re just going to have to cut the losses and get out of there? 

Well, obviously we’re pretty optimistic that we’re going to get there or we wouldn’t be soldiering on.  We’ve made huge progress and it’s only been a few years. We had 10-12 per cent brand awareness only a few years ago; today it’s 58 per cent.  FedEx’s is 98 per cent, so we’ve still got a way to go, but we’re a very visible brand now. It’s come at a high financial price and is still costing us, but in terms of the objective of building the global platform in all geographies including the US, we’ve got that. So now it’s the numbers and again you have to look at DHL as a single integrated business unit.  What is most important is that we achieve our overall company objectives and financial targets.  Of course if there’s a point at which a loss in the US would jeopardize the overall (business), then we have to make a tough decision and we would face up to that, but today that’s not the case.

You’ve gone from losses in 2005 into the black in 2006, and your projections going forward are pretty bullish. What’s that growth based upon?

Well, our target is to go from well over a US$100 million loss in 2005 through to US$1 billion profit in 2009. We’re on track at the moment, so we’re optimistic for the future.  It needs a turnaround in the US, it needs continued strong growth in the emerging markets where we need to continue to invest heavily and grow those businesses, and re-engineer Europe to extract more productivity out of the very large critical mass that we already have.

So you must be particularly concerned then about the current credit crunch and the possibility that the US could go into recession?

We definitely are.  I think we’re probably more bothered by the uncertainty than we are by the actual outcome. I mean if we knew for definite that a recession was coming, we could sit down and start to plan for it. It’s hard to discern clear trends but our view is that it’s got to be 50-50 that the US has a recession next year, and 50-50 is not a good percentage to be modeling around. 

Have you found it difficult to give guidance to the markets (and analysts) because of the fixation on the bottom line and quarterly results? Is that proving difficult in terms of the long-term plans for the company?

Yes, it definitely is.  It’s obviously very different giving forecasts and guidance in a mature stable business as in a major turnaround or in a developing business.  If you’ve got a situation where you’ve bought companies and you’re merging them, or like our US turnaround situation, you tend to start with the budget of what you want to achieve next year and then work back how you’re going to do it, which is obviously a different way of budgeting than saying this is the historical trend and let’s extrapolate it forward. 

So you wouldn’t be tempted to scrap the idea of having quarterly results?  Some companies are starting to think of just doing the interims half-yearly.

I would I think be in that camp.  The timing with which you do it is critical because if you do it at a time when people think you’re trying to hide something then it’s probably more damaging than not doing it.  If you were to do it on a high, when everybody’s very happy with performance, then I would go to an interim.

There’s a lot of talk these days about social responsibility but what is the return for shareholders, for consumers, for the employees, and for the company?

There is a monetary side to it, of course, but there’s also the side that is hard to quantify, that I think most of us want to go through life as individuals feeling that you’ve contributed a little bit to the community that you live in, and to your friends, and to your way of life. I think a corporate entity has the same responsibility.  For employees, seeing that our company is doing something serious about the environment or social responsibility programmes makes people feel a lot better about the place that they work in. That in turn attracts better talent, so I think, over time, those things add real dollar value to your company. You don’t get a return in the quarter in which you help out with the United Nations Food Programme or you do disaster relief or something but, in the long run, I think it adds financial value. We’ve talked about it a lot at our board and one thing you come down to is, if you cut emissions from vehicles or you have more efficient aircraft and you, therefore, pollute the world less, it can’t be a bad thing. 

And briefly, how do you attract and retain the best talent? 

Of course, every company is striving to be the employer of choice and to offer more incentives.  I think it’s a package of everything. The most important is the brand and the values that attract somebody to come and work for your company, that you’re seen as progressive, exciting, committed and performing. You want young people coming out of MBA programmes to say ‘that’s the sort of company I want to work for - they’re doing a lot of really good things, it’s a strong brand, great strategic focus and direction, development growth, all those things.’ You’ve got to make sure that your compensation and benefits are as good as most. And things like the environment. Today it’s on everybody’s mind and if you’re seen to be pretty active in environmental and social programmes, then I think those things make it a more appealing place for young people to come and work. 

Do you think within the culture of the company it’s important to have people from different backgrounds, nationalities?

Our whole business model, way of life and what we do every day is totally international.   We employ every nationality on the globe.  We have to be employee-friendly to all of those nationalities. It’s probably the single greatest buzz and pleasure that I get from my job. The fact that I interact with so many different nationalities and ways of life and values every day, I find hugely stimulating. It’s a rich strength of our company.  If we ever lost that, I think it would be a very retrograde step.