Eskew, Michael L. 1949–
Michael L. Eskew
Chief executive officer and chairman, UPS
Born: June 28, 1949, in Vincennes, Indiana.
Education: Purdue University, BS, 1972; Wharton School of Business, Advanced Management Program, 1993.
Family: Married Molly (maident name unknown); children: four.
Career: UPS, 1972–1982, industrial engineer; 1982–1984, manager of the northwest region; UPS Airlines, 1984–1991, industrial engineering manager; UPS, 1991–1993, district manager for central New Jersey; 1994, corporate vice president for industrial engineering; 1996–1999, group vice president of engineering; 1999–2000, executive vice president; 2000–2002, vice chairman; 2002–, chief executive officer and chairman.
Awards: Schools of Engineering, Purdue University, Distinguished Engineering Alumnus Award, 1998; Jet, Corporate Leadership Award, 2003.
■ Michael Eskew was an engineer with a flair for organization: processes preoccupied him, and his assignments as he climbed the corporate ladder at the United Parcel Service (UPS) involved everything from reorganizing parking spaces to the logistics of opening service to hundreds of millions of Chinese customers. His hobbies included golfing, but most significant for his place in history may have been his avidly reading nonfiction books, because he developed exceptional writing skills that he put to use in speeches and official documents. His skill at coining apt descriptions made "synchronization" a catchword for organizing businesses to meet the challenges at the beginning of the 21st century and made "constructively dissatisfied" a favorite of journalists for describing his management style. By going out into the field and listening to what customers said they wanted, he developed the
principle that global markets should be run by the desires of the end customers in transactions. He was a gifted speaker, eloquent and quotable, who became an outstanding advocate of the globalization of business and of the free market system: "No development in the history of mankind has brought greater opportunity, greater prosperity, greater understanding, and greater hope for peace in the world than democratic market trade," said Eskew in a speech at the Town Hall of Los Angeles (April 10, 2002).
In 1972 Eskew received a BS in industrial engineering from Purdue University, and he sought employment in his native Indiana. He found work with UPS and was first assigned the job of redesigning parking lots so that more trucks could fit in them. He next conducted time-motion studies, working out the efficiency of the processes that brought parcels to, through, and out of UPS. At the time UPS served only 37 states and was working through complex legal requirements to serve more.
In 1976 UPS began internal service within West Germany, and Eskew was sent there to oversee the development of the company's business in that country. In Germany he learned how to coordinate aircraft and truck parcel transfers while developing the skills he would need to establish guaranteed, on-time delivery to customers. In 1984 UPS created UPS Airlines and made Eskew its industrial engineering manager. He organized the airline's systems to make deliveries reliable, eventually creating UPS's Next Day Air service, which became a large part of the company's business. It was during his time at UPS Airlines that Eskew began developing his ideas for coordinating and tracking individual parcels. In the 1980s UPS packed parcels randomly in its delivery trucks, and drivers had to hunt through them to find which package to deliver at each address; Eskew eventually changed this costly procedure with supply-chain management. Probably of greater concern for his bosses during his time at UPS Airlines was the selection of aircraft; they trusted Eskew's judgment and put him in charge of buying the planes as well as of strategic planning and technology. By 1989, thanks in part to Eskew's efforts, UPS service was available in 180 countries and territories.
Eskew completed the advanced management program at Wharton School of Business of the University of Pennsylvania in 1993, which gave him academic qualifications that may have helped him win promotions; it demonstrated his dedication to management. Also in 1993 UPS began offering logistics management to business customers, which was the beginning of its development of supply-chain management services. In 1994 Eskew was promoted to corporate vice president in charge of industrial engineering for UPS, as well as of logistics management services for clients.
OPENING THE WORLD FOR UPS
Eskew was named group vice president of engineering in 1996. He was in charge of all of UPS's engineering worldwide, and he supervised all development and maintenance of UPS sites and buildings. Already skilled at coordinating airline and truck pickups and deliveries, Eskew took on the responsibility of coordinating all of UPS's air and ground operations around the world. He was also given accountability for making UPS more environmentally friendly, and under his leadership the company's engineers experimented with schemes for cutting pollution from UPS's vehicles, including developing an engine that could run on corn oil; eventually new, cleaner diesel technologies won out over the other alternatives for engine design. Eskew focused much attention on finding ways to reduce the number of miles driven by UPS trucks, cars, and motorcycles, reasoning that fewer miles driven meant less pollution, as well as savings in fuel costs. In 1996 UPS grossed $22.4 billion and netted $1.15 billion, up from a gross of just $1 billion in 1972.
A tough year followed 1996 because in August 1997, the International Brotherhood of Teamsters (IBT), representing about 200,000 UPS employees, went on strike for 15 days. The president of the IBT, Ron Carey, was up for reelection that year, and he called the strike as a way to rally union members behind him. UPS's business suffered as a result of the strike. Many customers switched their business to Federal Express and the United States Postal Service (USPS); UPS had won customers by claiming greater reliability than the USPS, but many former customers did not return after the strike. UPS lost $350 million in revenue to their two competitors.
Eskew was elected to the board of directors for UPS in 1998, and he found himself in charge of UPS Capital, which provided financial services to clients. UPS's logistics coordination enabled company loan officers to know how much inventory a client had and to use that knowledge to secure loans with the client's inventory. It was a quick and efficient process that enabled businesses to get loans tailored to their immediate needs and to pay those loans back swiftly.
In 1999 UPS created a new post especially for Eskew, that of executive vice president. Eskew remained in charge of engineering for UPS, and he was given new responsibilities, including corporate strategic planning. He also developed UPS's information services; he vigorously pursued the company's entry into Internet commerce. Further, he took charge of the UPS Logistics division. By being accountable for all these areas, Eskew had an overview of UPS's vast and diverse operations and saw links among them, inspiring him to add freight hauling and document delivery to the company's portfolio of services and to develop a new way of coordinating his various responsibilities into what he called "synchronized commerce."
Synchronized commerce involved arranging all of UPS's processes so that each matched the others in perfect timing. The vision for the existing system had a UPS truck picking up a parcel at a given time, then delivering it for sorting at exactly the time there would be space for it. Next it would be put on a UPS aircraft just before the aircraft took off and then picked up by a truck at exactly the moment the aircraft landed. Finally, it would be delivered at a prearranged time. This process had had an enormous amount of waste in it because none of the elements had meshed with the others. Using the Internet, Eskew led the development of tracking services that enabled clients and UPS to know exactly where a parcel was at any given moment. This system saved clients millions of dollars in inventory costs because they did not need to store property for extended periods. They could arrange with UPS to have what they needed delivered to them just when they needed it, not earlier, and manufacturers could arrange through UPS to produce exactly what was needed, with nothing extra, for when they had buyers.
In 1999 UPS went public with what was then the largest initial public offering in history. Its shares were inflated at $73 apiece because speculators overestimated UPS's initial value as an Internet company. The company grossed $29.8 billion for the year. When he was selected to be vice chairman in 2000, Eskew became the heir apparent to the CEO and chairman, James P. Kelly.
With Eskew in charge of developing UPS's information systems, the company had spent between $11 billion and $15 billion on information technology between 1985 and 2000. Eskew wanted to use this infrastructure to interconnect businesses around the world. He wanted a small businessperson in Africa to be able to discover clients on other continents through UPS; he reasoned that such businesspeople would then use UPS to ship what they sold.
Essential to Eskew's ambitions for UPS was the opening of Asian markets to the company's services, especially mainland China. He believed that world commerce was undergoing an epochal upheaval that would change how everyone did business and that globalization was an essential part of this revolution. He argued publicly that the changes would be the inevitable result of a universal human aspiration to be connected to other people. "Only elastic, adaptable corporations—and people—can survive this once-in-a-lifetime upheaval," asserted Eskew in a press release (March 30, 2000). This belief led him to pursue what he called the "consumer-pull business model," in which end customers drove the marketplace through their demands for goods, which meant UPS would be best served by making sure that their end customers received what they wanted when they wanted it.
During 2000 Eskew lobbied the United States Congress and the Chinese government to allow UPS Airlines to fly between the United States and China. In a rare convergence of interests, both Eskew and James P. Hoffa, the president of the IBT, lobbied Congress to approve the flights. Hoffa realized that expanding UPS business into China would result in more jobs for his membership. The lobbying worked; China and the United States granted UPS Airlines air rights for the transport of American and Chinese goods between the two nations. In 2000 UPS grossed $29.8 billion, while netting $2.93 billion. Eskew was paid $857,348 in salary and bonuses.
The next year began well for Eskew and UPS. After years of working on the project, Eskew finally led UPS into hauling freight, using its synchronized commerce system to help manufacturers keep track of their inventories and to reduce the overhead incurred by storing unneeded items. On January 10, 2001, UPS ordered 60 planes from Airbus for flying to Asia. In August Kelly announced that he would retire from UPS on January 1, 2002, and UPS's board of directors quickly named Eskew as Kelly's successor. Although Eskew noted that the world economy was flatlining, depressing sales of UPS's services, the creation of new business lines had so far enabled UPS to continue growing. This changed on September 11, 2001, when terrorists flew airliners into the World Trade Center in New York City, destroying the buildings and killing thousands of people.
"I've learned to stay out of the way and let our folks run the system" (October 1, 2001), Eskew later explained to account for why Manhattan District UPS employees were able to organize themselves within a few hours after the disaster. Eskew and other executives had developed a corporate culture in which local managers were given the authority not only to respond to emergencies but to suspend UPS rules when they needed to. Within hours of the attack, UPS's tracking system accounted for all of their New York City employees and vehicles; four trucks had been crushed, but all employees, including those who worked in the towers, were accounted for and were put to work sorting parcels by hand.
Eskew was now on top of UPS's worldwide operations and almost immediately began rearranging the company's services. There were many UPS Airlines craft in the air over America when the United States government ordered all aircraft grounded. The UPS airplanes landed in many unexpected places, their cargo far from where it was supposed to go. Normally, at any given moment, UPS delivered 13.6 million parcels, carrying 7 percent of America's gross national product, making its delivery services important to the functioning of America's economic engine. Using the tracking systems he had helped create, Eskew had his employees identify parcels and reorganize delivery schedules according to the availability of UPS trucks and other vehicles; those packages that could be delivered on the ground within three days were given top priority. Eskew reasoned that the government would allow UPS Airlines flights within one week and that they could then quickly transport the remaining parcels to their destinations. He proved to be correct. Meanwhile, workers in UPS's Manhattan District filled 27 tractor trailers with parcels that could not be delivered to seven Manhattan zip codes. (Two of the zip codes no longer existed, and five others were inaccessible.) Using its synchronized system information, UPS identified intended recipients who had been murdered in the attack and then tracked down people or businesses who had legitimate claims to the Manhattan parcels; remarkably, all of them were delivered. UPS grossed $30.6 billion, while netting $2.4 billion for the year, a decline from 2000 mostly attributable to a decrease in commerce because of the destruction of the World Trade Center. Eskew was paid $953,864.
On January 1, 2002, Eskew became UPS's chairman and its ninth CEO. That year the company opened an aircraft hub in the Philippines to serve Asia; UPS had spent $200 million on the hub and on new aircraft to serve the distant continent. The company served 451 markets in over 200 nations and territories around the world.
Eskew initiated a $45 million ad campaign, the biggest in UPS's history. He hoped to expand the company by offering new services to existing customers. UPS Capital began collecting payments for business clients from their clients' customers. This helped clients expand their businesses, which in turn meant more shipping business for UPS. The company put its synchronized commerce skills to good use in contracts with computer manufacturers to pick up and repair their customers' broken computers with as little as a 24-hour turnaround. In addition, UPS managed the inventories for many clients, decreasing their overhead costs. In an era of mistrust of corporations because of the misdeeds of the management at Enron, WorldCom, and other companies, Eskew took pride in maintaining transparent corporate finances, where anyone could find out where UPS's money was going.
Eskew pushed hard for UPS to expand its supply-chain management, which he believed was a $3 trillion global market waiting to be tapped. UPS's strengths in shipping, parcel tracking, and synchronized commerce enabled it to find ways to reorganize client companies' supply chains, making them more efficient and enabling them to focus on their core businesses while UPS took care of the delivery of supplies and the transportation of their manufactured products. Eskew saw this as an important service to the business world because it could enable clients' expansions into new markets. UPS's supply-chain services were expected to grow 20 percent to 30 percent annually.
Eskew became an outspoken proponent of global business, and he insisted that globalization was inevitable. To him, globalization satisfied a basic human need to be connected to other people, as well as the desire for economic opportunities and individual empowerment. He believed businesses should clarify what they meant by globalization and should help people hurt by the changes in old economies wrought by globalization. Further, he advocated regulation, believing businesses should be held accountable for their actions. For instance, the destruction of local environments because of business activity should not be tolerated.
In January 2002 UPS and the IBT began negotiating a new contract. The issues were common ones: wages, benefits, and retirement funds. The IBT president, James P. Hoffa, did not wish to send business to nonunion companies such as Federal Express, but he did not wish to appear soft on UPS's management, either. The union represented 230,000 of UPS's 370,000 workers; that 60 percent of the drivers owned stock in the company was a strong point for UPS. Even so, Hoffa bargained hard. On July 16, 2002, UPS and the IBT agreed on a contract to be submitted for a vote to UPS's union members that gave them a 22 percent wage increase over the contract's six-year duration.
In 2003 UPS invested $600 million to reorganize its delivery network in the United States. UPS Airlines had 265 aircraft, making it the ninth largest aircraft fleet in the United States and the eleventh largest in the world, carrying 1.2 million parcels per day of their total of 13.3 million. The company grossed $31.3 billion.
Eskew was appointed to the President's Export Council in 2002, and in 2004 he was elected chairman of the United States-China Business Council. On February 11, 2004, Eskew submitted his written recommendations for USPS reform to the Committee on Government Reform Special Panel on the Postal Service of the United States House of Representatives. Eskew worried about competing against a governmentsupported monopoly. He argued that the USPS should focus on delivering standard mail, first-class mail, and periodicals and leave most other services to public competition. Further, he wanted the USPS to have financial transparency so that its spending could be tracked and made more effective, that it not be allowed to use its subsidies to the detriment of private businesses, and that regulators be given more authority over how it conducted business.
As for UPS, Eskew wanted the company to emphasize solutions instead of products; clients should be shown how UPS could solve some of their problems. Eskew believed that UPS was no longer best characterized as a delivery company but as a global commerce company because of the diverse services it offered. He said that UPS relied on the flow of orders, the flow of goods, and the flow of money; how well it managed these flows would affect how much it prospered. Even though the company's supply-chain services alone sorted 350,000 parcels per hour, he still wanted each parcel to be treated as if it were the only one UPS was caring for rather than as if it were one of many.
See also entry on United Parcel Service of America Inc. in International Directory of Company Histories.
sources for further information
Barron, Kelly, "Logistics in Brown," Forbes, January 10, 2000, pp. 78–83.
Eskew Michael, "The 'I' in the Middle: Finding Common Ground in the Global Divide," Vital Speeches of the Day, June 1, 2002, pp. 493–497.
——, "Statement for the Record," United States House of Representatives, February 11, 2004, http://www.postcom.org/public/2004/eskew.pdf.
Haddad, Charles, "How UPS Delivered Through the Disaster," BusinessWeek, October 1, 2001, p. 66.
"Quantum Shift," company press release, March 30, 2000, http://www.pressroom.ups.com/.
Shook, David, "UPS Is 'Constructively Dissatisfied," BusinessWeek Online, May 13, 2002, http://www.businessweek.com/bwdaily/dnflash/may2002/nf20020513_5458.htm.
"UPS CEO Champions Global Trade," company press release, April 10, 2002, http://www.pressroom.ups.com/.
"UPS Chairman and CEO Jim Kelly to Retire," company press release, August 16, 2001, http://www.pressroom.ups.com/.
—Kirk H. Beetz